Court Opinion

ID: 1029110
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:51:58.601717+00
Date Added: 2024-06-11T12:37:28.636443
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 08-4430

UNITED STATES OF AMERICA,

                Plaintiff - Appellee,

           v.

TIMOTHY RAY CLINE,

                Defendant - Appellant.

Appeal from the United States District Court for the Southern
District of West Virginia, at Bluefield.     David A. Faber,
District Judge. (1:06-cr-00161-1)

Argued:   March 27, 2009                      Decided:   June 9, 2009

Before MICHAEL and TRAXLER, Circuit Judges, and Thomas D.
SCHROEDER, United States District Judge for the Middle District
of North Carolina, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: John Miles Morgan, Charleston, West Virginia, for
Appellant.   Larry Robert Ellis, OFFICE OF THE UNITED STATES
ATTORNEY, Charleston, West Virginia, for Appellee.   ON BRIEF:
Dwane L. Tinsley, HENDRICKSON & LONG, PLLC, Charleston, West
Virginia, for Appellant.      Charles T. Miller, United States
Attorney, Charleston, West Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

        Timothy Ray Cline pled guilty to one count of tax evasion

under 26 U.S.C. § 7201 and one count of Social Security fraud

under        42    U.S.C.     §     408(a)(4).           He     appeals     his      sentence,

contending the district court erred in calculating his sentence

and made incompatible findings of fact.                            Finding no error, we

affirm for the reasons stated below.

                                              I.

        From September 1991 to March 2003, Cline received Social

Security          Disability        Insurance        Benefits      (“DIB”)      in       amounts

ranging       from     $761       to    $1,370       a   month,     based    on      a    prior

determination         that     he      suffered      from     qualifying    disabilities. 1

J.A. 973.           From February 1995 to March 2003, Cline received

payments totaling $35,622.                J.A. 13-14.

        In    1993,   Cline       started    a       chain    of   nightclubs     and     adult

entertainment establishments in southern West Virginia which he

owned, operated and managed through a number of interrelated

corporate entities operating generally under the name “Southern

X-posure.”          J.A. 941-49, 953-64.                 Although he did not draw a

regular salary or wage from any of his companies, he regularly

appropriated the cash door revenue, or “cover charge,” collected

        1
       Cline became entitled to DIB in September 1991 with a
primary diagnosis of degenerative joint disease and a secondary
diagnosis of depression. J.A. 973.

                                                 2
at the nightclubs.         J.A. 941, 958.                From 2001 through 2003

alone, Cline drew an estimated $200,000.                    (Id.)     Neither Cline

nor any of his companies reported this income to the Internal

Revenue Service (“IRS”).          J.A. 971.

     Following the filing of an Information, Cline pled guilty

pursuant to a plea agreement to federal income tax evasion, in

violation of 26 U.S.C. § 7201, and Social Security fraud, in

violation of 42 U.S.C. § 408(a)(4).                J.A. 11-14.

     During    a   three-day      sentencing        hearing,     Cline         pursued   a

previously     filed     Motion      for       Downward     Departure          Based     on

Diminished Capacity under U.S. Sentencing Guideline (“USSG” or

“Guidelines”) § 5K2.13. 2         Cline presented the expert testimony of

Dr. Robert Miller, a forensic psychiatrist, and Timothy Saar,

Ph.D., a treating psychologist.                  Dr. Miller had administered a

series    of   psychiatric     and       psychological       tests    to       determine

Cline’s   mental     capacity,     and     Dr.    Saar    had   treated        Cline   for

substance abuse.       Based on their interaction with Cline and, in

part, on their independent review of Cline’s medical history

predating the offenses, both Drs. Miller and Saar testified that

Cline suffered from mental and emotional conditions supporting a

finding   of   the     diminished     capacity       required       for    a    downward

departure.     J.A. 86, 194-98, 878.             Cline refused to submit to an

     2
       Cline was sentenced pursuant to the Guidelines in effect
on November 1, 2007.

                                           3
examination by Dr. Ralph Smith, the Government’s expert, who

testified that certain of Cline’s test results indicated that he

had   inflated   and     falsified    symptoms    during    his       testing      and,

consistent    with   Cline’s     medical     history,    that    he    had    a    high

probability of malingering.            J.A. 435-40, 458, 482, 489, 493,

495, 919, 922-23.

