Court Opinion

ID: 2973111
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:58:25.484938+00
Date Added: 2024-06-11T11:36:22.132431
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                                Pursuant to Sixth Circuit Rule 206
                                      File Name: 05a0485p.06

                    UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________

                                                      X
                                 Plaintiff-Appellee, -
 UNITED STATES OF AMERICA,
                                                       -
                                                       -
                                                       -
                                                            Nos. 04-6184/6185
            v.
                                                       ,
                                                        >
 CHARLES C. STONE (04-6184); DORA B. STONE             -
                                                       -
                            Defendants-Appellants. -
 (04-6185),

                                                       -
                                                      N
                        Appeal from the United States District Court
                   for the Eastern District of Tennessee at Chattanooga.
                     No. 02-00189—Curtis L. Collier, District Judge.
                                   Argued: October 27, 2005
                            Decided and Filed: December 23, 2005
              Before: KEITH, KENNEDY, and BATCHELDER, Circuit Judges.
                                     _________________
                                          COUNSEL
ARGUED: Douglas A. Trant, Knoxville, Tennessee, for Appellants. Brian Galle, TAX DIVISION,
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Douglas A. Trant,
Knoxville, Tennessee, Roger W. Dickson, Travis R. McDonough, MILLER & MARTIN,
Chattanooga, Tennessee, for Appellants. Brian Galle, Alan Hechtkopf, TAX DIVISION,
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
                                     _________________
                                         OPINION
                                     _________________
        KENNEDY, Circuit Judge. On March 26, 2004, Defendants Charles C. Stone and Dora B.
Stone (collectively “Defendants” or “the Stones”) were convicted by a jury of one count of
conspiring to defraud the United States by impeding the Internal Revenue Service in the
ascertainment and collection of tax, in violation of Title 18 U.S.C. § 371, and three counts of
attempting to evade income tax, in violation of Title 26 U.S.C. § 7201. They were both sentenced
under the then mandatory U.S. SENTENCING GUIDELINES MANUAL (Guidelines). On appeal, they
jointly and individually raise errors with respect to both their convictions and their sentences,
primarily based on the United States Supreme Court’s rulings in Crawford v. Washington, 541 U.S.
36 (2004), and United States v. Booker, 125 S. Ct. 738 (2005). For the following reasons, we
AFFIRM their convictions, but REMAND for re-sentencing.

                                                1
Nos. 04-6184/6185 United States v. Stone, et al.                                               Page 2

                                         BACKGROUND
        Defendant Charles Stone owned Benton Manufacturing Company (BMC), a textile facility,
located in Benton, Tennessee. Mr. Stone managed the company, and his wife, Mrs. Dora Stone,
handled many administrative tasks, including keeping its books. BMC kept a corporate ledger of
all expenses for the company. The ledger contained a stub for each check drawn on the corporate
account. Mrs. Stone coded each stub to indicate what kind of corporate expense each check had
been drawn to pay. She then provided the stubs to the corporate accountant, a Mr. Robert George,
who would use those codes to determine whether each expense was a proper tax deduction on
BMC’s corporate tax return.
        Between 1993 and 1995, Defendants drew on corporate accounts to pay for over $200,000
in personal expenses. Checks drawn on the corporate account during this period were used to
remodel and furnish a summer home, for portraits of family members, and for several trips to
Florida. Defendants also charged large sums on their corporate American Express card for retail
clothes, jewelry, household furniture, tanning products and services, hotels in the Carribean, pool
and spa equipment, and monogrammed bathrobes. Defendants did not report any of these payments
on their personal income tax returns. All of the expenses were coded in the corporate ledger and
deducted from BMC’s corporate tax return as ordinary and necessary business expenses.
         The Government’s principal witness was Internal Revenue Service Agent Theresa Cantrell
(“Agent Cantrell”). Agent Cantrell was heavily involved in the investigation of the Stones. She
testified at both the trial and during the sentencing phase.
                                            ANALYSIS
         Defendants first challenge their convictions. They allege that Agent Cantrell based much
of her testimony on testimonial hearsay statements in violation of the U.S. Supreme Court’s ruling
in Crawford v. Washington, 541 U.S. 36 (2004). Crawford held that the “Confrontation Clause” of
the Sixth Amendment prohibits the introduction of testimonial statements by witnesses not called
to testify at trial. Id. at 68. Defendants argue that Agent Cantrell relied on out-of-court statements
made by witnesses who did not testify at trial and that her opinions were inadmissible under
Crawford. “The applicable standard of review for an evidentiary ruling of the district court where
the evidentiary issues relate to a claimed violation of the Sixth Amendment is the de novo standard.”
United States v. Robinson, 389 F.3d 582, 592 (6th Cir. 2004).
         Defendants, however, do not point to any testimony by Agent Cantrell that was not supported
by prior in-court witness testimony or by documents properly admitted into evidence. In fact, the
Government points to an exchange in which Agent Cantrell indicated that her expert opinions were
based on witness testimony and documents properly admitted into evidence. Because Defendants
do not establish that Agent Cantrell relied on out-of-court interviews of witnesses not called to
testify, their Crawford argument is not well taken. As this Crawford argument is the only
assignment of error relating to guilt Defendants make on appeal, their convictions are affirmed.
        Defendants also allege several errors with respect to their sentences. First, Defendants allege
that Crawford prohibits Agent Cantrell from opining on the amount of loss caused to the government
based on out-of-court statements made by witnesses not called to testify at trial. Unlike during the
conviction phase of the trial, Agent Cantrell arguably relied on “testimonial hearsay” statements
during the sentencing phase of the trial. It is an open question in this circuit whether our rule that
“confrontation rights do not apply in sentencing hearings . . .”applies after Crawford. U.S. v.
Silverman, 976 F.2d 1502, 1510 (6th Cir. 1992) (en banc). See also U.S. v. Gatewood, 230 F.3d 186,
192 (6th Cir. 2000). We are guided by our recent decision in U.S. v. Kirby, 418 F.3d 621, 627-28
(6th Cir. 2005), where we held that Crawford did not apply to evidence offered at revocation of
Nos. 04-6184/6185 United States v. Stone, et al.                                                             Page 3

