Court Opinion

ID: 2996110
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:25:22.260646+00
Date Added: 2024-06-11T11:45:28.250239
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

Nos. 02-1635 & 02-1636
UNITED STATES OF AMERICA,
                                                Plaintiff-Appellee,
                                v.

JEFFREY D’AMBROSIA and DUANE PEDE,
                                          Defendants-Appellants.
                         ____________
           Appeals from the United States District Court
               for the Western District of Wisconsin.
           No. 01 CR 121—Barbara B. Crabb, Chief Judge.
                         ____________
  ARGUED SEPTEMBER 27, 2002—DECIDED DECEMBER 16, 2002
                         ____________

  Before POSNER, RIPPLE, and MANION, Circuit Judges.
  MANION, Circuit Judge.        Duane Pede and Jeffrey
D’Ambrosia pleaded guilty to using wire communication
facilities to transmit wagering information in interstate
and foreign commerce in violation of 18 U.S.C. §§ 2, 1084
(“Wire Wagering Act”), and to making false and fraud-
ulent statements on income tax returns in violation of 26
U.S.C. § 7206(1). Pursuant to the terms of their plea agree-
ments, the defendants also stipulated that from 1997 to 1999
they conspired to defraud the Internal Revenue Service
by using the profits of an illegal offshore sports bookmak-
ing operation to pay vendors and bettors, and by placing
2                                     Nos. 02-1635 & 02-1636

profits from that operation and personal income in offshore
bank accounts under nominee names. The district court
sentenced each defendant to 60 months’ imprisonment. The
defendants appeal their sentences, and we affirm.

                               I.
  This case involves an elaborate scheme by Duane Pede
and Jeffrey D’Ambrosia to operate an illegal sports book-
making operation and to conceal income and assets from
the Internal Revenue Service. In July 1995, Pede and
D’Ambrosia merged their respective sports betting handi-
capping companies—The Scoreboard, Inc. (Pede) and
NSN, Inc. (D’Ambrosia)—to form Sports Spectrum, L.L.C.
                      1
(“Sports Spectrum”). Sports Spectrum provided its cus-
tomers with: (1) up-to-the-minute betting lines for sport-
ing events over the telephone for a fee; (2) up-to-the-min-
ute scores on sporting events over the telephone for a fee;
(3) “guaranteed” winning picks on sporting events over the
telephone through handicapping services; (4) sports bet-
ting and online casino gambling through one of two
sports books; and (5) internet access.
  In August 1996, Pede and D’Ambrosia expanded Sports
Spectrum’s business interests by founding Gold Medal
                              2
Sports Book (“Gold Medal”), an offshore internet-based
sports bookmaking operation incorporated and located
on the island of Curacao in the Netherlands Antilles. Pede

1
  Sports Spectrum had offices in Las Vegas, Nevada, where
D’Ambrosia resided, and in Nelsonville, Wisconsin, where Pede
resided.
2
   Gold Medal entered a plea of guilty to RICO charges on
December 3, 2001, agreeing to forfeit $3,528,617 and discontinue
its business operations.
Nos. 02-1635 & 02-1636                                           3

and D’Ambrosia placed profits from Gold Medal’s opera-
tions in offshore bank accounts in the Bahamas under
nominee names, some of which they used to pay Sports
Spectrum (for printing services, database support, statis-
tical analysis, and consulting and technical support ser-
       3
vices), The Scoreboard (for consulting and technical sup-
                                                    4
port services), other vendors, and winning bettors. The
defendants also directed the distribution of Gold Medal
profits to offshore banks as part of a deferred compensa-
tion program concocted by David Tedder, an attorney in
Orlando, Florida, who marketed estate planning and asset

