Court Opinion

ID: 2644986
Source: CourtListenerOpinion
Date Created: 2013-12-05 18:09:13.72644+00
Date Added: 2024-06-11T12:54:17.654283
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,             No. 09-10471
                Plaintiff-Appellee,
                                         D.C. No.
                v.                    2:05-cr-00121-
                                        DAE-RJJ-1
ROBERT DAVID KAHRE, AKA Robert
D. Kahre,
             Defendant-Appellant.

UNITED STATES OF AMERICA,             No. 09-10528
                Plaintiff-Appellee,
                                         D.C. No.
                v.                    2:05-cr-00121-
                                       DAE-RJJ-11
LORI A. KAHRE, AKA Donna Hall,
             Defendant-Appellant.

UNITED STATES OF AMERICA,             No. 09-10529
                Plaintiff-Appellee,
                                         D.C. No.
                v.                    2:05-cr-00121-
                                       DAE-RJJ-12
ALEXANDER C. LOGLIA,
             Defendant-Appellant.
                                        OPINION
2             UNITED STATES V. KAHRE

     Appeal from the United States District Court
              for the District of Nevada
      David A. Ezra, District Judge, Presiding

                 Argued and Submitted
       June 11, 2012—San Francisco, California

               Filed December 5, 2013

    Before: Proctor Hug, Jr., Johnnie B. Rawlinson,
          and Sandra S. Ikuta, Circuit Judges.

                 Per Curiam Opinion
                    UNITED STATES V. KAHRE                            3

                           SUMMARY*

                          Criminal Law

    The panel affirmed three defendants’ convictions and one
defendant’s sentence for criminal tax offenses arising from
their use of gold and silver coins to pay wages and thus avoid
the reporting of payroll and income taxes.

    Rejecting the defendants’ contention that dismissal of the
indictments was warranted, the panel held that the defendants
had sufficient notice of the illegality of relying on the face
value of coins to avoid paying taxes.

    The panel held that the district court did not abuse its
discretion in denying the defendants’ motions to disqualify
the prosecutor due to his status as a defendant in a Bivens
lawsuit filed by defendants Robert and Lori Kahre. The panel
held that the defendants failed to present clear and convincing
evidence of a conflict.

    The panel held that the district court properly denied as
moot Robert’s initial motion to suppress because none of the
seized evidence was introduced at trial. The panel held
alternatively that Robert’s arrest and the corresponding search
were legally conducted pursuant to a state bench warrant.
The panel held that the district court correctly denied
Robert’s subsequent suppression motion because the warrants
incorporated the accompanying affidavit, which possessed the
requisite specificity limiting the agents’ discretion.

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4                UNITED STATES V. KAHRE

     The panel held that the district court did not abuse its
discretion in excluding evidence challenging the legal import
of its ruling that gold and silver coins used to pay wages were
to be assessed at fair market value for tax purposes. The
panel held that the district court correctly recognized that the
coins were taxable as property based on their fair market
value.

    The panel held that the district court did not commit
reversible error in excluding testimony of the defendants’
contemporaneous statements concerning their tax theories.
The panel explained that in each instance the exclusion was
neither an abuse of discretion nor prejudicial, and held that
the district court acted within its discretion when it excluded,
as irrelevant and prejudicial, evidence of the federal agents’
use of force during execution of the search warrants. The
panel held that the district court did not engage in any
misconduct warranting a new trial.

    The panel held that the district court’s calculation of
Robert’s tax liability at sentencing and the corresponding
restitution amount was supported by the evidence presented
at trial and the jury’s findings, that an enhancement for
obstruction of justice and the denial of a downward
adjustment for acceptance of responsibility were consistent
with the historical record, and that Robert’s below-guidelines
sentence was reasonable and was not disproportionately
severe.
                  UNITED STATES V. KAHRE                         5

                          COUNSEL

Michael K. Powell and Michael J. Kennedy (argued),
Assistant Federal Public Defenders, Reno, Nevada, for
Appellant Lori A. Kahre.

Lisa A. Rasmussen, Las Vegas, Nevada, for Appellant Robert
D. Kahre.

Joel F. Hansen, Hansen Rasmussen, Las Vegas, Nevada, for
Appellant Alexander C. Loglia.

Gregory Victor Davis, Mark S. Determan (argued),
Department of Justice, Washington, D.C., for Appellee
United States.

                           OPINION

PER CURIAM:

    Appellants Robert Kahre (Kahre), Lori Kahre (Lori) and
Alexander Loglia (Loglia) challenge their convictions for
various criminal tax offenses arising from their use of gold
and silver coins to pay wages and thus avoid the reporting of
payroll and income taxes. Appellants contend that dismissal
of the indictments was warranted because Appellants lacked
the requisite notice that their conduct violated applicable tax
laws. Appellants also assert that a new trial was in order
because the prosecutor should have been disqualified due to
his status as a defendant in a Bivens1 lawsuit filed by the

  1
    Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics,
403 U.S. 388 (1971).
6                   UNITED STATES V. KAHRE

Kahres, and because the district court’s prejudicial conduct
and erroneous evidentiary rulings deprived them of a fair
trial. In addition, Robert Kahre challenges the district court’s
denial of his motions to suppress and the sentence imposed.
We affirm Appellants’ convictions and Kahre’s sentence.

I. BACKGROUND

    A. Third Superseding Indictment (Indictment)2

    The Indictment alleged that Appellants engaged in a
conspiracy to avoid the payment of payroll and income taxes
by utilizing a payroll system pursuant to which employees
received their wages in gold and silver coins, which were
later exchanged for cash. According to the Indictment, “the
face amount of the coins was one-eighth of the amount of pay
that the employee actually earned and received in the
envelope of cash[.]” The Indictment alleged that Appellants
failed to withhold the required federal income taxes, medicaid
taxes, and social security taxes from the employees’ wages,
and that Appellants created false invoices to conceal the
payroll expenses. The Indictment also alleged that Kahre
marketed the payroll service to other contractors and charged
an administrative fee for use of the payroll service.

    The Indictment charged all three defendants with one
count of conspiracy in violation of 18 U.S.C. § 371, and one
count of attempting to interfere with the administration of
internal revenue laws in violation of 26 U.S.C. § 7212(a).
Robert and Lori Kahre were charged with an additional count

  2
    The Third Superseding Indictment was the indictment in effect at the
time of trial at issue in this appeal.
                 UNITED STATES V. KAHRE                     7

of attempting to interfere with the administration of internal
revenue laws in violation of 26 U.S.C. § 7212(a).

    The Indictment charged Robert Kahre with forty-eight
counts of failure to pay employment taxes in violation of
26 U.S.C. § 7202; four counts of attempting to evade or
defeat taxes in violation of 26 U.S.C. § 7201; and one count
of wire fraud in violation of 18 U.S.C. § 1343.

    The Indictment charged Lori Kahre with one count of
making false statements to a bank in violation of 18 U.S.C.
§ 1014, and eight counts of attempting to evade or defeat
taxes in violation of 26 U.S.C. § 7201.

     Finally, the Indictment charged Loglia with one count of
filing false income tax returns in violation of 26 U.S.C.
§ 7206(1), and ten counts of attempting to evade or defeat
taxes in violation of 26 U.S.C. § 7201.

   B. Pretrial Motions

       1. Kahre’s Motions To Suppress

    In his search warrant affidavit, Internal Revenue Service
(IRS) Special Agent Jared Halper observed that, although
Kahre’s businesses were generating significant revenues,
Kahre had not filed business tax returns or employment taxes
since the early 1990s. Kahre also had not filed individual tax
returns since 1991.

    Agent Halper averred that Kahre leased employees to
various contractors, and withdrew cash from Bank of the
West for the payroll. According to Agent Halper, Kahre
withdrew $24,096,012 in cash between January 17, 2002, and
8                UNITED STATES V. KAHRE

October 31, 2002. Kahre’s employees collected their wages
at a warehouse located at 6270 Kimberly Avenue in Las
Vegas. The employees received nominal amounts of gold
certificates or gold chips, which they immediately exchanged
for envelopes of cash. Kahre allegedly withheld “sixty
percent of the employees’ payroll. . . .”

    Based on Kahre’s conduct, Agent Halper stated that there
was probable cause to believe that Kahre was engaged in a
conspiracy to evade taxes and to interfere with the
administration of the tax laws by the IRS. Agent Halper’s
affidavit reflected that evidence of Kahre’s criminal activities
could be found at the 6270 Kimberly Avenue, 6295 Grand
Canyon, and 1555 Bledsoe Lane addresses (The Kimberly,
Grand Canyon, and Bledsoe properties).

    In his declaration, Agent Halper related that IRS agents
reviewed the search warrant affidavit prior to the searches.
Kahre was subsequently arrested at Bank of the West
pursuant to a state bench warrant for failure to appear, and the
agents seized $230,913 in cash, which was provided to the
IRS to satisfy Kahre’s “unpaid federal income tax liabilities.”
According to Agent Halper, Kahre had unpaid tax
assessments of approximately $2,000,000.

     The district court ruled that Kahre’s motion to suppress
evidence seized when Kahre was arrested at Bank of the West
was moot because the seized evidence would not be used at
trial. The district court also determined that the government
was not required to return the cash seized from Kahre because
it was used to offset Kahre’s tax liabilities.

   The district court granted in part and denied in part
Kahre’s amended motions to suppress evidence seized from
                 UNITED STATES V. KAHRE                      9

the Kimberly, Bledsoe, and Grand Canyon properties.
Because Kahre was not present during the execution of the
search warrants, the district court held that Kahre lacked
standing to challenge the manner in which the search
warrants were executed. The district court concluded that,
because the search warrant properly incorporated the search
warrant affidavit, the warrant was not overly broad. The
district court also held that the agents properly seized gold
and silver coins relating to Kahre’s payroll scheme.
However, the district court granted Kahre’s motion to
suppress information and documents that were unrelated to
the time periods specified in the warrants.

       2. Appellants’ Motions To Disqualify the Prosecutor
          For Conflict of Interest

    On October 30, 2003, several plaintiffs, including the
Kahres, filed a Bivens action against the federal prosecutor,
as well as other federal defendants. The complaint alleged,
inter alia, that the federal defendants orchestrated an illegal
raid of Kahre’s properties, improperly arrested Kahre and
stole $230,913 in cash from him.

    On October 4, 2004, the district court in the Bivens action
denied the prosecutor’s motion to dismiss premised on
absolute immunity. Treating the complaint’s allegations as
true, the court denied absolute immunity because of the
prosecutor’s alleged involvement in planning the raids.

   The government subsequently filed two indictments
against Appellants, and the district court in the Bivens case
granted the government’s emergency motion to stay the
proceedings based on the pending criminal prosecutions.
During the first trial, the jury was unable to reach verdicts,
10               UNITED STATES V. KAHRE

and the government subsequently filed the Third Superseding
Indictment.

