Court Opinion

ID: 66823
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:14:42+00
Date Added: 2024-06-11T17:20:50.339361
License: Public Domain

[DO NOT PUBLISH]

           IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT               FILED
                      ________________________    U.S. COURT OF APPEALS
                                                    ELEVENTH CIRCUIT
                                                      December 30, 2008
                            No. 07-10090                THOMAS K. KAHN
                        Non-Argument Calendar               CLERK
                      ________________________

                  D. C. Docket No. 06-00083-CR-3-MCR

UNITED STATES OF AMERICA,

                                                         Plaintiff-Appellee,

                                versus

KENT E. HOVIND,

                                                       Defendant-Appellant.

                      ________________________

                            No. 07-10502
                        Non-Argument Calendar
                      _______________________

                  D. C. Docket No. 06-00083-CR-3-MCR

UNITED STATES OF AMERICA,

                                                         Plaintiff-Appellee,
                                       versus

KENT E. HOVIND,
JO D. HOVIND,

                                                             Defendants-Appellants.

                           ________________________

                   Appeals from the United States District Court
                       for the Northern District of Florida
                         _________________________

                                (December 30, 2008)

Before ANDERSON, MARCUS and PRYOR, Circuit Judges.

PER CURIAM:

      Kent Hovind appeals his convictions and sentences for failing to collect and

pay employment withholding taxes, obstructing tax laws, and structuring

transactions to avoid financial reporting laws, 18 U.S.C. § 2; 26 U.S.C. §§ 7202,

7212(a); 31 U.S.C. § 5324(a)(3), (d); 31 C.F.R. § 103.11, and his wife, Jo Hovind,

appeals her convictions and sentences for structuring transactions to avoid

reporting laws, 18 U.S.C. § 2; 31 U.S.C. § 5324(a)(3), (d); 31 C.F.R. § 103.11.

Kent and Jo challenge the sufficiency of their indictments and the evidence. Kent

also challenges the calculation of the loss amount and the imposition of restitution,

and Jo challenges the order of forfeiture. We affirm.

                                          2
                                 I. BACKGROUND

      The Hovinds owned and operated Creation Science Evangelism Enterprises,

which sold videos and literature, provided lecture services, and hosted live debates.

Between 1999 and 2003, the Hovinds withdrew from AmSouth Bank over one and

a half million dollars in increments less than $10,000 to avoid federal filing

requirements. Company documents and records of the transactions established that

Jo controlled the finances of Evangelism Enterprises and controlled most of the

checks that were cashed. Kent, who oversaw payroll and related federal tax

obligations, failed to withhold or pay quarterly federal withholding taxes or file

related documents with the Internal Revenue Service between 2001 and 2003.

      The Hovinds were charged in a 58-count indictment. Kent was charged in

the first twelve counts of the indictment for willfully failing to deduct and pay

federal income and withholding taxes for employees of Evangelism Enterprises.

26 U.S.C. § 7202. The Hovinds were charged in the next 45 counts for structuring

cash withdrawals to avoid financial reporting requirements. 18 U.S.C. § 2; 31

U.S.C. §§ 5313(a), 5324(a)(3), 5324(d); 31 C.F.R. § 103.11. Kent was charged in

the last count of the indictment for obstructing the administration of internal

revenue laws. 26 U.S.C. § 7212(a). The indictment also included a provision for

forfeiture by the Hovinds of “any and all property, real and personal, involved in”

                                           3
the financial reporting crimes “and any property traceable thereto” and, if that

specific property could not be recovered, for “forfeiture of any other property of

[the Hovinds] up to the value of the . . . property.” Approximately two months

after the court-imposed filing deadline, the Hovinds moved to dismiss their

indictments. The district court denied the motions as untimely and without merit.

      After the government rested its case at trial, the Hovinds moved for an

acquittal on each count of the indictment. Defense counsel argued that the

government was required to prove for each count of structuring that the transaction

equaled or exceeded $10,000 and, because the evidence established that each

transaction was less than that threshold, the Hovinds were entitled to dismissal of

those counts. The government responded that it had a “fundamental disagreement”

with the Hovinds’ interpretation of the structuring statutes and argued that

structuring necessarily requires a transaction under $10,000. The district court

“agree[d] with the government” that the Hovinds’ interpretation of structuring was

contrary to the statutes and denied the Hovinds’ motion. The court later referred to

its decision on the motion and instructed defense counsel that they would “not be

permitted” to argue their interpretation of the structuring statutes. After discussion

of the issue, defense counsel explained that they intended to argue that the

government did not prove that the Hovinds structured each transaction to evade

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reporting requirements.