3
   Pede and D’Ambrosia also owned a printing company and
bulk mailing business called Signature Press, which handled
all of the printing jobs for the various Sports Spectrum entities,
including the printing of scoring schedules for The Score-
board; tout letters for the handicapping services of Jeff Allen
Sports, Dan Pastorini Sports, Mike Wynn Sports, and Razor
Sharp Sports; and marketing brochures for the sports book
companies utilized by Sports Spectrum (i.e., Gold Medal and
Seven Palms Casino). Gold Medal mailed letters and brochures
to United States residents advertising its sports booking services,
and solicited those individuals to place wagers over the tele-
phone lines from the United States to Gold Medal in Curacao via
a toll-free betting line.
4
  Gold Medal handled telephone and internet sports bets in
excess of $33 million in 1996; $167 million in 1997; $119 million
in 1998; $78 million in 1999, and $5.7 million in the first quarter
of 2000. During the three and a half years it conducted busi-
ness, Gold Medal took in approximately $402.7 million in wa-
gers. A portion of the profits were distributed to investors
as dividends or “return on capital,” while a significant portion
of the corporation’s net profits were placed in deferred compen-
sation accounts for the defendants and other senior staff in
the manner described infra.
4                                        Nos. 02-1635 & 02-1636
                                     5
protection devices to his clients. The defendants hired
Tedder prior to the commencement of Gold Medal’s busi-
ness operations, and, following his advice, enrolled in a
foreign deferred compensation program that he devel-
oped and maintained. Under this program, the defendants
resigned from Sports Spectrum and entered into employ-
ment agreements with Surety Services Limited (“Surety
Services”), a corporation located in Dublin, Ireland, which
then loaned the defendants out to an independent United
States employee leasing company known as Personal Leas-
ing Services Company, Inc. (“PLSC”). PLSC, in turn, con-
tracted with Sports Spectrum for the defendants’ services.
Sports Spectrum paid PLSC for these services, PLSC trans-
ferred the defendants’ wages, i.e., “lease payments,” to
Surety Services, and Surety Services funneled the lease
payments to offshore bank accounts in nominee names.
According to Tedder, this process rendered the defen-
dants’ earnings “tax-free,” and made the money available
for use by them at any time by way of loans. D’Ambrosia
joined Tedder’s deferred compensation program in June
1997, placing a sizable portion of his personal savings into
the plan from the outset. After entering into the program,
D’Ambrosia’s untaxed earnings and profits from Gold
Medal were placed into an offshore account labeled Corpus
Harem #XIII at Barclays Bank in Nassau, Bahamas. From
1997 to 1999, D’Ambrosia’s untaxed earnings were ap-
proximately $3,638,234. Pede joined Tedder’s program in
December 1997, and his untaxed earnings and profits from
Gold Medal were thereafter placed in an offshore ac-
count labeled Corpus Harem #VIII at Surety Bank and
Trust in Nassau, Bahamas. From 1997 to 1999, Pede had

5
  Unbeknownst to the defendants, Tedder had been disbarred
from the practice of law at the time they retained his services.
Nos. 02-1635 & 02-1636                                      5

untaxed earnings of $1,467,352 diverted to this offshore
bank account.
  In 1999, Pede and D’Ambrosia filed fraudulent income
tax returns for tax year 1998. Schedule B, Part III, Line 7(a)
of the 1998 1040 form required the defendants, under pen-
alty of perjury, to answer the following question: “At any
time during 1998, did you have any interest in or signa-
ture or other authority over a financial account in a foreign
country, such as a bank account, securities account, or
other financial account?” Each defendant falsely answered
“no” to this question on their respective tax returns, not-
withstanding the fact that they both had financial inter-
est in and signature authority over numerous foreign bank
          6
accounts.
   On November 16, 2001, a three-count information was
filed against Pede and D’Ambrosia. Count One charged
the defendants with using wire communication facilities
to transmit wagering information in interstate and foreign
commerce in violation of 18 U.S.C. §§ 2, 1084. Count Two
charged defendant Pede with filing a false income tax re-
turn for tax year 1998 in violation of 26 U.S.C. § 7206(1).
Count three charged defendant D’Ambrosia with filing a
false income tax return for tax year 1998 in violation of
                     7
26 U.S.C. § 7206(1).

6
  The defendants had signature authority over at least four
foreign bank accounts: a Gold Medal account at ORCO Bank
in Curacao; and accounts at Surety Bank in Nassau, Bahamas
in the names of Gold Medal, Research Technology, and Global
Access. They also had “actual authority” of the deferred com-
pensation accounts noted supra.
7
  The government’s investigation also determined that Pede
and D’Ambrosia had engaged in money laundering and mail
                                              (continued...)
6                                       Nos. 02-1635 & 02-1636

  On December 3, 2001, the defendants waived indictment
and pleaded guilty to the three-count information. In
written plea agreements, the defendants also stipulated
that from 1997 to 1999 they conspired with one another and
others to defraud the IRS by using Gold Medal’s profits to
pay Sports Spectrum, vendors, and bettors, and by placing
some of the company’s profits in offshore bank accounts
under nominee names. The defendants stipulated that
the tax loss resulting from this tax conspiracy amounted
to $1,429,565. The district court accepted the defendants’
guilty pleas, and in doing so held: (1) that the tax offenses
and stipulated conduct (i.e., “tax conspiracy offenses”)
could be grouped together under U.S.S.G § 3D1.2(b)
         8
and (d); and (2) that the tax conspiracy offenses could

