Court Opinion

ID: 1031239
Source: CourtListenerOpinion
Date Created: 2013-07-05 08:28:06.658943+00
Date Added: 2024-06-11T15:27:37.845256
License: Public Domain

UNPUBLISHED

                 UNITED STATES COURT OF APPEALS
                     FOR THE FOURTH CIRCUIT

                            No. 08-4493

UNITED STATES OF AMERICA,

               Plaintiff - Appellant,

          v.

MARTIN LOUIS BAUCOM,

               Defendant - Appellee.

Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte.    Graham C. Mullen,
Senior District Judge. (3:02-cr-00147-GCM-1)

                            No. 08-4512

UNITED STATES OF AMERICA,

               Plaintiff - Appellant,

          v.

PATRICK GRANT DAVIS,

               Defendant - Appellee.

Appeal from the United States District Court for the Western
District of North Carolina, at Statesville.   Graham C. Mullen,
Senior District Judge. (5:02-cr-00026-GCM-CH-1)
Argued:   September 23, 2009           Decided:   January 13, 2010

Before TRAXLER, Chief Judge, WILKINSON, Circuit Judge,        and
Margaret B. SEYMOUR, United States District Judge for         the
District of South Carolina, sitting by designation.

Vacated and remanded by unpublished per curiam opinion.

ARGUED: David Alan Brown, Sr., OFFICE OF THE UNITED STATES
ATTORNEY, Charlotte, North Carolina, for Appellant. Noell Peter
Tin, TIN, FULTON, WALKER & OWEN, PLLC, Charlotte, North
Carolina; Ross Hall Richardson, FEDERAL DEFENDERS OF WESTERN
NORTH CAROLINA, INC., Charlotte, North Carolina, for Appellees.
ON BRIEF: Gretchen C. F. Shappert, United States Attorney,
Charlotte, North Carolina, for Appellant.    Claire J. Rauscher,
Executive Director, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA,
INC., Charlotte, North Carolina, for Appellee Martin Louis
Baucom.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

        The   government      appeals     the   sentences      imposed    on    Martin

Baucom and Patrick Davis after remand by the Supreme Court.                           We

vacate the sentences and remand for new sentencing proceedings

before a different district court judge. 1

                                           I.

        Appellants      operated     Baucom-Davis      and    Associates,      a   land

surveying and computer consulting business.                      From 1990 until

2002,       Baucom    and   Davis    failed     to   file    personal    income      tax

returns and failed to file income and employment tax returns for

the business.

        In May 2002, Baucom and Davis were separately charged with

three counts of failure to file income tax returns.                       Through a

superseding         indictment,     the   government    consolidated      the      cases

and   added     a    fourth   count,      charging    both    with   conspiracy       to

defraud the United States.                In August 2003, the case finally

proceeded to trial, and Baucom and Davis were convicted on all

counts.

        1
       During the sentencing proceedings that took place after
remand, the district court declared its intention to recuse
itself from any further proceedings involving these defendants.
See J.A. 187.    We hereby direct that the case on remand be
assigned to a different district court judge.

                                            3
        According to the information set out in the presentence

reports (“PSRs”), Baucom owed $347,134.40 in unpaid taxes, while

Davis owed $365,618.31.              These amounts included unpaid federal

and state income taxes from 1993 to 1997.                            Although the PSRs

noted that the defendants had not paid taxes for the years 1998

through 2002, the amounts for those years could not then be

determined       and   thus    were    not       included       in    the     loss       amount

calculated       by    the    PSR.       The         PSRs    recommended            two-level

acceptance-of-responsibility            adjustments           for      each        defendant,

bringing the total offense level to 16 and yielding a 21-27

month Guidelines sentencing range for Baucom and for Davis.

        A sentencing hearing was held for Baucom in November 2004.

The   district     court     refused    to       include     unpaid        state    taxes   as

relevant conduct, believing it was unfair to consider state-law

violations    when     sentencing      for       a    federal    crime.            The   court

announced a sentence of 21 months, but delayed entering judgment

until    after    Davis      was   sentenced.           After        the    Supreme      Court

announced its decision in United States v. Booker, 543 U.S. 220

(2005),    the    district     court    set          aside   Baucom’s        sentence       and

indicated that it would hold a new sentencing hearing.

