TR - United States of America v. Larson (8/5/2005)

[Riser Adkisson LLP]

United States of America v. Dwight D. Larson,
2005 U.S. App. LEXIS 16188 (7th Cir. 08/05/2005)

Nos. 02-2833 & 03-2472

UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

2005 U.S. App. LEXIS 16188;96 A.F.T.R.2d (RIA) 5547

April 6, 2005, Argued

August 5, 2005, Decided

PRIOR HISTORY: [*1] Appeals from the United States District Court for the Central District of
Illinois. No. 01 CR 20041. Michael P. McCuskey, Chief Judge.

COUNSEL: For UNITED STATES OF AMERICA, Plaintiff-Appellee (Nos. 02-2833 & 03-2472):
Gregory V. Davis, Brian D. Galle, DEPARTMENT OF JUSTICE, Tax Division, Appellate Section,
Washington, DC USA.

For DWIGHT D. LARSON, also known as DENNIS LARSON, Defendant-Appellant (No. 02-2833):
Babette P. Salus, SCHWING & SALUS, Springfield, IL USA.

PAUL E. PALMER, Defendant-Appellant, Pro se, Forrest City, AR USA (No. 03-2472).

JUDGES: Before BAUER, RIPPLE, and WOOD, Circuit Judges.

OPINIONBY: BAUER

OPINION: BAUER, Circuit Judge. A grand jury in the Central District of Illinois indicted Dwight
Larson and Paul Palmer in May 2001 for their involvement in a tax evasion scheme. Larson caught
wind of the grand jury investigation and fled the area prior to being indicted. He was arrested
in October 2001 in Florida where he was living under an assumed name and using a false social
security number. Larson pleaded guilty to conspiracy to defraud the United States Department of
Treasury, perjury, and willfully making and subscribing fraudulent income tax returns. Palmer
proceeded [*2] to trial pro se and was convicted on all counts. On appeal, Larson challenges the
district court's denial of a downward adjustment for acceptance of responsibility and seeks a
remand for resentencing on the basis of United States v. Booker, 160 L. Ed. 2d 621, 125 S. Ct.
738 (2005). Palmer requests reversal of his conviction under the Speedy Trial Act and advances a
Booker challenge. For the reasons stated herein, we affirm Palmer's conviction, remand his case
for resentencing, and order a limited remand with respect to Larson's sentence.

I. Background

Larson and Palmer were central figures in a conspiracy to avoid or minimize taxes owed by
themselves and others. The basic tack was to avoid reporting income and paying corresponding
federal income taxes by hiding assets in a series of sham trusts. The defendants' clients would
open bank accounts in the names of these trusts and transfer assets to the accounts. Instead of
ceding control of the trust assets, which would shift the incidence of taxation from the grantor
to the trust, the clients retained full control over the trust assets. See 26 U.S.C. §§ 641, 671-
79. But they did [*3] not report the income from the nominal trust assets and thereby evaded
taxation on the income. Defendants also filed tax returns on behalf of the trusts in which the
payments ultimately funneled back to their clients were deducted from the trust income. According
to the government, the scheme cost the Internal Revenue Service at least $ 2.6 million.

Both defendants played important roles in the scheme. Palmer recruited clients, prepared trust
papers, and set up the bank accounts. Larson, who operated Larson Accounting, Inc., in
Charleston, Illinois, served as the accountant for the clients. He filed returns designed to
conceal the fiscal reality of the transactions, and also opened accounts, set up trusts, and
recruited clients. In exchange for their services, defendants received hundreds of thousands of
dollars in direct compensation and Palmer was "loaned" millions more, which he may or may not
have repaid.

In late 1995, Larson began encouraging clients to use foreign trusts to decrease their taxes. The
foreign trusts were nothing more than trust names with addresses in foreign countries. Larson
knew that his clients were retaining control over the trust assets by either not sending [*4] any
money to the foreign accounts or only sending money for a short period of time. Larson also knew
that income taxes should have been paid on the money claimed to exist in the foreign trusts.

Larson prepared individual tax returns, corporate tax returns, and trust tax returns on behalf of
clients. The individual and corporate tax returns contained false expenses and deductions and
failed to report taxable income. The trust and foreign trust returns falsely represented that the
taxable income was distributed to foreign entities when the income was actually still controlled
by the taxpayer.