    Prior to the second trial, Kahre renewed a prior motion to
disqualify the prosecutor because of a conflict of interest. In
an attached declaration, Kahre’s counsel related that the
prosecutor had remarked that Kahre’s counsel had
“threatened [his] job and [his] pension,” making the case
“personal.” Kahre filed a subsequent motion to disqualify the
prosecutor because of his pecuniary and emotional interests
in the Bivens action, and because the prosecutor had filed the
indictments as retaliation for being named in the Bivens
action.

    The district court denied Kahre’s motion, ruling that
automatic disqualification was not warranted due to the
pendency of a Bivens action, and that the prosecutor’s
comments did not require disqualification on the merits.

       3. Appellants’ Motions To Dismiss the Indictments
          Based on the Gold and Silver Coins’ Valuation

    Appellants asserted that they lacked the requisite notice
that their payroll payments in gold and silver coins were
taxable at the coins’ fair market value and that their conduct
violated the tax laws. They contended that the lack of notice
in the statutory language compelled application of the rule of
lenity, resulting in a construction of the statute that was most
favorable to them. The district court rejected the Appellants’
argument, explaining that the applicable statutes were
unambiguous regarding the elements of conspiracy to defraud
the government and of willful failure to truthfully account for
taxes owed. The district court added that the statutes’
scienter requirements mitigated any vagueness and that the
                 UNITED STATES V. KAHRE                      11

tax provisions patently articulated reporting and filing
requirements.

    The district court eschewed Appellants’ argument that
they did not defraud the government because gold and silver
coins used to pay employees should have been assessed at
face value, rather than fair market value, for tax purposes. If,
for example, an employee was paid with ten silver dollar
coins, Appellants would argue that the employee received
only ten dollars in wages. However, if each silver dollar had
a fair market value of fifty dollars, the government assessed
the wages at 10 x $50 or $500.00. The district court was
persuaded that Ninth Circuit precedent, as well as that of
other courts including the Tax Court, required taxation of the
coins at fair market value. The district court observed that
the tax code and corresponding Treasury regulations treated
property, such as gold and silver coins used as compensation
for services rendered, as taxable at fair market value.

   C. Trial Testimony and Verdicts

    George Rodriguez (Rodriguez), who pled guilty to tax
evasion, served as a foreman and superintendent for Kahre’s
business, Wright Painting and Drywall. According to
Rodriguez, all employees were required to sign an
independent contract agreement in order to receive their pay.
The agreement was designed to shield Kahre and his
employees from tax obligations by establishing a system of
wage payments in gold and silver.

    Although Kahre told Rodriguez that he was an
independent contractor, Rodriguez described himself as an
employee of Robert Kahre’s business. Kahre had the
authority to direct Rodriguez in the performance of Kahre’s
12              UNITED STATES V. KAHRE

duties, including what work to perform and when the work
was to be performed. Kahre also instructed Rodriguez
regarding the timing of hiring additional workers, and
regarding where to purchase supplies and tools. Kahre also
had the right to terminate Rodriguez’s employment.

    According to Rodriguez, he and the other employees were
paid in gold and silver on a weekly basis based on a system
developed by Kahre and administered by Lori. Each week,
Rodriguez received a single gold coin which he immediately
exchanged for an envelope containing his $500 weekly salary
in cash. All employees were required to accept payment in
gold or silver coins, which coins were later exchanged for
cash. Rodriguez never received W-2 forms reflecting his
wages, and no deductions were made from his wages for
income tax purposes.

   Rodriguez obtained tubes of gold and silver which he
exchanged for envelopes of cash to distribute to the other
employees. Rodriguez confirmed payroll payments after
consulting payroll sheets generated by Lori. Payrolls were
met with cash payments, and Rodriguez did not recall any
employee who actually retained the gold or silver coins as
wage payments.

    Heidi Molesworth (Molesworth), who pled guilty to tax
evasion, was employed in Kahre’s payroll office for five
years. Kahre informed Molesworth that she was an
independent contractor and she signed an independent
contractor agreement.      Nevertheless, Kahre paid
Molesworth’s wages in gold and silver coins that she
immediately exchanged for envelopes of cash. Molesworth
                    UNITED STATES V. KAHRE                           13

did not receive W-2 or 1099 forms,3 and never filed a tax
return. Molesworth paid Kahre’s employees in gold and
silver coins. If an employee retained the gold or silver coins,
the coins’ fair market value was deducted from the cash
wages due.

    Molesworth testified that she and Lori used false names
on the payroll sheets to avoid having to pay taxes, and that it
was standard procedure to use false names on employment
verification forms. Although most other employees were
paid using the gold and silver exchange, Molesworth and the
Kahres did not use that system for payment of their own
wages. Instead, envelopes of cash were prepared for payment
of their wages. Robert Kahre received fees for administering
the payrolls of other companies, for which he used the same
coin/cash payment system he utilized for his employees.

    IRS Special Agent Ryan Rickey testified that, between
1999 and 2003, Kahre’s companies paid $22,382,760.42 in
wages. Between 1998 and 2003, the companies using Kahre
to administer their payrolls paid a total of $95,042,952.14 in
wages and Kahre received $14,100,087.10 in fees. Agent
Rickey also testified that return filing histories reflected that
Kahre did not file any tax returns between 1991 and 2006;

 3
   A W-2 form is “[t]he form that an employer must send to an employee
and the IRS at the end of the year. The W-2 form reports an employee’s
annual wages and the amount of taxes withheld from his or her paycheck.”
http://www.investopedia.com/terms/w/w2form.asp (last visited May 29,
2013).

    A 1099 form is “[t]he IRS form for reporting payments to
independent contractors or interest earned on investments or bank
accounts . . .” http://financial-dictionary.thefreedictionary.com/Form+
1099 (last visited May 29, 2013).
14               UNITED STATES V. KAHRE

Lori filed false returns from 1996 to 1999, and did not file
any returns between 2000 and 2006; and Loglia did not file
returns from 1998 to 2006.

    IRS Revenue Agent Sue Cutler estimated that, between
1999 and 2002, Kahre’s companies paid Kahre a total salary
of $1,956,738, and Kahre earned $14,100,087.10 in fees from
other companies using his payroll services. Agent Cutler
surmised that Kahre owed $2,049,172.97 in income taxes.
Because Kahre did not file any employment taxes for his
businesses from 1999 to 2003, Agent Cutler calculated an
additional tax liability of $7,082,138.54.

    In his testimony, Robert Kahre explained that he
developed his payroll system after the IRS seized his property
and equipment from a failed business. Kahre met John
Nelson (Nelson), who authored books and taught classes
about the IRS and the monetary system, and Nelson’s ideas
influenced Kahre to develop the payment system at issue.

    According to Kahre, he developed his gold payroll system
because the United States government had debauched the
national currency and utilized inflation to confiscate the
wealth of U.S. citizens. Kahre relied on court cases and the
Gold Bullion Coin Act of 1985 that approved gold coins as
legal tender. Kahre devised the independent contractor
agreements to reflect that the IRS was a foreign agent for the
World Bank and the International Monetary Fund (IMF). In
Kahre’s view, by collecting taxes for the IRS, employers
illegally served as foreign agents for the World Bank and
IMF. Kahre relied on several federal statutes, regulations,
and “Presidential Documents” in the process of developing
his payroll system to avoid the collection of taxes on behalf
of foreign agents.
                 UNITED STATES V. KAHRE                      15

     Loglia testified that, like Kahre, he was influenced by
Nelson’s ideas about monetary history and monetary policy.
Loglia believed that Congress approved the use of gold coins
as an alternative to paper currency. Because of his interest in
gold payments, Loglia agreed to work for Kahre, and stopped
filing tax returns in 1993, since his income, calculated in
accordance with the face value of the gold and silver coins,
was below the filing threshold. Loglia believed that there
was legal precedent supporting the gold payment system, and
he calculated his income based on the coins’ face value on the
ground that coins can be legally used to pay debt. Loglia was
of the view that federal statutes and the Gold Bullion Coin
Act of 1985 supported the gold payment system considering
that coins were approved legal tender, and that gold clause
contracts were legally authorized.

    Lori Kahre testified that she started to work for her
brother, Robert, in 1988. In 1993, Kahre commenced paying
Lori her wages in silver dollars, and Lori thought the coins
were legal tender based on Congressional acts. Lori was
persuaded that the coins were legal tender because a coin
shop did not collect taxes when exchanging cash for the
coins, and the companies utilizing Kahre’s payroll system
never challenged the transactions.

    Initially, Lori filed tax returns based on the face value of
the silver coins. In 2000, Lori determined that she received
between $63 and $125 wages per week, based on the face
value of the coins. Because her wages calculated on the face
value of the coins were below the threshold for filing taxes,
Lori did not file any tax returns between 2001 and 2006.

   The jury found Kahre guilty on all counts. Loglia was
acquitted of conspiracy, but convicted on the remaining
16                   UNITED STATES V. KAHRE

counts. The jury found Lori guilty on all counts with the
exception of one count of willfully attempting to evade or
defeat tax.

     D. Sentencing

    The presentence investigation report (PSR) calculated that
Kahre had paid $25,572,307.17 in cash wages to his
employees, and failed to withhold $10,891,791.72 in taxes.
The PSR also determined that Kahre paid $95,175,992.14 in
cash wages to the employees of thirty-five contracting
businesses and thereby obstructed the collection of
$40,847,545.80 in taxes. The PSR estimated the potential tax
loss of Kahre’s payroll scheme at $51,739,337.52. The PSR
estimated an additional $5,696,466.10 in tax liabilities due to
Kahre’s failure to file tax returns in 1992, 1993, 1999, 2000,
2001, and 2002. Combined with the tax losses from the
payroll scheme, the total potential tax loss was
$57,435,803.52.       From these calculations, the PSR
recommended a total offense level of 39, with a guideline
sentencing range of 262 to 327 months’ imprisonment.4

    The PSR calculated $16,060,104.72 in outstanding
restitution from Kahre’s personal tax liability of
$5,168,313.00, and $10,891,791.72 in tax losses from the
payroll scheme.

    During the sentencing hearing, the district court
determined that a base offense level of 30 was supported by
the trial testimony and relevant conduct, and rejected Kahre’s

 4
   The PSR also recommended an upward adjustment for obstruction of
justice in light of Kahre’s false trial testimony, and denial of a downward
adjustment for acceptance of responsibility.
                  UNITED STATES V. KAHRE                       17

objection that the applicable guideline range was 51 to 63
months. The district court held that there was ample support
for an obstruction of justice enhancement, and that a
downward adjustment for acceptance of responsibility was
unwarranted.     The district court concluded that the
recommended restitution amount was supported by the jury’s
findings and the evidence at trial. After deciding that a
downward variance was warranted, the district court
sentenced Kahre to 190 months’ imprisonment and three
years of supervised release. The district court also ordered
$16,060,104.72 in restitution with $10,891,791.72 “to be
jointly and severally owed by co-defendants.”

    The district court sentenced Lori to seventy-two months’
imprisonment, four years of supervised release, and $31,900
in restitution, and sentenced Loglia to twenty-six months’
imprisonment, three years of supervised release, and $83,000
in restitution.

