September 2, 2014

Tenth Circuit: In Tax Evasion Case, Conviction Affirmed, Sentence Reversed

The Tenth Circuit Court of Appeals published its opinion in United States v. Melot on Monday, October 21, 2013.

After a jury trial, appellant Bill Melot was convicted of one count of corruptly endeavoring to impede the administration of the Internal Revenue Code, one count of attempting to evade or defeat tax, six counts of willful failure to file, and seven counts of making false statements to the Department of Agriculture. Melot was sentenced to a term of sixty months’ imprisonment, a significant downward variance from the advisory guidelines range of 210-262 months. He was also ordered to pay $18,493,098.51 in  restitution to the Internal Revenue Service.

On appeal, Melot argued the Government presented insufficient evidence of willfulness to support his convictions and erred in the calculation of the tax loss and the amount of restitution. The Government cross-appealed, arguing the district court committed clear error by applying a two-level reduction to Melot’s offense level for acceptance of responsibility.

Regarding Melot’s conviction, the Tenth Circuit held that the Government’s evidence demonstrated overwhelmingly that Melot engaged in behavior consistent with an individual who had actual knowledge of his obligation to file returns and pay tax. The Government’s evidence showed Melot routinely concealed income and assets from the IRS; used cash extensively, informing others that this was a means to avoid the payment of income taxes; and acted in a manner inconsistent with his asserted belief he was not subject to federal income taxes because he was not a citizen of the United States. All of the Government’s evidence, together with the reasonable inferences that could be drawn from it, was amply sufficient to support the jury’s finding that Melot was aware of his obligation to file returns and pay federal taxes and negated any inference Melot acted in good faith.

On the issue of Melot’s sentence, Melot argued some evaded state fuel excise taxes did not qualify as relevant conduct because they were not groupable with his offenses of conviction. However, the court concluded the offenses of conviction and the evasion of fuel excise taxes were part of a common scheme or plan because both had a common purpose—the defeat of taxes owed.

In its cross-appeal, the Government argued the district court clearly erred in granting Melot a two-level decrease in his offense level for acceptance of responsibility. The Sentencing Guidelines provide that a defendant can meet his burden by showing, inter alia, he truthfully admitted the conduct comprising the offense of conviction or voluntarily paid restitution prior to adjudication of guilt. U.S.S.G. § 3E1.1. A review of the record confirmed Melot did neither of these things, nor did he engage in any other conduct demonstrating an acceptance of responsibility for his offenses. Because the record contained absolutely no evidence supporting the application of the acceptance-of-responsibility reduction but, instead, clearly demonstrated Melot did not accept responsibility for his criminal conduct, the district court’s determination that he was entitled to the § 3E1.1 decrease was clearly erroneous and Melot’s sentence had to be reversed.

The Tenth Circuit AFFIRMED Melot’s convictions and REVERSED his sentence.

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