US v. Celina Lord

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UNPUBLISHED AUTHORED OPINION filed. Originating case number: 1:09-cr-00159-JCC-2 Copies to all parties and the district court/agency. [998483691] [09-4924]

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US v. Celina Lord Doc. 0 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 1 UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-4924 UNITED STATES OF AMERICA, Plaintiff - Appellee, v. CELINA V. LORD, Defendant - Appellant. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. James C. Cacheris, Senior District Judge. (1:09-cr-00159-JCC-2) Argued: October 27, 2010 Decided: December 13, 2010 Before MOTZ and KEENAN, Circuit Judges, and HAMILTON, Senior Circuit Judge. Affirmed in part, vacated in part, and remanded by unpublished opinion. Judge Keenan wrote the opinion, in which Judge Motz and Senior Judge Hamilton joined. ARGUED: Mark John Petrovich, PETROVICH & WALSH, PLC, Fairfax, Virginia, for Appellant. Mark Sterling Determan, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: John A. DiCicco, Acting Assistant Attorney General, Alan Hechtkopf, Karen Quesnel, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Neil H. MacBride, United States Attorney, Alexandria, Virginia, for Appellee. Dockets.Justia.com Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 2 Unpublished opinions are not binding precedent in this circuit. 2 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 3 KEENAN, Circuit Judge: Celina Lord appeals her convictions by a jury on six counts of willfully failing to make payroll tax payments for her employer, ASSC, Inc. (ASSC), in violation of 26 U.S.C. 7202. The district court sentenced Lord to a total of 21 months' As imprisonment followed by three years of supervised release. a condition of her supervised release, the district court also ordered Lord to pay $776,849.47 in restitution to the United States government. Lord contends See 18 U.S.C. 3583(d), 3563(b). that the district court erred: 1) in purportedly permitting an Internal Revenue Service (IRS) revenue officer to testify about Lord's state of mind; 2) in providing the jury a particular definition of negligence; and 3) in denying Lord's motion under Rule 29 for a judgment of acquittal, in which Lord asserted that the evidence was insufficient to support the convictions. For the reasons discussed below, we affirm Lord's convictions and sentences, finding error only in the amount of restitution ordered by the district court. I. The record before us shows that certain types of employers, including ASSC, are required to withhold employment taxes from their employees' wages. See Erwin v. United States, 591 F.3d The employer holds the money in 3 313, 319 (4th Cir. 2010). Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 4 "trust for the United States" until making a federal tax payment in the amount of the withheld funds. 26 U.S.C. 3102, 3402. 26 U.S.C. 7501(a); see Because employment taxes are held in See trust, they commonly are referred to as "trust fund taxes." Plett v. United States, 185 F.3d 216, 218 (4th Cir. 1999). If the IRS is unable to collect "trust fund taxes" from an employer, as occurred in this case, the IRS may impose liability on the employer's officers or employees when two requirements are met. First, the officer or employee must have had a duty to "collect, account for, and pay over" employment taxes for the employer. exercises person." See 26 U.S.C. 7202, 6672(a). this authority is referred to An individual who as a "responsible See Slodov v. United States, 436 U.S. 238, 246 n.7 Second, this responsible (1978); Plett, 185 F.3d at 218-19. person must willfully have failed to perform these tax-related duties. See 26 U.S.C. 7202, 6672(a). If both conditions are satisfied, the employee may be personally liable to pay civil penalties penalties), under or 26 may U.S.C. face 6672(a) (trust fund recovery criminal sanctions and imprisonment under 26 U.S.C. 7202. In the present case, ASSC failed to pay over employment taxes to the federal government from the fourth quarter of 2001 through the second quarter of 2004. Celina Lord was the chief 4 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 5 financial officer and the acting president of ASSC during the period that ASSC failed to comply with federal tax laws. II. The evidence at trial showed that Jannette Green, a revenue officer for the IRS, was assigned responsibility for collecting delinquent employment taxes owed by ASSC. As part of her duties, Green conducted interviews with Lord and Linda Smith, the president of ASSC, to determine whether they were personally liable for trust fund recovery role penalties in ASSC's under 26 U.S.C. to 6672(a), based on their failure make employment tax payments. 