   Appellants timely appealed their convictions and Kahre
timely appealed his sentence.

II. STANDARDS OF REVIEW

    “We review de novo the district court’s ruling on a
motion to suppress.” United States v. Russell, 664 F.3d 1279,
1280 n.1 (9th Cir. 2012) (citation omitted). “The court’s
factual findings are reviewed for clear error . . .” Id. (citation
omitted).

    “The district court’s determination that the predicate law
was clearly established is a question of law which we review
de novo.” United States v. George, 420 F.3d 991, 995 (9th
Cir. 2005) (citation omitted).
18               UNITED STATES V. KAHRE

     “The district court’s refusal to disqualify the prosecutor
is reviewed for abuse of discretion.” United States v. Davis,
932 F.2d 752, 763 (9th Cir. 1991), as amended (citation
omitted).

    “We review evidentiary rulings for abuse of discretion,
though we review de novo the district court’s interpretation
of the Federal Rules of Evidence. . . .” United States v.
Urena, 659 F.3d 903, 908 (9th Cir. 2011) (citation omitted).

    “This Court reviews the district court’s interpretation of
the Sentencing Guidelines de novo, the district court’s
application of the Sentencing Guidelines to the facts of a case
for abuse of discretion, and the district court’s factual
findings for clear error.” United States v. Dann, 652 F.3d
1160, 1175 (9th Cir. 2011) (citation and internal quotation
marks omitted).

    “A factual finding that a defendant obstructed justice is
reviewed for clear error. . . .” United States v. Garro,
517 F.3d 1163, 1171 (9th Cir. 2008) (citation omitted). “A
district court’s decision about whether a defendant has
accepted responsibility is a factual determination reviewed
for clear error. . . .” United States v. Rosas, 615 F.3d 1058,
1066 (9th Cir. 2010), as amended (citation omitted).

    “A restitution order is reviewed for an abuse of discretion,
provided that it is within the bounds of the statutory
framework. Factual findings supporting an order of
restitution are reviewed for clear error. The legality of an
order of restitution is reviewed de novo.” Dann, 652 F.3d at
1175 (citation omitted).
                  UNITED STATES V. KAHRE                    19

III.      DISCUSSION

       A. Denial of Kahre’s Motions To Suppress

    Kahre contends that his arrest and the seizure of payroll
funds at Bank of the West were the products of an illegal,
pretextual search. The district court declined to address this
issue on the merits, concluding that the motion to suppress
was moot because the government was not introducing the
seized evidence at trial. The record confirms the district
court’s conclusion that the seized evidence was not
introduced at trial, thereby rendering the motion to suppress
moot. See United States v. Arias-Villanueva, 998 F.2d 1491,
1502 (9th Cir.1993), overruled on other grounds by United
States v. Jimenez-Ortega, 472 F.3d 1102, 1103-04 (9th
Cir.2007).

    In any event, suppression was not required merely
because the arrest and corresponding search by federal agents
were premised on a state warrant. See United States v.
Hudson, 100 F.3d 1409, 1415–16 (9th Cir. 1996) (upholding
the validity of a federal agent’s arrest and search premised on
a state warrant). Because the agents acted pursuant to a valid
state arrest warrant, the payroll funds were properly seized in
the search incident to Kahre’s arrest. See United States v.
Tank, 200 F.3d 627, 631 (9th Cir. 2000).
20                   UNITED STATES V. KAHRE

    Relying on Fed. R. Crim. P. 41(g),5 Kahre contends that
the payroll funds seized during his arrest should have been
returned. However, Rule 41 is inapplicable, as the seized
funds were applied to Kahre’s tax liabilities pursuant to a
notice of levy. See United States v. Fitzen, 80 F.3d 387,
388–89 (9th Cir. 1996) (“[A]n IRS tax levy will defeat a Rule
41(e) motion. . . . Regardless of whether the defendant owes
federal taxes or state taxes, the existence of a tax levy
demonstrates a right to possession adverse to that of the
defendant.”) (citation omitted).6 The district court, therefore,
properly denied Kahre’s motion to suppress and his request
for the return of the seized funds pursuant to Rule 41.

    Finally, Kahre asserts that the search warrants for the
Bledsoe, Kimberly, and Grand Canyon properties were
invalid general warrants because they did not specify any
criminal activity. To resolve this claim, we “must answer the
threshold question of whether the warrant[s] incorporated
Special Agent [Halper’s] affidavit.” United States v. SDI
Future Health, Inc., 568 F.3d 684, 699 (9th Cir. 2009), as
amended (citation omitted). “If it was incorporated, then we

 5
     Fed. R. Crim. P. 41(g) provides:

          A person aggrieved by an unlawful search and seizure
          of property or by the deprivation of property may move
          for the property's return. The motion must be filed in
          the district where the property was seized. The court
          must receive evidence on any factual issue necessary to
          decide the motion. If it grants the motion, the court
          must return the property to the movant, but may impose
          reasonable conditions to protect access to the property
          and its use in later proceedings.
 6
   The 1996 version of Rule 41(e) corresponds to the current version of
Rule 41(g). See Fed. R. Crim. P. 41(e) (1996).
                  UNITED STATES V. KAHRE                       21

evaluate the affidavit and the warrant as a whole, allowing the
affidavit to cure any deficiencies in the naked warrant.” Id.
(citation and internal quotation marks omitted). “We
consider an affidavit to be part of a warrant, and therefore
potentially curative of any defects, only if (1) the warrant
expressly incorporated the affidavit by reference and (2) the
affidavit either is attached physically to the warrant or at least
accompanies the warrant while agents execute the search.”
Id. (citations omitted). “A warrant expressly incorporates an
affidavit when it uses suitable words of reference. . . .” Id.
(citation and internal quotation marks omitted). The
challenged warrants in this case expressly incorporated the
affidavit, and a copy of the affidavit accompanied the
warrants. As discussed, the affidavits detailed criminal
activities committed in conjunction with Kahre’s operation –
failure to file tax returns, failure to withhold employment
taxes, and conspiracy to evade taxes and to interfere with
administration of the tax laws by the IRS. Because the search
warrants, read in tandem with the accompanying affidavits,
described specific crimes, the searches were not conducted
pursuant to an impermissible general warrant. See id. at
699–702.

   Kahre further contends that, because the warrants lacked
any limitations, seizure of items was improperly left to the
agents’ discretion.

       “The prohibition of general warrants imposes a
particularity limitation, requiring warrants to specify the
items to be seized and the locations to be searched. . . .”
United States v. Vasquez, 654 F.3d 880, 884 (9th Cir. 2011)
(citation and internal quotation marks omitted). “The
description must be specific enough to enable the person
conducting the search reasonably to identify the things
22                    UNITED STATES V. KAHRE

authorized to be seized. . . .” United States v. Smith, 424 F.3d
992, 1004 (9th Cir. 2005) (citation and alteration omitted).

    Attachment B to the warrants sufficiently limited the
agents’ discretion. Although Attachment B utilized the
phrase “all records,” the search was temporally limited to
records “[f]or the period January 1, 1992, until December 31,
1993; and January 1, 1997 to present date[.]”7 The

 7
     Attachment B specified the search parameters as:

          For the period January 1, 1992, until December 31,
          1993; and January 1,1997 to present date:

          A. All records which deal with: Robert Kahre, Bobby
          Kahre, or ALPS, Bobby K’s Carpet Service, Bobby K’s
          Home Care Service, Inc., Gold Contracts and
          Associates, HGK Products, Inc., Master Paints
          Distributing, Master Paints, Production Electric,
          Production Metal, Production Plumbing and Air
          Conditioning, Punchout Industries, Sherman Carpets,
          Sherman Tile and Marble, Sherman Granite and Tile,
          Union Pacific, Union Pacific Construction, Wright
          Painting and Drywall, Wright Painting, Wright
          Products, Inc., and any other business entities
          associated or related to Robert Kahre, including but not
          limited to, ledgers, journals, proposals, estimates, bids,
          contracts, correspondence to and from general
          contractors/sub-contractors/clients/customers/state
          agencies, labor records, employee records, time cards,
          expense records, income records, tax documents, tax
          returns, state records, payroll records, insurance
          records, incorporation records, incorporation filings,
          financial records, records showing the disposition of
          funds and acquisition of assets, scales, weighing
          device(s), records of the acquisition of gold or silver,
          disposition of gold or silver, contracts and
          correspondence that deal with the acquisition and
            UNITED STATES V. KAHRE                           23

disposition of gold or silver, literature describing the
use of gold or silver, envelopes which appear to be used
for payroll purposes, labels, employee listings,
employee identifying information and files, records of
off-site storage, records of security alarms or personnel.

B. All records which deal with Robert Kahre, or any
of the identified entities listed above, or any other
business entities associated or related to Robert Kahre
or Danille Cline, Richard Wellman, Myra Wellman
(a.k.a. Myra Buonomo/Myra Kahre), Gary Bowers,
Lori Rasmussen (a.k.a. Lori Kahre), including but not
limited to, employment records, financial records,
records showing the disposition of funds and/or
acquisition of assets, and any other documents or
records that includes a reference to the above named
entities and individuals.

C. All records which deal with Robert Kahre, or any
of the identified entities or individuals listed above, or
any other business entities associated or related to
Robert Kahre or: Pacific Tile and Marble, D & L
Framing, LLC, R J Company Framing, LLC (a.k.a. D
& L Framing), Mitchell Framing Contractors, Inc.,
Mitchell Drywall Systems, Inc., Mitchell General
Contractors, Inc., R J Company, National Builders,
Inc., National Builders, Olympic Framers, Inc., Bravo,
Inc., Rhodes Framing, Rhodes Design & Development
Corporation, Rocky Top Paint and Drywall, Bronco
Construction, First Premier Drywall and Paint, Brandon
LLC, Bricker Construction, Inc., ABC Roofing and
Siding, Robert Dillon Framing, Toro Concrete, Inc.,
Big Bear Concrete, Action Concrete, AM Concrete,
Bull Concrete, Concrete Systems, or any other business
entities or individuals associated with payroll,
employee leasing, cash payments, receipt of gold or
gold certificates, records to include but not limited to
contracts, agreements, proof of payments, financial
records, invoices, correspondence to or from any of the
24                   UNITED STATES V. KAHRE

search was thus confined to records associated with Kahre’s
corporate entities and with the use of gold and silver
payments. The search warrant affidavits furnished probable
cause to search for the enumerated items. As a result, the
search warrants provided the requisite specificity to limit the
agents’ discretion. See Smith, 424 F.3d at 1004–06.8

   We affirm the district court’s denial of Kahre’s motion to
suppress evidence seized from the Bledsoe, Kimberly, and
Grand Canyon properties.

