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United States v. Bickart

United States Court of Appeals, Seventh Circuit

June 17, 2016

United States of America, Plaintiff-Appellee
Clark Bickart and Jerlene Bickart, Defendants-Appellants.

          Argued April 19, 2016

         Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 14-cr-00245 - Thomas M. Durkin, Judge.

          Before Bauer, Posner, and Flaum, Circuit Judges.

          Flaum, Circuit Judge.

         Clark and Jerlene Bickart were convicted for tax fraud for submitting a falsified tax return supported by fabricated 1099-OID forms. The Bickarts challenge the imposition of the sophisticated means sentencing enhancement as well as their conditions of supervised release. For the following reasons, we vacate the third-party notification condition of Jerlene Bickart's supervised release and remand for resentencing. We affirm defendants' sentences and remaining conditions of supervised release in all other respects.

         I. Background

         On May 4, 2009, Jerlene Bickart, with the assistance of her husband, Clark Bickart, prepared and filed an income tax return containing a false income amount and a false withholding amount. The false income and withholding amounts were supported by nine fabricated 1099-OID forms that were submitted separately to the Internal Revenue Service ("IRS") in April 2009.[1] The 1099-OID forms were made to appear as if they came from a number of major financial institutions, when in fact, the financial institutions never issued any income to Jerlene nor withheld any taxes from her. Jerlene claimed the Bickarts' mortgage and credit limits as income, and withheld that amount minus $100. On May 15, the IRS paid Jerlene her claimed refund of $115, 412. Absent the false income and withholding amounts, Jerlene's refund would have been only $263.

         In January 2011, the IRS conducted an audit and discovered that these financial institutions never paid income to nor withheld taxes from Jerlene. On March 23, the IRS sent Jerlene a bill for $217, 923 for past due taxes, penalties, and interest, and explained that the submitted 1099-OID forms were fraudulent.

         Over the next four years, the Bickarts engaged in obstructive conduct to avoid paying their tax debt. The Bickarts first sent the IRS a 1040-V form, an IRS payment coupon, purporting to pay the amount. As an IRS agent later explained, this form did not constitute payment.

         On August 19, 2011, IRS agents interviewed the Bickarts. Jerlene told the agents that she and Clark had prepared the tax return and submitted the 1099-OID forms. Clark stated that he had prepared the 1099-OID forms based on information he obtained from a website. He claimed that he had spent over six months preparing to file the forms.

         In May 2012, an IRS revenue officer met with Jerlene. Jerlene claimed that the 1040-V form had satisfied the tax debt. The revenue officer informed Jerlene that the form did not constitute payment. After the IRS sent another bill, Jerlene sent the bill back with a response claiming that the bill had already been paid along with a fraudulent 1099-OID form. Then, in July 2012, Jerlene mailed a letter to the revenue officer with a number of baseless accusations, including that the officer had committed mail fraud by attempting to levy her wages. She sent an equally bizarre letter in December 2012, this time with a "fee schedule, " in which she claimed that the revenue officer owed her 588 ounces of silver because he had committed "Larceny by Trick ." In October 2013, Clark filed a frivolous lawsuit in the Northern District of Illinois against the revenue officer and his supervisor under a fake name.

         On May 1, 2014, Clark and Jerlene Bickart were indicted for conspiring to file a false claim to defraud the government in violation of 18 U.S.C. § 286 and for filing a false claim in violation of 18 U.S.C. § 287.

         The Bickarts proceeded pro se at trial and continued their pattern of obstructive conduct. Defendants filed motions alleging that they were sovereign citizens. They made various nonsensical accusations, including that "attorneys and judges of the United States are agents of the British Crown and answer to the [Queen] of England." Neither defendant testified. On March 20, 2015, the jury found defendants guilty on both counts. The Bickarts moved for acquittal, but their motions were denied.

         Prior to sentencing, the U.S. Probation Office filed a presentence investigation report ("PSR"). The PSR stated that each defendant had a base offense level of 16. The PSR applied a two-level enhancement for sophisticated means because "defendants created and submitted false and fictitious Forms 1099-OID in support of the 2008 tax return." The PSR also applied a two-level enhancement for obstruction of justice. Neither defendant had a criminal history. Based on the total offense level of 20, the sentencing guidelines provided for an imprisonment range of 33 to 41 months.

         The PSR also recommended that both defendants serve one to three year terms of supervised release and proposed twenty-two conditions of supervised release, including three mandatory conditions, eleven discretionary conditions, and eight special conditions. The Bickarts objected to several of these conditions prior to sentencing. The government accepted defendants' objection related to the excessive use of alcohol condition but disputed their objections related to probation officer visits and third-party notification.

         Defendants accepted their appointed attorneys' assistance for sentencing. At the hearing, neither defendant objected to the PSR's guidelines calculations, including the application of the sophisticated means enhancement. The district court concluded that the sophisticated means enhancement applied "because false and fictitious Forms 1099-OIDs were prepared and submitted in support of the 2008 return. It took some amount of cleverness to create such documents and send them in." The scheme "was a calculated effort to steal money from the government." The district court sentenced each defendant to concurrent terms of 24 months in prison, 9 months below the guidelines range, with their terms staggered, as well as restitution.

         The court also imposed a two-year term of supervised release for each defendant. Defendants objected to two conditions at sentencing. Defendants first objected to the thirdparty notification condition, which requires them to notify third parties of risks related to their criminal history when directed by the probation office, as vague. The district court nonetheless imposed the condition but modified it to require the probation office to seek the district court's approval before notifying or requiring that defendants notify third parties. The modified condition also gives defendants seven days to object to notification.

         Additionally, defendants objected to the condition permitting a probation officer to visit them at home or at work at any reasonable time, arguing that the condition was unnecessary and would make it difficult to secure and retain employment upon release. The district court overruled the objection, finding that it would be contrary to the goals of the probation office to do anything that would cause defendants to lose their jobs. Defendants appeal, challenging the application of the sophisticated means enhancement and the following conditions of supervised release:

• Discretionary Condition #4: Seek, and work conscien­tiously, at lawful employment or pursue conscien­tiously a course of study or vocational training that will equip the defendant for employment.
• Special Condition #5: Not incur new credit charges or open additional lines of credit without the approval of a probation officer unless the defendant is in compli­ance with the financial obligations imposed by this judgment.
• Special Condition #7: Notify the court of any material change in the defendant's economic circumstances that might affect the defendant's ability to pay ...

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