       The   district    court   denied      Cline’s    motion    and,       instead,

applied a 2-level enhancement under USSG § 3C1.1 for obstruction

of    justice,   based    on   its    finding    that    Cline    had       willfully

manipulated his test answers in an attempt to demonstrate he

possessed the diminished mental capacity necessary to obtain a

downward     departure.        J.A.   1078.      The     district      court       also

declined to apply a reduction for acceptance of responsibility

under USSG § 3E1.1.       J.A. 1076.

       To determine the appropriate base offense level for Cline’s

tax evasion count, the district court calculated the tax loss to

be $266,722.     J.A. 607-08, 1070.           To arrive at this figure, the

district     court   characterized     the    door     revenue   as     a    dividend

payment to Cline from one of his companies.                 J.A. 527, 607-08.

It concluded that the company would have paid $69,608 in taxes

on the door revenue prior to its distribution as a dividend and

included this amount in the total tax loss calculation.                           (Id.)

Based on a tax loss greater than $200,000, the district court

                                        4
assigned a base offense level of 18 to the tax evasion count.

J.A. 1077; USSG § 2T4.1.

        The district court also concluded that the loss for the

Social Security fraud count was $35,622, the entire amount of

DIB   Cline     was    charged     with    improperly      receiving.         J.A.   607,

1078.     It denied Cline’s request to offset from this amount the

Social Security and Medicare taxes he had inadvertently overpaid

on other, unrelated income.                The district court determined that

the Social Security fraud count carried a base offense level of

12,   the   sum       of    a   base   offense     level    of    6    plus   a   6-level

enhancement for causing loss in excess of $30,000.                            J.A. 1078;

USSG § 2B1.1.

        Based   on     these     findings,       the   district       court   imposed   a

sentence of 37 months imprisonment.                     Judgment was entered on

April 2, 2008, and Cline timely appealed.

                                            II.

        We exercise jurisdiction over this appeal under 28 U.S.C. §

1291 and 18 U.S.C. § 3742(a).                     Cline challenges the district

court’s sentence, contending it erred (1) in applying a 2-level

obstruction of justice enhancement under § 3C1.1, (2) in failing

to credit his overpayment of Social Security and Medicare taxes

in calculating the amount of loss for the Social Security fraud

count,    and    (3)       in   making    conflicting      findings      of   fact   with

                                             5
respect to the characterization of the unreported door revenue

he    appropriated    from    his    nightclubs     for   personal      use.   We

discuss each assignment of error in turn.

                                       III.

                                        A.

       Cline     raises    three    related   challenges    to    the     district

court’s imposition of the 2-level enhancement for obstruction of

justice under § 3C1.1 in connection with his attempt to obtain a

downward       departure    for    diminished   capacity    under     §   5K2.13.

First, he claims that the district court improperly relied on

pre-offense conduct.         Second, he argues that the district court

erred in concluding that he intentionally gave false information

to his experts in connection with tests they administered for

their analysis and testimony.           And third, he contends that, even

if he falsified test information, his conduct did not rise to

the    level     required    to     impose    the   obstruction      of    justice

enhancement.

                                        1.

       We first address Cline’s challenge to the district court’s

determination that § 3C1.1 applies to the facts of his case.

This is a legal issue, which we review de novo.                   United States

v. Hicks, 948 F.2d 877, 884 (4th Cir. 1991).

                                         6
     A    2-level       increase      in    a       defendant’s      offense     level   is

authorized if “the defendant willfully obstructed or impeded, or

attempted to obstruct or impede, the administration of justice

with respect to the investigation, prosecution, or sentencing of

the instant offense of conviction” and “the obstructive conduct

related     to    the    defendant’s         offense         of   conviction      and    any

relevant    conduct.”          USSG    §     3C1.1.          Cline    argues     that    the

district court relied on pre-offense medical records to support

the enhancement and that this reliance was improper because any

obstructive conduct evidenced therein is not related to either

of the offenses of conviction.