     B. The District Court’s Determination of Tax
        Valuation Based on the Fair Market Value of the
        Gold and Silver Coins

    Appellants contend that the district court erred in denying
their motions to dismiss the indictments because they did not
know that their use of gold and silver coins for payroll
payments was illegal under the tax laws. Appellants
specifically maintain that the district court’s tax valuation
predicated on the fair market value of the gold and silver

         above, and any other documents, records or evidence
         related to employees and/or payroll.
 8
    Kahre’s reliance on United States v. Bridges, 344 F.3d 1010 (9th Cir.
2003) is misplaced. In Bridges, IRS agents searched a business premised
on a warrant that “delineate[d] no clear material limitation or boundary as
to its scope.” Id. at 1017. Unlike the warrants in this case, the warrant in
Bridges lacked any temporal parameters or limitations regarding the types
of documents associated with the alleged criminal activity. See id. (“The
list is a comprehensive laundry list of sundry goods and inventory that one
would readily expect to discover in any small or medium-sized business
in the United States. . . .”). The warrant in Bridges also failed to specify
any criminal activity and did not incorporate the affidavit. See id. at 1018.
                  UNITED STATES V. KAHRE                      25

coins unfairly imputed criminal intent to their unknowing
actions.

     “The element of wilfulness cannot obtain in a criminal tax
evasion case unless the law clearly prohibited the conduct
alleged in the indictment.” George, 420 F.3d at 995 (citations
and internal quotation marks omitted). “Without sufficient
clarity in the law, taxpayers lack the fair notice demanded by
due process so that they may conform their conduct to the
law.” Id. (citation and internal quotation marks omitted).
“However, a lack of prior appellate rulings on the topic does
not render the law vague, nor does a lack of previously
litigated fact patterns deprive taxpayers of fair notice.” Id. at
995–96 (citation and internal quotation marks omitted).
“Thus, criminal prosecution is permissible when it is clear
beyond any doubt that the conduct is illegal under established
principles of tax law.” Id. at 996 (citation, alterations, and
internal quotation marks omitted).

    Appellants’ argument is unpersuasive, as we have
expressly held that coins are taxable as property when their
fair market value exceeds their face value. In Cordner v.
United States, 671 F.2d 367 (9th Cir. 1982), the appellants
received $20 Double Eagle gold coins as corporate dividends.
See id. at 368. After the appellants reported the dividends at
the coins’ face value, the IRS charged the appellants with a
taxable dividend equivalent to the coins’ fair market value.
See id. We held that the IRS correctly assessed the coins as
property based on their fair market value:

        We have no difficulty in holding that the gold
        coins here, though legal tender and hence
        money for some purposes, are also property to
        be taxed at fair market value because they
26               UNITED STATES V. KAHRE

       have been withdrawn from circulation and
       have numismatic worth. When legal tender,
       by reason of its value to collectors or the
       intrinsic worth of its contents, has a fair
       market value in excess of its face value or
       tender, then it should be deemed property
       other than money . . .

Id. (citations and internal quotation marks omitted).

    In Cal. Fed. Life Ins. Co. v. Comm’r, 680 F.2d 85 (9th
Cir. 1982), the appellant exchanged Swiss francs for $20 gold
coins, and claimed a capital loss premised on the coins’ face
value. See id. at 86. We affirmed the tax court’s
determination that the gold coins were taxable as property
based on their fair market value. See id. We held that usage
of the term “money” in I.R.C. § 1001(b) required a realistic
assessment of the coins as property:

       Section 1001(b) is clearly intended to permit
       a realistic assessment of the economic gain or
       loss attending a sale or exchange. That
       purpose would be frustrated by an
       interpretation that compelled gold coins to be
       treated at a fraction of their true value. We
       therefore conclude that money in § 1001(b)
       refers to the currently circulating medium of
       exchange, while property includes coins that
       have, by reason of their value to collectors or
       the intrinsic worth of their contents, a fair
       market value in excess of their face value.
       Because the key element is the excess of
       market over face value, it is immaterial that
                  UNITED STATES V. KAHRE                       27

        such coins may be legal tender at their face
        value.

Id. (footnote reference and internal quotation marks omitted).

    Appellants attempt to distinguish Cordner and Cal. Fed.
Life Ins. Co. because those cases involved coins that had been
withdrawn from circulation. However, in Cal. Fed. Life Ins.
Co., we declined to recognize this very distinction because
we “agree[ed] with the Tax Court’s conclusion that the
technical status of the coins as legal tender is immaterial . . .”
Cal. Fed. Life Ins. Co., 680 F.2d at 86 n.3 (citation and
internal quotation marks omitted). Rather, we emphasized
that “[b]ecause the key element is the excess of market over
face value, it is immaterial that such coins may be legal
tender at their face value. . . .” Id. at 86 (footnote reference
omitted).

    Other courts have held that coins in circulation may be
assessed at their fair market value. In Joslin v. United States,
666 F.2d 1306 (10th Cir. 1981), the Tenth Circuit considered
whether the taxpayer should have reported payments in silver
dollars at their numismatic value. See id. In that case, an
attorney received 200 silver dollars for legal services, and
reported the income as $200, instead of the fair market value
of $1,000. See id. at 1306–07. The Tenth Circuit observed
that “[i]f a taxpayer receives property other than cash as
compensation, the taxpayer’s income is measured by the
property’s fair market value.” Id. at 1307 (citation omitted).
Based on general tax principles, the Tenth Circuit held:

        Unquestionably, a silver dollar has both a face
        value and a separate value reflecting the
        coin’s numismatic worth. To this extent a
28               UNITED STATES V. KAHRE

       silver dollar combines the characteristics of
       cash and property. When a taxpayer bargains
       for and benefits from the higher market value
       of silver coins, he or she must include this
       amount in income. That silver dollars are
       designated legal tender with a nominal value
       of one dollar acceptable at the United States
       Treasury to discharge one dollar of debt, or
       exchangeable for a one dollar Federal Reserve
       note, does not require a different result. . . .

Id. (citations and footnote reference omitted).

    In Stoecklin v. Comm’r, 865 F.2d 1221 (11th Cir. 1989),
the Eleventh Circuit reached a similar conclusion. In that
case, the appellant, who was the trustee of an equity trust,
formed a corporation for his accounting practice, of which he
was the only shareholder and employee. See id. at 1222–23.
The corporation paid the appellant’s trust 250 silver dollars
per month for the appellant’s services. See id. at 1223.
Although the corporation deducted the coins’ fair market
value as expenses, the appellant only reported the face value
of the coins as income. See id. The IRS subsequently sought
a deficiency premised on the fair market value of the coins.
See id. Applying the precepts developed in Cordner and
Joslin, the Eleventh Circuit rejected the appellant’s argument
that coins still in circulation were assessed at face value, and
held that the IRS properly sought a deficiency premised on
the fair market value of the coins. See id. at 1225; see also
Lary v. Comm’r, 842 F.2d 296, 299 (11th Cir. 1988) (“Where
coins have a fair market value in excess of their face value,
                     UNITED STATES V. KAHRE                             29

their potential use as legal tender is irrelevant. . . .”) (citation
omitted).9,10

    Based on these longstanding and consistent precedent, we
conclude that Appellants had ample notice that their payroll
scheme, premised on the exchange of gold and silver coins
for envelopes of cash, triggered the requirement to remit
payroll taxes to the IRS and to report the payments as income
based on the fair market value of the coins. See George,
420 F.3d at 995–96.11

 9
    Appellants contend that gold and silver coins are statutorily valued at
face value. However, this appeal does not really concern the statutory
value of gold and silver coins when utilized as legal tender. See Cordner,
671 F.2d at 368; Stoecklin, 865 F.2d at 1225. Instead, this appeal
addresses Appellants’ payment of wages in gold and silver coins in a
scheme to avoid payroll taxes, as evidenced by the facts that Kahre’s
employees were required to immediately return the coins for cash and, that
if an employee retained the coins, his wages were reduced by the fair
market value of the coins.
 10
    The Tax Court has also opined that coins are taxed as property at fair
market value when used as compensation for services or goods. See Smith
v. Comm’r, T.C.Memo. 1998-148, 1998 WL 191835, at *3 (U.S. Tax Ct.
1998) (“When the fair market value of legal tender exceeds its face value,
such legal tender is property other than money.”) (citations omitted).
 11
    In their request for judicial notice, Appellants proffer a memorandum
from IRS Senior Counsel Mark Howard as confirmation that the IRS
assesses coins at face value, and that Appellants’ payments in gold and
silver coins were consistent with IRS policy. However, the referenced
memorandum primarily analyzed whether a taxpayer could pay a tax bill
with gold and silver coins at face value. Citing Joslin, Cordner, and Cal.
Fed. Life Ins. Co., the memorandum opined that “the taxpayer may have
taken his pay out of the business in gold and silver coins and reported only
the face value of the coins as income. We note that others have tried such
an approach in the past. In each of these cases, the courts required the
taxpayers to recognize income based on the market value and not on the
30                  UNITED STATES V. KAHRE

    We are not persuaded by Appellants’ argument that the
Gold Bullion Coin Act of 1985, Pub. L. No. 99-185, 99 Stat.
1177, overruled prior legal precedent that coins are assessed
at fair market value. Although the Gold Bullion Coin Act
provides the Secretary of the Treasury with the authority to
mint gold and silver coins for circulation, see 31 U.S.C.
§ 5112(a)(7)–(11) (2010),12 there is no statutory language
reflecting Congressional intent to overrule prior legal
precedent or to establish the taxable value of the coins as their
face value. See id.; see also Sklar v. Comm’r, 549 F.3d 1252,
1262 (9th Cir. 2008) (observing that if Congress intended to
overrule judicial precedent concerning tax laws, “it would
have expressed its intention more clearly”) (citation omitted).
Further, the legislative history of the Act reflects, if anything,
Congressional intent that gold coins retain their fair market
value. See 131 Cong. Rec. H10528-05, 1985 WL 721189
(Cong. Rec. Dec. 2, 1985) (statement of Rep. Annunzio)
(“The gold coins will be sold at the market price of gold plus
a small charge for minting, marketing and distribution,
beginning October 1, 1986. . . .”); see also id. (statement of
Rep. Lewis) (“The actual denomination of these new coins
will be obvious to everyone-1 troy ounce, half-ounce,
quarter-ounce, and tenth-ounce. Their value will be
determined by the free market, just as the values of all other

face value of the coins. This case may provide evidence of some sort of
ongoing scheme . . .” The memorandum does not support Appellants’
argument that their payroll payments were consistent with IRS policy. See
Consolidated Appellants’ Request to Take Judicial Notice of Government
Records and Facts Contained Therein That Can Be Accurately and
Readily Determined, March 5, 2012, Exh. 1, at 2, 5, Case No. 09-10471,
Docket No. 70.
  12
     The Gold Bullion Coin Act of 1985 is currently codified at 31 U.S.C.
§ 5112 (2010).
                 UNITED STATES V. KAHRE                    31

goods and services are determined.”). The legislative record
contains no linguistic or historical support for Appellants’
contention that the Gold Bullion Coin Act of 1985 overruled
prior legal precedent formulating tax assessments for gold
and silver coins.

