United States v. Ford

1997 WL 33551357 (9th Cir.)

Briefs and Other Related Documents

United States Court of Appeals, Ninth Circuit.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. Echols Doyle FORD, David C. Grigonis, Daniel Hong, Robert E. Ladum, Ronald D. Van Vliet, and James R. Weaver, Defendants-Appellants.

Nos. 97-30027, 97-30030, 97-30022, 97-30018, 97-30019 and 97-30044.

November 7, 1997.

Upon Appeal from the Judgment of the United States District Court for the District of Oregon the Honorable Ancer L. Haggerty No. CR 94-304-HA

Brief of the Plaintiff-Appellee

Kristine Olson, United States Attorney, District of Oregon, Claire M. Fay, Kent S. Robinson, Assistant United States Attorneys, 888 S.W. Fifth Ave., Suite 1000, Portland, OR 97204-2024, Telephone: (503) 727-1000, Attorneys for Plaintiff-Appellee.

*i INDEX

LIST OF AUTHORITIES CITED ... iii

STATEMENT OF ISSUES PRESENTED ... xi

STATEMENT OF THE CASE ... 1

A. Jurisdiction and Appealability ... 1

B. Defendants' Custody Status ... 1

C. Course of Proceedings Below ... 1

STATEMENT OF FACTS ... 4

A. T he Conspiracy ... 6

B. Expenditures on Wallowa Lake Lodge ... 15

C. False Tax Returns ... 17

D. False Oral Statements ... 19

E. The Bankruptcy Fraud ... 20

F. Money Laundering ... 21

G. Obstruction of Justice ... 22

H. Defendants' Case ... 23

SUMMARY OF ARGUMENT ... 24

ARGUMENT ... 26

I. THE DISTRICT COURT PROPERLY DENIED DEFENDANTS' CHALLENGES TO THE INDICTMENT ... 26

II. THE DISTRICT COURT PROPERLY DENIED HONG'S MOTIONTO SUPPRESS ... 36

III. THERE WAS SUFFICIENT EVIDENCE TO SUPPORT EACH COUNT OF CONVICTION ... 43

*ii IV. THE DISTRICT COURT'S SENTENCING DETERMINATIONS WERE CORRECT ... 66

CONCLUSION ... 98

STATEMENT OF RELATED CASES ... 99

BRIEF FORMAT CERTIFICATION ... 100

*iii LIST OF AUTHORITIES CITED

CASES CITED

Alexander v. United States, 509 U.S. 544 (1993) ... 92

Brown v. Illinois, 422 U.S. 590 (1975) ... 42, 43

Bryson v. United States, 396 U.S. 64 (1969) ... 39

Dallas v. Arave, 984 F.2d 292 (9th Cir. 1993) ... 76

Davis, 36 F.3d at 1435 ... 75

Dear Wing Jung v. United States, 312 F.2d 73 (9th Cir. 1962) ... 29

Dennis v. United States, 384 U.S. 855 (1966) ... 39

Glickstein v. United States, 222 U.S. 139 (1911) ... 40

In Re Fitzsimmons, 725 F.2d 1208 (9th Cir. 1984) ... 64

Jackson v. Virgini,a 443 U.S. 307 (1979) ... 43

Kay v. United States, 303 U.S. 1 (1938) ... 39

McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579 (1819) ... 60

New York v. Harris, 495 U.S. 16 (1989) ... 40, 42

Russell v. United States, 471 U.S. 858 (1985) ... 62

Siravo v. United States, 377 F.2d 469 (1st Cir. 1967) ... 30

United States v. Aguilar, 115 S. Ct. 2357 (1995) ... 52,53,56

United States v. Aguilar, 21 F.3d 1475 (9th Cir. 1994) ... 51

United States v. Alexander, 108 F.3d 853 (8th Cir. 1997) ... 94

United States v. Allen, 88 F.3d 765 (9th Cir. 1996) ... 60

*iv United States v. Apfelbaum, 445 U.S. 115 (1979) ... 40

Austin v. United States, 509 U.S. 602 (1993) ... 93

United States v. Avers, 924 F.2d 1468 (9th Cir. 1991) ... 45

United States v. Bailey, 691 F.2d 1009 (11th Cir. 1982) ... 38

United States v. Bajakajian, 84 F.3d 334 (9th Cir. 1996) ... 92

United States v. Batchelder, 442 U.S. 114(1979) ... 51

United States v. Beacon Brass, 344 U.S. 43 (1952) ... 37

United States v. Benitez, 34 F.3d 1489 (9th Cir. 1994), cert. denied, 513 U.S. 1197 (1995) ... 75, 76

United States v. Borden, 308 U.S. 188 (1939) ... 51

United States v. Borman, 992 F.2d 124 (7th Cir. 1993) ... 34

United States v. Bosch, 951 F.2d 1546(9th Cir. 1991) ... 91

United States v. Branch, 850 F.2d 1080 (5th Cir. 1988), cert. denied, 488 U.S. 1018 (1989) ... 53

United States v. Brown, 31 F.3d 484 (7th Cir. 1994) ... 61

United States v. Buchanan, 59 F.3d 914 (9th Cir.), cert. denied, 116 S. Ct. 430 (1995) ... 80

United States v. Buchanan, 70 F.3d 818 (5th Cir. 1995) ... 94

United States v. Chesney, 10 F.3d 641 (9th Cir. 1993) ... 66

United States v. Damon, 676 F.2d 1060 (5th Cir. 1982) ... 33

United States v. Davis, 36 F.3d 1424 (9th Cir. 1994), cert. denied, 513 U.S. 1171 (1995) ... 75

United States v. Dickey, 924 F.2d 836 (9th Cir.), cert. denid, 502 U.S. 943 (1991) ... 83

United States v. Dischner, 974 F.2d 1502 (9th Cir. 1991) ... 26

*v United States v. Divarco, 343 F. Supp. 101 (N.D. Ill. 1972), aff'd, 484 F.2d 670 (7th Cir. 19973), cert. denied, 415 U.S. (1974) ... 30

United States v. East, 416 F.2d 351 (9th Cir. 1969) ... 28

United States v. Edwards, 777 F.2d 644 (11th Cir. 1985) ... 33

United States v. Escobar, 992 F.2d 87 (6th Cir. 1993) ... 81

United States v. Estacio, 64 F.3d 477 (9th Cir. 1995), cert. denied, 116 S. Ct. 1356 (1996) ... 63

United States v. Facchini, 874 F.2d 638 (9th Cir. 1989) ... 27

United States v. Favorito, 5 F 3d 1338 (9th Cir. 1993) ... 87

United States v. Feldman, 853 F.2d 648 (9th Cir. 1988) ... 95

United States v. Fern, 696 F.2d 1269 (5th Cir. 1983) ... 28

United States v. Ford, 989 F.2d 347 (9th Cir. 1993) ... 73

United States v. Franks, 723 F.2d 1482 (10th Cir. 1983) ... 33

United States v. Fulbright, 105 F.3d 442 (9th Cir. 1997) ... 45

United States v. Garcia-Garcia, 927 F.2d 489 (9th Cir. 1991) ... 86, 87

United States v. Gates, 616 F.2d 1103 (9th Cir. 1980) ... 49, 54

United States v. Gaudin, 515 U.S. 506 (1995) ... 28

United States v. Gillock, 886 F.2d 220 (9th Cir. 1989) ... 43, 75

United States v. Golb, 69 F.3d 1417 (9th Cir. 1995) ... 66

United States v. Gordon, 974 F.2d 1110 (9th Cir. 1992) ... 38, 39

United States v. Hart, 963 F.2d 1278 (9th Cir. 1992) ... 77

United States v. Hernandez, 730 F.2d 895 (2d Cir. 1984) ... 53

United States v. Hoac, 990 F.2d 1099 (9th Cir. 1993), cert. denied 510 U.S. 1120 (1994) ... 76

*vi United States v. Holroyd, 732 F.2d 1122 (2d Cir. 1984) ... 32

United States v. Hopson, 18 F.3d 465 (7th Cir.), cert. denied, 512 U.S. 1243 (1994) ... 81