     Dr.     Miller,        Cline’s    expert,            administered    a     series   of

psychiatric and psychological tests on Cline to determine his

eligibility       for   a    downward       departure.            Among   the    tests    he

administered were:            two IQ tests, two Malingering Probability

Scale     tests     (MPS),      the        Minnesota        Multiphasic        Personality

Inventory        test   (MMPI-2),       and         the    BRIEF-A    test      (measuring

executive ability and behavior regulation).                          J.A. 203-10.         In

rendering his opinion, Dr. Miller relied on the lower of the IQ

scores, showing an IQ of 84.                    J.A. 887.         He also rejected the

first MPS test result that showed a 99% probability that Cline

was malingering and, when the second test result was invalid,

rejected it as well.           J.A. 243-47.           Cline’s MMPI-2 test results,

which suggested that he experienced moderate to severe emotional

                                                7
distress and was introverted and withdrawn, J.A. 232-33, 888,

also showed a high correlation with having been exaggerated for

secondary gain.          J.A. 236.          Cline’s BRIEF-A test results raised

concerns      about      his      ability    to     “initiate    problem         solving   or

activity,       sustain      working     memory,      plan    and    organize       problem-

solving approaches, [and] attend to task-oriented output.”                               J.A.

888.      Dr.      Miller      adopted   the       BRIEF-A    test   results       as    valid

despite      the    fact     that    Cline’s        answers   put    him     in    the   99th

percentile of all test takers for severity and an instruction in

the    test’s      interpretative           guide    cautioned       that    the     results

should be questioned.               J.A. 268-69.          Dr. Miller also considered

and relied upon Cline’s medical records, including pre-offense

records, along with his other testing in rendering his opinion

that Cline suffered from diminished capacity and had an IQ of

84,    demonstrating         borderline       intellectual       functioning.            J.A.

886-89.

       Dr.    Smith,       the    Government’s        expert,    formed      his     opinion

based on the same test results Dr. Miller interpreted because

Cline refused to submit to Dr. Smith’s examination.                               J.A. 429.

Dr. Smith opined that Cline’s higher IQ test score of 88 was

more accurate and, although within the low average intelligence

range   of      80-88,      did    not   support      a    conclusion       of    borderline

intellectual functioning.                (Id.)       Dr. Smith further criticized

Dr. Miller for rejecting the first MPS test result that revealed

                                               8
that Cline was malingering so he could conduct a second MPS

test, whose results he also rejected.                             J.A. 437-38.          He also

opined     the   MMPI-2        test     result            demonstrated        “extreme        over-

endorsement”      by    Cline     and       indicated           that    he    was    “trying     to

create the impression of a severe psychological problem.”                                      J.A.

436.     As to the BRIEF-A test results, Dr. Smith testified that

Cline “pegs it out at the very top, as if he has very, very,

very severe problems in all those areas and it just doesn’t

comport with the rest of his history to have that serious a

problem.”        J.A.    439.         In    short,         Dr.    Smith      opined    that     the

results obtained by Dr. Miller undercut a finding of diminished

capacity and contained significant evidence of malingering, all

of   which   were      inconsistent          with         the    decades      of    evidence     of

Cline’s ability to thrive in the business world.                               J.A. 458, 482,

919, 923.

       The district court concluded that Dr. Miller deviated from

standard testing methodology, ordered and repeated certain tests

to   significantly        influence         the       results,         “disregarded      results

indicating       an     extremely          high       probability”           that     Cline     was

malingering,      and     failed       to     account           for    Cline’s      ability      to

function day-to-day.            J.A. 1073.            It found that Cline “attempted

to manipulate the results of his psychiatric and psychological

evaluations      in    order    to     obtain         a    downward      departure      under     §

5K2.13.”     J.A. 1076.         The § 3C1.1 enhancement was supported, it

                                                  9
concluded,       by   “test   results     indicating         an     extremely      high

probability of malingering, by defendant’s refusal to submit to

an    independent     evaluation   for    purposes     of     his     motion    for   a

downward departure, and by the conclusions of Dr. Ralph Smith,”

the    Government’s      expert    who    confirmed      a        determination       of

malingering.      J.A. 1076.