    Appellants’ reliance on 31 U.S.C. § 5118(a) and (d) in
support of their argument that the district court’s ruling
violated their right to contract is similarly misplaced.
According to Appellants, § 5118 legalizes contracts like
theirs, that contain “gold clauses.”

   Section 5118 provides in relevant part:

       (a) In this section—(1) gold clause means a
       provision in or related to an obligation
       alleging to give the obligee a right to require
       payment in—(A) gold; (B) a particular United
       States coin or currency; or (C) United States
       money measured in gold or a particular
       United States coin or currency.

                             ...

       (d)(1) In this subsection, obligation means any
       obligation (except United States currency)
       payable in United States money. (2) An
       obligation issued containing a gold clause or
       governed by a gold clause is discharged on
       payment (dollar for dollar) in United States
       coin or currency that is legal tender at the time
       of payment. This paragraph does not apply to
       an obligation issued after October 27, 1977.
32               UNITED STATES V. KAHRE

Id. (internal quotation marks omitted).

    Assuming arguendo that § 5118 does “legalize” contracts
containing gold clauses, it would be of no help to Appellants,
because Appellants’ schemes did not implicate gold clause
contracts as defined in § 5118. See § 5118(a)(1) (defining
“gold clause” as an obligation purporting to give the obligee
the right to demand payment in, among other things, gold);
see also 60 Am.Jur.2d Payments § 26 (2012) (“A gold clause
is a provision in or related to an obligation alleging to give
the obligee a right to require payment in gold, a particular
United States coin or currency, or United States money
measured in gold or a particular United States coin or
currency. An obligation issued containing a gold clause or
governed by a gold clause is discharged on payment (dollar
for dollar) in United States coin or currency that is legal
tender at the time of payment. . . .”) (footnote references and
internal quotation marks omitted). Rather than utilizing a
gold clause, i.e., a clause designed to give employees a right
to demand payment in gold, Appellants evaded income and
payroll tax obligations by requiring employees to exchange
gold and silver coins for cash in order to receive their weekly
wages. This practice turned the gold clause standard on its
head. Rather than the obligee (the employee) demanding
payment in gold from the obligor (Kahre), the obligor (Kahre)
required the obligee (the employee) to accept payment in gold
that would then be repaid with cash. Nothing in 31 U.S.C.
§ 5118 or cases interpreting that statute validates Kahre’s
practice.

     Notably, if an employee retained a gold or silver coin in
lieu of cash, the fair market value of the coin, as opposed to
its face value, was deducted from the employee’s wages. The
evidence at trial also established that the Kahres did not
                  UNITED STATES V. KAHRE                       33

participate in the gold and silver coin exchange required of
Kahre’s employees, a clear indication of the illegitimacy of
the practice. Given the inapplicability of § 5118 to Kahre’s
scheme, Appellants’ argument regarding their right to
contract pursuant to that section is unpersuasive.

      In the alternative, Appellants maintain that the
Department of Justice and the IRS lack authority to value
coinage. In essence, Appellants erroneously assume that the
IRS thwarted Congress’ monetary powers, including the
valuation of money. The flaw in Appellants’ assumption is
that the IRS did not establish valuation of coinage as a matter
of monetary policy. Rather, the IRS interpreted and applied
the tax code defining the taxable value of gold and silver
coins as property when used as compensation for services
rendered. The IRS’s actions in no way violated the
separation of powers, as the IRS is “the authority on the
interpretation and application of the Internal Revenue Code
. . .” Tualatin Valley Builders Supply, Inc. v. United States,
522 F.3d 937, 942 (9th Cir. 2008); see also 26 U.S.C.
§ 7805(a) (delegating authority concerning the Internal
Revenue Code).

    Appellants again urge application of the rule of lenity to
reverse their convictions, pointing to the “uncertainty” of
their tax obligations. “The rule of lenity only applies,
however, where there is a grievous ambiguity or uncertainty
in the language and structure of the statute, such that even
after a court has seized every thing from which aid can be
derived, it is still left with an ambiguous statute. . . .” United
States v. Carona, 660 F.3d 360, 369 (9th Cir. 2011), as
amended (citation, alterations, and internal quotation marks
omitted). “Because the meaning of language is inherently
contextual, we have declined to deem a statute ambiguous for
34                  UNITED STATES V. KAHRE

purposes of lenity merely because it was possible to articulate
a construction more narrow than that urged by the
government. . . .” Id. (citation and alteration omitted)
(emphasis in the original).

    As discussed, several federal courts, as well as the Tax
Court, have held that gold and silver coins are assessed at
their fair market value when used for compensation for
services rendered. The applicable tax laws and corresponding
regulations also establish that, when property is used as
compensation, it is assessed at fair market value. See
26 U.S.C. § 61(a)(1) (defining gross income as including
“[c]ompensation for services, including fees, commissions,
fringe benefits, and similar items . . .”); 26 C.F.R.
§ 1.61-2(d)(1) (“[I]f services are paid for in property, the fair
market value of the property taken in payment must be
included in income as compensation. . . .”). Additionally,
Appellants were charged with violating 26 U.S.C. § 7202,
with the operative Indictment alleging that Appellants
“willfully fail[ed] to collect or truthfully account for and pay
over such tax . . .” (emphasis added). Inclusion of a scienter
requirement “mitigates a law’s vagueness, especially with
respect to the adequacy of notice to the complainant that his
conduct is proscribed.” United States v. Guo, 634 F.3d 1119,
1123 (9th Cir. 2011) (citations, alteration, and internal
quotation marks omitted).13

   13
     Appellants posit that the government’s confusion concerning the
valuation of gold and silver coins demonstrates that the law is unsettled.
In support of the premise that the government is in fact confused, they
point to the indictment in United States v. von Nothaus, Case No. 5:09-27
(W.D. N.C.) (von NotHaous Indictment). Appellants assert that
governmental confusion is evidenced by the allegation in the von Nothaus
Indictment that coins constitute United States currency, rather than
property. However, von Nothaus involved the creation and promotion of
                    UNITED STATES V. KAHRE                            35

    We hold that the district court correctly determined that
gold and silver coins used to pay wages were properly
assessed at their fair market value, and that Appellants had
sufficient notice that their conduct was illegal under the tax
laws.

    C. Disqualification of the Prosecutor

     Although we have held that the mere threat of civil
litigation does not warrant a prosecutor’s disqualification, see
United States v. Wencke, 604 F.2d 607, 611 (9th Cir. 1979),
we have not extensively addressed disqualification premised
on an extant civil action against the prosecutor. In United
States v. Kember, 685 F.2d 451 (D.C. Cir. 1982), the D.C.
Circuit addressed an analogous claim. In Kember, the
defendants sought disqualification of two federal prosecutors
who were named as defendants in a lawsuit concerning a
search conducted in bad faith. See id. at 458. The D.C.
Circuit held that the lawsuit alone did not require
disqualification, explaining that:

         The potential conflict of interest that might
         result from a personal civil suit filed against
         an Assistant United States Attorney (AUSA)
         by a defendant in a criminal case for acts
         undertaken by the AUSA in his official
         capacity in the criminal matter would have to
         be very strong before disqualification would
         be justified. It could not be justified by mere

a private coin as competing currency, and not violations of the tax code
through the use of wage payments in gold and silver coins to avoid paying
payroll taxes. As in this case, the legal analysis turned on the manner in
which the coins were used.
36                   UNITED STATES V. KAHRE

         inference from the filing of the suit but would
         require proof, by clear and convincing
         evidence, of a prima facie case of misconduct
         on the part of the AUSA. The defendants
         failed to produce the proof required by this
         standard.

Id. at 459 (citation omitted); see also United States v. Heldt,
668 F.2d 1238, 1275–77 (D.C. Cir. 1981) (per curiam), as
amended (clarifying that a lawsuit filed by a criminal
defendant against a prosecutor does not result in automatic
disqualification of that prosecutor).14

    Appellants contend that the district court improperly
applied a clear and convincing standard of proof in resolving
the disqualification issue because the Supreme Court
overruled Kember in Young v. United States ex rel. Vuitton Et
Fils, 481 U.S. 787 (1987) (Vuitton). In Vuitton, the Supreme
Court considered whether a private attorney, who was the

 14
    Appellants contend that the denial of qualified immunity in the Bivens
action was a unique event that impermissibly motivated the criminal
prosecution. We disagree. The district court in the civil action was
required to assume that the allegations of impermissible motivation were
true. See Ctr. for Bio-Ethical Reform, Inc. v. Los Angeles Cnty. Sheriff
Dep’t, 533 F.3d 780, 798 (9th Cir. 2008) (assuming the truth of allegations
in the Complaint for the purpose of qualified immunity analysis). Given
the posture of the civil case, the district court’s denial of qualified
immunity does not reflect a “unique event” distinguishing this case from
Kembler. We also do not consider the prosecutor’s dismissal of the appeal
in the Bivens case as an admission of misconduct, or proof of an
impermissible conflict of interest. The record simply reflects that
Appellants and the prosecutor, as one of several defendants, dismissed the
appeal based on the parties’ stipulations. Moreover, the government had
an exceptionally strong case against Appellants irrespective of the
prosecutor’s involvement.
                  UNITED STATES V. KAHRE                       37

beneficiary of an injunction regarding a trademark, could be
appointed to prosecute contempt charges for violations of the
injunction. See id. at 790–91. The Supreme Court observed
that “[p]rivate attorneys appointed to prosecute a criminal
contempt action represent the United States, not the party that
is the beneficiary of the court order allegedly violated. . . .”
Id. at 804. “A private attorney appointed to prosecute a
criminal contempt therefore certainly should be as
disinterested as a public prosecutor who undertakes such a
prosecution.” Id. (footnote reference omitted). The Supreme
Court held that “counsel for a party that is the beneficiary of
a court order may not be appointed as prosecutor in a
contempt action alleging a violation of that order.” Id. at 809
(footnote reference omitted). The Supreme Court also held
that harmless error review was inapplicable because the
appointment of an interested prosecutor constitutes structural
error. See id. at 809–10.

    Although the Supreme Court held that, in certain
situations, appointment of a prosecutor with a conflict of
interest constitutes reversible error, the Court did not alter the
standard for determining whether a disqualifying conflict
exists, or even discuss Kember. Concluding that a conflict
existed in Vuitton was an easy call. The appointed prosecutor
was a private attorney who represented Louis Vuitton, the
beneficiary of the injunction being enforced. See id. at
791–92. The Supreme Court identified the pecuniary interest
of the retained counsel/prosecutor as an “inherent conflict.”
Id. at 807. In recognition of that inherent conflict, the
Supreme Court held that “counsel for a party that is the
beneficiary of a court order may not be appointed as
prosecutor in a contempt action alleging a violation of that
order.” Id. at 808 (footnote reference omitted). Because of
the stark difference in facts between Vuitton and this case, we
38                UNITED STATES V. KAHRE

are not persuaded that Vuitton is applicable here. We are,
however, persuaded by and adopt the reasoning of the D.C.
Circuit in Kember. We therefore hold that proof of a conflict
must be clear and convincing to justify removal of a
prosecutor from a case. Otherwise, as noted in Heldt,
prosecutors could be removed simply by the filing of an
action against them. See Heldt, 668 F.2d at 1276.