United States v. Johnson, 319 U.S. 503 (1942) ... 30

United States v. Kapp, 302 U.S. 214 (1937) ... 40

United States v. Karterman, 60 F.3d 576 (9th Cir. 1995) ... 66, 72

United States v. Kenny, 973 F.2d 339 (4th Cir. 1992) ... 53

United States v. King, 724 F.2d 253 (1st Cir. 1984) ... 42

United States v. Knox, 396 U.S. 77 (1969) ... 39

United States v. Koshnevis, 979 F.2d 691 (9th Cir. 1992) ... 36

United States v. Kow, 58 F.3d 423 (9th Cir. 1995) ... 41

United States v. Krasovich, 819 F.2d 253 (9th Cir. 1987) ... 44

United States v. Kunzman, 54 F.3d 1522 (10th Cir. 1995) ... 61

United States v. Lai, 944 F.2d 1434 (9th Cir. 1991), cert. denied, 502 U.S. 1062 (1992) ... 46

United States v. Leslie, 103 F.3d 1093 (2d Cir. 1997) ... 59, 62

United States v. Lester, 749 F.2d 1288 (9th Cir. 1984) ... 50, 51

United States v. Levine, 970 F.2d 681 (10th Cir. 1992) ... 63, 65

United States v. Levy, 533 F.2d 969 (5th Cir. 1976) ... 32, 33

United States v. Limitoc, 807 F.2d 792 (9th Cir. 1987) ... 36

United States v. Lorenzo, 995 F.2d 1448 (9th Cir.), cert. denied, 510 U.S. 1006 (1993) ... 69, 74, 75

United States v. Lovett, 964 F.2d 1029 (10th Cir. 1992) ... 61

United States v. Lynch, 806 F.2d 1443 (9th Cir. 1986) ... 50

*vii United States v. Maloney, 71 F.3d 645 (7th Cir. 1995) ... 53

United States v. Manarite, 44 F.3d 1407 (9th Cir. 1995) ... 43

United States v. Manduiano, 425 U.S. 564 (1975) ... 39, 40

United States v. Marbella, 73 F.3d 1508 (9th Cir. 1995) ... 63

United States v. Masterpol, 940 F.2d 760 (2d Cir. 1991) ... 53

United States v. Melvin, 91 F.3d 1218 (9th Cir. 1996) ... 68, 69, 70

United States v. Mitchell, 812 F.2d 1250 (9th Cir. 1987) ... 37, 38, 39, 42

United States v. Mittelstaedt, 31 F.3d 1208 (2d Cir. 1994) ... 30, 36

United States v. Moody, 977 F.2d 1425 (11th Cir. 1992) ... 53

United States v. Myers, 878 F.2d 1142 (9th Cir. 1989) ... 28

United States v. Neel, 547 F.2d 95 (9th Cir. 1976) ... 37

United States v. Oren, 893 F.2d 1057 (9th Cir. 1990) ... 28, 29

United States v. Qrtland, 103 F.3d 539 (9th Cir. 1997) ... 88

United States v. Oser, 107 F.3d 1080 (3d Cir. 1997) ... 81

United States v. Peay, 974 F.2d at 74-75 ... 59, 60

United States v. Powell, 469 U.S. 57 (1984) ... 57, 76, 94

United States v. Real Property Located in El Dorado County, 59 F.3d 974 (9th Cir. 1995) ... 92, 93, 95, 96

United States v. Real Property, Titled in the Names of Godfrey Soon Bong Kang and Darrell Lee, 120 F.3d 947 (9th Cir. 1997) ... 95

United States v. Reynolds, 919 F.2d 435 (7th Cir. 1990) ... 34

United States v. Ripinsky, 109 F.3d 1436 (9th Cir. 1997) ... 58, 59, 61

United States v. Risken, 788 F.2d 1361 (8th Cir.), cert denied, 479 U.S. 923 (1986) ... 53

*viii United States v. Rivera, 996 F.2d 993 (9th Cir. 1993) ... 83

United States v. Rone, 598 F.2d 564 (9th Cir. 1979), cert. denied, 445 U.S. 946 (1980) ... 59

United States v. Savage, 67 F.3d 1435 (9th Cir. 1995) ... 63, 66

United States v. Schmoker, 564 F.2d 289 (9th Cir. 1977) ... 28

United States v. Shepard, 21 F.3d 933 (9th Cir. 1994) ... 42

United States v. Sullivan, 274 U.S. 256 (1927) ... 60

United States v. Tackett, 113 F.3d 603 (6th Cir. 1997) ... 52, 54

United States v. Various Computers and Computer Equipment, 82 F.3d 582 (3d Cir. 1996) ... 94

United States v. Werber, 787 F. Supp. 353 (S.D.N.Y. 1992) ... 63

United States v. West, 22 F.3d 586 (5th Cir.), cert. denied, 513 U.S. 1020 (1994) ... 64, 65

United States v. Wild, 47 F.3d 669 (4th Cir. 1995) ... 94

United States v. Williams, 874 F.2d 968 (5th Cir. 1989) ... 50

STATUTES AND RULES CITED

United States Code:

11 U.S.C. § 541(a)(6) ... 64

12 U.S.C. § 21 et seq ... 60

134 Cong. Rec. S17,369 (1988) ... 54

18 U.S.C. § 2 ... 2

18 U.S.C. § 152 ... 2

18 U.S.C. § 371 ... 2

18 U.S.C. § 372 ... 45

*ix 18 U.S.C. § 709 ... 60

18 U.S.C. § 871 ... 37

18 U.S.C. § 922(a) ... 73

18 U.S.C. § 924(a)(1)(A) ... 73

18 U.S.C. § 982(a)(1) ... 2

18 U.S.C. § 1001 ... 2, 3, 26, 17

18 U.S.C. § 1503 ... 2, 49, 50, 51, 53, 54

18 U.S.C. § 1512 ... 50, 51, 52, 53, 54

18 U.S.C. § 1956(a)(1)(B)(i) ... 2, 57, 63

18 U.S.C. § 1956(c)(4)(B) ... 58

18 U.S.C. § 1962(c) ... 59

18 U.S.C. § 3231 ... 1

18 U.S.C. § 3741(a)(1) ... 1

28 U.S.C. § 1294 ... 1

26 U.S.C. § 7206(2) ... 2

26 U.S.C. § 7206(1) ... 2, 3, 4,26, 30, 32, 33

United States Sentencing Guidelines:

§ 1B1.1 ... 83

§ 1B1.3 ... 80

§ 1B1.3, Comment (n.2) ... 69

§ 1B1.3(a)(1)(B) ... 69

*x § 2T 1.1, Comment (n.) ... 67

§ 2T1.1(b)(1) ... 71, 72, 74

§ 2T1.1(b)(1), Application Note 3 ... 72

§ 2T1.1(b)(2) ... 72

§ 2T1.1(c), Comment. (n.1) ... 67, 74

§ 2T1.9, Comment. (n.2) ... 74

§ 3B1.2, Comment. (n.3) ... 75

§ 3B1.2(b) ... 75

§ 4A1.1 ... 80

§ 4A1.1(d)(2) ... 80

§ 4A1.2, Application Note 1 ... 80

§ 4A1.2, Application Note 10 ... 84

§ 4A1.2(a)(1) ... 80

§ 4A1.3 ... 83

§ 5E1.2(a) ... 87

§ 5E 1.2(c)(3) ... 88, 91

*xi STATEMENT OF ISSUES PRESENTED

1. Concerning the indictment: (a) whether the allegations in Van Vliet's false statement charge were sufficient to warrant an inference of materiality; (b) whether filing a materially false Schedule C, which is attached to and incorporated into a tax return, can form the basis of a prosecution for filing a false tax return under 26 U.S.C. § 7206(1).

2. Whether false statements made by Hong, which were overt acts in furtherance of the conspiracy, should have been suppressed.

3. Whether there was sufficient evidence to support all counts of conviction: (a) whether there was sufficient evidence of tax motive to support the conviction of Ford and Weaver for conspiring to defraud the IRS; (b) whether non-coercive witness tampering is prosecutable as obstruction of justice, and if so, whether there was sufficient evidence to support Ladum's conviction; (c) whether there was sufficient evidence of the "interstate commerce" and "proceeds" elements to establish that Ladum and Grigonis had committed money laundering.

