Relevant Conduct and Groupability (9/4/12)

Circuit Splits blog has a discussion of a circuit split regarding the application of the Sentencing Guidelines relevant conduct concept.  Fourth Circuit Joins Lopsided Split in Authority Over Grouping Guidelines (Circuit Splits Blog 9/4/12), here.  The blog discusses United States v. Horton, ___ F.3d ___, 2012 U.S. App. LEXIS 18423 (4th Cir. 2012), here and here.  Horton is a nontax case, so I won't dwell on the details of the facts giving rise to the issue, but will state the issue and its potential relevant to tax crimes case.

The issue has to do with the concept of relevant conduct and, specifically, how criminal conduct other the counts of conviction can be factored into the Guidelines sentence.

In criminal tax cases, the principal driver for sentencing is the tax loss which determines the Base Offense Level under the Tax Table.  See Sentencing Guidelines §2T1.1, here, and §2T4.1, here.  The higher the tax loss, the higher the indicated Guidelines sentencing range (subject to adjustments before the Sentencing Table is applied).  Relevant conduct requires that the tax loss for noncharged conduct be included if relevant, as defined in the Guidelines, and the Government proves the conduct and tax loss at sentencing by a preponderance of the evidence (some courts might say by clear and convincing evidence).  If, as is usually the case the defendant pleads guilty, the relevant conduct will usually be stipulated in the plea agreement.

The Guidelines define Relevant Conduct in §1B1.3, here, quoted in "relevant" part:

§1B1.3. Relevant Conduct (Factors that Determine the Guideline Range)
(a) Chapters Two (Offense Conduct) and Three (Adjustments).
Unless otherwise specified, (i) the base offense level where the guideline specifies more than one base offense level, (ii) specific offense characteristics and (iii) cross references in Chapter Two, and (iv) adjustments in Chapter Three, shall be determined on the basis of the following:
(1) (A) all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant; and
(B) in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy), all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity,
that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense;
(2) solely with respect to offenses of a character for which §3D1.2(d) would require grouping of multiple counts, all acts and omissions described in subdivisions (1)(A) and (1)(B) above that were part of the same course of conduct or common scheme or plan as the offense of conviction;
(3) all harm that resulted from the acts and omissions specified in subsections (a)(1) and (a)(2) above, and all harm that was the object of such acts and omissions; and
(4) any other information specified in the applicable guideline.

The most usual "relevant conduct" encountered in tax crimes cases is other tax crimes -- state or federal -- from a common pattern for which the defendant was not convicted (whether not charged or acquitted).  Consider this example from my Federal Tax Crimes book:

Assume that, through a common pattern of tax evasion from year to year, the taxpayer commits tax evasion for years 01 through 06, evading $100,000 in each year.  The Government indicts him on April 14 of year 09, charging tax evasion (§ 7201) for all open years 03-06 (open years is a statute of limitations concept that I discuss later in these materials).  The Government cannot indict for years 01 and 02.  Assume that the taxpayer pleads guilty to one count of tax evasion for year 06.  In his allocution, he admits that, in years 01-06, he had a common pattern of tax evasion and stipulates that he evaded tax in each year by $100,000.  The tax loss for purposes of setting the Base Offense Level is $600,000.  And, this result is not changed even if, for example, (i) the jury determines guilt (rather than by plea) for the year 06 rather than the taxpayer pleading guilt but acquits for the other years (years 03-05), (ii) the prosecutors prove evasion of $100,000 in each of the years 01-05 in the sentencing phase by a preponderance of the evidence.  Nor is it changed by the fact that years 01 and 02, included in relevant conduct were beyond the statute of limitations.  What this means is that the defendant rides up the scale, gets a higher BOL, and a greater indicated sentencing range.  Relevant conduct is the concept that permits that phenomenon.   See particularly § 1.B.1.3.(a)(2) above.

Let's parse the Guidelines to see how we get there.

First, the tax Base Offense Level (BOL) is either 6 or, if higher, the BOL determined under the Tax Table.  §2T1.1(a),  The Tax Table provides multiple BOL's determined by the tax loss.  §2T4.1. So the requirement of §1B1.3(a)(i) is met.  The evasion for years 01-05 was not committed during the offense of conviction (evasion in year 06) nor, under these facts was the defendant aided by others in doing so.  So §1B1.3(a)(1) is not met.  But, §1B1.3(a)(2) is met.  Although,  §1B1.3(a)(2)  is above, I repeat it here

(2) solely with respect to offenses of a character for which §3D1.2(d) would require grouping of multiple counts, all acts and omissions described in subdivisions (1)(A) and (1)(B) above that were part of the same course of conduct or common scheme or plan as the offense of conviction;

So, this relevant conduct inclusion refers to the Grouping Rules in §3D1.2(d).  The commentary explaining this is:

3.      "Offenses of a character for which §3D1.2(d) would require grouping of multiple counts," as used in subsection (a)(2), applies to offenses for which grouping of counts would be required under §3D1.2(d) had the defendant been convicted of multiple counts.  Application of this provision does not require the defendant, in fact, to have been convicted of multiple counts.  For example, where the defendant engaged in three drug sales of 10, 15, and 20 grams of cocaine, as part of the same course of conduct or common scheme or plan, subsection (a)(2) provides that the total quantity of cocaine involved (45 grams) is to be used to determine the offense level even if the defendant is convicted of a single count charging only one of the sales.  If the defendant is convicted of multiple counts for the above noted sales, the grouping rules of Chapter Three, Part D (Multiple Counts) provide that the counts are grouped together.  Although Chapter Three, Part D (Multiple Counts) applies to multiple counts of conviction, it does not limit the scope of subsection (a)(2).  Subsection (a)(2) merely incorporates by reference the types of offenses set forth in §3D1.2(d); thus, as discussed above, multiple counts of conviction are not required for subsection (a)(2) to apply.
As noted above, subsection (a)(2) applies to offenses of a character for which §3D1.2(d) would require grouping of multiple counts, had the defendant been convicted of multiple counts.  For example, the defendant sells 30 grams of cocaine (a violation of 21 U.S.C. § 841) on one occasion and, as part of the same course of conduct or common scheme or plan, attempts to sell an additional 15 grams of cocaine (a violation of 21 U.S.C.  § 846) on another occasion.  The defendant is convicted of one count charging the completed sale of 30 grams of cocaine.  The two offenses (sale of cocaine and attempted sale of cocaine), although covered by different statutory provisions, are of a character for which §3D1.2(d) would require the grouping of counts, had the defendant been convicted of both counts.  Therefore, subsection (a)(2) applies and the total amount of cocaine (45 grams) involved is used to determine the offense level

I have bold-face the portion of the comment to which I refer that makes it clear that relevant conduct includes conduct for which there was no conviction.  The construct, however, requires that the nonconvicted conduct would have been groupable under §3D1.2(d) if it had been convicted.   §3D1.2(d)  provides:

(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 harm, or if the offense behavior is ongoing or continuous in nature and the offense guideline is written to cover such behavior.

Note that this phenomenon for relevant conduct is the reason that getting the Government to drop tax crimes counts in a plea bargain or even obtaining an acquittal after trial may not affect the defendant's sentence and thus may be a pyrrhic victory.

On Horton, see also, Fourth Circuit vacates LWOP sentence for illegal gun possession premised on uncharged murder (Sentencing Law and Policy Blog 8/30/12), here.