       There is no evidence that the district court improperly

based its application of the § 3C1.1 enhancement on Cline’s pre-

offense medical records. 3         Rather, it based its determination on

evidence that Cline malingered on psychiatric and psychological

evaluations administered by Dr. Miller, the results of which

were furnished to the district court in support of a downward

departure in the present case.                (Id.)    Thus, we conclude that

§ 3C1.1    was    properly    applied    based    on   the        facts   before   the

district court.

       3
       To the extent that Drs. Miller, Saar and Smith referred to
Cline’s pre-offense medical records in arriving at their
respective conclusions as to Cline’s condition, it bears noting
that Cline introduced the records himself.     Cline’s Motion to
Depart Downward Based on Diminished Capacity references his
extensive pre-offense mental history, including this “extensive
15 year history of psychiatric treatment involving several
Clinicians.”    J.A. 878, 881-82.     The expert reports Cline
submitted in support of his motion also rely on the records.
J.A. 887-88.     Moreover, his counsel expressly invited the
inquiry at the sentencing hearing by stating that Cline had a
“constitutional right” to bring to the court’s attention the
“mental history that [Cline] had for some 17 years.” J.A. 615.

                                         10
                                                2.

       Cline further contends that the district court erred in

concluding that he intentionally falsified his test results.                                       We

review    a      district       court’s    factual         findings      for     clear      error.

United States v. Layton, ___ F.3d ___, 2009 WL 1110814, at *2

(4th Cir. Apr. 27, 2009).                       Under a clear error standard of

review,      a   district       court’s     finding        will     be   reversed          only    if

there is a “definite and firm conviction that a mistake has been

committed.”         United States v. Stevenson, 396 F.3d 538, 542 (4th

Cir. 2005) (internal quotation marks and citation omitted).

       The       record       amply      supports          the     finding          that      Cline

intentionally        faked       test    results      in    an     effort      to    reduce       his

sentence.           For       example,     one       of    the     tests,        the    MPS,       is

specifically designed to detect malingering.                                It demonstrated

that   Cline       had    a     99%   probability          of    doing     so.         J.A.     437.

Cline’s       MMPI-2      and    BRIEF-A    results         also    showed       that      he     was

grossly exaggerating his symptoms for secondary gain. J.A. 235-

36, 436, 438-40, 835, 839.                      That Cline’s expert, Dr. Miller,

rejected      the   MPS       results     and    simply         accepted    the      other      test

results as valid despite their serious deficiencies does not

preclude the district court from relying on such evidence of

malingering.        J.A. 269-70, 210.

       After      considering         Cline’s        evidence,      the     district          court

concluded that Dr. Saar’s testimony was “unsupported by notes or

                                                11
records of his appointments with the defendant” and that Dr.

Miller        “deviated       from     standard       testing       methodology”              and

disregarded key test results that undermined his opinion.                                    J.A.

1073.     Instead, the district court found the testimony of Dr.

Smith,    whose       report    Dr.    Miller      characterized         as        “excellent,

well-written and well-reasoned,” to be more consistent with the

record as a whole.             J.A. 196.      Dr. Smith concluded that Cline’s

MMPI-2 results evidenced his “distortion or exaggeration of the

severity       of    [his]     psychopathology        in     an    attempt         to    derive

secondary gain . . . and [that he] has distorted and greatly

exaggerated his problems to create the impression of a severe

psychological problem.”               J.A. 919.            In concluding that Cline

“willfully          manipulated      his    test     answers       in    an     attempt        to

demonstrate the mental capacity necessary to obtain a downward

departure,”         J.A.    1074,    the    district       court    plainly         found     Dr.