        The district court finally convened sentencing hearings for

Baucom and Davis in February 2006.                       The district court again

refused to consider state tax losses as relevant conduct, and

the court declined to permit the government to present evidence

                                             4
of the tax losses for the years 1998-2002, evidence that had

become available since the PSRs were prepared in 2004.                                Over the

government’s      objections,        the    district           court    granted    two-level

acceptance-of-responsibility               adjustments            for    each     defendant.

The district court’s calculations yielded offense levels of 16

and    advisory        sentencing        ranges       of       21-27    months    for     each

defendant.

       As to Baucom, the court described him as a “scofflaw” who

had ignored the tax laws for 12 years, J.A. 146, and failed to

take    any    steps     to   correct       his       tax       problems.         The     court

nonetheless varied downward from the advisory Guidelines range

and sentenced Baucom to 15 months’ imprisonment.                               As to Davis,

the    court    likewise      concluded         that       a    downward       variance    was

appropriate.       The district court noted Davis’s “extraordinary

charitable works,” J.A. 129, his efforts to become current on

his    tax    liability,      and    the    hardship            that    the    employees    of

Davis’s business would suffer if he were sent to prison.                                    The

district       court     therefore        sentenced            Davis     to    four     years’

probation,      conditioned         on    the       service      of     12    months’    house

arrest.

       The government appealed the sentences to this court.                                 We

vacated and remanded for resentencing, concluding, among other

things, that the district court erred by granting acceptance-of-

responsibility adjustments and by refusing to consider unpaid

                                                5
state taxes as relevant conduct.               See United States v. Baucom,

486 F.3d 822, 829-30 (4th Cir. 2007) (“Baucom I”).

       Davis filed a petition for a writ of certiorari.                  After the

Supreme Court issued its opinion in Gall v. United States, 552

U.S.   38   (2007),    the    Court    granted    the    petition,     vacated   our

decision,    and    remanded    to     this   court     for    reconsideration    in

light of Gall.            See Davis v. United States, 128 S. Ct. 870

(2008) (mem).         We issued an order remanding the case to the

district court for resentencing in accordance with principles

set forth out in Gall.

       Prior to the second sentencing hearing for the defendants,

the probation agent filed supplements to the initial PSRs.                       The

supplemental       PSRs    eliminated    the     acceptance-of-responsibility

reductions that we had previously found improper and included

the federal and state tax losses for 1998-2002, information that

had been unavailable when the PSRs were first prepared.                          The

inclusion of the information from those years raised the tax

loss   to   more    than    $580,000    for    Baucom    and    for   Davis,   which

raised the offense level for each defendant from 18 to 20 and

yielded 33-41 month advisory sentencing ranges.

       At the re-sentencing hearing for Baucom, the district court

initially indicated that it agreed with the calculations of the

PSR supplement.           The district court, however, reversed course,

refusing to permit the government to present evidence of the

                                          6
additional tax losses that had not been included in the original

PSRs and refusing to increase the offense level based on those

losses.     The court therefore determined Baucom’s total offense

level to be 18.

      Counsel for Baucom sought a downward variance, arguing that

the five years between Baucom’s conviction and sentencing had

taken a toll on his family.        Counsel noted that while Baucom had

not yet paid any of his federal taxes, he had filed tax returns

for the years 2003 through 2005 and was prepared to file his

2006 return.       In response, the government noted that Baucom had

not filed federal tax returns for 12 years, had only managed to

file three federal tax returns since his conviction, but still

had failed to file a single state tax return.            The government

pointed out that Baucom had not paid any of his federal or state

tax   liabilities,     and   had   even   declared   himself    to    be   a

subcontractor rather than an employee so as to avoid any tax

withholding.    The government argued that an upward variance was

appropriate and sought a prison term of 84 months.

