Court Opinion

ID: 997706
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:00:31.858641+00
Date Added: 2024-06-11T15:27:09.839541
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,
Plaintiff-Appellee,

v.                                                                  No. 98-4074

RICHARD D. SALVATIERRA,
Defendant-Appellant.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Marvin J. Garbis, District Judge.
(CR-96-480-MJG)

Submitted: January 12, 1999

Decided: January 26, 1999

Before MURNAGHAN and MOTZ, Circuit Judges, and PHILLIPS,
Senior Circuit Judge.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

Barry Coburn, COBURN & SCHERTLER, Washington, D.C., for
Appellant. Lynne A. Battaglia, United States Attorney, Joseph L.
Evans, Assistant United States Attorney, Baltimore, Maryland, for
Appellee.

_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Richard J. Salvatierra was charged with one count of conspiracy to
defraud the United States in violation of 18 U.S.C.§ 371 (1994), thir-
teen counts of submitting false and fraudulent claims to the United
States in violation of 18 U.S.C. §§ 2, 287 (1994), and three counts of
willfully filing a false tax return in violation of 26 U.S.C. § 7206(1)
(1994) and 18 U.S.C. § 2. A jury found Salvatierra not guilty of the
first fourteen counts and guilty of the last three counts concerning
false tax returns. On appeal, Salvatierra contends that: (1) the evi-
dence was not sufficient to sustain the convictions, and (2) the court
made several sentencing errors. Finding no reversible error, we
affirm.

We review challenges to the sufficiency of the evidence by viewing
the evidence at trial in the light most favorable to the prosecution,
including all reasonable inferences that can be drawn from the evi-
dence. See Glasser v. United States, 315 U.S. 60, 82 (1942). In 1978,
Salvatierra founded a company called Triton which provided informa-
tion dissemination services to government agencies. Due to Salvatier-
ra's Hispanic heritage, Triton was a certified minority business given
preferences when bidding for government contracts. In the late
1980's, Triton's minority status was due to expire. In order to extend
Triton's contract preference, Salvatierra arranged to have Ricards
International, Inc. ("RII") purchase Triton. RII was owned by Jose
Ricardo, and, like Triton, was a certified minority business eligible
for contract preferences.

RII, which had no assets or employees, assumed all of Triton's
employees, assets, contracts, and property. RII agreed to purchase
Triton stock out of the ongoing proceeds generated by the newly
reconstituted RII. Salvatierra, Triton's principal stockholder, received
payment for his stock pursuant to a debenture by which he was to be
paid $266,000 over time.

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RII received contracts from several government agencies to ware-
house and distribute informational pamphlets and act as a referral ser-
vice. As part of its responsibilities, RII leased warehouse space. RII
was permitted to bill the contracting government agency for the actual
cost of leasing warehouse space.

In 1990, Salvatierra and Albert Ferri, RII's general counsel, created
Potomac Leasing, Inc. ("PLI"). Edsel Billingy, a senior vice-president
at RII, was included in the corporation. Salvatierra's home address
served as PLI's principal office. He owned forty percent of PLI stock
and Ferri and Billingy each owned thirty percent. PLI leased ware-
house and office space. PLI then sub-leased the various spaces to RII
at rates greater than that which PLI paid and at rates greater than that
which RII could have leased the spaces directly from original land-
lords. Government regulations require that services between any enti-
ties under common control can only be billed to the government on
the basis of the actual cost incurred.

Pursuant to a plea agreement, Billingy testified for the Govern-
ment. He stated that PLI accumulated funds that represented the dif-
ference between the leasing fees it was paying building owners and
the fees it was charging RII for leasing the same space. Those funds
were distributed to Salvatierra, Billingy, and Ferri in proportion to
their share of ownership in PLI. Billingy stated that Salvatierra
devised a plan whereby PLI's 1991 corporate tax return was used as
a mechanism to avoid having any of the three stockholders show the
cash disbursement as personal income on their individual tax returns.
Salvatierra told Billingy that the disbursements were made to appear
as PLI's corporate expenses on its tax return. No form W-2s or 1099s
were issued to any of the three stockholders. Salvatierra also told Bil-
lingy that they would not have to claim the disbursement as income
because the disbursements were treated as corporate expenses.