4. Whether the court's sentencing determinations were correct: (a) whether Ford properly was held accountable for all the tax losses caused by the conspiracy; (b) whether Ladum and Weaver properly had their guideline scores increased for receipt of more than $10,000 in income from illegal activities; (c) *xii whether Grigonis should have received an adjustment for minor role in the offense; (d) whether Ford's two prior convictions were "prior sentences," and as such, properly included in his criminal history calculation; (e) whether the court properly exercised its discretion in refusing to depart downward for overrepresentation of Ladum's criminal history; (f) whether the court properly assessed Ladum and Weaver $15,000 and $10,000 fines, respectively; (g) whether the forfeiture of three parcels of real property violated Grigonis' Eighth Amendment rights.

*1 STATEMENT OF THE CASE

A. Jurisdiction and Appealability

Defendants were charged with offenses against the United States, and thus, the district court had jurisdiction pursuant to 18 U.S.C. § 3231. This court has jurisdiction pursuant to 18 U.S.C. § 3741(a)(1), and 28 U.S.C. § 1294.

B. Defendants' Custody Status

Ladum, Grigonis, Hong, Van Vliet and Weaver are currently serving their respective sentences. A status conference regarding Ford's surrender date is scheduled for November 14, 1997 (CR 956). [FN1]

FN1. "CR" refers to the Clerk's Record; "ER" refers to the Excerpt of Record filed with defendants' brief; "SER" refers to the government's Supplemental Excerpt of Record; "RT" refers to the Reporter's Transcript of the trial which took place May 28 to July 18, 1996, and to the December 16, 1996, sentencing; "D.Br." refers to defendants' brief on appeal; "PSR" refers to the presentence reports; and "G.Exh." refers to the government's exhibits.

C. Course of Proceedings Below

On June 6, 1995, the grand jury issued a second superseding indictment charging all defendants in Count 1 with conspiracy to defraud the United States by impeding, impairing, obstructing and defeating the Internal Revenue Service in the ascertainment, computation, assessment, and collection of income tax, by deceitful *2 and dishonest means, in violation of 18 U.S.C. § 371 (CR 173). In addition, defendants were charged with the following substantive crimes:

Robert E. Ladum: 26 U.S.C. § 7206(2), aiding and assisting in the preparation of false income tax returns (Counts 2 and 3); 26 U.S.C. § 7206(1), filing a false income tax return (Count 4); 18 U.S.C. § 1503 and § 2, obstruction of justice and aiding and abetting (Count 19); 18 U.S.C. § 152, bankruptcy fraud (Count 20); 18 U.S.C. § 1956(a)(1)(B)(i), money laundering (Counts 21 - 30); 18 U.S.C. § 982(a)(1), forfeiture (Counts 31 - 33).

David Grigonis: 26 U.S.C. § 7206(1), filing false income tax returns (Counts 5 - 8); 18 U.S.C. § 1001, making false statements (Counts 13 - 14); 18 U.S.C. § 152, bankruptcy fraud (Count 20); 18 U.S.C. § 1956(a)(1)(B)(i), money laundering (Counts 21 - 30); 18 U.S.C. § 982(a)(1), forfeiture (Counts 31 - 33).

James R. Weaver: 18 U.S.C. § 1001, making a false statement (Count 17); 18 U.S.C. § 1503 and § 2, obstruction of justice and aiding and abetting (Count 19).

Echols D. Ford: 26 U.S.C. § 7206(1), filing false income tax returns (Counts 11 - 12); 18 U.S.C. § 1503 and § 2, obstruction of justice and aiding and abetting (Count 19).

*3 Daniel Hong: 26 U.S.C. § 7206(1), filing a false income tax return (Count 10); 18 U.S.C. § 1001, making a false statement (Count 15).

Ronald D. Van Vliet: 26 U.S.C. § 7206(1), filing a false income tax return (Count 9); 18 U.S.C. § 1001, making a false statement (Count 16) (CR 173).

Prior to trial, the court dismissed Counts 15 and 17, the false statement charges against Hong and Weaver (CR 630; RT 29-30). The court granted defendant Ford's motion for judgment of acquittal on Count 19, obstruction of justice (CR 724; RT 4189).

The jury found all defendants guilty of Count 1, the conspiracy to defraud the Internal Revenue Service. In addition, it found Ladum, Ford, Hong and Van Vliet guilty on all other counts (CR 721; RT 5720-5721). Grigonis was convicted of bankruptcy fraud and money laundering but acquitted on charges of filing false income tax returns and making false statements (CR 721, 728; RT 5720). Weaver was acquitted of obstruction of justice (CR 721; RT 5721). The jury also voted to forfeit the properties that were the subject of Counts 31 - 33 (CR 728; RT 5766-5768).

At sentencing, Ladum received 121 months in prison, three years of supervised release, a fee assessment of $800, a fine of $15,000 and costs of *4 prosecution of $5,000 (CR 804; RT 6008-6010). Grigonis was sentenced to 70 months in prison, a fine of $12,500, a three-year term of supervised release, a fee assessment of $600 and costs of prosecution of $2,500 (CR 804; RT 6000-6003). Weaver received a 41-month prison term, a three-year period of supervised release, a fine of $10,000 and a fee assessment of $50 (CR 808; RT 5955-5967). Ford received 41 months in prison, a three-year term of supervised release, $1,000 for costs of prosecution and a fee assessment of $150 (CR 804, 805; RT 5964-5966). Hong and Van Vliet received a 33-month jail term, three years of supervised release, $1,000 for costs of prosecution and fee assessments of $100 and $150 respectively (CR 804, 806, 807; RT 5931-5933, 5949-5952).

All defendants filed timely notices of appeal (CR 809, 815, 816, 820, 824, 829).

STATEMENT OF FACTS

During the 1980's and early 1990's, Ladum opened seven second-hand stores in the Portland, Oregon, area, known as The Hock Shop (renamed Abe's), Dave's Shop, The Money Man, Columbia Cash, The Money Pit, Union Cash, and Division Cash. He concealed his ownership interest in these stores so that he could evade paying tax on their income, by using Ford, Hong, Van Vliet and Weaver as *5 nominees. The nominees held themselves out as owners of the stores, but Ladum was the true owner and claimed the greater share of the profits of each business (RT 664-676, 685-689, 693-694, 708-711, 732-733, 776-778, 800-801, 820-821, 878, 898-899, 937-939, 966-967, 1019, 1008-1034, 1289-1290, 1321-1322, 1464-1469, 1497, 3515, 3614-3618).

Between 1985 and 1988, Ladum acquired the real properties where Columbia Cash, The Money Man, The Money Pit, Union Cash, and Division Cash were located. With the help of Weaver, a part-time real estate agent, Grigonis acted as the nominee for those real properties (RT 705-708). Grigonis used Ladum's money to purchase the real property, but placed title in his own name (RT 3663-3664).

Ladum took substantial profits from the stores. During a period from late 1987 to 1989, he used over $375,000 in store profits to secretly purchase and remodel the Wallowa Lake Lodge, a rustic hotel in Joseph, Oregon (RT 40684071, 4078-4118; G.Exh. 54-10).

In 1988, Ladum declared bankruptcy, omitting from his petitions the secondhand stores, the real property where they were located, and the Wallowa Lake Lodge (RT 2906-2926; G.Exhs. 15-1, 15-2). After his bankruptcy was discharged, Ladum and Grigonis continued to hide the ownership of the stores by using store *6 profits in circuitous transactions to pay the underlying mortgages (RT 3653-3661, 3756, 4058-4062; G.Exhs. 11-66 to 11-74).

Ladum's tax returns failed to reflect any income or expenses from the secondhand stores or the real properties (RT 3193; G.Exhs. 1-1 to 1-5). Ford, Hong, and Van Vliet, on the other hand, filed returns claiming they were the sole owners of the stores and had gotten all of the minimal reported income (RT 3193; G.Exhs. 1-31 to 1-34, 1-52 to 1-58(a)). On his returns, Grigonis claimed sole ownership of the real properties and all the income and expenses associated with these locations (RT 3193; G.Exhs. 1-8 to 1-15). In addition, during the investigation, Hong, Van Vliet and Weaver lied to agents about the ownership of the stores (RT 3411, 3974-3984, 4005-4011).

For years this pattern of deception successfully defeated attempts by the Internal Revenue Service to accurately assess Ladum's income (RT 1392-1393).