During the grand jury investigation, a subpoena was served on Larson for "any and all books and
records of any type related to income and expenses for the business known as Larson Accounting,
Inc. for the period 1/1/93 to [4/5/00]." Larson did not provide any pre-1996 records and later
falsely testified under oath that such records had been destroyed in the ordinary course of
business. In fact, there was no office policy of regular record destruction and some records from
the years in question were discovered at a storage facility where Larson Accounting kept its
records.

When Larson was informed [*5] in August 2000 that he was a target of the grand jury
investigation, he sold his business and other property and moved to Florida, where he lived under
an assumed name and used a false social security number. Larson was arrested in Marathon,
Florida, in October 2001, five months after he and Palmer were indicted. In January 2002, he
pleaded guilty to three counts in the indictment: Count 1, conspiracy to defraud an agency of the
United States in violation of 18 U.S.C. § 371; Count 8, willfully making and subscribing a
fraudulent tax return in violation of 26 U.S.C. § 7206(1); and Count 13, knowingly making false
declarations under oath in violation of 18 U.S.C. § 1623. The district judge sentenced Larson to
55 months' imprisonment and three years of supervised release, and ordered Larson to pay $
701,513 in restitution. Larson served his sentence and was released by the Federal Bureau of
Prisons on April 11, 2005. See http://www.bop.gov (inmate locator).

Facing one count of conspiracy to defraud a United States agency in violation of 18 U.S.C. § 371
and six counts of aiding and assisting [*6] the filing of false federal income tax returns in
violation of 26 U.S.C. § 7206(2), Palmer opted to test the government's evidence at trial. The
trial date was continued several times for reasons we will explain below. A jury ultimately found
Palmer guilty on all seven counts after an eight-day trial in May 2002. The district judge
imposed a sentence of 108 months' imprisonment, three years of supervised release, a fine of $
150,000, and restitution in the amount of $ 1,369,662. This appeal ensued.

II. Discussion

The only substantive issue on appeal is Palmer's Speedy Trial Act challenge. The Act provides
that no more than 70 days may elapse between arraignment and the commencement of trial. 18 U.S.C.
§ 3161(c)(1). However, certain periods of time between arraignment and trial are excluded from
the Speedy Trial calculation. 18 U.S.C. § 3161(h). Importantly for our purposes, "any period of
delay resulting in a continuance . . . [is excluded] if the judge granted such continuance on the
basis of his findings that the ends of justice served by taking such action outweigh the best
interest of the public and [*7] the defendant in a speedy trial." 18 U.S.C. § 3161(h)
((A). "Absent legal error, exclusions of time cannot be reversed except when there is an abuse of
discretion by the court and a showing of actual prejudice." United States v. Hemmings, 258 F.3d
587, 593 (7th Cir. 2001).

We begin with a procedural timeline to frame Palmer's argument. Palmer was arraigned on September
12, 2001, and his joint trial with Larson was set to commence on November 19, 2001. As of October
4, 2001, however, Larson was still at large. The government moved to continue the trial date
until December, with the suggestion of an interim status conference for an earlier trial if
Larson's custody status changed. The government argued that the delay period would not count
under the Act due to the absence of a codefendant and because no motion for severance had been
granted. See 18 U.S.C. § 3161(h)(7). The district court granted the motion in part, setting a new
trial date for November 26, 2001, and finding that the extra time was an excludable delay under
the Act. Larson was arrested in Florida on October 18, 2001, and arraigned in the Central
District [*8] of Illinois on November 19, 2001. After Larson's arrest but before his arraignment,
the court granted a motion to continue filed by Palmer. Palmer, who at the time was represented
by counsel, described the case as "very complicated and complex" and requested a ruling "ordering
the jury trial to commence no sooner than March 1, 2002." Palmer's Appx. at 3A, 3C. The district
court conducted a hearing on the matter, entertained Palmer's views on delaying the trial, and
reset the trial date to February 11, 2002. The judge specifically found that the time was
excludable under the Act because it was in the interests of justice to permit defense counsel
more time to prepare for trial. Palmer does not question the propriety of either of the foregoing
continuances or the district court's rulings that the resulting delays were excludable under the
Act.