At some point, the plan came to the attention of government
authorities. According to Billingy, Salvatierra discussed creating false
loan documents to make it appear as if the disbursements were loans.

Salvatierra did not report any of the money he received from PLI
as income on his 1991 or 1992 personal income tax return. After an
investigation was commenced by government authorities, Salvatierra

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filed an amended 1992 personal income tax return in which he
declared some of PLI's funds. He also filed a 1993 personal income
tax return in which he declared some of the money he received from
PLI. Testimony from Billingy and Salvatierra's ex-wife and secretary
showed that he used the PLI funds for personal expenses.

In addition, on his 1991 and 1992 personal income tax return,
Salvatierra overstated his unreimbursed employee business expense
deductions. By doing so, Salvatierra was able to decrease his tax bur-
den. Salvatierra also failed to disclose on his 1991, 1992, and 1993
personal income tax returns the debenture payments he was receiving
from RII in exchange for his Triton stock.

At sentencing, Salvatierra objected to the calculation of tax loss
and the application of an upward adjustment to the offense level when
there is unreported income from criminal activity in excess of
$10,000. See U.S. Sentencing Guidelines Manual §§ 2T1.1(b)(1),
2T4.1 (1995). In computing the tax loss, the court considered the false
PLI deductions, the failure of the three stockholders to report income
based upon PLI's disbursements, Salvatierra's false claims of unreim-
bursed business expenses, and his failure to report income with regard
to the debentures. The court found a total tax loss of $98,596.68,
resulting in a base offense level of 14. See USSG § 2T4.1(I). The
court imposed a two-level upward adjustment for having unreported
income in excess of $10,000 in 1991 and 1992 due to the disburse-
ments Salvatierra received from PLI. See USSG § 2T1.1(b)(1). Salva-
tierra was sentenced to 27 months' imprisonment and a one-year term
of supervised release.

Under § 7206(1), the following elements must be proven beyond a
reasonable doubt: (1) Salvatierra made and subscribed to a tax return
containing a written declaration; (2) the tax return was made under
penalty of perjury; (3) Salvatierra did not believe the return to be true
and correct as to every material matter; and (4) he acted willfully. See
United States v. Aramony, 88 F.3d 1369, 1382 (4th Cir. 1996), cert.
denied, ___ U.S. ___, 65 U.S.L.W. 3778, 65 U.S.L.W. 3781 (U.S.
May 27, 1997) (No. 96-752).

Salvatierra challenges the fourth element, contending that there
was insufficient evidence of willfulness in filing false tax returns.

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Willfulness is "a voluntary, intentional violation of a known legal
duty." Cheek v. United States, 498 U.S. 192, 200-01 (1991) (internal
quotation marks omitted). In Salvatierra's case, if he knew that PLI's
1991 tax return mislabeled disbursements as business expenses and
that he should have reported more income in his personal tax returns
than he did, then he acted willfully. See, e.g. , Sansone v. United
States, 380 U.S. 343, 353 (1965). At trial, Salvatierra claimed that his
reliance on his accountant in the preparation of the tax returns negates
the element of willfulness. See United States v. Morris, 20 F.3d 1111,
1115 n.4 (11th Cir. 1994) (noting that good-faith belief that defendant
complied with tax laws is a complete defense to willfully filing a false
tax return).

In determining the sufficiency of the evidence, we must view the
evidence in the light most favorable to the government and inquire
whether any rational trier of fact could find the essential elements of
the crime beyond a reasonable doubt. See Jackson v. Virginia, 443
U.S. 307, 319 (1979). We do not weigh the evidence or review the
credibility of the witnesses. See United States v. Wilson, 118 F.3d
228, 234 (4th Cir. 1997).

Although Salvatierra denied having conversations with Billingy
regarding the manner in which PLI's disbursements should be han-
dled, the jury was entitled to believe Billingy's testimony. See United
States v. Singh, 54 F.3d 1182, 1186 (4th Cir. 1995) (jury makes credi-
bility determinations and resolves conflicts presented by the evi-
dence). Thus, with Billingy's testimony in mind, there was sufficient
evidence to find that Salvatierra willfully filed a false income tax
return form on behalf of PLI due to the mislabeling of the disburse-
ments to the stockholders. Likewise, there was sufficient evidence to
find that Salvatierra willfully submitted false personal income tax
return forms in 1991 and 1992 due to his failure to declare the funds
received from PLI.