1 Green Smith. first testified that regarding she her conversations to Smith the with IRS's Green stated explained procedures for determining civil liability to pay trust fund recovery penalties. collection willfulness efforts, and Green informed Smith "that [as part of its the IRS makes] to a determination who was based on responsibility determine actually responsible for having turned over [withheld employment taxes] to the government and failed to do so." Linda Smith had taken a long-term leave of absence from the company during the first half of 2001, and at some time thereafter had appointed Lord to serve as acting president during Smith's absence. 5 1 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 6 Lord's counsel raised an objection, asserting that any statements by Green regarding which individuals at ASSC were responsible for payment of employment taxes would improperly invade the province of the jury to decide an element of the offense charged. Counsel for the government responded, suggesting that the district court instruct the jury that Green was only testifying about her discussions with Smith regarding her liability for civil penalties, and not about conclusions Green may have drawn about Lord's responsibility accepted the under the criminal statute. Lord's counsel government's proposal, stating, "All right." After a brief recess, the district court instructed the jury, "You had some testimony from Ms. Green on responsible party under her theory. The question of who is the responsible party is a question of law, and it's not for Ms. Green to make that decision." Lord's counsel did not object to this instruction. Counsel for the government resumed his direct examination of Green. In response to a question, Green testified, "I would have told [Smith] that based on the interview I conducted . . . that I had deemed that [Smith] was both willful and responsible for . . . having withheld money from employees' paychecks for taxes and Social Security and not having paid it over to the government." 6 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 7 Green gave similar testimony regarding her conversations with Lord, except that Green did not use the word "willful." Lord objected to the government's questions eliciting this testimony as leading, and to Green's testimony as irrelevant. The district court overruled Lord's objections. Green testified, "I told [Lord] how we determined who was responsible. And I told her that based on the interview, that I would be holding her responsible for the trust fund [recovery] penalties." A. We ordinarily review a district court's evidentiary rulings for abuse of discretion. 286, 292 (4th Cir. 2010). raised for the first See United States v. Johnson, 617 F.3d However, when an evidentiary issue is on appeal, our consideration is time limited to a plain error review. United States v. Lynn, 592 F.3d 572, 577 (4th Cir. 2010); see Fed. R. Crim. P. 52(b). Under the plain error standard, to constitute reversible error, the district court's error must be "plain" and must have affected a party's "substantial rights." Lord maintains for the first time Lynn, 592 F.3d at 577. on appeal that Green testified as an expert witness based on her specialized training as an IRS revenue officer, including her knowledge of the relevant provisions of the Internal Revenue Code. 7 Lord argues Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 8 that Green improperly rendered opinion testimony regarding Lord's mental state in violation of Federal Rule of Evidence 704(b), which prohibits an expert witness from "stat[ing] an opinion or inference as to whether the defendant did or did not have the mental state or condition constituting an element of the crime charged." Fed. R. Evid. 704(b). Lord further notes that under Rule 704(b), this inquiry is a "matter[] for the trier of fact alone." Id. In addressing this argument, we initially observe that the government witness, district did not attempt Lord did to not qualify raise Green an as an expert in the and that objection as court challenging Green's statements being inadmissible expert testimony. Thus, we review the district court's admission of Green's testimony under the plain error standard. See Lynn, 592 F.3d at 577. The jury was charged, pursuant to 26 U.S.C. 7202, with determining whether Lord was "required" to "collect, truthfully account for, and pay over" employment taxes, and whether she willfully failed to do so. This inquiry did not require See specialized knowledge or involve particular terms of art. Fed. R. Evid. 702. The words used in 7202 carry the same Thus, meaning under the statute that they do in everyday use. Green's testimony describing her conversations with Lord about Lord's responsibility to pay over the employment taxes and her 8 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 9 liability to pay civil penalties did not constitute "expert" testimony. Even if we assume, without deciding, that Green effectively rendered expert testimony, that testimony did not violate Rule 704(b). regarding Although Green a did not opine about to Lord's 26 Lord did state U.S.C. she not of mind 7202. be any subjective intent that violate told Green Green to testified pay civil she would make responsible penalties, statements regarding Lord's willfulness under 7202 in failing to pay over the employment taxes. testified that Smith acted Additionally, while Green Green's statement willfully, regarding Smith was not probative of Lord's culpability under 7202, and thus did not have a prejudicial effect on the jury's consideration of the issue whether Lord acted willfully. 