Court Opinion

ID: 1009798
Source: CourtListenerOpinion
Date Created: 2013-07-04 20:01:29.269101+00
Date Added: 2024-06-11T10:21:11.767617
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,              
                 Plaintiff-Appellee,
                 v.                               No. 02-4273
CHARLES JAMES PAYTON,
              Defendant-Appellant.
                                       
           Appeal from the United States District Court
     for the Eastern District of North Carolina, at Greenville.
               Malcolm J. Howard, District Judge.
                          (CR-01-17-HO)

                      Argued: January 23, 2003

                      Decided: February 10, 2003

       Before WILLIAMS and MOTZ, Circuit Judges, and
              HAMILTON, Senior Circuit Judge.

Affirmed by unpublished per curiam opinion.

                             COUNSEL

ARGUED: Thomas Kieran Maher, RUDOLF, MAHER, WIDEN-
HOUSE & FIALKO, Chapel Hill, North Carolina, for Appellant.
Christine Witcover Dean, Assistant United States Attorney, Raleigh,
North Carolina, for Appellee. ON BRIEF: Frank D. Whitney, United
States Attorney, Anne M. Hayes, Assistant United States Attorney,
Raleigh, North Carolina, for Appellee.
2                     UNITED STATES v. PAYTON
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

   Charles Payton, convicted of conspiracy and assisting in the prepa-
ration of false tax returns, appeals his conviction and sentence. Find-
ing no reversible error, we affirm.

                                  I.

   Payton is not an accountant or lawyer. In 1996, however, he left his
job at an automobile manufacturing company and opened a conve-
nience store, in the back of which he started a tax preparation busi-
ness. Payton developed a reputation in the community for obtaining
refunds through amended tax returns, and this case arises out of seven
of those amended returns.

   At trial, several taxpayers recounted a similar story: Payton pre-
pared amended tax returns for them, which yielded substantial
refunds, and for his services, Payton charged the taxpayers a percent-
age (usually between ten and twenty-five percent) of the amount
refunded. The amended returns reflected increased deductions for
medical and employment expenses and charitable contributions; but
the taxpayers testified that they provided Payton with no basis for
increasing the deductions, almost invariably only giving him their
original returns.

   Payton’s co-defendant, Ollie Maye, testifying pursuant to a plea
agreement, explained how Payton came up with the figures for the
increased deductions. Maye recounted that Payton directed him to use
percentages of a taxpayer’s adjusted gross income, such as twenty
percent for medical expenses and ten percent for charitable contribu-
tions. This practice often resulted in identical figures for a given
deduction for multiple taxpayers and for individual taxpayers for mul-
tiple years. For example, the IRS agent in charge of the investigation
                       UNITED STATES v. PAYTON                          3
explained that he reviewed over 500 amended returns from Payton’s
tax service, and many returns used the figures $6998 and $8998 for
medical expenses.

   According to the taxpayers, to alleviate their concerns about the
legitimacy of the deductions, Payton often told them that he had pre-
viously worked for the IRS. At trial, Payton denied making such
statements; he also denied preparing amended returns without proper
documentation or consultation. He suggested that any errors in the
returns were due to false information from the taxpayers.

   The jury convicted Payton of one count of conspiracy, in violation
of 18 U.S.C.A. § 371 (2000), and seven counts of assisting in the
preparation of a false tax return, in violation of 26 U.S.C.A. § 7206(2)
(2002). The district court sentenced him to 78 months imprisonment,
three years of supervised release, and restitution.

                                   II.

  Payton attacks his convictions on three grounds.

                                   A.

    First, Payton contends that the district court committed plain error
by interrupting defense counsel’s cross-examination of Maye and the
direct examination of Payton himself. The Federal Rules of Evidence
provide that a court "shall exercise reasonable control over the mode
and order of interrogating witnesses and presenting evidence so as to
. . . make the interrogation and presentation effective for the ascertain-
ment of the truth," Fed. R. Evid. 611(a), and "may interrogate wit-
nesses, whether called by itself or by a party." Fed. R. Evid. 614(b).

   In this case, the two isolated statements made by the district court
fall well within the province of its authority under these rules. In
response to defense counsel’s cross-examination of Maye, the district
court reasonably explained the complex nature of sentencing under
the Sentencing Guidelines, so as to correct the potential misimpres-
sion left by defense counsel regarding the effect of Maye’s plea
agreement on his sentence. The court also acted reasonably in direct-
4                      UNITED STATES v. PAYTON
ing defense counsel to ask Payton how he arrived at medical expenses
for one taxpayer in excess of $10,000 for three years in a row, in light
of the fact that the taxpayer had health insurance through his
employer.

