In the Courts

The court noted that the sentencing guidelines expressly establish a default tax loss of 28% of the unreported gross income, which would have placed Hoskins firmly in the guidelines range identified by the district court. Moreover, the court found the lower court's determination that the unclaimed deductions were incredible was not clearly erroneous. It noted that Hoskins had argued that over 60% of the business's income consisted of commission payments given to the escorts.

Ninth Circuit: Knowledge of Ongoing Criminal
Investigation Is Not Required for Obstruction of Justice Enhancement

On Oct. 3, 2011, the United States Court of Appeals for the Ninth Circuit, in an opinion by Judge Carlos T. Bea, affirmed the sentence of former Wells Fargo employee Dwight Gilchrist on the grounds that application of the obstruction of justice enhancement set forth in Section 3C1.1 of the U.S. Sentencing Guidelines did not require prosecutors to demonstrate that Gilchrist was aware of an ongoing criminal investigation. United States v. Gilchrist, No. 09-10250. Gilchrist had previously pled guilty to eight bank fraud counts and ten embezzlement counts, under 18 U.S.C. ” 1344 and 656, respectively. The charges related to embezzlement and check-kiting schemes orchestrated by Gilchrist to defraud his former employer.

As part of his appeal before the circuit court, Gilchrist argued that he should not be subject to ' 3C1.1, which provides a two-level enhancement when “(A) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution or sentencing of the instant offense of conviction, and (B) the obstructive conduct related to (i) the defendant's offense of conviction and any relevant conduct; or (ii) a closely related offense.” Specifically, Gilchrist argued that ' 3C1.1 was inapplicable, as he was unaware that he was the subject of a pending criminal investigation when he committed perjury during a civil deposition on the same subject. Gilchrist had been deposed as part of a suit he commenced against Wells Fargo in an attempt to recover the money that had actually been fraudulently withdrawn ' the same funds that eventually formed the basis of his indictment. By applying that two-level obstruction enhancement, the district court had previously sentenced Gilchrist to a 25-month prison sentence, along with a five-year term of supervised release.

While noting a split among the circuits as to the level of support required to apply the obstruction enhancement, the Ninth Circuit upheld its application against Gilchrist. In summarizing the court's analysis, Judge Bea stated, “We agree with out sister circuits that 'willful' means only that the defendant [has] engaged in intentional or deliberate acts designed to obstruct any potential investigation, at the time an investigation was in fact pending; it does not mean the defendant had to know for certain that the investigation was pending.” Using that reasoning, the court held that “[b]ecause Gilchrist willfully provided false testimony under oath after the FBI had initiated its investigation, and his perjury directly involved two of the counts of which he was convicted, the district court properly applied the ' 3C1.1 obstruction enhancement.” Based in part on this holding, the Ninth Circuit affirmed Gilchrist's sentence.

Tenth Circuit Upholds Sentence Despite Exclusion of Unclaimed Tax Deductions from Tax Losses

In United States v. Hoskins, No. 10-4092, 2011 WL 3555337, *3 (10th Cir. Aug. 12, 2011), the U.S. Court of Appeals for the Tenth Circuit upheld the sentence imposed by the lower court.

Roy Hoskins and his wife Jodi owned and operated a Salt Lake City escort service, called Concessions. That business did not file its own tax returns but, rather, its income was reported on Hoskins' personal tax return. In May 2008, a grand jury charged Hoskins with tax evasion for 2001 and 2002. The government alleged that Hoskins had failed to report over $2 million in Concessions income, including large cash receipts, which resulted in a tax loss of $817,895. Hoskins quickly pleaded guilty. At sentencing he presented an alternative calculation of the tax loss, including a number of unclaimed deductions, identifying a total loss of $228,740. Such a calculation, if accepted, would have reduced Hoskins' guidelines calculation from 51-63 months down to 46-57 months. On appeal, Hoskins claimed that the court should have accounted for his unclaimed deductions and reduced the tax loss accordingly. Interestingly, in light of the Tenth Circuit's ruling in United States v. Spencer , 178 F.3d 1365 (10th Cir. 1999) (suggesting that a district court should not take into account deductions that a defendant might have claimed on his inaccurate tax returns), counsel for Hoskins abandoned his sole argument. Although the court found that it was thus required to affirm the district court's ruling, it noted that the court did not err in any event. The government was required to prove the amount of the loss, but was not required to do so with certainty.

The court noted that the sentencing guidelines expressly establish a default tax loss of 28% of the unreported gross income, which would have placed Hoskins firmly in the guidelines range identified by the district court. Moreover, the court found the lower court's determination that the unclaimed deductions were incredible was not clearly erroneous. It noted that Hoskins had argued that over 60% of the business's income consisted of commission payments given to the escorts.

Ninth Circuit: Knowledge of Ongoing Criminal
Investigation Is Not Required for Obstruction of Justice Enhancement

On Oct. 3, 2011, the United States Court of Appeals for the Ninth Circuit, in an opinion by Judge Carlos T. Bea, affirmed the sentence of former Wells Fargo employee Dwight Gilchrist on the grounds that application of the obstruction of justice enhancement set forth in Section 3C1.1 of the U.S. Sentencing Guidelines did not require prosecutors to demonstrate that Gilchrist was aware of an ongoing criminal investigation. United States v. Gilchrist, No. 09-10250. Gilchrist had previously pled guilty to eight bank fraud counts and ten embezzlement counts, under 18 U.S.C. ” 1344 and 656, respectively. The charges related to embezzlement and check-kiting schemes orchestrated by Gilchrist to defraud his former employer.

As part of his appeal before the circuit court, Gilchrist argued that he should not be subject to ' 3C1.1, which provides a two-level enhancement when “(A) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice with respect to the investigation, prosecution or sentencing of the instant offense of conviction, and (B) the obstructive conduct related to (i) the defendant's offense of conviction and any relevant conduct; or (ii) a closely related offense.” Specifically, Gilchrist argued that ' 3C1.1 was inapplicable, as he was unaware that he was the subject of a pending criminal investigation when he committed perjury during a civil deposition on the same subject. Gilchrist had been deposed as part of a suit he commenced against Wells Fargo in an attempt to recover the money that had actually been fraudulently withdrawn ' the same funds that eventually formed the basis of his indictment. By applying that two-level obstruction enhancement, the district court had previously sentenced Gilchrist to a 25-month prison sentence, along with a five-year term of supervised release.

While noting a split among the circuits as to the level of support required to apply the obstruction enhancement, the Ninth Circuit upheld its application against Gilchrist. In summarizing the court's analysis, Judge Bea stated, “We agree with out sister circuits that 'willful' means only that the defendant [has] engaged in intentional or deliberate acts designed to obstruct any potential investigation, at the time an investigation was in fact pending; it does not mean the defendant had to know for certain that the investigation was pending.” Using that reasoning, the court held that “[b]ecause Gilchrist willfully provided false testimony under oath after the FBI had initiated its investigation, and his perjury directly involved two of the counts of which he was convicted, the district court properly applied the ' 3C1.1 obstruction enhancement.” Based in part on this holding, the Ninth Circuit affirmed Gilchrist's sentence.