2 We also note that after the close of all the evidence, the district court carefully instructed the jury by defining the terms contained in 26 U.S.C. 7202. The district court further stated, "If you find the defendant was not a responsible person, For this same reason, we disagree with Lord's alternative argument that if Green testified as a lay witness, her testimony regarding willfulness violated Federal Rule of Evidence 701(a), which limits a lay witness' testimony to opinions "rationally based on the perception of the witness." Fed. R. Evid. 701(a). As stated above, Green did not testify that Lord acted willfully, and Green's testimony regarding Smith's conduct was not probative of, or prejudicial to, the jury's consideration of the issue of Lord's willfulness. 9 2 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 10 then you will not consider any other issue. On the other hand, if you conclude the defendant was a responsible person, you must decide whether the defendant acted `willfully' in the failure to collect, truthfully account for and pay over taxes to the Government." These instructions, together with the unchallenged limiting instruction given to the jury during Green's testimony, plainly ultimate party who informed authority willfully the to jurors decide to that they, not Green, a had the whether pay Lord was responsible taxes failed over the employment under the terms of 7202. We therefore conclude that the district court did not plainly err in allowing the portions of Green's testimony at issue here. B. We turn to consider Lord's challenge to the district In court's supplemental jury instruction defining negligence. its initial charging instructions, the district court defined the term "willful," stating, "[t]o act willfully means to act voluntarily and deliberately and intending to violate a known legal duty." The court then explained that "[n]egligent conduct is not sufficient to constitute willfulness." During its deliberations, the jury asked the district court to define "negligent conduct." The district court informed 10 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 11 counsel that the court would respond that "negligence is a failure to exercise ordinary, reasonable care." Lord district objected court to this should definition, decline asserting to define that the either "negligent conduct," or should include in its definition the phrase "[care that a] reasonable person would exercise." proceeded to instruct the jury in accord The district court with the court's initial proposal. We review the district court's decision to give this jury instruction for abuse of discretion. See United States v. Abbas, 74 F.3d 506, 513 (4th Cir. 1996). reverse Lord's convictions together, on did this not Thus, we will not basis adequately unless state the the instructions, taken controlling legal principles. F.3d 557, 566 (4th Cir. 2009). United States v. Jeffers, 570 The parties agree that the determination of willfulness, for purposes of 7202, requires a subjective assessment of a defendant's conduct. "willful" given by Lord does not challenge the definition of the district court, but suggests that in defining negligence for the jury, the district court improperly implied that willfulness, like negligence, is determined objectively from the viewpoint of a reasonable person. We find no merit in Lord's argument. At the outset, we note that Lord expressly invited the district court to include 11 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 12 in its definition of "negligent conduct" language regarding a "reasonable person." 76 (4th Cir. both the 1994). "willful" district from See United States v. Herrera, 23 F.3d 74, Moreover, and the district court correctly As stated defined above, "negligent" also and conduct. court expressly instructed distinguished the jury that negligence willfulness, negligent acts cannot form the basis for a violation of 7202. Thus, we hold that the district court did not abuse its discretion in giving the jury the supplemental instruction at issue. C. We next address Lord's argument that the district court erred in denying her motion under Rule 29 for a judgment of acquittal, in which she argued that the evidence was insufficient to support her convictions. court's ruling de novo. 317 (4th Cir. 2008). We review the district United States v. Reid, 523 F.3d 310, When a Rule 29 motion is based on a claim of insufficient evidence, the jury verdict must be sustained if there is "substantial evidence" to support the verdict, taking the view most favorable to the government. Id. The evidence is considered "substantial" if a reasonable finder of fact could accept the proof as sufficient to support Id. a defendant's conviction beyond a reasonable doubt. 