      The Hovinds were found guilty of all charges. The jury found that $430,400

was involved in or traceable to the financial reporting crimes. The jury entered a

special verdict against the Hovinds for the forfeiture of real and personal property

attributable to the reporting crimes.

      Separate presentence investigation reports were prepared for Kent and Jo.

Kent’s report paired the first 12 counts of the indictment into one group and the

next 44 counts into a second group. United States Sentencing Guidelines §

3D1.2(d) (Nov. 2001). The report listed the offense level applicable to each group

and selected the second group, which had the highest offense level of 22. Id. §§

2B1.1(b)(1); 3D1.3(b); 2S1.3. The base offense level was increased by 2 levels

because the offense was part of a pattern of unlawful activity that involved more

than $100,000 in a 12-month period, id. § 2S1.3(b)(2), and increased another 6

levels for Kent’s aggravating role in the crimes. Id. §§ 3B1.1(a); 3C1.1. With a

criminal history of I, the report provided a sentencing range between 97 and 121

months of imprisonment. The report calculated a tax liability, under the first

twelve counts of the indictment, of $604,874.87. Id. § 5E1.1(a)(2).

      Jo’s presentence report listed a base offense level of 22. Id. §§ 2B1.1(b)(1);

2S1.3. The report decreased the base level by 16 levels because Jo did not act with

                                          5
reckless disregard of the source of the funds and because the funds were the

proceeds of lawful activity and were to be used for a lawful purpose, id. §

2D1.3(b)(2). With a criminal history of I, the report provided a sentencing range

between 0 and 6 months of imprisonment.

       Before Jo’s sentencing hearing, the government moved to forfeit substitute

property and requested the court substitute ten parcels of real property and a bank

account belonging to Jo and Kent to satisfy the $430,400 judgment. 21 U.S.C. §

853(p). The government attached to the motion an affidavit from Special Agent

Charles Evans of the Internal Revenue Service. The affidavit stated that the

agency could not find the $430,400 because the Hovinds had transferred the assets

to a third party, expended the assets on business-related expenses, and removed the

assets from the jurisdiction of the district court.

       The district court found that the Hovinds had disposed of the assets subject

to forfeiture and granted the motion of the government to substitute property. The

district court entered a final order of forfeiture against Jo and sentenced her to one

year and one day of imprisonment. The court sentenced Kent to 120 months of

imprisonment and to supervised release of 3 years, and ordered Kent to pay

restitution of $604,874.87.

                                            6
                         II. STANDARDS OF REVIEW

      We apply three standards of review in this appeal. We review de novo the

sufficiency of an indictment. United States v. Bobo, 344 F.3d 1076, 1082–83

(11th Cir. 2003). We review de novo challenges to the sufficiency of the evidence

and view the evidence in the light most favorable to the government. United States

v. Futrell, 209 F.3d 1286, 1288 (11th Cir. 2000). When an issue is not preserved

for appeal, our review is for plain error. See United States v. Rubio, 317 F.3d

1240, 1241 n.1 (11th Cir. 2003). We review de novo jury instructions to determine

“‘whether they misstate the law or mislead the jury to the prejudice of the objecting

party.’” United States v. Bender, 290 F.3d 1279, 1284 (11th Cir. 2002) (quoting

United States v. Grigsby, 111 F.3d 806, 814 (11th Cir. 1997)). We review for clear

error the calculation of the amount of loss. United States v. Machado, 333 F.3d

1225, 1227 (11th Cir. 2003). We review de novo the legality of the orders of

restitution and of forfeiture. United States v. Foley, 508 F.3d 627, 632 (11th Cir.

2007) (citing United States v. Hasson, 333 F.3d 1264, 1275 (11th Cir. 2003)).

                                 III. DISCUSSION

      Kent and Jo Hovind raise multiple issues for our consideration. Their

arguments fail. We address each argument in turn.

                                          7
                    A. The Hovinds Indictments Were Sufficient.

      It is a well-established principle that “‘[t]he sufficiency of a criminal

indictment is determined from its face.’” United States v. Sharpe, 438 F.3d 1257,

1263 (11th Cir. 2006) (quoting United States v. Salman, 378 F.3d 1266, 1268 (11th

Cir. 2004)). “For an indictment to be valid, it must ‘contain the elements of the

offense intended to be charged, and sufficiently apprise the defendant of what he

must be prepared to meet.’” United States v. Bobo, 344 F.3d 1076, 1083 (11th Cir.

