United States v. Rankin

929 F.3d 399

UNITED STATES of America, Plaintiff-Appellee,

v.John Anderson RANKIN, Defendant-Appellant.

No. 18-3345

United States Court of Appeals, Sixth Circuit.

Argued: May 2, 2019

Decided and Filed: July 12, 2019

ARGUED: Keith A. Yeazel, KEITH A. YEAZEL LAW OFFICE, Columbus, Ohio, for Appellant. Noah Litton, UNITED STATES ATTORNEY’S OFFICE, Columbus, Ohio, for Appellee. ON BRIEF: Keith A. Yeazel, KEITH A. YEAZEL LAW OFFICE, Columbus, Ohio, for Appellant. Daniel A. Brown, UNITED STATES ATTORNEY’S OFFICE, COLUMBUS, Ohio, for Appellee.

Before: MOORE, SUTTON, and MURPHY, Circuit Judges.

KAREN NELSON MOORE, Circuit Judge.

Defendant John Rankin knowingly violated several tax laws in operating his companies, including by failing to turn over to the IRS employees’ withholding taxes and inaccurately reporting his own earnings. The IRS investigated Rankin and his businesses, first civilly and then criminally. Rankin interfered with and delayed the investigations. He was charged with and convicted of seventeen tax-related counts, sentenced to sixty months in prison, and required to pay a sizable restitution. We AFFIRM his conviction and sentence but modify his judgment to reflect that he need not pay restitution until his term of supervised release commences.

I. BACKGROUND

Rankin owned Connectivity Systems, Inc. ("CSI"), a software development and management business, a restaurant called Tuscan Table, and an umbrella organization called Rankin Enterprises, LLC. R. 179 (Trial Tr. at 205–06) (Page ID #4023–24). For years, Rankin failed to pay employee payroll withholdings to the IRS, and he disbursed money from CSI to himself and his other companies as "tangible wages" and "research and development" compensation without reporting it as wages. Id . at 206–21 (Page ID #4024–39); R. 181 (Trial Tr. at 213–220) (Page ID #4522–29).

Rankin’s tax practices were first scrutinized in 2004 by Rea & Associates, a private auditing firm hired by banks that had been lending to Rankin. R. 179 (Trial Tr. at 204–05) (Page ID #4022–23). The audits uncovered that Rankin had been disbursing CSI funds to himself and Rankin Enterprises, classifying them as "royalties" or "research and development," and failing to report them as wages to the IRS. Id . at 218 (Page ID #4036); R. 178 (Trial Tr. at 42–43, 112–29, 140–42) (Page ID #3626–27, 3696–3713, 3724–26). Rankin admitted to the Rea auditors that the payments were employee compensation, not royalties. R. 178 (Trial Tr. at 142) (Page ID #3726).

The IRS initiated a civil investigation into Rankin’s businesses’ unpaid tax liabilities and unfiled tax returns in 2008 and contacted Rankin to inquire about them. R. 181 (Trial Tr. at 95–96, 100–03) (Page ID #4404–05, 4409–12). He continued to fail to file tax returns for his businesses and proved uncooperative in the IRS investigation. When an IRS investigator informed Rankin that she planned to file a notice of tax lien, he responded that he would make a payment every day so that it would be difficult for the IRS to know the balance owed and file the lien. Id . at 115–16, 118, 122 (Page ID #4424–25, 4427, 4431). Rankin also claimed that a fire had destroyed some financial records, leading to the delay in his tax payments. Id . at 156 (Page ID #4465). Evidence presented at trial suggested that the fire had not in fact encumbered his ability to access the financial records or satisfy his tax obligations. Id. at 156, 158–59 (Page ID #4465, 4467–68); R. 179 (Trial Tr. at 203–04) (Page ID #4021–22). For example, the jury saw a letter that Rankin had written to CSI employees bragging about his efforts to beat the IRS at its own game, R. 190 (Exhibit at 3–6) (Page ID #5769–72), and a special agent who worked on the case testified that the records were readily available elsewhere. R. 182 (Trial Tr. at 208–09) (Page ID #4778–79).

The IRS eventually initiated a criminal investigation into Rankin’s tax activities. Rankin was informed in person by an IRS officer that he was under investigation in April 2011. R. 181 (Trial Tr. at 231–33) (Page ID #4540–42). In May 2011, Rankin filed five amended individual income tax returns for the years 2005 through 2009. These tax returns falsely declared negative adjusted gross income and no federal tax due. Rankin achieved this outcome by declaring some previously undisclosed income and claiming suspicious new offsets to which he was not entitled. See, e.g. , R. 182 (Trial Tr. at 32–35) (Page ID #4602–4605).