Smith’s testimony more credible.                   A district court’s credibility

determinations         receive       “great    deference.”          United          States     v.

Feurtado, 191 F.3d 420, 424 n.2 (4th Cir. 1999).                              Moreover, in

situations          where    there    are     “two    permissible            views      of    the

evidence, the [district court’s] choice between them cannot be

clearly       erroneous.”           Stevenson,       396    F.3d    at       542     (internal

quotation marks and citation omitted).                        Thus, Cline fails to

demonstrate that the district court clearly erred in concluding

that     he    falsified       test     information         based       on    the       court’s

                                              12
crediting of Dr. Smith’s testimony over that of Drs. Miller and

Saar.

                                              3.

       Cline contends that, even had he falsified responses on Dr.

Miller’s tests, such conduct would not rise to the level of

egregiousness    necessary            to    trigger    the       §    3C1.1     enhancement.

(Appellant’s Br. at 19.)               We review the application of § 3C1.1

to the facts de novo.           Hicks, 948 F.2d at 884.

       The   district          court        found      that          Cline’s     deliberate

manipulation    of    his      answers       to    psychiatric         and     psychological

tests was calculated to lead his examiners to misrepresent his

mental capacity to the district court.                       J.A. 619-22.         Providing

materially false information to a judge is an explicit basis for

the enhancement.          USSG § 3C1.1 cmt. n.4.                     Material information

means    “evidence,        fact,       statement       or     information         that,     if

believed,    would    tend      to    influence       or    affect      the     issue    under

determination.”       USSG § 3C1.1 cmt. n.6.                     Cline’s falsification

of test results was intended to mislead the district court into

concluding     that       he   was     eligible       for    a       downward    departure.

Therefore, the district court properly applied the enhancement

upon     a   finding           that        Cline      willfully          obstructed        the

administration       of    justice         with    respect    to      his     sentencing    by

providing    false        answers      to    the    district          court    through     his

examiners, with the goal of receiving a downward departure to

                                              13
which he was not entitled.            See United States v. Frierson, No.

08-6254,     2009    WL   766533,    at    *2    (10th       Cir.   Mar.    24,   2009)

(unpublished)        (affirming      district           court’s     imposition      of

obstruction of justice enhancement under § 3C1.1 for defendant’s

malingering on his post-plea competency tests); United States v.

Greer, 158 F.3d 228, 234-38 (5th Cir. 1998) (finding obstruction

enhancement     proper      for   defendant      who    feigned     incompetency    by

misrepresenting       his     psychiatric       condition      to   his     examiners,

intending for them to present their inaccurate impressions to

the court).

                                          B.

       Cline also challenges the district court’s sentence on his

Social Security fraud count.              The district court concluded that

the loss on this count was $35,622, the total amount of DIB

Cline received from February 1995 to March 2003.                     J.A. 1078.     In

2001 and 2002, Cline inadvertently overpaid Social Security and

Medicare taxes on other income in the amount of $14,380, a sum

he argues should have been credited against the amount of DIB

payments he improperly received from the Government.                        We review

the    district     court’s    application       of    the    Guidelines     de   novo.

Layton, ___ F.3d at ___, 2009 WL 1110814, at *2.

       The district court calculated the Government’s loss under

USSG    §   2B1.1,   cmt.     n.3(F)(ii),       which    provides,     in    pertinent

part, that in government benefit cases “loss shall be considered

                                          14
to   be   not    less       than   the   value      of     the    benefits       obtained    by

unintended recipients.”               The district court thus determined that

the loss for the Social Security fraud count was $35,622, the

total amount of DIB Cline was charged with improperly receiving.

J.A. 1078.        Cline urges application of the “net loss” theory

under which the Government’s loss would be reduced by “the money

returned . . . by the defendant . . . to the victim before the

offense was detected.”               USSG § 2B1.1, cmt. n.3(E).                  A credit for

his overpayment of taxes would reduce the amount of the social

security loss to $21,242, resulting in a 2-level decrease in his

base offense level. 4          USSG § 2B1.1(b)(1).