   A district court has a "duty to ensure that the facts are properly
developed and that their bearing upon the question at issue are clearly
understood by the jury." United States v. Castner, 50 F.3d 1267, 1272
(4th Cir. 1995) (internal quotation marks omitted). The district court
properly carried out that duty here, and we find no error.

                                   B.

   Second, Payton argues that the district court abused its discretion,
under Federal Rule of Evidence 608, in permitting the government to
cross-examine him about his failure to file his own tax returns from
1997 through 2000. Payton contends that failure to file tax returns,
without additional proof of dishonest intent or willfulness, is not pro-
bative of truthfulness. Even if the district court erred in permitting the
cross-examination, we find the error harmless. See Fed. R. Crim. P.
52(a). We do so both because Payton was permitted to explain to the
jury that he failed to file his taxes for an innocent reason, namely the
destruction of his documentation in a flood, and because of the over-
whelming evidence of Payton’s guilt. See United States v. Weaver,
282 F.3d 302, 314 (4th Cir. 2002) ("[E]vidence was harmless in light
of the overwhelming evidence against the defendant.").

                                   C.

   Finally, Payton contends that the district court erred in excluding
proffered defense witnesses who would have testified that "defendant
acted in a professional manner in preparing their [tax] returns"; Pay-
ton maintains on appeal that this testimony constituted proper habit
evidence admissible under Federal Rule of Evidence 406. We review
this claim for plain error, because Payton only argued to the district
court that these witnesses should be admitted under Federal Rule of
Evidence 404(b) and did not seek their admission under Rule 406. See
United States v. Parodi, 703 F.2d 768, 783 (4th Cir. 1983).
                       UNITED STATES v. PAYTON                          5
   In deciding whether to admit evidence under Rule 406, "courts
consider three factors: (1) the degree to which the conduct is reflexive
or semi-automatic as opposed to volitional; (2) the specificity or par-
ticularity of the conduct; and (3) the regularity or numerosity of the
examples of the conduct." United States v. Angwin, 271 F.3d 786, 799
(9th Cir. 2001); cf. Wilson v. Volkswagen of Am., Inc., 561 F.2d 494,
511 (4th Cir. 1977) ("It has been repeatedly stated that habit or pattern
of conduct is never to be lightly established, and evidence of exam-
ples, for purpose of establishing such habit, is to be carefully scruti-
nized before admission.").

   In this case, Payton’s proffered habit evidence was not reflexive or
semi-automatic. Rather, he had complete freedom to decide the man-
ner in which he prepared returns, including the amount of documenta-
tion he required and how much attention he paid to any available
documentation. Moreover, the conduct of preparing tax returns can be
quite general — covering a wide range of practices and routines.
Accordingly, we find no error.

                                   III.

  Payton also challenges his sentence on three grounds.

                                   A.

   Payton initially contends that the district court erred when it took
"the position that a defendant who objects" to a Sentencing Guide-
lines adjustment or enhancement "runs the risk of receiving a higher
increase, while one who does not object does not run this risk." Once
again, we review for plain error because Payton never raised this
objection before the district court.

   Payton bases this argument on the following statements made by
the district court at the sentencing hearing. The court stated at the out-
set of the sentencing hearing:

     I’ll go ahead and advise you on objections that involve cal-
     culations and so forth, once the objection is made and I
     begin to hear the objection, if the matter goes higher than
6                     UNITED STATES v. PAYTON
    what’s there [in the presentence report (PSR)], that’s your
    problem, not mine.

Payton objected to the recommendation in the PSR that he receive a
two-level adjustment for a leadership role in the offense, pursuant to
U.S.S.G. § 3B1.1(c), based on his leadership of Maye; the court then
asked the government whether it viewed the people who used the tax
service as participants. The government responded that "that would
have been something that [it] wish[ed] [it] had pressed further." The
court responded:

    It’s now on the floor; Mr. Maher [defense counsel] opened
    it up. . . . You [defense counsel] brought this matter out
    about role in the offense.

After hearing argument from both sides, the court concluded:

    The court, by virtue of it being brought to its attention,
    believes the probation officer incorrectly assigned this.

The court then assigned a four-level increase under § 3B1.1(a) rather
than the recommended two-level increase under § 3B1.1(c).