      The district court appeared to agree with the government,

stating that, “[r]egrettably, Mr. Baucom presents a continued

scofflaw.      I    think    the   government’s   argument     is    largely

correct.”    J.A. 164.       The court noted that “[h]e has not paid

any of his state taxes. . . .             He continues to reject the

seriousness of the offense.         He continues not to abide by the

                                     7
law. . . .       [C]ertainly if he’s not going to pay his taxes, all

we can do basically is punish him for that.”                       J.A. 165.     Despite

the    tenor    of     the   court’s     comments,      the    district      court   still

concluded       that    a    downward    variance       was    appropriate,     and    the

court    sentenced       Baucom    to    the       15-month    term   of   imprisonment

originally imposed.

       Davis was resentenced later that day.                       Counsel for Davis

had not yet seen the supplemental PSR, and the district court

offered    to     re-schedule      the     hearing.           As   counsel    for    Davis

reviewed the supplemental PSR, the government noted that the

issues were the same as in Baucom’s resentencing and that it

suspected the district court would resolve the issues in the

same manner.          The district court then explained the differences

in the supplemental PSR:               “You know you lose the two points for

acceptance      of     responsibility      and       that   the    Presentence       Report

calls for an 18 [total offense level] and one [criminal history

category].”          J.A. 171.     Counsel for Davis then stated, “I guess

it’s two levels up from what it was previously,” to which the

court responded, “That’s correct.                   The Court of Appeals tells me

. . . I should not have accepted the recommendation in the

Presentence Report, and that therefore it was 18 and one.”                            J.A.

171.

       Counsel for Davis agreed to proceed with the sentencing and

urged     the    district        court    to       again    impose    a    probationary

                                               8
sentence.     Counsel explained that Davis had filed all his tax

returns since the conviction and was actively working with the

IRS to negotiate and pay his tax liabilities.            Counsel noted

that Davis was still running his company and was involved in the

same charitable activities as he had been at the time of the

original sentencing.   For its part, the government argued that a

term of incarceration was required.         The government noted that

while Davis was current with his tax filings, Davis had not yet

repaid any of the back taxes.         The government contended that

Davis   had   structured   his   personal     finances   and   business

operation so as to put most of his assets beyond the reach of

the government, thus making himself effectively judgment-proof,

and that Davis facilitated Baucom’s ongoing tax avoidance by

agreeing to treat Baucom as an independent contractor rather

than an employee.

     The district court concluded that a probationary sentence

was warranted for Davis.   The court explained that

     the situation with Mr. Davis is completely different
     from Mr. Baucom.   Mr. Davis has stepped up.  He has
     filed his taxes. . . .

           He has no criminal record.     The circuit took
     umbrage with me talking about his charitable work, but
     I think I can consider that.        I don’t give it
     particularly great weight in this.       I think the
     support   he   provides   his  family,   his   gainful
     employment, I think the effect on large numbers of
     employees who would be out of work tells me that I did
     the right thing the first time for the right reasons.
     . . .

                                  9
J.A. 185.    The district court therefore sentenced Davis to the

same   sentence   previously    imposed   --   four   years’   probation,

conditioned on the service of 12 months’ house arrest.

       The government appeals and again challenges the sentences

imposed on Baucom and Davis.

                                   II.

       Although the Sentencing Guidelines are now advisory, see

United States v. Booker, 543 U.S. 220, 245 (2005), “district

courts in the post-Booker landscape must follow specific steps

to arrive at an appropriate sentence.”           United States v. Abu

Ali, 528 F.3d 210, 260 (2008).          The court must first calculate

the    appropriate   advisory    Guidelines    range,   making    factual

findings as necessary.    After giving the parties the opportunity

to argue for the sentence they believe to be warranted, the

court must consider the advisory sentencing range in conjunction

with the factors set out in 18 U.S.C.A. § 3553(a) (West 2000 &

Supp. 2009) and impose the sentence it concludes is appropriate

under all the circumstances.       See Gall, 552 U.S. at 49-50; Abu

Ali, 528 F.3d at 260.          When imposing sentence, the district

court “must make an individualized assessment based on the facts

presented,” Gall, 552 U.S. at 50, and the court “must adequately

explain the chosen sentence to allow for meaningful appellate

review,” id.