A. The Conspiracy

The conspiracy was established through the testimony of its former members, who described a uniform scheme. Ladum's agreement with each required reimbursement for his start-up costs and inventory, followed by a split of net profits. Percentages varied, but in each case Ladum received a greater share of the profits *7 and retained control of the nominee and the business (RT 685- 689, 820-821, 1021-1034, 1321-1322, 1465-1466, 3614-3617).

Ladum did not want any documentation of his ownership and insisted that his nominees place their names on title documents, business records, federal firearms licenses, and virtually any paperwork pertaining to the operation and ownership of the stores (RT 685, 699, 1375, 1472-1474, 3633-3638). Ladum did not want to pay tax on the substantial income he earned from the second-hand stores, so he instructed his nominees to deal in cash, avoid keeping records of income, destroy or create false records, treat store employees as independent contractors to avoid payment of withholding taxes, and file tax returns that claimed only a minimal amount of income (RT 730-745, 756-757, 961-962, 1044, 1281-1282, 1331, 1421-1422, 1441, 3647-3648, 3698, 3703-3706, 3730).

1. Robert Ladum

In the summer of 1983, Ladum opened the Hock Shop in the name of Joseph Miller (RT 960, 1002, 1287-1290, 3544; G.Exh. 16-1). That store, later renamed Abe's, became the headquarters for Ladum's organization. Ladum spent most of his time there between 1983 and approximately October 1992 (RT 962-963). Abe's *8 Shop was in the business of buying, selling and hocking second-hand merchandise (RT 620-621, 631, 1002-1004, 1294-1296).

Ladum installed himself at a desk in Abe's office, counting the large amounts of cash that came in (RT 474476). Many employees of Ladum's organization started at Abe's (RT 1291-1294, 1405-1409). Additionally, inventory from Abe's was used to stock new second-hand stores as they opened (RT 776, 1235, 1317, 3641). The employees, who looked upon Ladum as the boss, took instructions from him as he approved or vetoed merchandise that customers brought into the store (RT 476-479, 514).

Nominee J.D. Northouse was asked by Ladum in the summer of 1986 to manage The Money Man (RT 685). By the end of his involvement in the conspiracy, Northouse managed three other stores: Union Cash, Abe's and The Money Pit (RT 708-711, 716, 731-733). Ladum asked Northouse to pretend to be the owner of these stores by placing the business paperwork and federal firearms license in his name (RT 685-686). Ladum did not want to show the IRS that he had any assets, since he had no intention of paying all his taxes (RT 699). He directed that there be no business records reflecting income and expenses of the stores, and no taxes withheld from employees' salaries (RT 732-735, 756-757, 788). The *9 financial arrangements were essentially the same for each store: after start-up costs were paid, Ladum and Northouse split the profits. (RT 685-686, 694, 708-711, 745-747). Start up costs included the down payment Ladum made on the real estate, the inventory, utilities, operating cash and display cabinets (RT 686-689). Both Ladum and Northouse maintained ledgers calculating the amounts owed by the nominee and paid to reduce his debt (RT 690). On average, Northouse delivered approximately $10,000 cash per week to Ladum, by skimming daily receipts and destroying income records (RT 694, 708-711, 745-747). In July 1989, Northouse quit in a dispute with Ladum and left town (RT 789-794).

In late 1992, Ladum approached Patrick Mathis with an offer to manage The Money Man (RT 3614-3617). Ladum told Mathis that Ford was having management problems and that Ladum would provide start-up costs, cash, and inventory from his other second-hand stores for Mathis to take over at The Money Man (RT 3614- 3617, 3641-3644). After repaying those costs, Mathis and Ladum would split net profits 30/70 (RT 3614-3617, 3643). Ladum assured Mathis that the business was very profitable and that he could clear $1,000 per day (RT 3617). A false bill of sale was created showing Mathis purchasing The Money Man from *10 Ford (RT 3618-3622, 3692, 3711; G.Exh. 23-29). Again, Ladum wanted no paperwork in his name (RT 3633-3638).

The accounts of these nominees were corroborated by undercover detective William Bailey, who in 1987 was posing as a second-hand store owner. Ladum told Bailey that he used people as front-men at several businesses (RT 485, 499-501, 532; G.Exh. 45-1). He said that none of the business paperwork was in his name and that all the store personnel were independent contractors so he could avoid paying employment taxes (RT 482-483). He admitted that in 1984 he set up two friends in second-hand stores and took a 10% cut of their monthly income, earning $45,000 per month (RT 510, 570). He said that, although Abe's was in Joe Miller's name, Ladum made all the business decisions there (RT 480, 481- 484). Ladum advised Bailey that he cheated on his income tax returns by only claiming a small percentage of the income he made from the second-hand stores (RT 483-484, 597-600). Ladum tried to persuade Bailey to enter into a similar arrangement, offering Bailey cash to either set up a store or to sell his business to Ladum (RT 509, 510, 512, 515-516, 518-521, 532; G.Exhs. 45-3, 45-5, 45-7).

*11 2. Echols Doyle Ford--Dave's Shop and the Money Man

Ford played a series of roles in the conspiracy. He worked for Ladum consigning goods at O'Gallerie auction house as early as 1983 (RT 2737, 2741- 2742, 2750-2752; G.Exhs. 34-8, 34-44). Ford was the nominee at Dave's Shop between 1983 and 1986. On July 16, 1984, Ford signed an alarm permit for the shop, stating that Ladum was an alarm key holder and that Ladum would be coming into the store evenings and weekends (RT 2434; G.Exh. 24-3). Ford's 1986 tax return shows him on a Schedule C as sole proprietor of Dave's Shop, a pattern followed by the other coconspirators throughout the conspiracy (RT 3193; G.Exh. 1-28). When Ladum removed Ford, he put another nominee in his place, and they had an arrangement similar to those Ladum had with other front-men (RT 1122- 1140; G.Exh. 23-25).

During 1984 to May 1989, Ford also worked at Abe's and acted as floater among the stores, filling in for other employees (RT 980-981, 997, 3509; G.Exh. 23- 28).

Ford was nominee at The Money Man between July 1989 and March 1993 (RT 980- 981, 997, 1250-1251, 3499, 3506, 3614-3618, 3621-3623; G.Exhs. 23-5, 23-6, 23- 25). Ford obtained a federal firearms license for The Money Man in *12 September 1989 by falsely claiming he was the sole owner (RT 3543; G.Exh. 16-1). During his tenure at The Money Man, Ford relied on Ladum to supply him with cash and merchandise when reserves were inadequate (RT 1571- 1572, 3580-3581).

Ladum later took that store away from Ford and gave it to Mathis. After Mathis took over, Ladum told him that Ford would stay at The Money Man and run a car-hocking business out of the back room (RT 3651-3652). Ford never paid rent to Mathis, but Mathis was instructed to tell the grand jury otherwise during the course of the investigation (RT 3652). Ford attended business meetings with Mathis and Ladum to discuss business strategies at the second-hand stores (RT 3665-3666). Ford was also prepared to lie to the grand jury and investigators by telling them he had sold the business to Mathis for $50,000 (RT 3711-3713).

After Mathis left The Money Man in 1994, he told Ladum he wanted the business paperwork out of his name (RT 3725-3726). In early 1995, Ladum tried to allay Mathis' fears about liability by assuring he was working on placing a new nominee at The Money Man, and suggested Ford, since Ford could now secure a second-hand dealer's license (RT 5898; G.Exh. 12 - Sentencing).

*13 Further evidence of Ford's involvement is detailed below, in response to his sufficiency argument. See Argument III, B, infra.

3. Daniel Hong--Columbia Cash

Ladum started Columbia Cash in March 1986, using a relative of Northouse as the first nominee and replacing him shortly thereafter with Daniel Heinze (RT 1002-1006, 1012-1014, 1051-1052). After Heinze repaid start-up costs, he split profits 40/60 with Ladum (RT 1012-1021). Heinze left Columbia Cash in September 1987, troubled by Ladum's insistence that he not keep business records and not report all the income from the store on tax returns (RT 1032-1034, 1039-1040, 1043-1044, 1048, 1050-1051). Heinze acknowledged that his tax returns for 1986 and 1987 were false, since he failed to report profits he had given to Ladum (RT 1043).