   Regardless of whether or not the defendant or the government
objects to the proposed findings in a PSR, the district court has a
"separate obligation" to make "independent factual findings" and
Guidelines calculations. United States v. Love, 134 F.3d 595, 605 (4th
Cir. 1998); cf. Fed. R. Crim. P. 32(i)(3)(A) (2002) ("At sentencing,
the court may accept any undisputed portion of the presentence report
as a finding of fact[.]" (emphasis added)).

   In this case, although the district court’s choice of words was
unfortunate, the record does not establish that the court intended to
convey to Payton that if he did not object to the PSR, the court would
accept the recommendations, but if he did object, the court would
consider increased calculations or adjustments. Of course, such a
practice would improperly chill a defendant’s right to object to PSR
recommendations. See Fed. R. Crim. P. 32(f), (i). Because Payton did
not advise the district court of his present challenge to the court’s
                       UNITED STATES v. PAYTON                        7
comments and the record does not offer any clear support for this
challenge, we find no plain error here.

                                  B.

   Payton also challenges the district court’s application of the four-
level leadership adjustment under U.S.S.G. § 3B1.1(a).

   He argues that the district court erroneously counted the taxpayers
as "participants" in the offense in applying § 3B1.1(a)’s four-level
adjustment. Under § 3B1.1(a), the offense level should be increased
by four levels if "the defendant was an organizer or leader of a crimi-
nal activity that involved five or more participants or was otherwise
extensive." Application note 1 to § 3B1.1 provides that a "‘partici-
pant’ is a person who is criminally responsible for the commission of
the offense, but need not have been convicted." Moreover, application
note 3 provides that in "assessing whether an organization is ‘other-
wise extensive,’ all persons involved during the course of the entire
offense are to be considered. Thus, a fraud that involved only three
participants but used the unknowing services of many outsiders could
be considered extensive."

   The district court found that "300 plus people were participants"
and the criminal activity "was extensive." The court also noted that
the government gave some of the taxpayers immunity from prosecu-
tion. Indeed, in opening statements, defense counsel characterized the
taxpayers and Payton as equally culpable: "The first thing you need
to realize is these taxpayers do not have clean hands. If Mr. Payton
is guilty of anything, these taxpayers are just as guilty. But the gov-
ernment in getting them to testify has granted them immunity." Given
this evidence, the district court did not clearly err in finding five or
more "participants" in the criminal activity and that this activity,
which Payton led, was "otherwise extensive."

                                  C.

   Alternatively, Payton contends that the court engaged in impermis-
sible "double counting" in applying both a specific offense two-level
increase under § 2T1.4(b)(1)(B) and the leadership adjustment under
8                       UNITED STATES v. PAYTON
§ 3B1.1(a). We review this claim for plain error because Payton did
not object below.1

   The district court applied a two-level specific offense increase,
under § 2T1.4(b)(1)(B), because Payton was "in the business of pre-
paring or assisting in the preparation of tax returns." As discussed
supra, Payton also received a four-level increase under § 3B1.1(a),
for his leadership role in "a criminal activity that involved five or
more participants or was otherwise extensive." Payton argues that vir-
tually every person in the business of preparing tax returns will have
more than five customers, so those receiving the specific offense
characteristic of § 2T1.4(b)(1)(B) will also always receive the adjust-
ment under § 3B1.1(a).2

   The guidelines do not expressly prohibit application of both
§ 2T1.4(b)(1)(B) and § 3B1.1(a). We have "emphasized repeatedly
that the sentencing guidelines should be applied as written. . . . To
effectuate this principle, double counting is permissible under the sen-
tencing guidelines except where it is expressly prohibited." See
United States v. Wilson, 198 F.3d 467, 472 n.* (4th Cir. 1999) (inter-
nal quotation marks and citations omitted). Thus, we find no error.

                                   IV.

    For the foregoing reasons, the judgment of the district court is

                                                             AFFIRMED.
    1
    Payton did not raise his "double counting" argument in his written
objections to the PSR or in regard to the adjustment under § 3B1.1. In
asking the district court to sentence him to the bottom of the guidelines
range, he stated that the two-level enhancement under § 2T1.4(b)(1)(B)
and the four-level adjustment under § 3B1.1(a) "may or may not be tech-
nically double counting." This equivocal statement, made not in the form
of an objection but in the form of an argument for sentencing at the bot-
tom of the guidelines range, did not adequately preserve Payton’s present
objection.
  2
    As the government notes, however, Maye qualified for the specific
offense characteristic of being in the tax preparation business but not for
any leadership role adjustment.