                                   10
     Our review of the district court’s sentencing decision is

limited to determining, under a deferential abuse-of-discretion

standard, whether the sentence imposed is reasonable.                     See id.

at 40-41.       This reasonableness review requires us to determine

whether   the    court   committed      any    procedural    errors,     “such    as

failing to calculate (or improperly calculating) the Guidelines

range, treating the Guidelines as mandatory, failing to consider

the § 3553(a) factors, selecting a sentence based on clearly

erroneous facts, or failing to adequately explain the chosen

sentence-including       an    explanation     for   any   deviation     from    the

Guidelines range.”            Id. at 51.       If there are no procedural

errors, we then consider the substantive reasonableness of the

sentence. “Substantive reasonableness review entails taking into

account the totality of the circumstances, including the extent

of any variance from the Guidelines range.”                   United States v.

Pauley, 511 F.3d 468, 473 (4th Cir. 2007) (internal quotation

marks omitted).

     On   appeal,      the    government      contends     that   the    sentences

imposed by the district court are procedurally and substantively

unreasonable.         The government claims that the district court

miscalculated the Guidelines range by refusing to consider the

additional      tax   losses,    that    the    district     court      failed    to

properly consider the § 3553(a) factors, and that the district

                                        11
court failed to adequately explain its reasons for the sentences

imposed.

                                            A.

      We    begin    with    the    government’s         claim       that    the       district

court improperly calculated the advisory sentencing range under

the   guidelines.        The    government        contends          that    the    state     and

federal tax losses for the years 1998-2002 were part of the

relevant conduct and therefore should have been considered by

the   district       court   when      determining       the        defendants’         offense

level.      We agree.

      The     base     offense      level      for     tax      evasion        charges        is

determined by the tax loss, see U.S.S.G. § 2T1.1(a) (1998), and

the tax loss includes the losses flowing from the offense of

conviction and all relevant conduct, see U.S.S.G. § 1B1.3(a).

The   superseding       indictment        charged        Baucom        and        Davis      with

conspiring      to    violate      the   tax      laws     beginning         in     1993     and

continuing through the date of the indictment – December 2002.

The tax losses, both state and federal, for the years 1998 –

2002 are thus part of the relevant conduct for the offense of

conviction.         See U.S.S.G. § 2T1.1, cmt., n.2 (“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.

                                            12
The following examples are illustrative of conduct that is part

of the same course of conduct or common scheme or plan: (a)

there is a continuing pattern of violations of the tax laws by

the defendant. . . .”).          The defendants do not challenge the

substance of this conclusion -- that is, they do not argue that

the   1998-2002   tax   losses   do    not   fall   within   the    Guidelines’

definition   of   relevant    conduct.         Instead,    Baucom    and   Davis

advance separate arguments as to the government’s claim that the

district court erred in calculating the offense levels.

      Baucom contends that the loss amounts for 1998-2002 cannot

be included now because the government did not present evidence

establishing those losses at the sentencing proceedings in 2006.

See United State v. Parker, 30 F.3d 542, 553-54 (4th Cir. 1993)

(“[T]he prosecution has already been given one full and fair

opportunity to offer whatever proof about Tonsler Park it could

assemble.    Having     failed    to    seize       that   opportunity,     the

Government at resentencing should not be allowed to introduce

additional   evidence    to   prove     that    Tonsler    Park    contained   a

playground [and thus that a sentencing enhancement would apply].

One bite at the apple is enough.”).

      In this case, however, the government has not had “one full

and fair opportunity” to offer evidence of the 1998-2002 losses.

The original PSRs, prepared in 2004, did not include the tax-

loss figures for the years 1998-2002, because that information

                                       13
could not be determined at that time.                       The PSRs, however, did

note that losses of an as-yet undetermined amount had occurred

for   those     years.       Information      about     those    losses    had   become

available       by   the    time   of   the       sentencing    in   2006,    but     the

district court refused to permit the government to present that

evidence.        See J.A. 117-19.            While the primary focus of our

opinion in Baucom I was the district court’s error in excluding

the state tax amounts, our opinion also made clear that the

district court erred by not permitting the government to present

the evidence of the 1998-2002 tax losses.                       As we explained in

Baucom I, inclusion of the state tax amounts alone would not

have affected the defendants’ offense levels, but we nonetheless

rejected      the    defendants’     claim       that   the    state-tax     error    was

harmless.       We reasoned that because “the district court did not

include    in    its    calculations        tax    losses     from   the   years     1998

through 2002, nor did it consider updated figures offered by the

Government at Davis’ sentencing hearing,” Baucom I, 486 F.3d at

829, the total loss amount at that point was uncertain, and we

therefore       could      not   conclude     that      the   state-tax    error      was

harmless.

