United States v. Foxx

96 F.4th 987

UNITED STATES of America, Plaintiff-Appellee, v. LaTonya R. FOXX, Defendant-Appellant.

No. 22-1360

No. 22-1761

United States Court of Appeals, Seventh Circuit

Argued October 24, 2023

Decided March 21, 2024

Appeals from the United States District Court for the Northern District of Indiana, Hammond Division. No. 18-cr-00080-JD-JEM-3 — Jon E. DeGuilio, Judge.

Nathaniel Whalen, Attorney, Office of the United States Attorney, Hammond, IN, for Plaintiff-Appellee.

Gregory T. Mitchell, Attorney, Law Office of Gregory T. Mitchell, P.C., Homewood, IL, for Defendant-Appellant.

Before Rovner, Wood and Hamilton, Circuit Judges.

Rovner, Circuit Judge.

On July 18, 2018, a grand jury charged LaTonya Foxx, Yvonna Lee, and Tanisha Bledsoe with engaging in a scheme to defraud by filing hundreds of fraudulent tax returns. Foxx entered a blind guilty plea to one count of wire fraud under 18 U.S.C. § 1343, and was sentenced to 18 months' imprisonment, one year of supervised release, and $1,261,903 in restitution. She now appeals the restitution order.

According to the indictment, "the purpose of the scheme was to: (1) file hundreds of fraudulent federal tax returns that generated improper refunds for clients who paid fees ranging from $400 to $3,000; and (2) to file fraudulent federal tax returns for the defendants, generating improper refunds." Dist. Ct. Doc. 1 at 3-4. The indictment described the scheme in detail. As part of the scheme, Foxx, Lee, and Bledsoe would recruit clients, promising them maximum tax refunds, and would obtain the clients' personal information including names, dates of birth, social security numbers, and dependent and income information. Bledsoe and Foxx then used the information they collected from their own clients, as well as the information provided by Lee to Bledsoe and Foxx pertaining to Lee's clients, to electronically file federal tax returns with the IRS on behalf of those clients. Furthermore, the indictment detailed that the fabricated information on the tax returns included, but was not limited to, claiming that very young children attended college to claim the American Opportunity Tax Credit ("AOTC"), creating fake Form W-2s, listing false itemized deductions on Schedule A, and listing false profits and losses on Schedule C, all in order to obtain inflated tax refunds. To conceal their fraudulent behavior, Bledsoe and Foxx filed those fraudulent federal returns as "self-prepared" returns, rather than disclosing that they were paid to prepare them. For their services, Lee, Bledsoe, and Foxx required a tax preparation fee from their clients, ranging between $400 and $3,000. They also included false information on their own federal returns, thereby obtaining inflated returns for themselves.

Count 3, to which Foxx pled guilty, set forth one use of the wires "[i]n executing the scheme to defraud," specifically that Lee sent a text to Bledsoe from Indiana to Chicago that she had initially received from Foxx, which contained the personally identifying information relating to a resident of Indiana. Id. at 6.

Federal courts have no inherent power to award restitution. United States v. Berkowitz, 732 F.3d 850, 853 (7th Cir. 2013). Any such power, must come from a statute. Id. The Mandatory Victims Restitution Act of 1996 ("MVRA"), 18 U.S.C. § 3663A, authorizes district courts to impose restitution for wire fraud offenses. United States v. Westerfield, 714 F.3d 480, 489 (7th Cir. 2013). Where, as here, the offense of conviction involves a scheme to defraud, restitution is required under the MVRA for "any person directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern." 18 U.S.C. § 3663A(a)(2). "Restitution is 'limited to the actual losses caused by the specific conduct underlying the offense, and, like the loss amount, the government must establish that by a preponderance of the evidence.' " United States v. Meza, 983 F.3d 908, 918 (7th Cir. 2020), quoting United States v. Orillo, 733 F.3d 241, 244 (7th Cir. 2013).

The offense comprehended by the wire fraud statute is not limited to the specific conduct set forth in the count to which Foxx pled guilty, but rather encompasses the entire scheme to defraud, such that restitution for the victims of the overall scheme is required. Id.; United States v. Locke, 643 F.3d 235, 247 (7th Cir. 2011). Under the MVRA, Foxx therefore could be ordered to pay restitution for all the losses she caused during the scheme, and not just those relating to the specific wire transactions to which she pled guilty. "When calculating a defendant's restitution amount, district courts should 'adequately demarcate the scheme' by explaining the scheme's scope," which "necessarily requires the district court to explain how the defendant is responsible for the amount of restitution ordered." United States v. Dridi, 952 F.3d 893, 901 (7th Cir. 2020), quoting United States v. Smith, 218 F.3d 777, 784 (7th Cir. 2000).

In the district court, Foxx argued that the restitution amount should only be $653,189, because she was unaware of fraudulent returns that Lee prepared through co-defendant Bledsoe, and because the IRS might have recouped some of the improper tax returns. She does not pursue those arguments on appeal, and instead asserts that the district court failed to adequately demarcate the scheme and make specific findings that the losses included in restitution derived from the same scheme for which she was convicted. Ordinarily, we review a challenge to a district court's restitution amount for abuse of discretion. United States v. White, 883 F.3d 983, 992 (7th Cir. 2018). As Foxx concedes, however, she failed to raise the challenge below, and therefore we review the challenge only for plain error. Id. Under that standard of review, "we ask whether the defendant has shown that the error was obvious, affects substantial rights, and seriously affects the fairness, integrity, or public reputation of the proceedings." United States v. Beltran-Leon, 9 F.4th 485, 499 (7th Cir. 2021); United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). The record reveals that Foxx cannot demonstrate plain error here.

Foxx argues that the district court failed to adequately demarcate the scheme in that the court did not explain how the restitution amount represented financial harm caused by the wire fraud scheme involving Foxx and co-defendants Lee and Bledsoe. Foxx specifically questioned how the guilty plea to the wire fraud sceme charged in Count 3 of the indictment included the " 'relevant conduct' of her separate fraudulent tax filing wire fraud scheme for tax years 2013 through 2015, wherein she prepared false federal tax returns falsely claiming entitlement to the American Opportunity Tax Credit, an education credit." Defendant-Appellant Brief at 12-13. Essentially, Foxx would characterize some of her false federal return filings as part of a separate scheme from other such filings directly involving Lee or Bledsoe.

The only question, then, is whether the district court adequately set forth findings as to the scope of the scheme so as to support the restitution award. We are cognizant that the district court cannot necessarily be faulted for the failure to expand upon an issue never raised. Accordingly, "[t]he lack of a finding is not necessarily fatal, but the lack of evidentiary support that would have supported a finding is." White, 883 F.3d at 992; Berkowitz, 732 F.3d at 854 ("...