    This rule is consistent with our precedent, which has
treated the Supreme Court’s ruling in Vuitton as a narrow
one. See F.T.C. v. Am. Nat’l Cellular, 868 F.2d 315, 319 (9th
Cir. 1989) (“The Vuitton opinion focused quite narrowly on
the conflicts of interest faced by private attorneys trying to
represent simultaneously both their private clients’ interests
and the public interest in prosecuting contemnors.
Specifically, the Court in Vuitton appears largely to have been
concerned with conflicting financial interests. . . .”) (citation
omitted) (emphasis in the original). In Am. Nat. Cellular, we
compared the conflict in Vuitton to the financial interests that
would foreclose the participation of a government prosecutor.
See id. (referencing 18 U.S.C. § 208(a), which prohibits
government employees from participating in matters in which
they have a financial interest). It is undisputed that the
prosecutor’s alleged conflict of interest in this case arose after
he was already involved in the case as a government attorney,
and in no way involved a financial interest on the part of the
prosecutor. The dichotomy between the private attorney’s
appointment in Vuitton and non-prejudicial potential conflicts
of interest arising in other contexts is exemplified by the facts
of United States v. Lorenzo, 995 F.2d 1448 (9th Cir. 1993).
In that post-Vuitton case, we considered whether the United
States Attorney’s Office in Hawaii should have been
disqualified because some of its employees were victims of
a tax protest scheme. See id. at 1451–52. Relying on Heldt,
                 UNITED STATES V. KAHRE                      39

we held that disqualification was not warranted because the
defendants failed to demonstrate prejudice. See id. at 1453.
Lorenzo establishes that, at a minimum, defendants must
demonstrate prejudice from the prosecutor’s potential conflict
of interest. See id. Under Kember, which was not overruled
by Vuitton, clear and convincing evidence of prosecutorial
misconduct must be presented. See Kember, 685 F.2d at 459.
This requirement is logical, otherwise any defendant could
disqualify a prosecutor by simply filing a Bivens action
without presenting clear and convincing evidence of
prosecutorial misconduct, but only “complain[ing] of some
action taken by the prosecutor outside of his quasi-judicial
capacity . . .” Heldt, 668 F.2d at 1276.

    Appellants contend that the prosecutor’s comments
regarding threats to his pension from the Bivens action and
his statement that the case was “personal” demonstrate the
requisite misconduct. We do not agree. As the district court
observed, the prosecutor’s remarks occurred in 2008, almost
three years after the filing of the initial indictments in 2005,
and thereby could not have been the impetus for filing the
criminal charges. Moreover, even inflammatory comments
made during a trial do not necessarily warrant reversal. See
Hein v. Sullivan, 601 F.3d 897, 913, 916 (9th Cir. 2010)
(holding that a prosecutor’s derogatory comments in closing
argument regarding defendants and defense counsel were not
prejudicial). The prosecutor’s isolated remarks do not
constitute clear and convincing evidence of misconduct
stemming from an impermissible conflict of interest. See id.
at 916.

    In a similar vein, Appellants maintain that disqualification
was justified because of the heightened prosecutorial
discretion in tax cases, i.e., tax deficiencies may be pursued
40                UNITED STATES V. KAHRE

criminally or civilly. However, this argument overlooks the
reality that an Assistant United States Attorney does not
possess unbridled discretion to pursue prosecution in tax
cases. Rather, the Department of Justice’s Tax Division must
approve all criminal tax prosecutions. See U.S.A.M. § 6-
4:010 (“To achieve uniform, broad, and balanced criminal tax
enforcement, the Attorney General has authorized the Tax
Division to oversee all federal criminal tax enforcement and
to authorize or decline investigations and prosecutions in tax
matters. . . .”) (citation omitted). Appellants do not
persuasively contend that the Department of Justice’s Tax
Division operated under any conflict or that its supervisory
role was ineffective in this case.

    Appellants next argue that the prosecutor’s trial conduct
manifested his conflict of interest. For example, Appellants
assert that the prosecutor, due to his conflict of interest, failed
to elicit from Molesworth that her testimony in the first trial
was perjured. However, Appellants fail to identify any aspect
of Moleworth’s testimony that was false. See United States
v. Bingham, 653 F.3d 983, 995 (9th Cir. 2011) (“We cannot
presume that the prosecutor knew that the prior inconsistent
statement was true but elicited perjured testimony anyway,
and [Appellants] point[ ] to nothing in the record that shows
the intentional use of perjured testimony. . . .”) (citation,
alteration, and internal quotation marks omitted). Appellants
in no way challenge the district court’s ruling that the
government properly disclosed to Appellants prior to trial
Molesworth’s statement that she had previously perjured
herself and that Appellants’ counsel effectively cross-
examined Molesworth on that point. The district court’s
unchallenged ruling rebuts Appellants’ allegations of
prosecutorial misconduct.
                     UNITED STATES V. KAHRE                              41

    Finally, Appellants contend that the prosecutor suborned
perjury because one witness’ testimony was contradicted by
other witnesses.     However, Appellants fail again to
effectively challenge the district court’s ruling that the
contradictory testimony presented a credibility issue, not
perjury. Therefore, the district court did not abuse its
discretion in ruling that the prosecutor should not be
dismissed on this basis. See Davis, 932 F.2d at 761–62.15

    Because Appellants failed to present clear and convincing
evidence of an impermissible conflict of interest or of
prejudice, we conclude that the district court properly denied
Appellants’ motion to disqualify the prosecutor. See Lorenzo,
995 F.2d at 1453; see also Kember, 685 F.2d at 459.

 15
    Appellants posit a litany of alleged discovery violations reflecting the
prosecutor’s conflict of interest. However, the district court did not find
any such violations, and its rulings with respect to disqualification on
these bases did not constitute an abuse of discretion. See United States v.
Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc) (holding that
reversal for “abuse of discretion” is permissible only when the ruling or
finding being reviewed “is illogical, implausible, or without support in
inferences that may be drawn from the facts in the record”).

    Appellants also accuse the prosecutor of misrepresenting the factual
basis for a summary chart that was received into evidence. The district
court ruled that the summary chart was admissible, and that it did not
“hurt the defendant in any way, shape, or form.” Here too, the district
court did not abuse its discretion by declining to disqualify the prosecutor.
42               UNITED STATES V. KAHRE

     D. Evidentiary Rulings

        1. Evidence Concerning the Legality of Gold
           Clause Contracts

    Appellants challenge the district court’s exclusion of
evidence concerning the legality of gold clause contracts.

    As discussed, the district court properly determined that
gold and silver coins should be assessed at fair market value
when used as compensation for services. Based on this
correct legal conclusion, the district court held that proffered
evidence attempting to otherwise establish the requirements
of governing tax law was irrelevant to the issue of
willfulness.    However, Appellants were permitted to
introduce statutes, IRS pamphlets, tax provisions and other
sources upon which Appellants relied in good faith during the
duration of their wage payment system.

    The district court’s ruling fully comported with our
precedent. In United States v. Powell, 955 F.2d 1206 (9th
Cir. 1992), as amended, we observed that, in a criminal tax
case, “a district court may exclude evidence of what the law
is or should be . . .” Id. at 1214 (citation omitted) (emphasis
in the original). In contrast, the district court “ordinarily
cannot exclude evidence relevant to the jury’s determination
of what a defendant thought the law was . . . because
willfulness is an element of the offense.” Id. (emphasis in the
original). “[S]tatutes or case law upon which the defendant
claims to have actually relied are admissible to disprove that
element if the defendant lays a proper foundation which
demonstrates such reliance.” Id. (citations and emphasis
omitted). “Legal materials upon which the defendant does
not claim to have relied, however, can be excluded as
                      UNITED STATES V. KAHRE                               43

irrelevant and unnecessarily confusing because only the
defendant’s subjective belief is at issue: the court remains the
jury’s sole source of the law.” Id. “In addition, the court may
instruct the jury that the legal material admitted at trial is
relevant only to the defendant’s state of mind and not to the
requirements of the law, and may give other proper
cautionary and limiting instructions as well.” Id.

    The district court, therefore, properly excluded evidence,
including proffered expert testimony, that conflicted with its
correct legal ruling that coins were assessed at fair market
value for tax purposes irrespective of their use as legal tender.
See id.16

    Appellants’ contention that the district court’s evidentiary
rulings improperly diluted the burden of proof and precluded
a complete defense is unpersuasive. Although the district
court excluded evidence that contradicted its correct legal
ruling regarding valuation of gold and silver coins for tax
purposes, the court properly instructed the jury that:

         A defendant’s conduct is not willful if that person
         acts due to a good faith misunderstanding of the
         law. Because the government has the burden of

 16
    Appellants’ assertion that the district court erred in excluding evidence
that its ruling was the first in the nation is unavailing. The district court’s
exclusion of the proffered evidence did not impact the presentation of
evidence of Appellants’ good faith beliefs, as the court’s ruling on
valuation of the coins occurred subsequent to the charged conduct and
could not have been relied upon by Appellants in implementing their wage
payment system. See Powell, 955 F.2d at 1214 (instructing that evidence
is admissible only if relied upon by defendants). In any event, as a factual
matter, the district court’s ruling was not the first in the nation. Rather, it
was premised on prior legal precedent.
44                   UNITED STATES V. KAHRE

         proving a defendant acted willfully, the
         government also has the burden of negating a
         defendant’s claim that because of a
         misunderstanding of the law, the defendant had a
         good faith belief that he was not violating the
         relevant provisions of the tax code.

    The district court’s ruling and corresponding instructions
encompassed Appellants’ good faith defense. See Powell,
955 F.2d at 1214 (“In addition, the court may instruct the jury
that the legal material admitted at trial is relevant only to the
defendant’s state of mind and not to the requirements of the
law, and may give other proper cautionary and limiting
instructions as well.”).

         2. Other Evidence Concerning Appellants’ Good
            Faith Belief That The Wage Payments Were
            Not Taxable

    Appellants contend that the district court erred under Fed.
R. Evid. 803(3)17 when it excluded testimony of the Kahres’

 17
     Pursuant to Fed. R. Evid. 803(3), as it existed at the time of the trials
at issue in this case:

         The following are not excluded by the hearsay rule,
         even though the declarant is available as a witness:

         (3) A statement of the declarant’s then-existing state of
         mind, emotion, sensation, or physical condition (such as
         intent, plan, motive, design, mental feeling, pain, and bodily
         health), but not including a statement of memory or belief to
         prove the fact remembered or believed unless it relates to
         the execution, revocation, identification, or terms of the
         declarant’s will.
                     UNITED STATES V. KAHRE                            45

contemporaneous statements regarding their good faith belief
that the payments were legal and non-taxable.