On February 1, 2002, the district court held what was to be Palmer's final pre-trial conference.
At the conference, Palmer expressed dissatisfaction with the Federal Defender's Office's handling
of his case, asked to represent himself, and requested a three-month continuance to give himself
time to review all of the discovery and prepare for trial. [*9] Palmer Tr. 92-96, 128-29. After a
colloquy during which the district court strongly advised Palmer against representing himself,
the court found that he had knowingly and willingly waived his right to counsel and continued the
trial date until May 13, 2002. In granting the continuance, the district court did not
specifically find that the delay was excluded under the Speedy Trial Act. On May 2, 2002, Palmer
filed a motion to dismiss the indictment based on his claim that more than 70 non-excludable days
had passed prior to the commencement of trial. According to Palmer, the Speedy Trial clock began
on February 2, 2002, the day after the third continuance was granted, and 89 days had elapsed as
of the filing date of his motion. n1 The district court denied Palmer's motion at a May 8, 2002,
hearing. At that hearing, the court specifically found that the period from February 2, 2002,
until May 13, 2002, did not count as time under the Act because it qualified for the interests of
justice exclusion. Palmer challenges this ruling on appeal, arguing that his conviction must be
reversed because he was "sandbagged" by the district court's exclusion of that time. The
government contends that [*10] the district court's findings at the February 1, 2002, hearing
were sufficient to exclude the delay under the Act.

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n1 In the typical joint trial, the Speedy Trial clock begins when the last codefendant is
arraigned. United States v. Baskin-Bey, 45 F.3d 200, 203 (7th Cir. 1995) (citing Henderson v.
United States, 476 U.S. 321, 323 n.2, 90 L. Ed. 2d 299, 106 S. Ct. 1871 (1986)); 18 U.S.C. § 3161
(h)(7). In this case, that would be November 19, 2001, the date of Larson's arraignment. But no
time ran from Larson's arraignment up until at least the February setting because, shortly prior
to his arraignment, the district court continued the trial and excluded the accompanying delay.

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Though the district court is not required to make Speedy Trial Act findings contemporaneously
with a continuance order, United States v. Jean, 25 F.3d 588, 595 (7th Cir. 1994), the better
practice is for the court to make the required findings at least prior to a defendant's motion
[*11] to dismiss the indictment for a violation of the Act. See United States v. Janik, 723 F.2d
537, 544-45 (7th Cir. 1983), criticized on other grounds by Henderson, 476 U.S. at 328-29.
Nevertheless, Palmer is hardly in a position to complain about the delay because he was the one
who asked for it. As related above, Palmer precipitated the delay by insisting on proceeding pro
se on the eve of trial in a relatively complicated white collar case. Palmer himself observed in
his first motion to continue that the case involved "mountains of discovery" housed in two
government rooms and approximately eight computer hard drives. Palmer Appx. at 3B. With this
volume of discovery in mind, the district court had little choice but to continue the trial when
Palmer jettisoned his attorney at the final pre-trial conference. As we noted in a similar
situation, "it is unfair of [the defendant] to ask that the trial be delayed to suit her,
implicitly agree to the government's request that time be excluded because of her request, and
then try to sandbag the government by insisting that the time be counted against the speedy trial
clock." United States v. Baskin-Bey, 45 F.3d 200, 204 (7th Cir. 1995). [*12] It also warrants
mentioning that the purpose of the Speedy Trial Act is to protect the defendant from excessive
pre-trial delay and incarceration by the government and to protect the public's interest in the
speedy resolution of justice. The Act was certainly not meant to hamstring a defendant by pushing
him into trial unprepared, which "skews the fairness of the entire system," Barker v. Wingo, 407
U.S. 514, 532, 33 L. Ed. 2d 101, 92 S. Ct. 2182 (1972), or to permit opportunistic behavior by
defendants who request continuances for their benefit and then seek to have the accompanying
delay count against the 70-day limit. In the circumstances of this case, we do not find the
timing of the district court's findings to be problematic.

Moreover, Palmer cannot establish that he was prejudiced by the delay. "Prejudice is caused by
delays intended to hamper defendant's ability to present his defense." United States v. Wiehoff,
748 F.2d 1158, 1160 n.2 (7th Cir. 1984) (citation omitted). In this case, the delay did not
impede his defense, it had the opposite effect: it allowed him the time necessary to present a
defense. Palmer does not provide the prejudice link in his brief, [*13] probably because it is
clear that the district court had Palmer's best interests in mind when it granted his motion to
continue. Given Palmer's failure to show prejudice, we have no basis to reverse the district
court's exclusion of the delay associated with the third continuance.