Salvatierra also contends the court made several errors with regard
to computing the tax loss for purposes of sentencing. The court's fac-
tual findings with regard to computing tax loss is reviewed for clear
error. See United States v. Fleschner, 98 F.3d 155, 160 (4th Cir.
1996), cert. denied, ___ U.S. #6D6D 6D#, 65 U.S.L.W. 3838 (U.S. June 23,
1997) (No. 96-7983). Based upon a finding that Salvatierra caused a

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total tax loss of $98,596.68, the court imposed a base offense level of
14. See USSG § 2T4.1.

Salvatierra argues that it was error for the court to include as part
of the total tax loss the tax loss caused by Ferri and Billingy based
upon their alleged failure to report funds received from PLI. In com-
puting tax loss, the court may consider the conduct of co-conspirators
taken in furtherance of the execution of the jointly-undertaken crimi-
nal activity that was reasonably foreseeable by the defendant. See
United States v. Martinez-Rios, 143 F.3d 662, 674 (2d Cir. 1998);
United States v. Clark, 139 F.3d 485, 490 (5th Cir. 1998), cert.
denied, ___ U.S. ___, 67 U.S.L.W. 3237 (U.S. Oct. 5, 1998) (No. 98-
5463).

In 1991, Ferri and Billingy each received approximately $15,000
from PLI. The court found the tax loss attributed to those two men
to be about $8500, or 28% of the funds received. See USSG
§ 2T1.1(c)(1)(A). Neither the Government nor the probation office
had argued that the tax loss caused by Ferri and Billingy should be
considered part of Salvatierra's relevant conduct. According to Salva-
tierra, there was no evidence of an agreement among the three stock-
holders regarding the manner in which the PLI money should be
handled when filing personal income tax forms, nor was there any
evidence of a jointly undertaken activity. Further, Salvatierra asserts
that there was no evidence of how Ferri treated his share of the PLI
money.

We conclude that the district court did not err in finding that there
was a jointly undertaken criminal activity. It appears, however, that
the court overestimated the tax losses that could be attributed to
Salvatierra on account of conduct by Ferri and Billingy. While the
court found that Billingy did not report any of the funds received from
PLI, the evidence showed that Billingy reported about $5000 of the
$15,000 he received in 1991. Furthermore, Salvatierra correctly con-
tends that there was no evidence explaining whether or to what extent
Ferri did or did not properly report his receipt of funds from PLI.
Nevertheless, even if the $8500 tax loss allegedly caused by Ferri's
and Billingy's conduct is subtracted from the total tax loss attributed
to Salvatierra, the base offense level calculated by the district court
does not change. Salvatierra would be left with a tax loss of about

                    6
$90,000, far more than the $70,000 tax loss needed for an offense
level of 14. Thus, even if there was an error, Salvatierra was not prej-
udiced.

Salvatierra also contends the court erred by considering Salvatier-
ra's false claims of deductions for unreimbursed business expenses.
The court stated that Salvatierra's "generalized, largely vague, asser-
tions that his expenditures were for business purposes are not worthy
of the slightest credence." (J.A. at 124). There was testimony that
despite Salvatierra's contentions, RII always reimbursed him for his
business expenses. His ex-wife identified some of the expenses as
personal, including items for car repairs, health club memberships,
vacations, and political contributions. In addition, the evidence estab-
lished that certain travel expenses Salvatierra insisted were business
related were actually family related, including trips to visit his son at
college in North Carolina and a brother-in-law at Hilton Head, South
Carolina. We defer to the district court's finding regarding Salvatier-
ra's credibility and find that it did not clearly err in considering the
unreimbursed business expenses in determining the tax loss. See
United States v. Sampson, 140 F.3d 585, 591 (4th Cir. 1998).

Salvatierra also contends that the tax loss occasioned by the 1991
PLI income tax return should not be attributed to him. He claims that
there was no evidence that he willfully filed a false tax return in that
instance. This argument is a duplication of Salvatierra's sufficiency
of the evidence argument. As previously stated, there was sufficient
evidence to find Salvatierra's conduct willful. Accordingly, the court
did not err by including this tax loss as part of Salvatierra's total tax
loss.