7
  (...continued)
fraud. The defendants were not, however, charged with either
of these offenses.
8
  Section 3D1.2—“Groups of Closely Related Counts”—provides
that “[a]ll counts involving substantially the same harm shall
be grouped together into a single Group.” Counts involve sub-
stantially the same harm within the meaning of this rule:
    (a) When counts involve the same victim and the same act
    or transaction.
    (b) When counts involve the same victim and two or more
    acts or transactions connected by a common criminal ob-
    jective or constituting part of a common scheme or plan.
    (c) When one of the counts embodies conduct that is
    treated as a specific offense characteristic in, or other ad-
    justment to, the guideline applicable to another of the counts.
    (d) When the offense level is determined largely on the
    basis of the total amount of harm or loss, the quantity of a
    substance involved, or some other measure of aggregate
                                                  (continued...)
Nos. 02-1635 & 02-1636                                             7

then be grouped with the wagering offense under U.S.S.G.
§ 3D1.2(c) “because [the wagering offense] embodies con-
duct (criminal activity producing the source of income not
correctly reported) that is treated as a specific offense
                                  9
characteristic in guideline 2T1.1, which is applicable to

8
    (...continued)
       harm, or if the offense behavior is ongoing or continuous
       in nature and the offense guideline is written to cover
       such behavior.
The defendants do not challenge the propriety of the district
court’s decision to group the tax offenses with the stipulated
conduct.
9
  Section 2T1.1, “Tax Evasion; Willful Failure to File Return,
Supply Information, or Pay Tax; Fraudulent or False Returns,
Statements, or Other Documents,” provides:
    (a) Base Offense Level:
          (1) Level from § 2T4.1 (Tax Table) corresponding to the
          tax loss; or
          (2) 6, if there is no tax loss.
      (b) Specific Offense Characteristics
          (1) If the defendant failed to report or to correctly
          identify the source of income exceeding $10,000 in
          any year from criminal activity, increase by 2 levels. If
          the resulting offense level is less than level 12, increase
          to level 12.
          (2) If the offense involved sophisticated means, in-
          crease by 2 levels. If the resulting offense level is less
          than level 12, increase to level 12.
      (c) Special Instructions
          For the purposes of this guideline—
          (1) If the offense involved tax evasion or a fraudulent
          or false return, statement, or other document, the tax
                                                    (continued...)
8                                          Nos. 02-1635 & 02-1636

the stipulated conduct that constitutes a separate count
for the purpose of sentencing.” In calculating the defen-
dants’ sentences under the guidelines, the district court
concluded that a four-level increase in the offense level
was appropriate for their role in the grouped offense be-
cause it determined that Pede and D’Ambrosia “were the
leaders and organizers of criminal activity that involved
more than five participants or was otherwise extensive.”
The district court then used the offense level for the tax
                                                   10
conspiracy (24), pursuant to U.S.S.G. § 3D1.3(a), as the
offense level for the grouped offenses, resulting in a sen-
tencing guideline range of imprisonment of 51 to 63
months. The district court then sentenced each defendant
to 60 months’ imprisonment followed by one year of su-
pervised release, and a fine of $100,000. The defendants
appeal their sentences, challenging the district court’s
decision to group the wagering offense with the tax con-
spiracy offenses and to apply a four-level increase to their
offense levels for being leaders or organizers of the tax
conspiracy under U.S.S.G. § 3B1.1(a).

9
     (...continued)
             loss is the total amount of loss that was the object of
             the offense (i.e., the loss that would have resulted had
             the offense been successfully completed).
10
    Section 3D1.3(a), “Offense Level Applicable to Each Group of
Closely Related Counts,” provides that “[i]n the case of counts
grouped together pursuant to § 3D1.2(a)-(c), the offense level
applicable to a Group is the offense level, determined in ac-
cordance with Chapter Two and Parts A, B, and C of Chapter
Three, for the most serious of the counts comprising the Group,
i.e., the highest offense level of the counts in the Group.”
Nos. 02-1635 & 02-1636                                           9

                                II.
  We review the district court’s application of the United
States Sentencing Guidelines de novo, but defer to the court’s
findings of fact unless they are clearly erroneous. See, e.g.,
United States v. Febus, 218 F.3d 784, 795-96 (7th Cir. 2000).
  The issue before us is whether the district court erred
in applying a four-level enhancement to each of the de-
fendants’ sentences for being leaders or organizers of a
tax conspiracy under U.S.S.G § 3B1.1. The defendants
make two arguments on appeal. First, they contend that
the district court should have applied the adjustment for
role in offense, under § 3B1.1, prior to grouping as re-
                                 11
quired by U.S.S.G. § 1B1.1(d). Second, the defendants
maintain that the district court erred in grouping the
wagering offense with the tax conspiracy offenses, and
that but for this error they would not have received four-
level “organizer or leader” enhancements for the tax con-
spiracy offenses. Without the four-level sentencing enhance-