    Appellants challenge only two rulings by the district
court. In the first challenged ruling, the district court
sustained the government’s objection to testimony in which
the witness explained that Kahre told him coins were taxed at
their face value. In the second challenged ruling, the district
court excluded testimony that Lori Kahre instructed another
witness to pay her own taxes.18 This proffered testimony, if
admitted, “would have been hearsay . . . about defendants’
state of mind at the time, a subject about which they could be
examined and cross-examined if they took the stand. But as
a second-hand statement of memory or belief to prove the fact
remembered . . . it is not only hearsay, but irrelevant
hearsay.” United States v. Bishop, 291 F.3d 1100, 1110–11
(9th Cir. 2002) (internal quotation marks omitted).19
Therefore, the district court did not plainly err in excluding it.

    Regardless, any error in excluding the testimony was
harmless. See id. at 1108 (“Not every hearsay error amounts
to a constitutional violation. At a minimum, a defendant

  18
     Because Appellants did not argue before the district court that the
testimony was admissible pursuant to Fed. R. Evid. 803(3), we review for
plain error. See United States v. Orm Hieng, 679 F.3d 1131, 1135 (9th
Cir. 2012) (“We review evidentiary rulings to which no objection was
made for plain error.”) (citation omitted).
   19
      Appellants make the additional argument that the district court
violated their due process rights by admitting evidence of their good faith
beliefs only if Appellants testified. However, the district court actually
permitted Appellants to offer proof of their good faith beliefs through
other sources. Appellants also testified during trial, providing the best
evidence of their good faith beliefs. See Bishop, 291 F.3d at 1110 (“The
best evidence would be the defendant’s own testimony. . . .”).
46                   UNITED STATES V. KAHRE

must demonstrate that the excluded evidence was important
to his defense. . . .”) (citation and alteration omitted). Not
only was the government’s case exceptionally strong, but
Kahre, Lori, and Loglia each testified extensively about the
good faith that underlay their belief that the gold payment
system was legal. See Bishop, 291 F.3d at 1110 (“Such
[third-party] testimony may fall under the state of mind
exception to the rule against hearsay, but it would still be
self-serving, and duplicative of the defendants’ own
testimony about their state of mind, if they chose to
testify. . . .”) (internal quotation marks omitted).20

      E. The District Court’s Partiality

    Appellants contend that a new trial is warranted because
of the district court’s partiality, as evidenced by its improper
comments and conduct.

    “We will reverse a trial court for excessive judicial
intervention only in cases of actual bias . . . or if the judge’s
remarks and questioning of witnesses projected to the jury an
appearance of advocacy or partiality, and the alleged

 20
    Appellants further contend that the district court erred in excluding an
IRS agent’s report that a prior investigation had been closed for lack of
criminal intent. However, Appellants were not prejudiced, as the IRS
agent testified and confirmed his conclusions regarding the lack of proof
of criminal intent.

     Appellants also argue that the district court erred in excluding
evidence concerning the amount of force used against Lori Kahre during
the search. Although Appellants cited no specific ruling, it appears that
the district court excluded evidence related to the searches as irrelevant
and potentially prejudicial. Here too, the exclusion at issue was not
prejudicial, because Lori’s testimony completely elucidated every aspect
of her defense.
                 UNITED STATES V. KAHRE                      47

misconduct had a prejudicial effect on the trial.” United
States v. Scott, 642 F.3d 791, 799 (9th Cir. 2011) (citation and
internal quotation marks omitted). “Before a jury’s verdict
will be overturned because of the conduct of a trial judge in
rebuking or punishing an attorney or otherwise intervening in
the proceedings, it must appear that the conduct measured by
the facts of the case presented together with the result of the
trial, was clearly prejudicial to the rights of the party.” Id.
(citation omitted). “The assessment is to be made, moreover,
in light of the evidence of guilt.” Id. (citation omitted).

     Appellants urge the conclusion that the district court
utilized prejudicial analogies when explaining its evidentiary
rulings to the jury. For example, the district court explained
that the silver coins could be placed into evidence, but could
not be sent back with the jury for jurors to examine, just as
narcotics can be placed in evidence, but not sent back with
the jury. The district court analogized the chain of custody
utilized in narcotics cases to the introduction of records
seized from a residence. The district court also utilized what
it characterized as the “ridiculous example” of an organized
crime figure having a business purpose in the process of
addressing whether a witness could testify regarding a
possible business purpose underlying Kahre’s payroll system.

    Although the district court utilized analogies, its
comments did not undermine Appellants’ defense. It is
presumed that the jury followed the district court’s
instructions that it was not to give any weight to the court’s
explanatory comments. See Scott, 642 F.3d at 800. These
comments do not justify a new trial, particularly in view of
the strong evidence of guilt. See id. at 799.
48                UNITED STATES V. KAHRE

     Although Appellants complain that the district court
improperly objected to the defense’s cross-examination and
denigrated counsel, the record does not reflect that the district
court interfered with or impeded the defense’s cross-
examination at all. Contrary to Appellants’ assertion that the
district court denigrated counsel by impermissibly objecting
to the defense’s cross-examination, the record reflects that the
district court interrupted those questions that were deemed
irrelevant or inappropriate. For example, the district court
interrupted defense counsel when he asked a witness if
escrow could close if “the person may not have remembered
signing it because they were intoxicated when they signed
it[.]” The district court also interrupted a witness who was
reading from documents although the witness lacked any
personal knowledge of the transaction related to the
documents. When defense counsel argued that government
witnesses had been allowed to read from documents, the
district court replied that “[t]o the extent the Government did
it and nobody objected, they shouldn’t have. . . .” The other
asserted instances in which the district court interrupted
cross-examination similarly reflect that the district court
properly intervened to frame the questioning. Appellants
made no showing that the district court’s rulings in
controlling the proceedings were incorrect, or that they were
unable to mount an effective defense. In sum, the district
court did not improperly impede Appellants’ presentation of
their case. See United States v. Gurolla, 333 F.3d 944, 958
(9th Cir. 2003) (explaining that the district court’s rulings
regarding cross-examination constitute reversible error only
in the event the rulings resulted in the denial of a fair trial).

    Appellants’ assertion that the district court interrupted
Loglia’s testimony and denigrated Loglia’s good faith belief
in the wage payment system is similarly unavailing. During
                 UNITED STATES V. KAHRE                      49

his testimony, Loglia stated that he relied in part on Civil War
era cases for his use of gold and silver coins for wage
payments. The district court did not denigrate Loglia’s
reliance on the case law. Rather, the district court accurately
clarified that the weight the jury gave to a legal opinion
admitted into evidence may be affected by changes in legal
precedent. By way of example, the district court simply
remarked that an individual could not rely in good faith on
“Plessy v. Ferguson that used to say separate but equal was
okay in schooling. . . .” The district court also did not commit
reversible error when it merely observed that prior case law
did not “represent the law that applies to this case, nor did it
ever, by the way. It’s the effect on Mr. Loglia that counts.”

    Contrary to Appellants’ assertions, neither did the district
court denigrate Loglia’s reliance on an IRS letter that
purportedly supported the wage payment system. The
government objected to admission of the letter based on its
lack of authentication, and the district court innocuously
remarked that it was not uncommon for government letters to
be fabricated. However, the district court admitted the letter
into evidence because “if [Loglia] actually got the document
and relied on it, thinking it was real, that’s what counts. It’s
not whether in fact it was real.”

    Appellants further contend that the district court
impermissibly explained the government’s theory of the case
when making its evidentiary rulings. Appellants fault the
district court for commenting on the government’s theory that
Lori Kahre acted as a straw buyer for the silver coins; that the
government’s charges were based on a conspiracy; that the
government’s argument was that the gold clause contracts
were a sham; and that the government’s challenge to a
witness was premised on the witness’s bad acts. However,
50                UNITED STATES V. KAHRE

the record reflects that the district court did not impermissibly
explain the government’s theory. Instead, the district court
merely remarked that “[o]ne of the contentions of the
Government in this case is that Ms. Kahre was simply a straw
buyer and that the real owner was Mr. Kahre . . . So that’s for
the jury to decide,” and that “it is the Government’s
contention these people were all in conspiracy together. So
I don’t know what your objection is.” In permitting
testimony concerning an unindicted coconspirator, the district
court simply observed that waiver of the hearsay rule was
warranted “[b]ecause it’s the whole government theory the
reason [the unindicted coconspirator] was doing all these
chicaneries was because he was in league with
[Appellants]. . . .” The district court also passively noted the
government’s position that a gold clause contract utilized by
Appellants was “a sham because it’s a device by which they
are alleging Mr. Kahre used to avoid paying taxes. That is
what they’re claiming.”

     In each case, the district court referred to the
government’s theory as it related to evidentiary issues and
clarified that it was within the province of the jury to
determine the validity of the government’s theory. Thus, we
conclude that Appellants are not entitled to a new trial based
on the district court’s comments or conduct. Our conclusion
is further supported by the strength of the government’s case,
and the court’s curative instructions. See Scott, 642 F.3d at
800.

     F. Robert Kahre’s Sentence

    Kahre challenges the district court’s calculation of his
adjusted offense level and of the applicable guideline range,
                     UNITED STATES V. KAHRE                            51

both of which were largely attributable to the tax loss
associated with his crimes of conviction.

    “The government bears the burden of establishing the
base offense level, and, hence, here, the amount of tax loss,
by a preponderance of the evidence.” United States v.
Montano, 250 F.3d 709, 713 (9th Cir. 2001) (citation
omitted). “Under the preponderance of the evidence
standard, the relevant facts must be shown to be more likely
true than not.” Id. (citations and internal quotation marks
omitted). “In determining the total tax loss attributable to the
offense, all conduct violating the tax laws should be
considered as part of the same course of conduct or common
scheme or plan unless the evidence demonstrates that the
conduct is clearly unrelated.” Bishop, 291 F.3d at 1115
(citation and alteration omitted). “Tax loss is determined
from the reasonably foreseeable conduct of all co-actors, not
just the defendant’s own conduct. . . .” Id. (citation and
alteration omitted).

   Kahre asserts that, because his workers were independent
contractors, the district court erred in calculating a tax loss
premised on payroll taxes for employees.

    The IRS has established a twenty-factor test to
differentiate an employee from an independent contractor for
tax purposes.      See IRS Rev. Rul. 87-41 (1987).21

 21
     The factors include: (1) the employer’s right to require the worker’s
compliance with instructions; (2) the employer’s training requirements;
(3) the integration of the worker’s services into the employer’s business;
(4) the worker’s personal rendering of services; (5) the employer’s hiring,
supervision, and payment of assistants; (6) a continuing relationship
between the employer and the worker; (7) the employer’s setting of hours;
(8) the employer’s requirement of full-time service; (9) performance of
52                   UNITED STATES V. KAHRE

“[G]enerally the relationship of employer and employee
exists when the person or persons for whom the services are
performed have the right to control and direct the individual
who performs the services, not only as to the result to be
accomplished by the work but also as to the details and means
by which that result is accomplished. . . .” Id. “Thus, if such
a relationship exists, it is of no consequence that the
employee is designated as a partner, coadventurer, agent,
independent contractor, or the like.” Id.