12 To obtain a reversal Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 13 of a conviction on the ground that the evidence was insufficient, the prosecution's failure of proof must be clear. United States v. Moye, 454 F.3d 390, 394 (4th Cir. 2006) (en banc). Lord contends first that the government failed to prove that she "had a duty to collect, truthfully account for, and pay over" employment taxes on behalf of ASSC. Lord's argument. The evidentiary record contains substantial evidence We disagree with showing that Lord was a "responsible person" required to pay over employment taxes on behalf of ASSC. Lord conceded during her testimony that she exercised authority over the finances of ASSC. She not only was authorized to sign employment tax returns, but also had the ability to transfer the sums withheld for taxes to the accounting service used by ASSC. Other ASSC employees testified that Lord controlled the day-to-day operations and finances of ASSC throughout the time periods at issue. Smith testified that Lord had signature authority over the bank account used by ASSC to pay all bills, including payroll taxes. permission to file ASSC's Smith further stated that Lord had tax returns and to pay over the employment taxes. Taken together, this evidence was sufficient to permit the jury to find beyond a reasonable doubt that Lord 13 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 14 was responsible for withholding and paying over employment taxes on behalf of ASSC. Lord argues, nevertheless, that the government failed to prove that her failure to perform this duty was willful. argument, however, is refuted directly by the record. This The jury heard evidence that Lord was aware of the importance of filing tax returns. Prior to accepting the position of chief financial officer for ASSC, Lord had been an accountant for almost twenty years. In at least two of her previous jobs, Lord was involved with, or was in charge of, ensuring that her employer's payroll taxes were properly filed and paid. Further, Lord conceded in her trial testimony that one of her "higher priorities" at ASSC was to "file and to pay all outstanding taxes." Lord repeatedly testified that she was too busy with other responsibilities, and had to satisfy other debts and pay employee wages, before she made ASSC's employment tax payments. Such acts, of paying wages and of satisfying debts to creditors in lieu of remitting employment taxes to the IRS, constitute circumstantial evidence of a voluntary and deliberate violation of 7202. See United States v. Gilbert, 266 F.3d 1180, 1185 Lord's willfulness also can be inferred from (9th Cir. 2001). her pattern of failing to pay over the taxes for an extended period of time. See United States v. Ostendorff, 371 F.2d 729, 14 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 15 731 (4th Cir. 1967); United States v. Greenlee, 517 F.2d 899, 903 (3d Cir. 1975). Based on this evidence, and viewing the government's proof as a whole, we conclude that substantial evidence in the record supports the jury's conclusion that Lord willfully violated 7702. Thus, we hold that the district court properly denied Lord's Rule 29 motion for judgment of acquittal, and we affirm Lord's convictions. III. We conclude, however, that there was error in the amount of restitution ordered by the district court. Restitution is allowed only "for the loss[es] caused by the specific conduct that is the basis of the offense of conviction." United States, 495 U.S. 411, 413 (1990). Conduct Hughey v. that is relevant to the government's proof but does not form a basis for the conviction may not be considered in ordering restitution. United States v. Newsome, 322 F.3d 328, 341 (4th Cir. 2003). The parties agree that the proper amount of restitution attributable to the conduct underlying Lord's conviction is $330,430.79, rather than the amount of $776,849.47 ordered by the district court. not harmless. We The government concedes that this error was therefore affirm Lord's convictions and sentences, with the sole exception of the restitution ordered in 15 Case: 09-4924 Document: 42 Date Filed: 12/13/2010 Page: 16 this case. We vacate the restitution provision in the district court's final judgment order, and we remand the case to the district court for the limited purpose of entry of final judgment reflecting the corrected amount of restitution. AFFIRMED IN PART, VACATED IN PART, AND REMANDED 16

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