      Our opinion in Baucom I thus required the district court on

remand to allow the government to present evidence of the 1998-

2002 tax losses and to consider those losses when calculating

the defendants’ offense levels.                  The Supreme Court’s decision to

                                            14
vacate Baucom I for reconsideration in light of Gall gives us no

reason       to    question     that     conclusion          now.      The    1998-2002    tax

losses       are     clearly      part    of        the    defendants’        pre-indictment

pattern of tax evasion and thus are properly considered relevant

conduct, and the original PSRs discussed the defendants’ failure

to file returns from 1998 through 2002.                            That information about

the amount of those tax losses was not available for inclusion

in the PSRs should not have precluded the government in the

original         sentencing     hearing     from          presenting    the    (then)    newly

available information, as we concluded in Baucom I. 2                            Because the

government         has    never     had    an        opportunity        to     present     this

evidence, Parker’s one-bite-at-the-sentencing-apple rule simply

has no applicability here.

        For his part, Davis contends that the district court in

fact       set    his   offense    level       at    20,     the    level    sought   by   the

government on appeal, and that, accordingly, there was no error

in the district court’s Guidelines calculation.                                We disagree.

       The 2006 PSR set Davis’s offense level at 20, and two of

those       points      were   attributable          to    the     1998-2002    tax   losses.

When the district court summarized the changes in the PSR for

       2
       If the defendants at the original hearing had not been
prepared to address the 1998-2002 tax loss information, the
district court could have granted a brief continuance to give
counsel an opportunity to prepare.

                                               15
Davis’s attorney, the court told counsel that the difference was

the elimination of the acceptance-of-responsibility reduction,

and the court twice told counsel that the offense level was 18.

See    J.A.    171.            Since    the    district        court    had    just     sentenced

Baucom and had in that proceeding refused to include the two-

point increase for the 1998-2002 tax losses, it is apparent that

the district court likewise took those two points off Davis’s

offense level, thus giving him an offense level of 18, as the

district court stated to counsel.

       As     support          for    his    claim,      however,      Davis       points    to   an

exchange between the district court and the government at the

end    of     the    hearing,           when     the     government          was     putting      its

objections to the sentencing on the record.                                   As noted above,

the PSR set the offense level at 20, but the government at

sentencing sought a sophisticated-means enhancement that would

have    brought          the    offense       level      to    22.      At    the    end    of    the

hearing,      the        government         noted     its     objection       “to    the    Court’s

ruling       that    [the        offense       level     and    criminal       history       score]

should      not     be    22     and    one.”        J.A.      187.     The    district        court

interjected,         “20        and    one.      20      and    one.”         J.A.    187.        The

government then explained that its “position is it should have

been    22    and        one,    Your       Honor,”      to    which    the    district        court

responded, “Based on what you[] argued, yeah.                                Okay.”     J.A. 187.

We disagree with Davis’s claim that the district court’s mention

                                                    16
of “20 and one” means that the court actually used an offense

level of 20 for Davis.             We think it clear from the context of

this conversation that the district court was briefly confused

about the offense level the government had sought and thought

the government had only sought an offense level of 20.                            The

court’s statement in no way indicates that the court actually

used an offense level of 20 when sentencing Davis.

       Because the 1998-2002 state and federal tax losses were

clearly relevant conduct, the district court erred by excluding

those amounts from the tax loss calculation.                    See United States

v. Hayes, 322 F.3d 792, 802 (4th Cir. 2003) (“[A] court has no

discretion to disregard relevant conduct in order to achieve the

sentence    it    considers        appropriate.”).          This     error   in   the

Guidelines’      calculation        renders    the       sentences      procedurally

unreasonable and requires us to remand for resentencing.                          See

United States v. Diaz-Ibarra, 522 F.3d 343, 347 (4th Cir. 2008)

(“An   error     in    the   calculation      of   the    applicable     Guidelines

range, whether an error of fact or of law, infects all that

follows    at    the   sentencing     proceeding,        including    the    ultimate

sentence   chosen      by    the   district   court,      and   makes    a   sentence

procedurally unreasonable even under our deferential abuse-of-

discretion standard.” (internal quotation marks omitted)).