Ladum told Heinze that his replacement was Hong, an employee at The Money Man (RT 1048, 3409). Heinze drew up a phony document showing he had "sold" the business to Daniel Hong for $50,000, although Hong never actually paid any money (RT 1036-1039; G.Exhs. 39-1, 39-2).

Northouse testified that Hong admitted he was Ladum's nominee at Columbia Cash (RT 763). Hong admitted to Daniel Abbott, an employee, that Ladum had *14 given him Columbia Cash as a reward for being a successful hock man (RT 3446-3453).

4. Ronald D. Van Vliet--Division Cash

In approximately January 1988, Ladum began secretly operating Division Cash, using former Abe's employee Van Vliet as his nominee (RT 627, 772-776, 779, 820-821). Ladum had previously offered Van Vliet an opportunity to comanage a store with Heinze, which Van Vliet rejected (RT 1015-1016, 1052).

The inventory for Division Cash came from other Ladum stores, and Van Vliet ran the store the same way as the other shops (RT 779-880, 1198). Van Vliet admitted to Northouse that he was the front man for Ladum at Division Cash and that Van Vliet had an agreement to receive 7% of net profits after he repaid Ladum start-up costs of $35,000 to $50,000 (RT 820-821, 878).

In 1992, Abe's burned down and Ladum moved his headquarters to Division Cash (RT 3588-3589). Ladum took over, giving instructions to employees, organizing merchandise, purchasing inventory, and taking cash out of the register, even though Van Vliet still claimed to be the sole owner (RT 1573-1578, 3594-3606, 3957-3958).

*15 5. James R. Weaver--Abe's and Real Property Transactions

Weaver served three roles in the conspiracy. First, when Northouse left town in 1989, Weaver took over as nominee at Abe's. See Argument III, B, infra. Second, he used his real estate expertise to locate and secretly acquire real estate for Ladum, using Grigonis as a nominee. He told a witness that he was acquiring the real estate for Ladum (RT 2828-2829), but it was all placed in Grigonis's name. Third, he participated in obstructing the grand jury investigation, although he was acquitted on that count. See Statement of Facts, G, infra.

6. Defendant Grigonis--The Real Properties

Ladum had Grigonis purchase real property for new second-hand stores, using Ladum's money and Weaver's real estate experience (RT 664-665). The evidence against Grigonis is detailed below in response to his argument that he should have received a minor role adjustment at sentencing. See Argument IV, D, infra.

B. Expenditures on Wallowa Lake Lodge

Ladum funneled over $375,000 into the Wallowa Lake Lodge (RT 2248, 41174118; G.Exh. 54-10). These transactions showed the huge profits Ladum was pulling from the stores and his dedication to concealing his interest (RT 2247-2248, *16 2390). He recruited his uncle Larry Ladum to act as the "figurehead" owner of the Lodge (RT 1948-1960).

The purchase was accomplished with a $50,000 down payment and contract payments of $80,000, most of it traced to cash, passing through the hands of various nominees (G.Exhs. 54-3 to 54-10). Four Ladum associates wrote checks to pay for remodeling the Lodge: Grigonis purportedly spent $78,800 of his own money; Ford "contributed" $14,590; Joe Miller "provided" $5,000; and Ladum's attorney, $50,900 (RT 4117-4118; G.Exh. 54-10). None of these Ladum associates received a refund of their "investment" when the Lodge was "sold" in 1990 (RT 1989-2008).

Large sums were deposited directly into the bank accounts of contractors who worked on the remodeling. Lodge contractors gave Ladum their bank account numbers so he could make deposits in payment (RT 2217, 2252-2258, 2292-2296, 2302, 3286-3292, 4115-4116). Several were surprised that checks written to or on the accounts of Columbia Cash, Grigonis, and other Ladum associates were deposited (RT 2251-2252, 2272, 2292-2296, 2301, 2306-2307). Some were paid with merchandise, such as antique guns and diamonds, while others received wads or even grocery bags of cash (RT 2255, 2264-2267, 2282-2283, 2307, 2313-2314). Ladum gave Lodge manager Steve Johnson blank checks from Ford's Key Bank *17 account, and instructed Johnson to use these to pay Lodge operating expenses (RT 2218-2224). At the same time, Ford told IRS he was destitute and could not pay an outstanding tax liability from the early 1980's (RT 3294- 3304).

C. False Tax Returns

At meetings among the conspirators, the reporting of taxes and techniques to deal with law enforcement were discussed (RT 719-724, 1325-1333, 3672-3678). Ladum did not want the IRS to discover how much the stores were making or the fact that the nominees were not the true owners (RT 723-724). Ladum, Hong, Van Vliet, Northouse, and the others did not want to give the IRS any information on tax returns that could be used to build a case against them (RT 723-724). Ladum told the nominees not to keep any records of income, not to report his cut on their tax returns, and to report only enough income to cover living expenses (RT 723-724, 755-757, 940, 1325-1332, 1354-1360).

The conspirators followed these directions. Ford, Hong and Van Vliet filed their own tax returns, holding themselves out as "sole proprietors" of the stores. All filed Schedules C rather than K-l forms and partnership returns which would have disclosed Ladum's interest (G. Exhs. 1-31 to 1-34, 1-45 to 1- 49, 1-52 to 1-58(a)).

*18 Aside from omitting Ladum's interest, these tax returns also grossly understated income. Merchandise usually was purchased for approximately one-third of the price at which it would later be sold (RT 1342, 1412, 1452, 3549). However, the returns reported costs of goods sold as high as 77% (G.Exh. 54- 22). At sentencing, in an effort to measure the total tax harm, the government calculated what the true income should have been, even if the costs of goods sold ran as high as 50%. That computation showed tax losses of more than $550,000, representing just 20% of unreported income. See Argument IV, B, infra.

This money, of course, was not reported on Ladum's returns. His returns for the years 1984-88 reported total taxable income of approximately $63,000 (G.Exhs. 1-1 to 1-5). He did not file any returns thereafter. Don Johansen, who prepared Ladum's returns, testified he was unaware Ladum was involved in the second-hand stores, and had he known this, it would have made a difference in the way the returns were prepared (RT 3332-3339, 3346-3349, 3356-3360).

Grigonis's income tax returns for 1986 through 1991 falsely claimed that he was the sole owner of the real properties. He treated the properties as rentals, claiming all the income as his, offset by various expenses (G.Exhs. 1- 8 to 1-13). As with the other nominees, Ladum's interest was hidden.

*19 D. False Oral Statements

At conspiratorial meetings, Ladum expressed concern that IRS might discover that the nominees were not the true owners and the stores were making large amounts of money. Ladum's instructions to his associates about dealing with law enforcement inquiries was to be as obstructive as possible and refuse to give information (RT 721-724, 3665-3669).

Hong told employee Daniel Abbott that if law enforcement personnel ever asked, he should lie about Ladum's role in the business (RT 3453). When a 1990 search warrant was executed at Columbia Cash, Abbott did as he was told. Immediately after the search, Hong questioned Abbott about what he told the investigators and congratulated Abbott for lying (RT 3436). At the same time, Hong lied, telling an IRS special agent that he had purchased the business from Heinze in September of 1986 or 1987, and that Ladum was merely a business acquaintance who occasionally purchased merchandise at Columbia Cash (RT 3411).

Van Vliet lied to federal agents by telling them he had always been the sole owner of Division Cash from the time it opened in 1988, that he had no partners, and that all the income from Division Cash went only to him (RT 3973- 3974).

*20 Weaver made false statements consistent with this scheme, as detailed in the sufficiency discussion below.

During an audit, Grigonis told an IRS agent the huge sums of cash deposited to his bank accounts came from personal savings, which he kept in a box at his house that even his wife was unaware of (RT 3213-3215, 3232-3234). The jury acquitted him on charges that these statements were false.

E. The Bankruptcy Fraud

On September 29, 1988, Ladum filed for Chapter 7 bankruptcy protection. His petition and later testimony were false: he claimed no interests in the stores or any real property (RT 2989-3045; G.Exhs. 15-1, 15-2). He claimed his employer was the Portland Mint and that he had borrowed money from relatives to fund renovations at the Wallowa Lake Lodge.