      We find Cline’s argument to be without merit.                              The district

court’s calculation of loss was consistent with the Application

Notes, which define loss as “the greater of actual or intended

loss.”       USSG       §    2B1.1    cmt.      n.3(A).          Actual      loss    is    “the

reasonably       foreseeable         pecuniary      harm     that      resulted     from    the

offense,”       and    intended      loss      is   “the    pecuniary        harm   that    was

intended    to        result   from      the    offense.”           USSG     §    2B1.1    cmt.

n.3(A)(i)-(ii).             In making “loss” calculations, the sentencing

court is instructed to hold the defendant “responsible for the

amount     of    loss       which     was      intended,         not   the       actual    loss

ultimately sustained.”               United States v. Loayza, 107 F.3d 257,

      4
       The base offense level is enhanced by 4 levels for a loss
greater than $10,000, and by 6 levels for a loss greater than
$30,000. USSG § 2B1.1.

                                               15
266    (4th       Cir.    1997)   (refusing        to    apply       net   loss   theory     and

credit payments made to victims of Ponzi scheme against amount

of loss intended by perpetrator); cf. United States v. Phelps,

478 F.3d 680, 682 (5th Cir. 2007) (“We are not persuaded that

the amount of tax loss Appellant intended to cause should be

reduced          simply     because     his        scheme       to    defraud       apparently

inadvertently caused payment of excess social security taxes.”).

       Because Cline’s overpayments were “erroneous,” his intended

harm       was    the     full    amount      of    DIB     he       improperly      received.

Moreover,         Cline     has   provided     no       case    applying      the    net   loss

theory       to     government        benefit       cases,       and       nothing    in    the

Application Notes suggests such an application is required here.

Accordingly, the district court properly applied § 2B1.1 cmt.

n.3(F)(ii)         to     calculate    “loss”       in    the    Social      Security      fraud

count as the sum total of DIB payments Cline improperly received

from the Government. 5

       5
       Cline is correct that the trial court’s Sealed Memorandum
of Sentencing Hearing (“Sealed Memorandum”) misstates his
argument as one requesting a credit against the calculation of
loss for the tax evasion count, rather than for the Social
Security fraud count. J.A. 1072. However, the transcript from
his sentencing hearing demonstrates that the district court
understood his request as an offset against the loss for the
Social Security fraud count, and orally denied it.     J.A. 606-
607.   Because the request was denied orally at the sentencing
hearing, the error in the Sealed Memorandum had no impact on
Cline’s sentence and does not alter the fact that the amount of
loss was properly calculated under USSG § 2B1.1.

                                              16
                                      C.

    Cline argues next that the district court committed clear

error in calculating the loss on the tax evasion count when it

characterized the unreported door revenue he appropriated from

his nightclubs as dividend payments rather than a salary.                Cline

contends this error had two significant consequences.               First, he

claims it increased the amount of the tax loss and resulted in a

higher base offense level for the tax evasion count.               Second, he

contends    that   it   is    incompatible   with   the     district    court’s

findings of fact to support the Social Security fraud count.

The district court’s characterization of the door revenue as a

dividend payment is a factual determination reviewable for clear

error.     Layton, ___ F.3d at ___, 2009 WL 1110814, at *2.

                                      1.

    The district court calculated the loss for the tax evasion

count at $266,772.      This sum includes $69,608, the amount of tax

one of Cline’s companies would have paid on the approximately

$204,730    in   unreported    door   revenue   before    paying   it   out   to

Cline as a dividend distribution. 6             J.A. 670.     Cline contends

that the door revenue should have been classified as a salary

and thereby a deductible expense to Cline’s corporation on which

    6
       The door revenue would have been treated first as income
to one of Cline’s companies and been subject to taxation at the
34% corporate rate before being paid out as a dividend to Cline
individually. J.A. 527; see USSG § 2T1.1(c)(1)(A).