11
  Section 1B1.1(d) provides that “[i]f there are multiple counts
of conviction, repeat steps (a) through (c) for each count. Apply
Part D of Chapter Three to group the various counts and adjust
the offense level accordingly.” Id. Section 1B1.1(a)-(c) provide
the following “application instructions”:
     (a) Determine, pursuant to § 1B1.2 (Applicable Guidelines),
     the offense guideline section from Chapter Two (Offense
     Conduct) applicable to the offense of conviction. See § 1B1.2.
     (b) Determine the base offense level and apply any appro-
     priate specific offense characteristics, cross references, and
     special instructions contained in the particular guideline
     in Chapter Two in the order listed.
     (c) Apply the adjustments as appropriate related to victim,
     role, and obstruction of justice from Parts A, B, and C of
     Chapter Three.
10                                        Nos. 02-1635 & 02-1636

ment, the defendants would have been subject to a lower
sentencing range, and therefore, presumably, would have
received less prison time.
  Because we conclude that the defendants are subject to
the four-level “organizer-leader” enhancement regardless
of whether the wagering offense and tax conspiracy of-
fenses are analyzed separately or grouped together under
§ 3D1.2, we need not address whether the district court’s
grouping of these offenses was proper. See, e.g., Williams
v. United States, 503 U.S. 193, 203 (1992) (holding that a
remand is not necessary for a district court’s misapplica-
tion of the sentencing guidelines if we conclude, on the
record as a whole, that the error was harmless because it
did not affect the district court’s selection of the sentence
imposed); United States v. Saunders, 129 F.3d 925, 932 (7th
Cir. 1997) (same).
  Our analysis in this case begins with the defendants’
stipulations in their respective plea agreements that they
conspired with David Tedder to defraud the IRS. Their
stipulations are identical and provide as follows:
                                     12
     Pursuant to USSG § 1B1.2(c), the defendant stipulates
     that the government could prove that from 1997 to 1999,
     the defendant conspired with David Tedder [and co-
     defendant] to defraud the Internal Revenue Service
     by hiding income and assets. The defendant further
     stipulates that the government could prove that the
     tax loss associated with the conspiracy was $1,429,565,
     and was reasonably foreseeable to the defendant.

12
  Section 1B1.2(c) directs that “[a] plea agreement . . . containing
a stipulation that specifically establishes the commission of
additional offense(s) shall be treated as if the defendant had
been convicted of additional count(s) charging those offense(s).”
Nos. 02-1635 & 02-1636                                    11

  In analyzing whether the defendants played an “aggra-
vating role” in the tax conspiracy, we turn to § 3B1.1, which
“provides adjustments to the offense level based upon the
role the defendant played in committing the offense.”
§ 3B1.1, introductory commentary. Section 3B1.1(a) directs
that “[i]f the defendant was an organizer or leader of a
criminal activity that involved five or more participants
or was otherwise extensive, increase by 4 levels.”
   The defendants readily concede that they were leaders
and/or organizers of an offshore sports book, Gold Medal,
and that a four-level enhancement for their role in the
wagering offense, under § 3B1.1(a), was therefore appro-
priate. The defendants take issue, however, with the dis-
trict court’s determination that they were also organizers
and/or leaders of the tax conspiracy. They contend that
their participation in the tax conspiracy was limited to
their role as clients of David Tedder. In support of their
argument, the defendants direct us to the fourth applica-
tion note of § 3B1.1, which provides that:
    In distinguishing a leadership and organizational role
    from one of mere management or supervision, titles
    such as “kingpin” or “boss” are not controlling. Factors
    the court should consider include the exercise of deci-
    sion making authority, the nature of participation in
    the commission of the offense, the recruitment of ac-
    complices, the claimed right to a larger share of the
    fruits of the crime, the degree of participation in plan-
    ning or organizing the offense, the nature and scope
    of the illegal activity, and the degree of control and
    authority exercised over others. There can, of course,
    be more than one person who qualifies as a leader or
    organizer of a criminal association or conspiracy. This
    adjustment does not apply to a defendant who merely
    suggests committing the offense.
§ 3B1.1, commentary n.4.
12                                     Nos. 02-1635 & 02-1636

