Saturday, September 18, 2010

The Triple Whammy from Breach of Trust Illegal Income -- Ouch, That Hurts

In United States v. Welch, 2010 U.S. App. LEXIS 19107 (5th Cir. 2010) (unpublished), the Court affirmed a relatively rare upward variance from the guidelines sentencing range in a tax case. The background (from an update in my book) is:

The Guidelines provide an upward adjustment if the defendant abused a position of public or private trust “in a manner that significantly facilitated the commission or concealment of the offense.” §3B1.3. A tax crime involving only the breach of the duty to the Government to report and/or pay tax does not invoke this upward adjustment, but if the tax crime involves or arises from some other conduct that does breach a position of public or private trust, then this upward adjustment may apply. For example, if the tax crime is failure to report embezzled income, this adjustment may apply as well as the two level adjustment §2T1.1(b)(1) for illegal income and then, even worse, a sentencing court may consider the nontax breach of trust conduct as a factor warranting an upward variance.

In Welch, the defendant was charged under Section 7206(1) (tax perjury) for failing to report embezzlement income of $622,000. In computing the Guidelines range, the sentencing court included an illegal source adjustment (S.G. §2T1.1(b)(1)) and a breach of trust adjustment under §3B1.3. The court then determined to vary upward from the thus enhanced Guidelines range because the defendant's embezzlement had not been prosecuted and thus, in the court's view, the Guidelines calculations even as thus enhanced did not adequately reflect the seriousness of the conduct.

The Fifth Circuit sustained as a proper application of the sentencing court's authority under Booker.  The Court said succinctly:
The district court was entitled to base its variance upon the embezzlement, even if that offense was already accounted for in the Guidelines calculation. United States v. Brantley, 537 F.3d 347, 350 (5th Cir. 2008); United States v. Williams, 517 F.3d 801, 810-11 (5th Cir. 2008) (holding that a district court may rely upon factors already incorporated by the Guidelines to support a non-Guidelines sentence).

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