                                      17
no tax would have been owed, resulting in no net loss of tax

revenue      to   the   Government.       Treated   in   this   fashion,   the

Government’s loss on the tax evasion count would have been less

than $200,000 and resulted in a base offense level of 16 rather

than 18. 7    J.A. 1077.

     Cline’s contention is without merit.            The record is replete

with testimony that although Cline was encouraged on more than

one occasion by his accountant and his lawyer to draw a salary,

he refused to do so.           J.A. 311-12, 534, 951-52.        The district

court understandably found Cline’s post-conviction argument that

he would have characterized the door revenue as a salary lacking

in credibility.         Moreover, in United States v. Delfino, 510 F.3d

468, 473 (4th Cir. 2007), this court refused to engage in post-

hoc determinations of how a defendant, convicted of tax evasion,

would have completed his tax returns had he not committed tax

fraud. 8      The   district    court’s    characterization     of   the   door

revenue as a dividend was not clear error.

     7
       A tax loss greater than $80,000 results in a base offense
level of 16; whereas a tax loss greater than $200,000 results in
a base offense level of 18. USSG § 2T2.1 & 4.1.
     8
       Cline attempts to distinguish Delfino on factual grounds,
claiming that, unlike Delfino, he actually filed tax returns and
cooperated with the IRS audit.   (Pet’r Br. 35.)   None of these
facts affects the holding that a district court is not required
to speculate and reconstruct what a convicted tax evader would
have claimed as deductions on a hypothetical tax return.
Delfino, 510 F.3d at 473.

                                      18
                                          2.

       Cline     contends      lastly     that    the        district   court    made

incompatible findings of fact in classifying the door revenue as

a salary for purposes of the Social Security fraud count and as

a dividend in calculating the loss for the tax evasion count.

This       argument   incorrectly      presumes       that    the   Social   Security

fraud count is premised upon his receipt of a salary.                         Cline’s

conviction for Social Security fraud is premised on a violation

of   42     U.S.C.    §   408(a)(4),    based    on    his    failure   to   disclose

events that affected his eligibility for DIB with the intent to

fraudulently secure such payments in an amount greater than he

was due. 9     J.A. 14.

       An individual must be under a “disability” to qualify for

DIB.       42 U.S.C. § 423(a)(1)(E).            An individual is not eligible

for DIB if he is engaged in substantial gainful work activity.

20 C.F.R. § 416.920(b).                Work is substantial if it involves

doing significant physical or mental activities and is gainful

if it “is the kind of work usually done for pay or profit,

       9
           Section 408(a)(2) provides that whoever:
       “having knowledge of the occurrence of any event
       affecting (1) his initial or continued right to any
       payment under this subchapter, or (2) the initial or
       continued right to any payment of any other individual
       in whose behalf he has applied for or is receiving
       such payment, conceals or fails to disclose such event
       with an intent fraudulently to secure payment either
       in a greater amount than is due or when no payment is
       authorized shall be guilty of a felony.”

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whether     or     not    a     profit     is        realized.”             20     C.F.R.

§ 416.972(a)-(b) (emphasis added).               In this case, Cline owned,

operated    and     managed      a    chain      of     nightclubs          and    adult

entertainment       establishments        through        a        complex     corporate

structure involving a number of entities.                    The record indicates

that Cline was “very active” in the operation of his clubs,

monitoring nightly alcohol sales and door revenues vigilantly

and   conducting    weekly      reviews    of    reports          detailing      dancers’

individual sales.         J.A. 954, 957-961.            Whether and how he was

compensated is irrelevant -- the operative facts are that he was

engaged    in    significant     physical       or    mental       activity      that    is

usually done for pay or profit, thereby making him ineligible

for DIB payments, and that he failed to disclose this activity.

Because    the   nature    of   the   compensation           is    not   part     of    the

offense conduct, Cline’s Social Security fraud conviction did

not require a factual finding as to whether the compensation was

a salary or a dividend.           Therefore, no conflicting findings of

fact exist between the Social Security fraud and tax evasion

counts.

                                         IV.

      For the foregoing reasons, the sentence imposed on Cline by

the district court is

                                                                              AFFIRMED.

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