Palmer also argues that the district court unconstitutionally enhanced his sentence on the basis
of factual findings that were neither admitted nor proven to a jury beyond a reasonable doubt.
Specifically, Palmer notes that his sentence was enhanced by the district court's findings with
regard to tax loss, obstruction of justice, use of sophisticated means to conceal the offense,
role in the offense, and receipt of a substantial portion of income from a fraudulent scheme.
Because Palmer raised this issue below by challenging the district court's sentencing
enhancements on the basis of Apprendi v. New Jersey, 530 U.S. 466, 147 L. Ed. 2d 435, 120 S. Ct.
2348 (2000), the government has the burden on appeal of establishing that the error was harmless.
United States v. Olano, 507 U.S. 725, 734-35, 123 L. Ed. 2d 508, 113 S. Ct. 1770 (1993); FED. R.
CR. P. 52(a) ("Any error, [*14] defect, irregularity, or variance that does not affect
substantial rights must be disregarded."). The government does not attempt to make this showing;
it admits that the district court's factual findings run afoul of the Sixth Amendment principles
explained in United States v. Booker, 160 L. Ed. 2d 621, 125 S. Ct. 738 (2005), and concedes that
a full remand is the appropriate remedy. Gov't Brief at 25. We agree and accordingly vacate
Palmer's sentence and remand for resentencing. n2 United States v. Schlifer, 403 F.3d 849, 855
(7th Cir. 2005); United States v. McGee, 408 F.3d 966, 987 (7th Cir. 2005).

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n2 Palmer contends that the indictment must be dismissed due to these sentencing errors. This is
incorrect. Errors in sentencing are remedied by resentencing rather than dismissal of indictments
or reversal of convictions.

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Larson appeals the district court's denial of an acceptance of responsibility adjustment and
advances a Booker claim. Before addressing [*15] the merits of his arguments, we must determine
whether Larson's recent release from prison has mooted his appeal. Though his imprisonment is
over, Larson remains on supervised release, which is a form of custody. United States v. Trotter,
270 F.3d 1150, 1152 (7th Cir. 2001). Larson correctly points out that the case is not moot if the
judge on remand would have discretion to shorten his supervised release. Trotter, 270 F.3d at
1152-53. Larson's three-year term is at the statutory and guidelines maximum for his offenses. 18
U.S.C. § 3583(b) (three-year maximum, no mandatory minimum); U.S.S.G. § 5D1.2(a)(2) (three-year
maximum, two-year minimum). With irrelevant exceptions, the statutory scheme makes the imposition
of supervised release discretionary, 18 U.S.C. § 3583(a), and the sentencing guidelines are now
merely advisory. Booker, 160 L. Ed. 2d 621, 125 S. Ct. 738. Because the district court has the
discretion to shorten Larson's supervised release, the case is not moot so we proceed to the
merits.

Larson's challenge of the district court's denial of an [*16] acceptance of responsibility
adjustment is unavailing. The government did promise to recommend an acceptance of responsibility
adjustment in the plea agreement, but the agreement qualified the promise by providing that the
government could change its position if Larson subsequently demonstrated a lack of acceptance of
personal responsibility. Larson Plea at 6. Based on an April 2002 meeting with a government agent
where Larson attempted to shift the blame for the fraud to his clients (the meeting convinced the
government not to call Larson as a witness at Palmer's trial), the district court found that
Larson had not accepted responsibility. This finding was not clearly erroneous.

Larson also attacks his sentence on the basis of Booker, correctly noting that the district court
unconstitutionally enhanced his sentence based on factual findings regarding use of sophisticated
means, role in the offense, and obstruction of justice. Unlike Palmer, Larson did not bring this
issue to the district court's attention by objecting at his sentencing. This forfeiture means
that we may only correct the error if Larson demonstrates that it was plain error under Rule 52
(b) of the Federal Rules of Criminal Procedure. [*17] Olano, 507 U.S. at 732-37. In United States
v. Paladino, 401 F.3d 471 (7th Cir. 2005), we explained that the plain error analysis as it
relates to Booker errors depends on whether the district judge would have imposed the same
sentence had he known that the guidelines were merely advisory, which is a question that only the
sentencing judge can answer. Id. at 483-84. Consequently, we will order a limited remand in
accordance with the procedure outlined in Paladino. Id. at 484-85. We will vacate and remand the
case for resentencing if the judge states that he would have given Larson a lighter supervised
release term or otherwise imposed a different sentence had he known that the guidelines were
advisory. Id. If, on the other hand, the judge states that he would reimpose the same sentence
even under an advisory sentencing regime, we will affirm the original sentence provided that it
is reasonable. Id.

III. Conclusion

For the reasons stated herein, we affirm Palmer's conviction, vacate and remand his case for
resentencing, and order a limited remand with respect to Larson's sentence.