Appeal from a judgment of the United States District Court for the Eastern District of New York (Nicholas G. Garaufis, Judge) entered October 15, 2010, convicting defendant-appellant Joseph Cadet, after a jury trial, of 16 counts of aiding and assisting in the preparation of false federal income tax returns, in violation of 26 U.S.C. § 7206(2), and sentencing him principally to 41 months' incarceration, three years' supervised release, and restitution in the amount of $104,243.
The opinion of the court was delivered by: Jose A. Cabranes, Circuit Judge:
Before: MINER, CABRANES, and WESLEY, Circuit Judges.
This sentence exceeded the maximum term of imprisonment that may be imposed for each violation of 26 U.S.C. § 7206 (36 months), as well as the maximum term of supervised release that may be imposed for each violation (one year), 18 U.S.C. § 3583(b)(3).
The judgment of conviction entered by the District Court is affirmed, except with respect to certain aspects of the sentence, as to which the judgment is vacated and remanded for: (1) resentencing within the range authorized by statute; and (2) amendment of the restitution order to
(a) determine whether the State and the City of New York are victims entitled to restitution (and adjust and apportion the restitution award accordingly), (b) exclude payments already made by the
individual taxpayer-clients to the Internal Revenue Service, and (c) exclude losses associated with a 2001 tax return that did not serve as a basis for any of the 16 counts of conviction.
Defendant-appellant Joseph Cadet appeals from a judgment of the United States District Court for the Eastern District of New York (Nicholas G. Garaufis, Judge) entered October 15, 2010, convicting him, after a jury trial, of 16 counts of aiding and assisting in the preparation of false federal income tax returns, in violation of 26 U.S.C. § 7206(2), and sentencing him to concurrent terms of 41 months' incarceration, three years' supervised release, restitution in the amount of $104,243, and a $1,600 special assessment.
We affirm the judgment of conviction but vacate the sentence and remand the cause for the various reasons stated below.
On July 8, 2008, a grand jury returned an indictment charging Cadet with 35 counts of aiding and assisting the preparation of false income tax returns, in violation of 26 U.S.C. § 7206(2).*fn1 The indictment alleged that Cadet knowingly and willfully prepared 35 false tax returns on behalf of ten clients between approximately April 15, 2003 and April 15, 2006. The indictment further alleged that Cadet obtained unwarranted tax refunds for his clients by inserting false or inflated deductions on the Schedules "A" (itemized deduction schedule), "C" (profit or loss from business schedule), and "E" (supplemental income or loss statement) attached to clients' individual income tax returns (Forms 1040). The overstated or falsified deductions included deductions for mortgage interest, job expenses, and losses associated with rental properties.
Prior to trial, the government moved in limine to introduce evidence in its case-in-chief of interactions between Cadet and an undercover Internal Revenue Service ("IRS") agent, Justin Green, in which Cadet proposed to use "creative financing" to prepare a Form 1040 for Green that would generate a fraudulent refund of over $2,400 in exchange for a higher fee. In a Memorandum & Order dated September 11, 2009, the District Court held that the evidence was admissible pursuant to Federal Rule of Evidence 404(b) ("Rule 404(b)")*fn2 for several non-propensity purposes, such as "demonstrating motive, intent, and corroboration" and "absence of mistake," noting that Cadet was contesting the willfulness of his conduct by arguing that, in preparing his clients' returns, he either relied on inaccurate information provided by the clients or made mistakes. The District Court also declined to exclude, under Federal Rule of Evidence 403,*fn3 the evidence of Cadet's interactions with
Agent Green, finding the evidence "highly probative of a number of disputed issues" and the "risk of unfair prejudice" to be "quite small."
On September 15, 2009, the first day of trial, the District Court granted the government's motion to dismiss 15 of the 35 counts of the indictment. The remaining 20 counts arose from tax returns that Cadet had prepared and filed on behalf of five of the ten taxpayer-clients to whom the indictment referred.
The government's evidence at trial consisted principally of testimony from the five taxpayerclients and Agent Green. All of the taxpayers testified that they gave Cadet truthful financial information and had no idea that the returns he prepared for them were inaccurate; that Cadet always carefully reviewed with them the financial information they provided to him; and that they always paid Cadet a ...