In addition, Salvatierra contends that the court erred by including
as part of the total tax loss Salvatierra's 1993 Schedule C deductions.
Salvatierra's 1993 personal income tax return was completed with the
understanding that there was investigation regarding PLI. Unlike the
1991 and 1992 personal income tax returns, Salvatierra now claimed
some of the income received from PLI. He attempted to offset the
income by claiming several Schedule C deductions, which were simi-
lar to the unreimbursed business expenses claimed in 1991 and 1992.
The court found these deductions to "have the same lack of validity
as did [Salvatierra's] deductions for unreimbursed employee business

                     7
expenses." (J.A. at 125). Salvatierra attempted to shift the blame to
the accountants who prepared the tax return. However, the accoun-
tants relied solely on information provided by Salvatierra. We find the
court did not clearly err in finding that the 1993 deductions were part
of the same course of conduct intended by Salvatierra to reduce his
tax liability.

Salvatierra also argues that the court erred by considering the tax
loss due to under-reporting the debenture payments received in 1991,
1992, and 1993 in determining the total tax loss. Salvatierra contends
that there was no evidence that he knew the payments needed to be
reported as income. He also contended that the failure to report the
payments was not relevant conduct because it was not related to the
charged conduct.

The court found that due to Salvatierra's experience in business,
"he knew full well that these debenture payments constituted income
to him." (J.A. at 126). Furthermore, the court found noteworthy
Salvatierra's failure to disclose this source of income to his accoun-
tants when they were preparing amended tax returns in 1993. Con-
cealing sources of income from an accountant that results in a false
tax return may be evidence of willfulness to avoid paying taxes. See
United States v. Beidler, 110 F.3d 1064, 1069 (4th Cir. 1997) (citing
Spies v. United States, 317 U.S. 492, 499 (1943)); United States v.
Madden, 300 F.2d 757, 758 (4th Cir. 1962).

As for whether the conduct can be considered relevant conduct for
sentencing purposes, it is well established that conduct may be con-
sidered relevant even if the defendant is not convicted of an offense
based on the conduct. The Government need only establish the exis-
tence of relevant conduct by a preponderance of the evidence. See
United States v. Jones, 31 F.3d 1304, 1316 (4th Cir. 1994). In deter-
mining the total tax loss attributable to an offense as relevant conduct
under USSG § 1B1.3(a)(2), "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." USSG § 2T1.1 comment. (n.2).

Salvatierra's failure to report the debenture payments was part of
a pattern of conduct that included his failure to report other sources

                    8
of income. All the conduct occurred within a three-year period and
involved the same tax returns and the same source of income, namely
RII. We find no error in considering this source of income as part of
the total tax loss.

Finally, Salvatierra contends it was error to impose a two-level
enhancement for failing to report income exceeding $10,000 in 1991
and 1992 that was derived from criminal activity. See USSG
§ 2T1.1(b)(1). The Government sought the enhancement due to
Salvatierra's use of PLI to overcharge government agencies for ware-
house and office space. This conduct was the basis of counts two
through fourteen charged in the indictment. The Supreme Court
recently held "that a jury's verdict of acquittal does not prevent the
sentencing court from considering conduct underlying the acquitted
charge, so long as that conduct has been proved by a preponderance
of the evidence." United States v. Watts, 519 U.S. 148, 157 (1997).

The court found that the Government proved the criminal activity
by a preponderance of the evidence. Salvatierra testified that PLI was
formed because landlords were not willing to lease space to RII
because of its financial situation. The court did not find this excuse
credible, noting that Salvatierra effectively controlled both corpora-
tions and that the rent PLI charged RII, which was passed on to gov-
ernment agencies, was excessive. The court also noted that PLI
inflated the amount of square footage it was subletting to RII. We
agree with the district court that the Government proved its case of
fraud against the government agencies by a preponderance of the evi-
dence. Accordingly, the two-level enhancement was proper.

We affirm the convictions and sentence. We dispense with oral
argument because the facts and legal contentions are adequately pre-
sented in the materials before the court and argument would not aid
the decisional process.

AFFIRMED

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