  Pede and D’Ambrosia contend that while they were
participants in the tax conspiracy (i.e., providing the
necessary funding and making investment suggestions),
they did not control the total number of participants or the
manner in which the monies were diverted as part of the
deferred compensation scheme. The defendants also as-
sert that they neither participated in the recruitment of
accomplices nor “claimed right to a larger share of the
fruits of the crime.” In short, they claim that Tedder was
the mastermind of the tax conspiracy because he: (1) de-
veloped and implemented the tax deferment scheme;
(2) directed and employed associates and assistants who
helped him manage their investments; (3) established the
necessary banking relationships; (4) controlled the de-
fendants’ investments; (5) managed the offshore bank ac-
counts; and (6) claimed the largest share of the fruits of the
tax conspiracy by misappropriating the defendants’ money.
As such, the defendants maintain that the district court
erred in applying a four-level “organizer or leader” en-
hancement to their tax conspiracy offenses per § 3B1.1(a).
  The defendants’ argument, however, fails to recognize
that the determination of whether a defendant is an “orga-
nizer or leader” under § 3B1.1 “is to be made on the basis
of all conduct within the scope of § 1B1.3 (Relevant Con-
duct), i.e., all conduct included under § 1B1.3(a)(1)-(4),
and not solely on the basis of the elements and acts cited in the
count of the conviction.” § 3B1.1, introductory commentary
(emphasis added). Thus, in evaluating the extent of the
defendants’ role in the tax conspiracy under § 3B1.1, we
look not only to their participation in the tax conspiracy
but to any other conduct relevant to that conspiracy. See,
e.g., United States v. Bjorkman, 270 F.3d 482, 496 (7th Cir.
2001); United States v. Baker, 227 F.3d 955, 966 (7th Cir.
2000); United States v. Montague, 29 F.3d 317, 323-24 (7th
Cir. 1994). Relevant conduct includes “all acts and omis-
Nos. 02-1635 & 02-1636                                       13

sions committed, aided, abetted, counseled, commanded,
induced, procured, or willfully caused by the defendant,”
§ 1B1.3(a)(1)(A), and “all reasonably foreseeable acts and
omissions of others in furtherance of the jointly undertak-
en criminal activity,” § 1B1.3(a)(1)(B), that “occurred dur-
ing the commission of the offense of conviction, in prepara-
tion for that offense, or in the course of attempting to avoid
detection or responsibility for that offense.” § 1B1.3(a)(1)
(A)-(B).
  Here, there is no question that the defendants’ operation
of a multi-jurisdictional offshore sports bookmaking em-
pire is clearly relevant in assessing their role in the tax
conspiracy. Pede and D’Ambrosia were the leaders of their
respective businesses, Sports Spectrum and Gold Medal.
They consulted with one another frequently and togeth-
er made decisions affecting these businesses, including
decisions on investing money in the scheme established
                            13
and managed by Tedder. Specifically, the defendants
conspired to evade taxes by placing the profits of Gold
Medal in offshore bank accounts in nominee names and
by using these nontaxed profits to fund Gold Medal’s on-
going operations—i.e., paying vendors and winning bettors.
In doing so, they directed staff within their own organiza-
tions to transfer money to accounts controlled by Tedder
and assigned accountant Randy Moreau the task of mon-
itoring the deferred compensation accounts for them. Fur-
thermore, as the district court noted, “[t]he tax shelters . . .
were an integral part of the corporate structure [of the
defendants’ gambling operation] . . . . Not only did the tax

13
   Tedder controlled his part of the organization by directing
his staff to run component businesses that were “shell corpora-
tions” as part of the deferred compensation program.
14                                  Nos. 02-1635 & 02-1636

shelters increase the profits obtained from the operation
of the illegal betting scheme, they helped hide the exis-
tence of the corporations from federal regulators because
the [defendants] did not report the income from the corpo-
rations.”
  That Pede and D’Ambrosia were neither organizers nor
leaders of Tedder’s deferred compensation program is of
no consequence. The tax conspiracy offenses address the
extent to which each defendant used Tedder’s program to
conceal from the IRS the income and assets they derived
from Gold Medal’s operations. We, therefore, agree with
the district court that “it is not determinative whether
[the defendants] exercised a leadership role over David
Tedder and his colleagues. [They] exercised a leadership
role over the entire scheme, a part of which was to hide
assets and income through an illegal tax shelter.” See, e.g.,
United States v. Nicolaou, 180 F.3d 565, 574 (4th Cir. 1999)
(holding that defendant’s leadership role in illegal gam-
bling was relevant conduct supporting four-level leader-
ship sentencing enhancement “because [the conduct] oc-
curred during ‘the commission of, and in preparation for’
the money laundering . . . [and] [w]ithout the illegal gam-
bling, there would have been no ill-gotten gains to laun-
der.”). See also Febus, 218 F.3d at 796 (holding that defen-
dant’s interim leadership of long-running illegal lottery was
relevant conduct to gambling and conspiracy offenses,
thus supporting four-level “organizer or leader” enhance-
ment); United States v. Damico, 99 F.3d 1431, 1437 (7th Cir.
1996) (rejecting defendant’s argument that his racketeer-
ing conduct was not relevant to his extortion-related
conduct, for purposes of § 3B1.1(a)—i.e., that the extortion-
related conduct involved only one person other than him-
self—because “section 3B1.1’s use of the phrase ‘criminal
activity’ is ‘broad enough to include the entire racketeer-
Nos. 02-1635 & 02-1636                                        15