Rodney Scott, the owner of Portland Mint, testified that in 1988, he and Ladum had concocted an employment arrangement that was completely false. Scott created a W-2 Form showing Ladum's receipt of $2,400 in wages, but Ladum repaid these bogus "wages" to Scott shortly after receiving them (RT 2600-2610).

Donna Savory, Ladum's aunt, stated that in September 1988, Ladum sent her a false promissory note purporting to show her loaning $21,000 to Larry Ladum in *21 connection with the Lodge (RT 2652-2664; G.Exh. 31-1). The note was false, since neither Savory nor her husband ever loaned money to Robert or Larry Ladum (RT 2664, 2677). Other Ladum relatives testified similarly (RT 2703-2704, 2706-2708).

On January 30, 1989, Grigonis was deposed as part of the Ladum bankruptcy case. Grigonis also lied repeatedly, claiming that he was the sole owner of the properties which housed the stores and that Ladum had not provided him with money to acquire them (RT 3073-3100, 3177; G.Exhs. 15-4, 154A).

As a result of Ladum's and Grigonis' lies, Ladum's debts were discharged on May 11, 1990 (RT 2909-2912, 2915-2920, 2924-2926, 2989-3047, 3136-3137; G.Exhs. 15-1, 15-2).

Ladum told several people that bankruptcy was an easy way to dispose of bad debts while keeping assets (RT 2225, 3680). Ladum bragged to both Northouse and Mathis that he managed to avoid losing his mansion and the Wallowa Lake Lodge to bankruptcy creditors by placing title to the properties in others' names (RT 749, 3680).

F. Money Laundering

At Ladum's direction, and after his May 1990 discharge from bankruptcy, nominees from Division Cash, Columbia Cash, and The Money Man conducted *22 financial transactions involving the funds of those stores. Specifically, the nominees wrote "rent" checks on the funds of those stores to Grigonis, which were deposited into his accounts. He in turn, used those funds to make mortgage or contract payments on the properties housing those businesses (RT 3655-3661, 3756, 40584061; G.Exhs. 11-66 to 11-74). This arrangement perpetuated the fiction that Grigonis owned the stores.

G. Obstruction of Justice

By 1993, Ladum was aware of the federal grand jury investigation of his activities at the second-hand stores (RT 3681-3683). Ladum held "yuk sessions" in the back room of Division Cash, regaling the store employees with tales of witnesses relentlessly lying to the grand jury (RT 3684-3688). When Mathis expressed concern about receiving a subpoena, Ladum's advice was to do a series of things, including avoiding service, delaying his appearance by making up an excuse not to appear on the appointed day, requesting a court appointed attorney, demanding immunity, and finally lying (RT 3688-3691).

Mathis was subpoenaed to the grand jury in August 1993. In response, Ladum told Mathis to lie to the grand jury by testifying he was a "volunteer" at Abe's, that he had purchased The Money Man from defendant Ford, and that a *23 portion of the down payment came from an employee named John Hunter (RT 3692-3693, 3707). [FN2] Ford approved this plan, agreeing to corroborate Mathis if questioned by law enforcement (RT 3711-3713). Ladum counseled Mathis and Hunter to create false documents purporting to be purchase and sales records for The Money Man, which Mathis later delivered to the grand jury in response to a subpoena (RT 3695-3698, 3703-3706).

FN2. Hunter's 1995 conviction on four counts of lying to the grand jury was upheld by this court in United States v. John Elbert Hunter, No. 96- 30120.

After receiving the subpoena, Mathis also met twice with Weaver, once to discuss the "volunteer" story so that Weaver could corroborate it if questioned, and once to procure a backdated lease to present to the grand jury (RT 3709). Weaver encouraged Mathis to lie to the grand jury by claiming that he had done so and got away with it (RT 3708).

H. Defendants' Case

Defendants' case chiefly consisted of attacking the credibility of the government's witnesses and offering a computation showing how Grigonis could have amassed the funds to purchase the store real estate. Several defendants presented character witnesses. Van Vliet, the only defendant to testify, attempted to portray his store as different from the rest in the Ladum empire.

*24 SUMMARY OF ARGUMENT

1. The indictment was sufficient. The false statement charge against Van Vliet properly stated materiality by alleging he had made false statements to IRS about Ladum's involvement in a business. The tax return charges were sufficient because Schedules C are an integral part of a tax return, and these were alleged to contain affirmative falsehoods.

2. It was proper not to suppress Hong's statements because they constituted criminal conduct, not inculpatory admissions.

3. There was sufficient evidence to support all counts of conviction. Ford and Weaver were properly convicted of conspiring to defraud IRS upon proof that they acted as Ladum's nominees and misrepresented his involvement in the stores to IRS orally and on tax returns. Ladum was properly convicted for obstruction of justice because non-coercive witness tampering may be charged under that statute, he urged his nominee to lie, and he participated in a scheme to present false documents to the grand jury. There was sufficient evidence to support the money laundering convictions of Ladum and Grigonis. The interstate commerce element was proven by showing that their financial transactions employed U.S. National Bank, a facility in interstate commerce. The income earned by the *25 second-hand stores qualified as a "proceed" of the underlying bankruptcy fraud, and the defendants conducted transactions with those proceeds in an attempt to conceal them.

4. The court's sentencing determinations were correct. Ford was properly held accountable for the entire tax loss caused by the conspiracy when he was involved over the entire course of the conspiracy, and had sufficient involvement in all its activities to comprehend its scope. Ladum and Weaver properly received enhancements upon a showing that they earned more than $10,000 from illegal gun sales. Grigonis properly was denied a reduction in his offense level for role in the offense, when the evidence established that his role as nominee of the real properties and as Ladum's banker were central to the success of the conspiracy. Ford's criminal history properly included two municipal violations which were not named in the indictment, proven at trial, or a part of the relevant conduct of his offense of conviction. The court did not abuse its discretion in refusing a downward departure for Ladum for overrepresentation of criminal history, a decision which is not appealable. The court properly determined that Ladum and Weaver were able to pay minimal fines. The forfeiture of the real estate housing three stores was not *26 excessive under the Eight Amendment, given that the stores were the proceeds of the bankruptcy fraud, and therefore, Grigonis had no legitimate claim to them.

ARGUMENT

THE DISTRICT COURT PROPERLY DENIED DEFENDANTS' CHALLENGES TO THE INDICTMENT.

Two challenges to the sufficiency of the indictment are raised in this appeal. Van Vliet argues Count 16, which charged him with making a false statement in violation of 18 U.S.C. § 1001, should have been dismissed for failure to allege materiality (D.Br. 4448). Hong (D.Br. 61-70), joined by Van Vliet (D.Br. 4849) and Ford (D.Br. 88), argues that the false tax return charges, violations of 26 U.S.C. § 7206(1), should have been dismissed for failure to state an offense. Each of these claims lacks merit.

A. Standard of Review

Challenges to the sufficiency of an indictment are reviewed de novo. United States v. Dischner, 974 F.2d 1502, 1518 (9th Cir. 1991).

*27 B. Van Vliet's False Statement Charge Properly Alleged Materiality.

Count 16 charged Van Vliet with making false oral statements to IRS Special Agent Michael Maney. [FN3] Specifically, Van Vliet stated he was the sole owner of Division Cash, whereas he knew Ladum had an ownership interest (ER 34).

FN3. 18 U.S.C. § 1001 states in pertinent part:

Whoever, in any matter within the jurisdiction of any department or agency

of the United States knowingly and willfully ... makes any false, fictitious or fraudulent statements or representations [is guilty of a felony].

Materiality is an essential element of a false statement charge under § 1001. United States v. Facchini, 874 F.2d 638, 641 (9th Cir. 1989)(en banc). As the Ninth Circuit has stated:

[T]he test for determining the materiality of the falsification is whether the falsification is calculated to induce action or reliance by an agency of the United States, -- is it one that could affect or influence the exercise of governmental functions,--does it have a natural tendency to influence or is it capable of influencing agency decision?

*28 United States v. East, 416 F.2d 351, 353 (9th Cir. 1969). [FN4] Thus, false oral statements to an IRS investigator which affect his ability to conduct an audit or determine a tax liability are material. United States v. Schmoker, 564 F.2d 289, 291 (9th Cir. 1977); accord, United States v. Fern, 696 F.2d 1269, 1274-1275 (5th Cir. 1983).