On July 7, 2015 Rankin was charged with seven counts of failure to account for and pay over withholding, FICA, and Medicare taxes involving Rankin Enterprises and Tuscan Table in violation of 26 U.S.C. § 7202, six counts of subscription of false individual income tax returns in violation of 26 U.S.C. § 7206(1), three counts of subscription of false CSI income tax returns in violation of the same statute, and one count of corruptly endeavoring to obstruct the due administration of the Internal Revenue laws in violation of 26 U.S.C. § 7212(a). R. 1 (Indictment at 1–5) (Page ID #1–5).

Rankin moved to dismiss Count 17 of the indictment, which charged him with corruptly endeavoring to obstruct the due administration of the tax laws in violation of 26 U.S.C. § 7212(a). R. 50 (Mot. to Dismiss Count 17 of Indictment) (Page ID #1249). Count 17 alleged that "[f]rom on or about January 1, 2005, through the date of the filing of this Indictment [on July 7, 2015]" Rankin had "willfully misl[ed] agents of the IRS by making false and misleading statements to those agents and by concealing information sought by those agents who he well knew were attempting to ascertain income, expenses and taxes for [Rankin] and his various business entities and interests." R. 1 (Indictment at 5) (Page ID #5). Rankin argued that this language was vague, mostly parroted the language of the statute without adding factual detail, and encompassed an approximately ten-year period without highlighting specific instances of misconduct. See R. 50 (Mot. to Dismiss Count 17 of Indictment at 5) (Page ID #1253). He further argued that the language of Count 17 was so vague that it was impossible to tell whether the challenged conduct was already covered by one of the other counts in the indictment, violating the Double Jeopardy Clause. Id .

The district court ordered the government to respond to Rankin’s motion either with a memorandum or with a bill of particulars. R. 89 (Jul. 13, 2017 Order at 3) (Page ID #1624). The government responded with a memorandum arguing that Rankin had been provided the relevant evidence supporting Count 17 in discovery and highlighting particular examples of occasions on which he had violated the statute. R. 93 (Mem. Contra Mot. to Dismiss Count 17) (Page ID #1640). The government also provided Rankin with a draft exhibit list including evidence it intended to introduce at trial. It argued that the indictment covered such a lengthy time span because the investigation had lasted many years and Rankin had impeded the investigation throughout. Id . at 4 (Page ID #1643).

The district court determined that this response was adequate and denied Rankin’s motion to dismiss Count 17. R. 95 (Aug. 2, 2017 Op. and Order at 6–7) (Page ID #1669–70). It concluded that "[t]he indictment [was] sufficient to advise Defendant that the Government alleges he had taken [willfully obstructive] actions while he was aware that there was some pending IRS action" because the government’s proffered exhibit list included examples of Rankin’s obstructive behavior. Id . at 6 (Page ID #1669).

Rankin went to trial and was convicted of all counts. Prior to sentencing, Rankin objected to many aspects of the presentence investigation report (PSR) produced by the Probation Office. See R. 189 (Tr. at 3–53) (Page ID #5667–5719). The objections relevant to this appeal fall into two categories. First, Rankin challenged the district court’s consideration of uncharged conduct in determining his sentence, tax loss, and restitution. Second, he challenged the PSR’s calculation of the amount of tax loss which characterized money that CSI had paid to Rankin as ordinary income rather than constructive dividends.

The district court overruled both of these objections to the PSR. On April 3, 2018 the district court sentenced Rankin to sixty months of incarceration on Counts 1–6 and thirty-six months on Counts 7–17, to run concurrently; judgment was entered the following day. R. 172 (Judgment at 1–4) (Page ID #3233–36). The district court also ordered Rankin to pay $7,101,018.72 in restitution. Id . at 6–8 (Page ID #3238–40). Rankin filed his notice of appeal on April 12, 2018. R. 174 (Notice of Appeal) (Page ID #3247).

II. DISCUSSION

Rankin raises five challenges on appeal. We reject all except for the last.

A. Count 17 of the indictment

First, Rankin argues that Count 17 of the indictment failed to state an offense because it did not adequately allege either a nexus between Rankin’s evasive conduct and the IRS investigation or that the investigation was pending at the time of his conduct. This claim fails because the indictment adequately alleged the elements of the crime.

We review de novo a district court’s denial of a motion to dismiss an indictment on legal grounds, such as its failure to state an offense. See United States v. Grenier , 513 F.3d 632, 636 (6th Cir. 2008) ; see also United States v. Olive , 804 F.3d 747, 752 (6th Cir. 2015). Even if the indictment were insufficient to satisfy due process, "[a] constitutionally deficient indictment is subject to harmless-error review." Williams v. Haviland , 467 F.3d 527, 535 (6th Cir. 2006) (citing United States v. Cor-Bon Custom Bullet Co. , 287 F.3d 576, 580 (6th Cir. 2002) ). Thus, we will reverse a conviction due to the insufficiency of the indictment only if the defendant’s substantial rights are affected, meaning he can "show[ ] prejudice to his ability to defend himself at trial, to the general fairness of the trial, or to the indictment’s...