                                         17
                                         B.

     Although the Guidelines-calculation error in and of itself

requires re-sentencing, we briefly address other issues raised

by the government that might arise again on remand.

     We agree with the government that the district court failed

to adequately consider the need for deterrence and failed to

consider   the      policy     statements           expressing       the       Sentencing

Commission’s views that tax evasion is a serious offense, its

concerns   about     the     pre-Guidelines         frequency        of    probationary

sentences for tax evaders, and its belief that deterrence of

others should be a primary consideration when sentencing tax

evaders.   See U.S.S.G. Ch. 2, Pt. T, introductory cmt.; id. at

Ch. 1, Pt. A, introductory cmt 4(d).                   As we explain in United

States v. Engle, No. 08-4497, an opinion also filed today, the

district court is not required to agree with the Commission’s

policy views, but it is required to consider those views.

    We also agree with the government that the district court’s

explanation   for    the     sentences        was    inadequate.           A    district

court’s    sentencing         decision        must      be     premised          on   an

“individualized assessment based on the facts presented,” Gall,

552 U.S. at 50, and the court’s explanation of its sentencing

must be sufficient “to satisfy the appellate court that [the

district court] has considered the parties’ arguments and has a

reasoned   basis    for    exercising         his    own     legal    decisionmaking

                                         18
authority,” Rita v. United States, 551 U.S. 338, 356 (2007).

The   district      court’s       explanation              need     not      necessarily        be

“elaborate or lengthy,” particularly when the sentence is within

the advisory Guidelines range.                        United States v. Carter, 564

F.3d 325, 330 (4th Cir. 2009).                         In this case, however, the

sentences    significantly            deviated        from    the      advisory     Guidelines

range,   thus    warranting           a    more      detailed      explanation         from   the

district court.          See Gall, 552 U.S. at 50 (explaining that if

the   sentencing         judge        “decides         that       an    outside-Guidelines

sentence    is   warranted,           he      must    consider         the    extent    of     the

deviation    and    ensure       that         the    justification           is   sufficiently

compelling to support the degree of the variance. We find it

uncontroversial that a major departure should be supported by a

more significant justification than a minor one.”).                                 And as to

Baucom, the explanation offered by the district court, which

characterized      Baucom        is       a   “continued         scofflaw,”        would      have

supported an upward variance, but it in no way provides any

support for a downward variance in any amount, much less the

significant downward variance imposed by the district court in

this case.

      Finally,     we     also        agree         with   the      government      that       the

district court improperly focused on the effect that a term of

imprisonment       for    Davis           would       have    on       Davis’s      employees.

Sentencing a defendant to prison will always have an effect,

                                                19
often a very serious negative effect, on the lives of others --

families lose caretakers and providers, and employees sometimes

lose their employers.        In the usual case, however, the effect of

the sentence on others is an insufficient basis for rejecting a

term of imprisonment.          Moreover, because defendants who have

employees are more likely to be wealthy, the approach taken by

the district court in this case would, as the government argues,

have the effect of “reward[ing] the wealthy with probationary

sentences while punishing the impoverished with incarceration.”

Brief of Appellant at 23.         While the socio-economic status of a

defendant may sometimes be relevant to certain aspects of the

sentencing process, it should not play the kind of role that it

played in the district court’s decision in this case to entirely

disregard    the   sentence    recommended      by   the     Guidelines.      See

Engle, No. 08-4497, section II(B).

                                    III.

     Accordingly, for the foregoing reasons, we hereby vacate

the sentences and remand for resentencing before a different

district judge.      On remand, the district court shall permit the

government   to    present    evidence    of   the   state    and   federal   tax

losses for the years 1998 through 2002, and the court shall

                                     20
include those amounts when determining the defendants’ offense

levels.

                                          VACATED AND REMANDED

                              21