    The trial testimony amply supports the district court’s
finding that Kahre’s employees were not independent
contractors. Rodriguez testified at length regarding the
control Kahre exercised over his employees’ work, and
expressly acknowledged that the employees were not
independent contractors. The district court instructed the jury
that it was required to apply the twenty-factor test and
determine whether Kahre’s workers were employees or
independent contractors. Having followed that instruction,
the jury found Kahre guilty on all counts. Given the evidence
and the jury’s findings from that evidence, the district court
did not err in finding that Kahre failed to pay the requisite
payroll taxes for his employees, or in calculating the amount

work on the employer’s premises; (10) the worker’s performance of
services in a sequence set by the employer; (11) the employer’s
requirement that the worker submit oral or written reports; (12) payments
on an hourly, weekly, or monthly basis; (13) the employer’s payment of
business or travel expenses; (14) the employer’s furnishing of materials
or tools; (15) lack of significant investment in the facilities by the worker;
(16) lack of realization of loss or profit by the worker; (17) lack of work
for multiple firms by the worker; (18) lack of availability of the worker’s
services to the general public; (19) the employer’s right to discharge the
worker; and (20) the worker’s right to terminate her or his services. See
IRS Rev. Rul. 87-41.
                    UNITED STATES V. KAHRE                           53

of loss from the tax scheme. See Bishop, 291 F.3d at 1115
(reasoning that tax loss is to be calculated in view of the
totality of the tax evasion scheme).22

    Kahre maintains that he was not responsible for
withholding taxes from wages paid to employees of the
thirty-five businesses that utilized his payroll services.
However, “[i]n determining the total tax loss attributable to
the offense, all conduct violating the tax laws should be
considered as part of the same course of conduct or common
scheme or plan unless the evidence demonstrates that the
conduct is clearly unrelated. . . .” Id. (citation and alteration
omitted) (emphasis added). Kahre was responsible for “the
reasonably foreseeable conduct of all co-actors, not just [his]
own conduct. . . .” Id. This means that Kahre was indeed
responsible for the conduct of the businesses that utilized his
payroll services, particularly since trial testimony revealed
that Kahre devised these payroll services, and administered
them in the same illicit manner as his own. The district court,
therefore, did not err in determining it was more likely than
not that the tax loss incurred from these utilizing companies
was attributable to Kahre.

  22
     Kahre maintains that two of his several hundred employees were
independent contractors as noted in their plea agreements. However,
classification of two individuals as independent contractors would not
undermine the district court’s findings regarding the status of the
overwhelming majority of the employees. See Montano, 250 F.3d at 713
(“Under the preponderance of the evidence standard, the relevant facts
must be shown to be more likely true than not.”) (citations and internal
quotation marks omitted). Given the trial testimony reflecting the
extensive nature of Kahre’s payroll scheme involving several hundred
employees, Kahre’s argument is unavailing.
54                   UNITED STATES V. KAHRE

    Contrary to Kahre’s assertions, the evidence elicited
during trial also supports the district court’s adoption of the
calculation in the PSR of a total tax liability of
$57,435,803.52.       The total tax liability included
$51,739,337.52 in unpaid payroll taxes and $5,696,466.10
Kahre owed in income taxes from 1992 to 2008. Agent
Rickey testified that Kahre earned unreported income of
$10,758,167.32 in fees from his payroll services, and Agent
Cutler calculated that Kahre earned unreported income of
$1,956,739 from his companies. These figures more than
sufficiently support the district court’s tax liability
determination.23

    Kahre next takes issue with the obstruction of justice
enhancement, arguing that he did not attempt to conceal his
gold and silver payroll system from the IRS, testified
honestly about his failure to pay his personal income taxes,
and had a good faith belief that his activities were legal.
However, the obstruction of justice enhancement was
premised on Kahre’s false trial testimony. The indictment
alleged that Kahre engaged in a conspiracy to defraud the IRS
by placing “real property, which he in fact owned, controlled

  23
     Kahre also appears to challenge the amount of restitution stemming
from the calculation of his total tax liability. Although Kahre asserts that
there was no factual basis for the restitution amount, the PSR explained
that the $16,000,000 restitution amount was calculated from $5,168,313
due in income taxes and $10,891,791.72 due in payroll taxes. Because the
district court properly determined Kahre’s tax liability using these figures,
Kahre cannot establish clear error in similarly calculating the restitution
amount. See United States v. Yeung, 672 F.3d 594, 600 (9th Cir. 2012)
(“We review factual findings supporting an order of restitution for clear
error.”) (citation omitted); see also United States v. Jenkins, 884 F.2d 433,
440 (9th Cir. 1989) (observing that restitution is based on the total tax
liability).
                 UNITED STATES V. KAHRE                      55

and otherwise benefitted from, located at 6295 Grand Canyon
Drive, Las Vegas, Nevada, in the name of a nominee,
specifically defendant Danille D. Cline.” During trial, Kahre
testified that he could not have signed a false loan application
on behalf of Cline in Las Vegas on September 11, 2011,
because he was in Oregon on that date. Kahre’s testimony
was belied by currency transaction reports reflecting that
Kahre cashed checks for $65,000, $143,918, and $26,031
around that date in Las Vegas. The PSR recommended an
obstruction enhancement because Kahre “provided materially
false information while testifying at trial.” In support of the
PSR’s recommendation, the government argued that “[t]he
enhancement relates to the false testimony that . . . Kahre
made at trial concerning his whereabouts on September 11,
2001, the day when he and defendant Cline met with Tom
Browne to sign a false home loan application for the purchase
of 6295 N. Grand Canyon Drive.” The district court adopted
the PSR’s recommendation and held that the obstruction of
justice enhancement was supported “by more than a
preponderance of the evidence, in fact, by clear and
convincing evidence . . .” Kahre does not effectively rebut
the district court’s finding that he committed perjury when he
testified. See United States v. Armstrong, 620 F.3d 1172,
1176 (9th Cir. 2010) (“A witness commits perjury if he gives
false testimony under oath or affirmation, concerning a
material matter, with the willful intent to provide false
testimony, rather than as a result of confusion, mistake, or
faulty memory. The sentencing judge need only find by a
preponderance of the evidence that the defendant committed
perjury.”) (citations, footnote reference, and internal
quotation marks omitted).

    The district court’s obstruction of justice enhancement is
not negated because Kahre terminated his payroll system after
56                  UNITED STATES V. KAHRE

the district court ruled that it was illegal. As discussed, there
was ample legal precedent establishing the illegality of
Kahre’s conduct prior to the district court’s ruling to that
effect. Unsurprisingly, the district court relied on that
existing legal precedent to formulate its conclusion that
Kahre’s conduct was illegal. Kahre continued to use the gold
and silver coins after the search warrants were executed, and
apparently only ceased use of his scheme after being indicted.
We affirm the district court’s calculation of the guidelines
range and its related determination of the restitution amount.24

    Kahre’s argument that his sentence is disproportionate is
not persuasive. “The district court was not required to
conform the sentence to those imposed in similar cases . . .
Although comparability is a legitimate sentencing factor,
divergence from sentences imposed in similar cases is
permissible so long as the court is attentive to relevant
sentencing factors, as the district court was here.” United
States v. Burgum, 633 F.3d 810, 813–14 (9th Cir. 2011)
(citation omitted). “A district court need not, and, as a
practical matter, cannot compare a proposed sentence to the
sentence of every criminal defendant who has ever been
sentenced before. Too many factors dictate the exercise of
sound sentencing discretion in a particular case to make the
inquiry [Kahre] urges helpful or even feasible. . . .” United
States v. Treadwell, 593 F.3d 990, 1012 (9th Cir. 2010)
(citation omitted). Kahre’s below-guidelines sentence

 24
   Because the district court did not clearly err when it enhanced Kahre’s
sentence for obstruction of justice, Kahre cannot establish clear error in
the court’s rejection of a downward adjustment for acceptance of
responsibility. See Rosas, 615 F.3d at 1066–67 (explaining that an
obstruction of justice enhancement “ordinarily indicates” that the
defendant has failed to accept responsibility).
                 UNITED STATES V. KAHRE                      57

imposed for the extensive illegal payroll scheme with its
associated tax loss, was comparable to sentences for similar
crimes, and was reasonable. See United States v. Bendtzen,
542 F.3d 722, 729 (9th Cir. 2008) (“Because a Guidelines
sentence will usually be reasonable, [Kahre’s] below-
Guidelines sentence, supported by the district court’s specific
reasoning, is reasonable.”) (citation and internal quotation
marks omitted).

IV.    CONCLUSION

    We affirm Appellants’ convictions and Robert Kahre’s
sentence. Dismissal of the indictments was not warranted.
Appellants had sufficient notice of the illegality of relying on
the face value of coins to avoid paying taxes. Longstanding
and consistent statutory, regulatory, and court precedent
informed the public that gold and silver coins are assessed at
fair market value for tax purposes when used to pay wages.

    We hold that prosecutors must be removed from a case
only if “clear and convincing evidence of a conflict is
presented.” Kember, 685 F.2d at 459. Appellants failed to
present such “clear and convincing evidence.” It follows that
the district court did not abuse its discretion in denying
Appellants’ motions to disqualify the prosecutor.

    The district court properly denied as moot Kahre’s initial
motion to suppress because none of the seized evidence was
introduced at trial. Alternatively, Kahre’s arrest and the
corresponding search were legally conducted pursuant to a
state bench warrant. The district court correctly denied
Kahre’s subsequent motion to suppress because the warrants
incorporated the accompanying affidavit, which possessed the
requisite specificity limiting the agents’ discretion.
58               UNITED STATES V. KAHRE

    The district court did not abuse its discretion in excluding
evidence challenging the legal import of its ruling that gold
and silver coins used to pay wages were to be assessed at fair
market value for tax purposes. The district court correctly
recognized that the coins were taxable as property based on
their fair market value. See Cal. Fed. Life Ins. Co., 680 F.2d
at 86. Neither did the district court commit reversible error
in excluding testimony of Appellants’ contemporaneous
statements concerning their tax theories. In each instance the
exclusion was neither an abuse of discretion, see Hinkson,
585 F.3d at 1263, nor prejudicial. The district court also
acted within its discretion when it excluded, as irrelevant and
prejudicial, evidence of the federal agents’ use of force during
execution of the search warrants. In sum, the district court
did not engage in any misconduct warranting a new trial.

    Finally, the district court did not err when sentencing
Robert Kahre. The district court’s calculation of Kahre’s tax
liability and the corresponding restitution amount was
supported by the evidence presented at trial and by the jury’s
findings. The district court’s enhancement of Kahre’s
sentence for obstruction of justice and denial of a downward
adjustment for acceptance of responsibility were consistent
with the historical record. Kahre’s below-guidelines sentence
was reasonable and was not disproportionately severe when
compared to analogous sentences.

     AFFIRMED.