FN4. It is not necessary for the government to show that the statements actually had the effect of influencing an agency decision. United States v. Myers, 878 F.2d 1142, 1143 (9th Cir. 1989).

The jury was clearly instructed on the element of materiality (RT 5682). Thus, the issue here is not whether the jury was required to find all essential elements, cf., United States v. Gaudin, 515 U.S. 506 (1995), but whether the indictment was technically sufficient.

An indictment need not explicitly allege materiality; it need only raise an inference of materiality. In United States v. Oren, 893 F.2d 1057, 1063 (9th Cir. 1990), [FN5] the Ninth Circuit stated:

FN5. Defendant cites several cases for the proposition that it is insufficient to plead an essential element by implication (D.Br. 46). To the extent those cases so hold, they are inconsistent with Oren and not the law of this Circuit.

An indictment's failure ... to allege materiality will not necessarily render the indictment insufficient. Indeed, '[i]t is well-settled, at least in this circuit, that an indictment need not allege *29 the materiality of a false representation if the facts alleged by the pleader warrant the inference of materiality.'

Id. at 1063 (emphasis added). This standard is not difficult to meet.

In Oren, defendant was charged with making false statements to the National Park Service. Although the indictment did not explicitly allege materiality, it did allege that the Park Service was contemplating acquiring land, that it required an appraisal to make such a purchase, and that defendant had made a false statement to the appraiser. The court held, "Surely these allegations 'warrant the inference of materiality' of Oren's false statements." Id.

Similarly, in Dear Wing Jung v. United States, 312 F.2d 73, 74 (9th Cir. 1962), the indictment alleged merely that an Asian defendant had made false statements about his own identity while acting as a witness in an immigration hearing. This court found those allegations sufficient to raise an inference of materiality. Id. at 75.

Van Vliet's indictment clearly raised an inference of materiality. He concealed from IRS that Ladum had an ownership interest in a business. From ownership of a business flows obvious tax consequences. Thus, pretending to be the owner of a business, to conceal the interest of another therein, can aid and abet *30 tax evasion. United States v. Johnson, 319 U.S. 503, 518 (1942). In the context of false return prosecutions, the failure to report a business to IRS is a material falsehood, Siravo v. United States, 377 F.2d 469, 472 (1st Cir. 1967), as is the failure to report correctly the source of income, United States v. Divarco, 343 F. Supp. 101, 103-04 (N.D. Ill. 1972), aff'd, 484 F.2d 670 (7th Cir. 1973), cert denied, 415 U.S. 916 (1974). Failure to disclose the identity of a partner also is material. United States v. Mittelstaedt, 31 F.3d 1208, 1221 (2d Cir. 1994). Van Vliet's concealment of Ladum's role in the business clearly affected the ability of IRS to determine Ladum's taxes.

C. The Substantive Tax Counts Properly Alleged Offenses.

Van Vliet (Count 9), Hong (Count 10), and Ford (Counts 11 and 12), were charged with violations of 26 U.S.C. § 7206(1). That statute penalizes filing a false "return, statement or other document" under the penalty of perjury. The charges alleged, in parallel language, that each defendant filed a "United States Individual Income Tax Return, Form 1040, ... which said return he did not believe to be true and correct as to every material matter in that the return and accompanying Schedule C reported that the business [the relevant second-hand store] was a sole proprietorship owned by defendant..., and that defendant ... had received all the *31 net income of the business; whereas he then and there well knew and believed that he ... was not the sole proprietor of [the business] and that Robert E. Ladum received income from [it]" (ER 29-32).

Defendants argue, first, that because a Schedule C is not specifically required by regulation, filing a false one is not, as a mater of law, a crime. (D.Br. 68-70.) Second, they argue that, by using a Schedule C when they should not have, at worst they filed the wrong tax form, which also does not constitute a crime. (D.Br. 63-68). These arguments lack merit.

The principal difficulty with both these arguments is that defendants were not merely charged with filing false Schedules C. On the contrary, the indictment language quoted above clearly charged them with filing false tax returns, of which the Schedules C were only a part. This is not a semantic distinction. Each Form 1040, at line 13, directed the person filing it to report, "Business income or (loss) (attach Schedule C)." Each also contained a verification above defendants' signature lines which stated:

Under penalties of pejury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct and complete.

*32 (ER 131,132). Thus, the Schedules C were incorporated into the Forms 1040. Defendants concede, as they must, that there is a specific regulation authorizing the IRS to require the filing of tax returns (D.Br. 70).

1. Schedules C are integral parts of tax returns.

Defendants argue that falsehoods on a Schedule C are not prosecutable under § 7206(1) because there is no specific regulation requiring the filing of such forms. This arguments seeks an expansion of the Fifth Circuit's decision in United States v. Levy. 533 F.2d 969, 972 (5th Cir. 1976). Defendant in Levy filed a false Form 433AB, which is employed to obtain financial statements from taxpayers who are negotiating payment schedules. Because this document was not a "return," the Levy decision analyzed whether it was a "statement or other document," within the meaning of § 7206(1). Obviously, this analysis provides no guidance for determining whether a Schedule C falls within the term "return" in § 7206(1).

Levy considered the term "statement or other document" unclear, and therefore, turned to the legislative history for guidance. The court concluded that the statute could only apply to a statement or document if there was a regulation specifically authorizing it. Id. at 974-975. This ruling has been severely criticized. In United States v. Holroyd, 732 F.2d 1122, 1128 (2d Cir. 1984), the court found *33 the term "any ... document" perfectly clear, and applicable to a Form 433-AB. The court concluded it would be inappropriate to graft a regulatory requirement onto the statute by referring to the legislative history. Id.

But this court need not address whether the Levy analysis is correct, because it plainly has nothing to do with this case. Whatever validity the decision may have for miscellaneous forms, the case has never been applied to tax returns. Indeed, the expansion sought by defendants has been rejected by the same circuit that produced Levy. In United States v. Damon, 676 F.2d 1060, 1063-1064 (5th Cir. 1982), the court held that a Schedule C is an integral part of a tax "return," clearly bringing it within § 7206, and refused to extend Levy to such a document. [FN6] Every other circuit to address the question has held that § 7206(1) may be applied to any attachment to or question on a tax return. United States v. Edwards, 777 F.2d 644, 652 (11th Cir. 1985); United States v. Franks, 723 F.2d 1482, 1485 (10th Cir. 1983).

FN6. While noting this authority in a footnote (D.Br. at 70, n.20), defendants make no attempt to reconcile their claim with it. In short, they ask the court to follow the Fifth Circuit's decision in Levy, but ignore the more recent decision by the same circuit in Damon.

In any event, the indictment charged that the falsehoods of defendants' Schedules C--reporting all the businesses' net income as theirs--was carried over to the Forms 1040. Clearly, these were prosecutable falsehoods.

*34 2. Defendants were charged with affirmative falsehoods.

Defendants claim that, at worst, they filed the wrong form, and that such conduct does not constitute filing a false return. This claim is premised on United States v. Reynolds, 919 F.2d 435, 437 (7th Cir. 1990), and United States v. Borman, 992 F.2d 124, 125 (7th Cir. 1993). In both cases, defendants filed short form tax returns, Forms 1040A. Those forms have a line for income derived from "wages, salaries and tips." The defendants in both cases had earned income not reported on the returns, but not from one of the specified categories. Instead, the defendants earned their unreported income from embezzlement and a side business, respectively.

In Reynolds, the court found the return to be literally true, because it properly reported the correct amount of wages, salaries and tips. The court noted the absence of any inquiry on the short form whether there were other types of income. 919 F.2d at 637. In Borman, the government argued that identical conduct contained the implicit representation that the taxpayer had no income other than wages, salary and tips. But the court rejected this theory as well, holding that an implicit representation or use of the wrong form does not constitute a false statement. 992 F.2d at 126.

*35 These cases have little significance outside their unique factual setting. They both involve returns on which each entry was literally true. And they both involve returns which do not direct taxpayers to fill out other forms or put certain types of income at certain places on the return.