2003) (quoting Russell v. United States, 369 U.S. 749, 763, 82 S. Ct. 1038, 1047

(1962)). When the indictment tracks the language of the statute, “‘it must be

accompanied with such a statement of the facts and circumstances as will inform

the accused of the specific offense, coming under the general description, with

which he is charged.’” Id. (quoting Russell, 369 U.S. at 765, 82 S. Ct. at 1048).

      The indictment sufficiently alleged Kent’s tax crimes. Kent complains that

his indictment omitted what part of Title 26 required him to collect and pay federal

withholding taxes for employees of Evangelism Enterprises and failed to define

how he acted “willfully,” but these arguments fail. Kent was adequately notified

of his offenses to prepare a defense and to plead double jeopardy in any future

prosecution for the same offense. The indictment alleged that Kent violated

Section 7202 of Title 26 and described Kent’s responsibilities under the tax laws,

                                           8
explained Kent’s failure to withhold and pay quarterly federal withholding taxes,

and stated the taxable periods in which Kent incurred a tax liability. The

government was not required to include specific statutory authority for Kent’s tax

liability or to allege facts regarding Kent’s willfulness. See United States v.

Chisum, 502 F.3d 1237, 1244–45 (10th Cir. 2007) (affirming as sufficient an

indictment for tax evasion that omitted “what part of Title 26 imposed the tax that

was being evaded or defeated”). Cf. Huff v. United States, 273 F.2d 56, 58–59

(5th Cir. 1959) (indictment for smuggling goods into the United States without an

invoice was sufficient even without a reference to the statute that required

invoicing or a factual description of the crime).

      The indictment also sufficiently alleged the Hovinds’ structuring crimes.

The Hovinds argue that each of the structuring counts fails to state an offense

because each count fails to allege that the Hovinds structured an amount that

exceeded $10,000 and, without this allegation, the indictments were defective. The

Hovinds contend that the language used in the financial reporting statute did not

suggest that structuring could involve a cash transaction of less than $10,000.

These arguments ignore the plain language of the statute and our interpretation of

it. A person is prohibited from “structur[ing] . . . any transaction” to “evad[e] the

reporting requirements[,]” 31 U.S.C. § 5324(a)(3), of domestic financial

                                           9
institutions. Those reporting requirements are activated upon the “payment,

receipt, or transfer of United States coins or currency[,]” 31 U.S.C. § 5313(a), “of

more than $10,000.” 31 C.F.R. § 103.22(b). In other words, section 5324(a)(3)

forbids a person from transacting in amounts less than $10,000 to avoid detection

by and reporting of the transactions by a financial institution. United States v.

Phipps, 81 F.3d 1056, 1060–61 (11th Cir. 1996). That interpretation is also

consistent with the intent of Congress for the structuring provision to “operate[]

‘without regard for whether an individual transaction is, itself, reportable . . . .’”

Id. at 1061 (quoting S. Rep. No. 433, 99th Cong., 2d Sess. 22 (1986)). Because a

cash transaction does not have to equal or exceed $10,000 to constitute a

structuring offense, the district court did not err by denying the Hovinds’ motion to

dismiss.

      Kent’s indictment for obstructing administration of the tax laws also states

an offense. Kent argues for the first time on appeal that the charge failed to state

an offense because none of the acts listed, which included filing complaints against

agents of the Internal Revenue Service and instituting bankruptcy and other legal

proceedings against those agents, were corrupt. His argument misapprehends the

definition of “corruptly.” Acts that might otherwise be legal become corrupt and

obstructionist when they are used to “thwart the efforts of government officers and

                                            10
employees in executing the laws enacted by Congress.” United States v. Popkin,

943 F.2d 1535, 1540 (11th Cir. 1991). The district court did not err, much less

plainly err, by denying Kent’s motion to dismiss.

    B. The Government Introduced Sufficient Evidence To Support the Hovinds’
                                 Convictions.

      The Hovinds challenge their convictions on three grounds. First, Kent

argues that his failure to withhold taxes was not willful. Second, the Hovinds

argue that they did not know that section 5324(a)(3) prohibited a transaction of less

than $10,000. Third, Kent argues that legal actions he instituted before and during

the investigation of the Internal Revenue Service were not corrupt and cannot

support his conviction for obstruction of tax laws.