ing conspiracy rather than the particular predicate act
                               14
alone.’ ”) (citation omitted).
  The defendants’ final argument is that their roles as
leaders and organizers of the wagering offense should have
no bearing on whether they were organizers and/or leaders
of the tax conspiracy because “[t]he purpose of U.S.S.G.
§ 3B1.1 is [to] permit the district court to assess the relative
culpability of one defendant to another participant . . . .” We
rejected this same argument, however, in United States
                                            15
v. Bjorkman, 270 F.3d 482 (7th Cir. 2001), noting:
     [The defendant] correctly notes that the purpose of
     § 3B1.1 is to assign punishment to defendants based
     upon their relative degree of responsibility for the “of-
     fense.” However, this proposition aids [the defendant’s]
     argument only if the term “offense” is construed nar-
     rowly as denoting only the offense of conviction,
     not including relevant conduct. Since we have rejected
     this construction of “offense,” we must also reject
     [the defendant’s] derivative argument from § 3B1.1’s
     purpose.
Id. at 497.

14
  That the defendants consider Tedder to be the “bigger fish”
in the tax conspiracy, even if true, has no bearing on whether
they organized or exercised a leadership role in the tax conspir-
acy. See § 3B1.1, cmt. 4 (“There can, of course, be more than
one person who qualifies as a leader or organizer of a criminal
association or conspiracy.”). Cf. Bjorkman, 270 F.3d at 497 n.1.
15
   The dissent suggests that our reliance on Bjorkman is some-
how misplaced because that case involved a grouping of mul-
tiple counts under § 3D1.2(d), an issue we do not address
here. The fact that § 3B1.1 and § 3D1.2 both refer to § 1B1.3(a),
however, makes this a distinction without a difference. As
such, we see no reason why the Bjorkman Court’s analysis is
any less persuasive outside of the grouping context.
16                                  Nos. 02-1635 & 02-1636

  Therefore, whether the defendants’ wagering and tax
conspiracy offenses are evaluated separately or grouped
together, the result remains the same: the tax conspiracy
offenses incorporate the defendants’ relevant conduct in
operating a multi-jurisdictional offshore sports book bet-
ting empire, thus subjecting them to a four-level “organizer
or leader” enhancement under § 3B1.1(a). See, e.g., Nicolaou,
180 F.3d 565, 574 (4th Cir. 1999) (holding “that even if
grouping of money laundering and gambling were im-
proper, or if a role adjustment were only to be applied
prior to grouping, the four-level enhancement to the
money-laundering sentence on the basis of a leadership
role in the gambling offenses would be appropriate under
the Guidelines [pursuant to § 1B1.3(a)(1)-(2)]”).

                            III.
   For the reasons noted herein, we conclude that the dis-
trict court’s decision to apply a four-level “organizer or
leader” enhancement to the defendants’ tax conspiracy
offenses, pursuant to § 3B1.1, was proper. The judgment
of the district court is, therefore, AFFIRMED.
Nos. 02-1635 & 02-1636                                      17

