Court Opinion

ID: 176062
Source: CourtListenerOpinion
Date Created: 2010-09-28 16:27:17+00
Date Added: 2024-06-11T17:25:37.630327
License: Public Domain

FILED
                                                           United States Court of Appeals
                                                                   Tenth Circuit

                                                               September 28, 2010
                     UNITED STATES COURT OF APPEALS
                                                  Elisabeth A. Shumaker
                                                                   Clerk of Court
                            FOR THE TENTH CIRCUIT

    UNITED STATES OF AMERICA,

                Plaintiff-Appellee,

    v.                                                   No. 10-1345
                                              (D.C. No. 1:10-CR-00317-REB-2)
    RICHARD KELLOGG                                       (D. Colo.)
    ARMSTRONG,

                Defendant-Appellant.

                            ORDER AND JUDGMENT *

Before LUCERO, MURPHY, and O’BRIEN, Circuit Judges.

         Richard Kellogg Armstrong appeals from the district court’s order requiring

that he be detained pending trial. Exercising our jurisdiction pursuant to

28 U.S.C. § 1291 and 18 U.S.C. § 3145(c), we affirm the district court’s detention

order.

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
                                          I.

      The indictment charges Mr. Armstrong with participating in a fraudulent

scheme involving the use of fabricated and false Internal Revenue Service (IRS)

1099-OID forms to obtain large income tax refunds to which he was not entitled.

Greg Flynn, an IRS agent, investigated Mr. Armstrong and submitted an affidavit

that was filed with the criminal complaint. Agent Flynn determined that, in

October 2008, Mr. Armstrong filed amended returns for tax years 2005, 2006, and

2007, claiming that he was entitled to refunds based on federal income tax

payments that were withheld by financial institutions. Mr. Armstrong attached to

his amended returns IRS 1099-OID forms purportedly issued by the financial

institutions that reflected large amounts of income tax withheld. Mr. Armstrong

filed these returns with the help of his co-defendant, Curtis Morris, a tax-return

preparer.

      In December 2008, Mr. Armstrong received a $1.6 million refund from the

IRS based on these amended returns. As part of his investigation, Agent Flynn

contacted the financial institutions that purportedly generated Mr. Armstrong’s

1099-OID forms. Those institutions informed Agent Flynn that they did not

generate those 1099-OID forms and that they did not withhold the federal income

taxes claimed on those forms.

      After receiving the $1.6 million refund, Mr. Armstrong contacted his

long-term accountant, Ken Chafin, who had previously worked with him on tax

                                         -2-
matters. In an email to Mr. Chafin, Mr. Armstrong told him about his use of the

1099-OID forms and his receipt of the large refund. Mr. Armstrong asked

Mr. Chafin to prepare his 2008 tax return using a similar process. Mr. Armstrong

asserted that his use of the 1099-OID forms was legal. Mr. Chafin responded

with an email in which he refused to prepare Mr. Armstrong’s tax return using the

1099-OID forms, advised Mr. Armstrong that the use of the forms was illegal, and

further advised Mr. Armstrong that he should return the refund or risk being

subject to criminal prosecution. Mr. Chafin included in his email a link to the

IRS website where the IRS had posted a fraud alert about the unlawful use of

1099-OID forms.

      In January 2009, Mr. Armstrong filed his 2008 tax return with the

assistance of Mr. Morris using 1099-OID forms. He claimed he was owed a

refund of $1.7 million. The IRS rejected his claim. In April 2009, the IRS began

investigating Mr. Morris and those clients with whom he had filed tax returns

with 1099-OID forms. A criminal complaint was filed against Mr. Armstrong on

May 18, 2010, and a week later he was arrested in California.

      A magistrate judge in the Southern District of California held a detention

hearing and subsequently issued a written decision, concluding that

Mr. Armstrong should be detained because he was a flight risk and no condition

or combination of conditions would reasonably assure his appearance. But, at the

same time, the decision did note that the District of Colorado would be best suited

                                         -3-
to determine if there were any conditions that could be set to ensure

Mr. Armstrong’s appearance at trial.

      After Mr. Armstrong was transferred to the District of Colorado, he

appeared before a magistrate judge who allowed him to reopen his detention

hearing. The court held a hearing and the government presented documentary and

testimonial evidence. Agent Flynn testified about his investigation of

Mr. Armstrong that led to the indictment. He also testified about the fact that

Mr. Armstrong had a pilot’s license, traveled frequently to Mexico where he

owned property and his wife had a real estate business, and transferred and

received money from overseas banks, including financial institutions in Belize.

Agent Flynn testified that he had attempted to trace the refund proceeds but that

he could not locate approximately $600,000 of the proceeds, with an estimated

$400,000 being transferred to international financial institutions where they could

not be traced.

      At the close of the hearing, the magistrate judge orally ruled that

Mr. Armstrong was a flight risk and that he should be detained pending trial

because there were no conditions or combination of conditions that could

reasonably ensure his presence as required by the court. The next day the court

issued a written order supporting the detention decision. Mr. Armstrong moved

for reconsideration of the magistrate judge’s detention decision. The district

court reviewed de novo the detention decision, and then issued an order denying

                                         -4-
Mr. Armstrong’s motion for reconsideration and ordering his continued detention.

Mr. Armstrong now appeals from that decision.

                                         II.

      Claims of erroneous detention present mixed questions of law and fact.

United States v. Cisneros, 328 F.3d 610, 613 (10th Cir. 2003). On appeal, we

review the mixed questions of law and fact concerning the detention decision de

novo, “but we accept the district court’s findings of historical fact which support

that decision unless they are clearly erroneous.” Id. It is the government’s

burden to prove risk of flight by a preponderance of the evidence. Id. at 616.

      The Bail Reform Act requires a magistrate judge or district court judge to

order a defendant detained before trial if the judge determines “that no condition

or combination of conditions will reasonably assure the appearance of the

[defendant] as required and the safety of any other person and the community.”

18 U.S.C. § 3142(e)(1). In determining whether there are conditions of release

that would reasonably assure the defendant’s appearance and the safety of the

community, the judge must consider the following: 1) “[t]he nature and

circumstances of the offense charged, including whether the offense is a crime of

violence;” 2) “the weight of the evidence against the person;” 3) “the history and

characteristics of the person,” including, among other things, the person’s family

ties, length of residence in the community, employment, past conduct, criminal

history, and past record of appearances at court proceedings; and 4) “the nature

                                         -5-
and seriousness of the danger to any person or the community that would be

posed by the person’s release.” Id. § 3142(g).

         Mr. Armstrong argues that the district court erred in its assessment of the

evidence and the statutory factors. We disagree. Having reviewed the record, the

parties’ briefs, the applicable statutory provisions, and the decisions from the

district court and magistrate judge, we conclude that the district court properly

considered the evidence in conjunction with the statutory factors in reaching its

determination that Mr. Armstrong is a flight risk and should be detained pending

trial.

         The judgment of the district court is AFFIRMED.

                                         ENTERED FOR THE COURT
                                         PER CURIAM

                                           -6-