        1. Kent Refused To Comply With Laws To Collect And Pay Federal
                              Withholding Taxes.

      Sufficient evidence establishes that Kent failed to collect or pay withholding

taxes. Kent argues that the government failed to prove that he acted willfully

absent evidence that Kent knew of the specific statutes that required him to collect

and pay withholding taxes, but that argument fails. In Cheek v. United States, 498

U.S. 192, 201, 111 S. Ct. 604, 610 (1991), the Supreme Court explained in a

hypothetical that the government would satisfy the “knowledge component of the

willfulness requirement” if it introduced evidence that the defendant knew of the

                                          11
“duty purportedly imposed” by the tax laws, not that he knew which specific

provision created that duty. Id. at 201–02, 111 S. Ct. at 610–11. When a

defendant knows of facts constituting an offense, he has “acted with the requisite

willfulness to violate the law.” United States v. Fields, 500 F.3d 1327, 1332 (11th

Cir. 2007) (citing Bryan v. United States, 498 U.S. 184, 196, 118 S. Ct. 1939, 1947

(1998)).

      The government proved that Kent knew the tax laws required the collection

and payment of withholding taxes, but he refused to comply. Employees of

Evangelism Enterprises, peers, and legal counsel testified that Kent disputed the

authority of the Internal Revenue Service based on the separation of the church and

state, debated the interpretation and application of the withholding requirements,

and intentionally characterized Evangelism Enterprises as a “church” and his

employees as “missionaries” to avoid tax obligations. Kent had opined to attorney

David Gibbs that he was “smarter” than other church officials who had forfeited

real property after they refused to collect or pay withholding taxes. Although Kent

argued at trial that he was ignorant of the law and the Revenue Service failed to

identify a law that required him to collect and pay withholding taxes, the jury was

entitled to find that Kent knew about and deliberately violated the tax laws. See

United States v. Lankford, 955 F.2d 1545, 1550 (11th Cir. 1992).

                                         12
    2. The Hovinds Structured Transactions To Avoid Reporting Requirements.

      The government also proved that the Hovinds structured their cash

withdrawals to avoid federal reporting requirements. Although the Hovinds

challenge the validity of their convictions on the ground that the statute does not

penalize transactions below $10,000, this interpretation does not comport with the

language of the statute. Congress enacted Section 5324(a)(3) to penalize “any

transaction” structured to “avoid triggering [a] bank’s duty to file a [Currency

Transaction Report] in the first place.” Phipps, 81 F.3d at 1059–60. By its plain

language, the statute prohibits transactions of less than $10,000 that are intended to

evade reporting requirements. Id. at 1060–61. That reading comports with the

regulations that define structuring to penalize cash transactions designed “in any

manner, . . . including transactions . . . below $10,000 . . . for the purpose of

evading the reporting requirements . . . .” 31 C.F.R. § 103.11(gg).

      Evidence established that Kent and Jo Hovind structured cash transactions

with knowledge of, and the intent to avoid, reporting of those transactions by

AmSouth Bank. See United States v. MacPherson, 424 F.3d 183, 189 (2d Cir.

2005); United States v. Cassano, 371 F.3d 868, 878 (7th Cir. 2004). A former

employee of Evangelism Enterprises, Brian Popp, testified that Kent knew of and

complained about the bank reporting requirements and that Jo, often at Kent’s

                                           13
direction, regularly obtained cash to pay employees of the organization. Other

employees and associates of Kent testified that the Hovinds openly disputed the

validity of the tax laws. Various documents established that Jo withdrew cash in

increments of $9500 and $9600 from AmSouth Bank as often as four or five times

a month, for a total of 45 transactions between July 2001 and August 2002.

Viewing this evidence in a light favorable to the prosecution, the jury was entitled

to find that Kent and Jo knew of the reporting requirements and structured cash

transactions in amounts less than $10,000 to prevent AmSouth Bank from

reporting the transactions. See United States v. Williams, 121 F.3d 615, 621 (11th

Cir. 1997) (willfulness “requires proof of an intentional violation of a known legal

duty”); In re Jacobs, 490 F.3d 913, 925 (11th Cir. 2007) (“‘the conduct

requirement is satisfied where a debtor engages in affirmative acts to avoid

payment or collection of taxes’” (quoting In re Fretz, 244 F.3d 1323, 1329 (11th

Cir. 2001))).