  POSNER, Circuit Judge, dissenting. The district court
imposed the organizer enhancement on these two defen-
dants after grouping the tax and gambling offenses. My
colleagues now affirm on a different ground, that the
gambling offense was relevant conduct.
   I disagree but I wish they had at least said that the
grouping was improper, as it plainly was, rather than
ducking the issue. The government’s defense of the dis-
trict court’s ruling was irresponsible. Not only was it a
palpable error for the district court to group the two of-
fenses, but since grouping usually results in a more lenient
sentence (and would have done so here had the judge not
improperly enhanced the sentences) the government is
arguing against its long-term interests. Once again a local
office of the Justice Department, indifferent as it seems to
the implications of its position for the Department as a
whole, has embraced a position rejected by the Department
in its other cases. See Adler v. Espy, 35 F.3d 263, 264 (7th
Cir. 1994); Ortega v. United States, 270 F.3d 540, 548-49
(8th Cir. 2001); United States v. Bartlett, 856 F.2d 1071, 1080
n. 13 (8th Cir. 1988); cf. Woodhill Corp. v. Federal Emergency
Management Agency, 168 F.3d 1025, 1027-28 (7th Cir. 1999);
United States v. White, 882 F.2d 250, 252 (7th Cir. 1989).
  Grouping—the purpose and usual effect of which are
to limit the defendant’s sentence to the punishment for the
most serious of the grouped offenses, U.S.S.G. ch. 3, pt. D,
Introductory Commentary; United States v. Runyan, 290
F.3d 223, 251 (5th Cir. 2002); United States v. Kalust, 249
F.3d 106, 110 (2d Cir. 2001); United States v. Reetz, 18 F.3d
595, 598 and n. 3 (8th Cir. 1994); United States v. Patterson,
947 F.2d 635, 636-37 (2d Cir. 1991)—is done when a defen-
dant is convicted of multiple counts so closely related
that they essentially merge into a single offense; or, in the
words of the guideline, when they inflict “substantially the
18                                    Nos. 02-1635 & 02-1636

same harm.” U.S.S.G. § 3D1.2. When, as in this case, the
victims are different (the victims of the gambling offense
are the community as a whole, as in other “victimless”
crimes, and perhaps the gamblers themselves, if a paternal-
istic view is taken, while the victims of the tax offenses
are the members of the taxpaying public), grouping is
improper, as several cases hold with regard to the closely
related question whether to group fraud and tax evasion.
Weinberger v. United States, 268 F.3d 346, 354-55 (6th
Cir. 2001); United States v. Astorri, 923 F.2d 1052, 1056-57 (3d
Cir. 1991); United States v. Vitale, 159 F.3d 810, 813-15 (3d
Cir. 1998); United States v. Lindsay, 184 F.3d 1138, 1142-43
(10th Cir. 1999).
   I acknowledge the existence of contrary precedents,
illustrated by United States v. Gordon, 291 F.3d 181, 189-90
(2d Cir. 2002), and United States v. Haltom, 113 F.3d 43, 46
(5th Cir. 1997), that allow the grouping of fraud and
tax evasion, but their reasoning is not persuasive, especially
if carried over to a case like this. It is common for illegal
gambling enterprises to pay income taxes in order to avoid
compounding their offenses, especially since, as this case
illustrates, the tax offense will often be more serious than
what in the case of gambling is little more than a “morals”
offense. Gambling is extremely widespread in the United
States and broadly approved; the moral distinction be-
tween the gambling that is legal and the gambling that
is illegal is faint to the point of invisibility.
  In all the cases I have cited or could cite on both sides
of the question, except Gordon, where the government
grudgingly acknowledged the existence of binding cir-
cuit precedent that required grouping, the government was
arguing against grouping, which is to say against the
position it is arguing for in this case. See also Brief for the
United States in Glover v. United States (531 U.S. 198 (2001)),
No. 99-8576, pp. 39-44.
Nos. 02-1635 & 02-1636                                      19

  I said that the usual effect, not the invariable effect, of
grouping is to lighten the defendant’s sentence. In United
States v. Bjorkman, 270 F.3d 482, 495-97 (7th Cir. 2001) (per
curiam), we held, pursuant to U.S.S.G. § 1B1.3(a)(2), that
when offenses constituting parts of the “same course of
conduct or common scheme or plan” are grouped under
section 3D1.2(d) of the guidelines (which is done “when
the offense level is determined largely on the basis of the
total amount of harm or loss, the quantity of a substance
involved, or some other measure of aggregate harm, or if
the offense behavior is ongoing or continuous in na-
ture . . .”), a managerial role in one of the grouped offenses
can be automatically attached to the offense of conviction.
For by definition offenses grouped on such a basis in such
circumstances are not merely different characterizations
of the same basic criminal activity but different building
blocks of an overarching offense. A typical example would
be where the defendant’s offense level is determined by
what may have been the relatively minor amount of drugs
that he handled but it was part of a larger course of con-
duct in which he played a managerial role.
   Bjorkman was such a case; this is not; the difference
is made clear by United States v. Ritsema, 31 F.3d 559, 565-66
(7th Cir. 1994), which held that “section 1B1.3(a)(2) cannot
be read to make Ritsema’s obstruction of justice conduct
relevant to his silencer offense [possession of an unregis-
tered silencer] because by its terms, it applies only to
offenses which would be grouped as multiple counts
under section 3D1.2(d).” Substitute gambling for obstruc-
tion of justice and tax evasion for possessing an unregis-
tered silencer and you have this case. In any event, my
colleagues decline to decide whether grouping was prop-
er in this case, making unintelligible their reliance on Bjork-
man, a case that presupposed grouping—and under the
inapplicable § 3D1.2(d), to boot. Pretending that the de-
20                                    Nos. 02-1635 & 02-1636

