Opinion ID: 2816319
Heading Depth: 4
Heading Rank: 1

Heading: Fountain and Johnson

Text: Fountain and Johnson both argue that the District Court erred in applying a two-level enhancement for sophisticated means to their sentences under U.S.S.G. § 2B1.1 because there was nothing particularly sophisticated about the means employed in their schemes. Their arguments are unpersuasive. While the Application Notes to § 2B1.1 suggest that the use of “fictitious entities, corporate shells, or offshore financial accounts” would constitute sophisticated means,6 an offense can easily warrant the sophisticated means enhancement absent the use of those tactics. See United States v. Jennings, 711 F.3d 1144, 1147 (9th Cir. 2013) 6 See U.S.S.G. § 2B1.1 cmt. n.9(B) (“‘[S]ophisticated means’ means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means.”); id. § 2T1.1 cmt. n.5 (explaining similar factors for applying the sophisticated means enhancement for tax fraud offenses); see also id. § 2T1.1 cmt. background (“Although tax offenses always involve some planning, unusually sophisticated efforts to conceal the offense decrease the likelihood of detection and therefore warrant an additional sanction for deterrence purposes.”). 14 (upholding a sophisticated means enhancement in the absence of corporate shells or offshore accounts, and explaining that “the list contained in the application note is not exhaustive,” and that “the enhancement properly applies to conduct less sophisticated than the list articulated in the application note”); see also Fish, 731 F.3d at 280 (holding that the existence of one of the facts listed in the application note is not necessary to a determination that an offense employed sophisticated means). Determining whether a defendant employed sophisticated means can involve considering factors like the duration of a scheme, the number of participants, the use of multiple accounts, and efforts to avoid detection. See Fish, 731 F.3d at 280. Ultimately, a sophisticated means enhancement is appropriate where a defendant’s conduct “shows a greater level of planning or concealment than a typical fraud of its kind.” United States v. Fumo, 655 F.3d 288, 315 (3d Cir. 2011) (quoting United States v. Landwer, 640 F.3d 769, 771 (7th Cir. 2011)) (internal quotation mark omitted). The enhancement was clearly appropriate here. Fountain identified IRS programs that would pay substantial sums and then designed a scheme to maximize her payout while avoiding detection. In finding that she employed sophisticated means, the District Court pointed specifically to Fountain’s use of inside knowledge of the IRS’s enforcement thresholds, including that TETR claims under $1,500 would not be flagged for review. Fountain took steps to conceal her identity even from others involved in the scheme, employing third parties to recruit claimants and collect their fees so she could avoid any contact with them. Additionally, Fountain developed an enforcement mechanism to ensure her fees were 15 paid: submitting amended returns that tipped off the IRS when claimants were reluctant to pay her. Fountain’s choice to use the IRS as her enforcer further decreased the likelihood that claimants would report her, as they would fear prosecution themselves. In short, Fountain endowed the scheme with a sophisticated knowledge of IRS practices— including some not known to the public—and an elaborate plan for manipulating hundreds of people. For his part, Johnson engaged recruiters to collect additional claimants and instituted additional practices to avoid detection. He routed refunds into accounts that would not raise alarms, like the business bank accounts of various relatives and the estate and personal accounts of his recentlydeceased grandmother, and he used different business and personal addresses for the delivery and cashing of checks. Moreover, he electronically filed claims in such a manner that they could be traced only to a third party’s wireless network, rather than his own. Overall, the sophisticated means employed by Fountain, Johnson, and their co-conspirators (including Ishmael) allowed the scheme to grow to an extraordinary size while remaining undetected for years. Their cunning and willingness to abuse Fountain’s position with the IRS clearly set this scheme apart from a “typical fraud of its kind.” See Fumo, 655 F.3d at 315. Their conduct led the District Judge to remark, at Johnson’s sentencing, that “this was as sophisticated a tax fraud scheme as this Judge has seen in 22 years.” Gov’t’s Supplemental App. 74. In light of these findings, the application of sophisticated means enhancements to Fountain and Ishmael was not clear error.