                3. Kent Obstructed the Investigation of His Tax Offenses.

      Substantial evidence established that Kent obstructed investigation of his tax

offenses. A person is guilty of obstructing the administration of tax laws if he

“corruptly” acts to “intimidate or impede any officer” or to “obstruct[], impede, or

endeavors to obstruct or impede, the due administration” of the tax laws. Kent

                                           14
filed complaints and sued agents of the Internal Revenue Service and instituted

legal proceedings to circumvent the lawful seizure of his assets. This evidence

supports the finding of the jury that Kent intended to impede agents of the Revenue

Service in their efforts to investigate and prosecute Kent’s violations of the tax

laws.

  C. The District Court Did Not Err By Adding a Sentence to the Jury Instruction.

        A district court is required to inform counsel before closing arguments how

it intends to rule on proposed jury instructions. Fed. R. Crim. P. 30(b). We require

substantial compliance with Rule 30 and reverse for a violation of the rule only if

the defendant establishes that he was prejudiced by the change in a jury instruction.

United States v. White, 27 F.3d 1531, 1538 (11th Cir. 1990). Prejudice exists only

if the defendant establishes that the modification of the instruction was substantial

and repudiated or rendered ineffective his arguments. Id.

        The Hovinds were not prejudiced by the change to the jury instruction. The

district court did not substantially modify the instruction on structuring. In his

closing argument, Kent Hovind used the original jury instruction in a manner that

suggested that the government was required to prove that structuring required a

cash transaction that equaled or exceeded $10,000. That jury instruction read,

        To structure a transaction means to deposit or withdraw or otherwise
        participate in a transfer of a total of more than $10,000 in cash or

                                          15
      currency by or through a financial institution or bank by setting up or
      arranging a series of separate transactions, each involving $10,000 or
      less individually, thereby intentionally evading the currency reporting
      requirements that would have applied if the transaction had not been
      so structured.

The district court added the last sentence of the regulation that defines structuring:

“The transaction or transactions need not exceed the $10,000 reporting threshold at

any single financial institution on any single day in order to constitute structuring .

. . .” 31 C.F.R. § 103.11(gg). The district court was entitled to revise the jury

instruction in this manner. See Bender, 290 F.3d at 1284 (“We give the district

court wide discretion as to the style and wording employed in the instructions,

ascertaining that the instructions accurately reflect the law.”).

                     D. The Hovinds Were Correctly Sentenced.

      The Hovinds challenge their sentences on three grounds. First, Kent

challenges the calculation of the tax loss. Second, Kent challenges his restitution.

Third, Jo challenges the forfeiture of substitute property. These arguments fail.

      Kent argues that the district court violated his rights under the Sixth

Amendment when it calculated the tax loss attributable to his tax evasion charges,

but the tax loss played no role in Kent’s sentence. The district court used the

offense level for Kent’s structuring charges instead of the offense level for his tax

charges to calculate Kent’s sentence. Because the guideline range and sentence

                                           16
was the same regardless of the amount of tax loss, any error in the calculation was

harmless. See United States v. Tampas, 493 F.3d 1291, 1305 (11th Cir. 2007).

      Kent challenges his restitution on two grounds both of which fail. First,

Kent argues that restitution was not a penalty for his crimes, but his argument

ignores that the district court ordered restitution as a condition of Kent’s

supervised release. See 18 U.S.C. §§ 3563, 3583(d). Second, Kent argues, without

citation to any authority, that the Internal Revenue Service cannot be a victim, but

Kent’s argument overlooks that the Revenue Service, as the agency responsible for

collecting taxes, is the only possible victim of tax evasion. Cf. Balogun v. U.S.

Att’y Gen., 425 F.3d 1356, 1361 (11th Cir. 2005) (finding the government a

“victim” of tax evasion under immigration law). The district court did not err by

ordering Kent to pay restitution.

      Jo presents two challenges to the forfeiture of substitute property both of

which fail. First, Jo argues that the amount of forfeiture was excessive and

unconstitutional because the money was obtained legally and expended for

business obligations of Evangelism Enterprises, but we disagree. The jury was

entitled to find that the Hovinds structured transactions to avoid financial reporting

laws and hide assets from the Revenue Service and a forfeiture of $430,400 was

warranted to punish the Hovinds for their crimes. See Hasson, 333 F.3d at

                                           17
1279–80. Second, Jo argues that the district court erred by substituting property

because the $430,300 could be traced to business-related expenses, but we again

disagree. The district court was entitled to order the forfeiture of substitute

property when the original property was “transferred . . . or deposited with[] a third

party.” 21 U.S.C. § 853(p)(1)(B). The district court did not err by ordering a

substitution of forfeiture property.

                                 IV. CONCLUSION

      The convictions and sentences of the Hovinds are AFFIRMED.

                                           18