fendants had been convicted only of the tax offense, my
colleagues adopt the government’s alternative argument
that since that offense was related to the gambling of-
fense and the sentencing guidelines provide that in decid-
ing whether a defendant is an organizer the sentencing
court should consider “relevant conduct,” U.S.S.G. ch. 3,
pt. B, Introductory Commentary; United States v. Billingsley,
115 F.3d 458, 465 (7th Cir. 1997); United States v. Febus,
218 F.3d 784, 796 (7th Cir. 2000), the defendants should
be deemed organizers of the tax offense. This is a fiction.
Their role in the tax offense was merely to accept the il-
legal advice of their tax lawyer. He concocted, organized,
and implemented the offense. They are guilty too of course
but are no more organizers of the offense than a thief
who sells stolen property to a fence is an organizer of the
fencing operation.
  Is it a fiction commanded or countenanced by the sen-
tencing guidelines? It is not. So far as bears on this case
(since it is not a grouping case, or treated as one by the
majority), relevant conduct is criminal activity “that oc-
curred during the commission of the offense of convic-
tion, in preparation for that offense, or in the course of
attempting to avoid detection or responsibility for that of-
fense.” U.S.S.G. § 1B1.3(a)(1). The offense of conviction
was tax evasion, and the gambling activity that generated
the income on which the defendants failed to pay taxes
was not “in preparation for that offense.” We have made
clear that “factually related to” is not synonymous with “in
preparation for.” United States v. Tai, 994 F.2d 1204, 1213
(7th Cir. 1993). Nor is this a case like United States v. Lewis,
79 F.3d 688, 691-92 (7th Cir. 1996), where the relevant con-
duct was money laundering undertaken to shield the
offense of conviction, which was the sale of cocaine, from
detection. The government has it backwards: the tax eva-
sion was an attempt to avoid discovery of the gambling
Nos. 02-1635 & 02-1636                                       21

offense, not vice versa. And while the gambling offense
and the tax offense overlapped in time, for an offense to
“occur . . . during the commission of the offense of convic-
tion” implies more than a temporal overlap, as we held
in United States v. Ritsema, supra, 31 F.3d at 566-67; see
also United States v. Taylor, 272 F.3d 980, 982-84 (7th Cir.
2001); compare United States v. Ellison, 113 F.3d 77, 83
(7th Cir. 1997). Otherwise, if the defendants had beaten
their wives during the period in which they were beating
taxes, the wife-beating offense would be deemed relevant
conduct. The purpose of “during the commission” is, we
explained in Ritsema, “to free the [sentencing] court from
the strict confines of the indictment so that it may hold
the defendant accountable for the full range of harms
that stemmed from his offense conduct.” 31 F.3d at 567.
The harm from the defendants’ tax evasion was not aug-
mented by the fact that the income on which they evaded
taxes was generated by gambling. The harm would have
been the same had it been generated by lawful business
dealings.
  The guidelines’ directive to consider relevant conduct
in determining a defendant’s status as an organizer per-
tains to situations in which the relevant conduct enables
the court to identify the defendant as an organizer of the
offense of which he was convicted. Suppose that that
offense is a single sale of drugs to an undercover agent by
the defendant at the door of a crack house and the rele-
vant conduct is defendant’s ownership and management
of the crack house. Then it would be apparent that his role
in relation to the sale had been that of an organizer rather
than merely that of a sales clerk. See United States v.
Noble, 246 F.3d 946, 954 (7th Cir. 2001); United States v.
McClinton, 135 F.3d 1178, 1191 (7th Cir. 1998); see also
United States v. Lillard, 929 F.2d 500, 503 (9th Cir. 1991); cf.
my earlier discussion of grouping under U.S.S.G. § 3D1.2(d).
22                                  Nos. 02-1635 & 02-1636

But the relevant conduct here, which is to say the gam-
bling enterprise, does not demonstrate that the defen-
dants played an organizing role in relation to the tax of-
fense. All it demonstrates is the motive and source of
funds for their dealings with the crooked tax lawyer.

A true Copy:
       Teste:

                         _____________________________
                         Clerk of the United States Court of
                           Appeals for the Seventh Circuit

                  USCA-02-C-0072—12-16-02