Ninth Circuit Rejects Defendant's Attack on Sentencing Calculations (1/31/18)

In United States v. Murphy, 2018 U.S. App. LEXIS 1508 (9th Cir. 2018), unpublished, here, Murphy was convicted of four counts of filing fictitious financial obligations (18 USC § 514), three counts of making false claims (18 USC § 287, and one count of tax obstruction (§ 7212(a).  The opinion, as is sometimes true particularly of unpublished opinions, is fairly cryptic.  I focus on four issues, more as reminders to students and practitioners rather than addressing new issue or analysis.

First, as to his tax loss, Murphy argued that the refunds he claimed of $1.2 million because he had printed on the returns and in an accompanying letter that "he in fact requested that this amount be set off against his preexisting debt, not returned to him as a refund."  The Court rejected the argument as follows:

Neither the largely unintelligible text he printed on each page nor the equally opaque letter accompanying his returns clearly indicate that he sought to have that money set off against his debt rather than refunded to the accounts whose information he provided; indeed, these passages are largely gibberish.

I am confused as to why the court needed to affirm on that basis.  Applying refunds to other debts -- I presume other tax debts -- is the equivalent of a refund, and if that were Murphy's intent to illegally lower his other debt (tax or otherwise), the object of the offense was the amount that he requested be applied.

Second, Murphy complained that the sentencing court had applied both the sophisticated means two level enhancement and the obstruction two level enhancement.  It is not clear what the basis for the sophisticated means enhancement was but Probation recommended the obstruction enhancement because "the defendant sent false written accusations of criminal conduct to an IRS employee, for the purposes of intimidation, in order to prevent him from performing official duties."  Of course, such conduct could be obstruction.  And it is not at all clear from the opinion how that conduct would have entered into the determination of sophisticated means, so as to even present the issue of "double counting."  There is nothing at all sophisticated about sending "false written accusations of criminal conduct to an IRS employee, for the purposes of intimidation, in order to prevent him from performing official duties."  The Court of Appeals does say that overlapping conduct may have been involved, but does not hint what the overlapping conduct may have been or that the sentencing court considered such overlapping conduct in imposed the obstruction enhancement .  In any event, the Court of Appeals ties its conclusion that the sentencing court did not improperly based the obstruction enhancement on conduct considered for the sophisticated means enhancement.

Third, the Court of Appeals affirmed the award of restitution for the tax obstruction (§ 7212(a)) conviction.  As background, restitution is generally not permitted for Title 26 tax crimes -- including tax obstruction.  But, restitution can be awarded if a condition of a benefit offered the defendant.  In this case, "The Court * * * ordered restitution of $447,528 as a condition of supervised release."  Murphy argued on appeal that the award was improper because the tax obstruction verdict was a general verdict which did not specify the conduct that was the basis of the verdict.  The tax obstruction crime -- like the defraud conspiracy (indeed tax obstruction has been called a one-person conspiracy) -- can be based on conduct that may have not been illegal per se and may not have had any object to cause a tax loss.  Hence, as the Court noted, that Murphy argued:

the district court erred by imposing restitution for his violation of Section 7212(a) despite the fact that the jury returned a general verdict and some of the conduct charged under that count did not cause any loss. 

The Court of Appeals rejects the argument in based on failure to show  plain error, including failure "to show that the loss associated with the respective count could not have equaled the amount of restitution ordered."

Finally, the Court of Appeals affirmed the sentencing court's calculation of the amount of restitution.  As to the base tax loss, he failed to contest below and, as to the calculation of prejudgment interest at the Code's statutory rate in § 6621, the Court of Appeals held that "Applying that law in the context of restitution intended to compensate the IRS for that same loss was not an error at all, much less an abuse of discretion."