defendant was not convicted of tax evasion or causing a tax loss or taking a false tax credit. In fact, in this case there was no tax loss or tax evasion.
The figures stated by Krause in his tax return and forms were an obvious exaggeration and patently fictitious. No reasonably prudent tax examiner or IRS employee would have refunded 23 million dollars based on Krause's return. What the Government charged, and this defendant was convicted of, was filing a false tax return and forms, and corruptly harassing and impeding IRS employees.
Further, it is reasonable to believe that there was no actual loss intended by the defendant. Krause was angry with the persons who filed tax liens against him. In order to hurt these people, he engaged in this scheme to harass, frighten and confuse them. The whole scenario, although constituting criminal acts, was an obvious fictional device of protest. However, the Court finds that no tax loss was intended or incurred and no tax credit was intended or incurred.
F. United States v. Telemaque
There is another case cited by the Government, which is significant in the Court's consideration of the guideline at issue. In United States v. Telemaque, 934 F.2d 169 (8th Cir. 1991), the defendant was involved in a tax protest scheme. The defendant was convicted, not of filing a false tax return, not of corruptly harassing and impeding an IRS employee, but of conspiring to defraud the United States. She had concocted an elaborate scheme under which she would file fraudulent tax returns, claiming a refund for money reported on a 1099 form.
The evidence established that pursuant to this scheme, fraudulent tax returns claiming refunds in excess of a billion dollars and fraudulent 1099's claiming payments of over a billion dollars were sent to the victims of the scheme, who included not only IRS employees, but a bankruptcy Judge, a congressman, the Commissioner of the Internal Revenue Service and other IRS agents and employees. The defendant played a central role in preparing and disseminating instructional materials explaining how to implement this fraud, through an organization called the American Destiny Church located in Phoenix, Arizona. After a jury trial, Telemaque was found guilty of conspiracy to defraud the United States.
The district court determined that the appropriate guideline was section 2T1.9 which is entitled "Conspiracy to Impair, Impede or Defeat Tax." Just as section 2T1.3, the guideline in this case which pertains to fraud and false statements made under penalty of perjury, section 2T1.9 also has two subdivisions, and reads as follows: "§ 2t1.9
Conspiracy to Impair, Impede or Defeat Tax
(a) Base Offense Level (Apply the greater):
(1) Offense level determined from § 2t1/1 or § 2T1.3, as applicable; or
After a hearing, the District Court determined that under the circumstances in issue, namely, the one billion dollars plus claimed, the alternative section of the guideline applied, and the Court did not sentence based on the amount of the loss, but instead sentenced on the alternate base level of ten. This base level of ten is analogous to the "otherwise" base level of 6 applicable in this case, in that it is a "catchall" provision, providing a sentencing level when other calculated levels do not apply. After applying the base level of ten, the Court made certain increases in the offense level, in part based on Telemaque's encouraging others to violate the Internal Revenue Code (see Telemaque, supra, at p. 170). In addition to the enhancements, the District Judge made an upward departure of two levels "because of the extent of the intended monetary loss and disruption of the government" ( Telemaque, supra, at p.171).
On appeal, the Eighth Circuit stated that "we are convinced that the District Court's application of the guidelines was not clearly erroneous" ( id. at p. 171).
Telemaque is a significant case, and in this Court's view, relevant to the issue in this case. The Eighth Circuit did not consider the false and obviously exaggerated figures in determining the guideline level. Instead, it applied section 2T1.9(a)(2), which contains a base level of 10, the lower level of the guideline, which is analogous to the "otherwise 6" level in this case. This Court agrees with this interpretation and will follow this reasoning in sentencing Krause.
The Court concludes that Guideline section 2T1.3(a)(2), the "otherwise" section, applies to this case. It is conceded that the government suffered no actual tax loss through Krause's protest activities. In addition, Krause was not charged or convicted with tax loss or tax evasion or false tax credit.
Accordingly, it is determined that section 2T1.3(a)(2), the "catchall," level six provision, calling for a zero to six months incarceration, is the applicable guideline provision in this case.
Dated: Uniondale, New York
March 24, 1992
Arthur D. Spatt
United States District Judge
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