supervised release hearings. In Kirby, we relied on our prior decision in Silverman as precedent
establishing that the confrontation clause did not apply in sentencing proceedings. Id. The First
Circuit has also evaluated this question and determined that nothing in Crawford compels a different
result. See U.S. v. Luciano, 414 F.3d 174, 178-80 (1st Cir. 2005) (“Nothing in Crawford requires
us to alter our previous conclusion that there is no Sixth Amendment Confrontation Clause right at
sentencing.”). We agree with the First Circuit. Because Crawford was concerned only with
testimonial evidence introduced at trial, Crawford does not change our long-settled rule that the
confrontation clause does not apply in sentencing proceedings.
        Defendants’ final joint challenge to their sentences is based on the Supreme Court’s recent
ruling in United States v. Booker, 125 S. Ct. 738, 765 (2005). See also United States v. Oliver, 397
F.3d 369, 378 (6th Cir. 2005). Defendants allege that the district court’s determination of the
amount of tax loss and the imposition of an obstruction of justice enhancement violated their Sixth
Amendment rights. Based on the Supreme Court’s ruling in Booker, the Sentencing Guidelines are
no longer mandatory; they are advisory. Booker, 125 S. Ct. at 764. See also Oliver, 397, F.3d at
378. In U.S. v. Barnett, 398 F.3d 516, 526-30 (6th Cir. 2005), this court determined that a sentence
imposed under the mandatory Guidelines is plain error that requires a remand for re-sentencing.
Under Oliver and Barnett, we must remand this case to the district court for re-sentencing.
        Insofar as Defendants argue that the district court should not make judicial findings of fact
as to the amount of tax loss, or as to whether Defendants obstructed justice, those assignments of
error are not well taken. Booker did not eliminate judicial fact-finding. Instead, the remedial
majority gave district courts the option, after calculating the Guideline range, to sentence a
defendant outside the resulting Guideline range. Booker, 125 S. Ct. at 764, 769; U.S. v. Williams,
411 F.3d 675, 678 (6th Cir. 2005). District courts, in cases such as these, must, therefore, calculate
the Guideline range as they would have done prior to Booker, but then sentence defendants by taking
into account all of the relevant factors of 18 U.S.C. § 3553, as well as the Guidelines range.1
        Finally, we address the argument made by Defendant Charles Stone that the district court
should have reduced his sentence to reflect his claimed minor role in the offense pursuant to United
States Sentencing Guideline (“U.S.S.G.”) § 3B1.2. Defendant Charles Stone has the burden of
proving this mitigating factor by a preponderance of the evidence. See U.S. v. Lloyd, 10 F.3d 1197,
1220 (6th Cir. 1993). We review a district court’s fact-based culpability determination for clear
error. See id. Mr. Stone attempts to meet his burden of demonstrating he is entitled to this reduction
by arguing that it was Mrs. Stone who falsely coded the BMC check stubs and that he made
relatively few purchases with the corporate American Express card. Even if this were true, the facts
on the record concerning Mr. Stone’s role in the crimes are substantial. Mr. Stone was the sole
owner of BMC, he signed all of the fraudulently coded checks, signed the fraudulent tax returns,
received five times the salary from BMC than that of Mrs. Stone, and split with her the tax benefits
of the unreported income and false deductions. Thus, as the Government states, “without [Mr.
Stone’s] contributions, the scheme could not have succeeded.” (Appellee’s Br. at 32.). An
indispensable contributor to a conspiracy cannot be a minor participant entitled to a role reduction
under U.S.S.G. § 3B1.2. United States v. Samuels, 308 F.3d 662, 672 (6th Cir. 2002).
                                                CONCLUSION
       For the foregoing reasons, we AFFIRM Defendants’ convictions, but we VACATE their
sentences and REMAND for re-sentencing.

         1
          We make no finding at this stage as to the reasonableness of sentences above or below the advisory Guideline
range in this case. In addition, because we are remanding the case for re-sentencing, the district court must also
determine anew the amount of restitution that the Defendants should pay. We note that we recently decided that Booker
does not apply to orders of restitution. See United States v. Sosebee, 419 F.3d 451, 461 (6th Cir. 2005).