Tuesday, February 13, 2007

Intended Loss, not Actual Loss, Governs Loss Amount Calculation Under U.S.S.G. §2T4.1

United States v. Phelps, No. 05-51279 (5th Cir. Feb. 12, 2007) (per curiam) (Reavley, Jolly, Benavides)

"Charles Phelps, Jr. (Appellant) managed various adult entertainment businesses for his codefendant, John Kenneth Coil. Over a period of several years, Appellant caused corporate monies to be falsely reported as wages paid to his family members." Slip op. at 1. Those actions led to his conviction of "one count of conspiracy to defraud the United States by impeding the IRS in its collection of revenue in violation of 18 U.S.C. § 371." Id. at 2.

The district court calculated Phelps's offense level under U.S.S.G. §2T4.1. At sentencing, Phelps presented an expert who put the tax loss amount at $80,463.64, but who also argued that "the excess social security taxes paid through [his] family members' fraudulent tax filings should be credited against that figure." The district court disagreed, finding that Phelps was responsible for a tax loss between $80,000 and $200,000 (good for a base offense level of 16). This appeal ensued.

The court held that losses under §2T4.1 must be calculated the same way that they are under 2T1.1 and 2T3.1, and under those guidelines it is the intended loss that matters, not the Government's actual loss. Accordingly, the loss amount that Phelps intended should not be offset by the extra social security taxes that his scheme generated for the Government, and the district court did not clearly err in its loss calculation.

The court also rejected Phelps's argument, which he raised for preservation purposes, that his sentence could not be enhanced on the basis of findings made on a preponderance standard rather than BRD. (Of course, considering that the loss amount centered on a legal dispute rather than a factual dispute, and that Phelps presented expert testimony supporting the district court's finding on loss amount, it's hard to see how the standard-of-proof would make a difference here.)

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