The present case is far different. Defendants were charged with making explicit misrepresentations on returns and attachments containing explicit directions. As the district court noted in ruling on this motion, Forms 1040 direct those reporting income from a business to use a Schedule C, and those reporting income from a partnership to use a Schedule E (RT 4232-4237). If, as alleged, the defendants were in partnership with Ladum, they should not have filed Schedules C. Yet they did. Those Schedules C stated they were for "Sole Proprietorships," and directed that "Partnerships, Joint Ventures, etc., Must File Form 1065" (ER 132). On the first line of those Schedules, each defendant listed himself, alone, as the proprietor. This was untrue. Defendants did not merely imply they were sole proprietors; they affirmatively represented they were. Defendants totaled the net income of their business on the Schedule C, and carried it over to the Form 1040, reporting the entirety of the business income solely as their own. [FN7] This, too, was an *36 affirmative misrepresentation. In short, the indictment alleged, and the evidence ultimately proved, that each of these returns contained affirmative material falsehoods. United States v. Mittelstaedt, 31 F.3d 1208, 1221 (2d Cir. 1994) (return concealing identity of partner is materially false). Accordingly, the district court was correct in refusing to dismiss or grant judgment on them.

FN7. Defendants argue that these entries were literally correct because they simply contain a mathematical calculation. But this misses the point; the mathematical calculation is wrong because it reports all of the income of each business, instead of each defendant's true proportionate share.

II.

THE DISTRICT COURT PROPERLY DENIED HONG'S MOTION TO SUPPRESS.

A. Standard of Review

Motions to suppress are reviewed de novo. United States v. Limitoc, 807 F.2d 792, 794 (9th Cir. 1987). The appellate court may affirm denial of a suppression motion on any ground fairly supported by the record. United States v. Koshnevis, 979 F.2d 691, 694 (9th Cir. 1992).

B. Argument

Hong claims the district court should have granted his motion to suppress statements he made during a 1990 search of Columbia Cash. At that time, he falsely *37 told the agents that he had bought the business from Heinze, that Hong was the sole owner, and that Ladum had nothing to do with it (RT 3411). The government acquiesced in suppression of the documentary evidence seized during that search, after concluding that the warrant was overbroad, but contended that the statements should not be suppressed. The district court properly agreed.

1. The Exclusionary Rule Does Not Apply to Statements Which Are Crimes.

Hong's statements during the 1990 search were not confessions, they were crimes. A false statement to an IRS agent is sufficient to establish a tax crime. See United States v. Beacon Brass, 344 U.S. 43 (1952); United States v. Neel, 547 F.2d 95, 96 (9th Cir. 1976). Here, Hong's falsehood was an overt act in furtherance of the conspiracy (ER 19). The Ninth Circuit has twice refused to extend the exclusionary rule to statements which constitute crimes. These cases were cited below by the government, yet defendant simply ignores them.

In United States v. Mitchell, 812 F.2d 1250 (9th Cir. 1987), defendant was illegally arrested and during his detention threatened to kill the President. He was subsequently prosecuted for making that threat, in violation of 18 U.S.C. § 871, and sought to suppress the statements which constituted the crime. Like Hong, he *38 claimed that the statements were fruit of an illegality, and therefore subject to the exclusionary rule. The court held:

... [W]hat Mitchell seeks in reality is immunity from prosecution for his crime; for it is the crime itself--the making of a threat against the President--not merely evidence of a previously committed crime, that is allegedly the fruit or product of the illegal arrest.

Committing a crime is far different from making an inculpatory statement, and the treatment we afford the two events differs accordingly. An inculpatory statement usually relates to a previously committed illegal act; there is nothing unlawful about the statement itself. A crime, on the other hand, whether committed by word or deed is by definition an act that violates the law. We exclude inculpatory evidence when it is obtained as a result of an unlawful search or seizure. We have never, however, applied the exclusionary rule as a bar to the prosecution of a crime.

Id. at 1253 (emphasis added). The court rejected the claim that a causal connection between illegal police conduct and defendant's new crime warranted exclusion. Id. at 1254 (citing United States v. Bailey, 691 F.2d 1009 (11th Cir. 1982) (refusing to suppress evidence of assault on arresting officers)).

This holding was applied to Fifth Amendment violations in United States v. Gordon, 974 F.2d 1110, 1116 (9th Cir. 1992). The court noted that, while Minda *39 warnings are designed to protect the constitutional privilege against self-incrimination, they are irrelevant to new charges. Id. Thus, defendant's threats, even though obtained in violation of Miranda, were admissible, because they were new crimes.

Defendant Hong clearly committed new crimes when he lied during the execution of the search. While those statements would not have occurred but for the illegal search, Mitchell held such causation irrelevant. Neither the Fourth nor Fifth Amendments provides Hong with the privilege of committing new crimes during the search. On this basis alone, the court should deny defendant's motion.

2. The Exclusionary Rule Does Not Apply to Falsehoods.

The authorities above are consonant with the long-standing proposition that the constitution does not protect falsehoods. "[O]ur cases have consistently-- indeed without exception--allowed sanctions for false statements or perjury; they have done so even in instances where the perjurer complained that the Government exceeded its constitutional powers in making the inquiry." United States v. Mandujano, 425 U.S. 564, 577 (1975) (plurality opinion); [FN8] accord, id. at 584 (Brennan, J. *40 concurring); id. at 609 (Stewart, J., concurring). Once an individual has been warned of the right to remain silent-- as Hong indisputably was--his choice is to tell the truth or remain silent. Id. The constitution does not "empower the person who testifies with a license to commit perjury." United States v. Apfelbaum, 445 U.S. 115, 127 (1979) (quoting Glickstein v. United States, 222 U.S. 139, 142 (1911).

FN8. Mandujano cites the following cases as establishing this rule: United States v. Knox, 396 U.S. 77 (1969); Bryson v. United States, 396 U.S. 64 (1969); Dennis v. United States, 384 U.S. 855 (1966); Kay v. United States, 303 U.S. 1 (1938); United States v. Kapp, 302 U.S. 214 (1937).

This principle was cited below by the government, yet once again the defense simply ignores it. What defendant seeks, however, is the exception which Mandujano notes has never been made: permission to lie.

3. Exclusion is Inappropriate.

Even if the court turns to an exclusionary rule analysis, it is clear that suppression is inappropriate.

As a threshold matter, the court must first determine whether the challenged evidence is in some sense the product of illegal government activity. New York v. Harris, 495 U.S. 16, 19 (1989). This is not a "but for" test; rather, the issue is whether there is a link between the "penalties visited upon the Government, and in turn upon the public" and the "purposes which the law is to serve." Id. at 17. The present case does not meet this threshold.

*41 The illegality here was a warrant which provided insufficient guidance to the executing agents about what documents they could seize. See United States v. Kow, 58 F.3d 423 (9th Cir. 1995). Such a warrant should result in suppression of the documents described too broadly; that penalty will deter overbroad warrants. But the overbreadth of the warrant is unrelated to the government's right to be on the premises or question persons present during the search.

Defendant does not dispute that the agents had probable cause to search, and that a magistrate authorized the search. Thus, the agents had a legitimate, court-authorized reason for being present at the time of the questioning. In fact, defendant was contacted at business premises open to the public. Defendant has not even shown that a warrant was necessary for the agents to gain access to the premises to question him. Moreover, defendant does not claim that he was in custody at the time of his questioning. The only constitutional principle implicated in the agents' questioning of defendant was their right to be on the premises, and there is no hint they were there unlawfully. Under these circumstances, there is no Link between the suppression sought-- defendant's statements--and the illegality--an overbroad list in an attachment to the warrant.

*42 Should the court turn to a conventional attenuation analysis, this case still fails to meet the test for suppression. Three factors are considered: (1) the temporal proximity of the illegality and the confession; (2) the presence of intervening circumstances; (3) the purpose and flagrancy of official misconduct. Brown v. Illinois, 422 U.S.590, 603-604 (1975); accord, United States v. Shepard, 21 F.3d 933, 939 (9th Cir. 1994). None of these fits this case.

First, given the absence of any link between an overbroad description and the agents' right to be on the premises, the "temporal proximity" test is moot.

Second, the fact that defendant lied, as opposed to confessing, constitutes an intervening act of will, independent of the governmental conduct. United States v. Mitchell, 812 F.2d at 1253-1254 (citing United States v. King, 724 F.2d 253, 256 (1st Cir. 1984)).

Third, this was not purposeful or flagrant misconduct. Cf., Brown v. Illinois, 422 U.S. at 604 (plainly improper arrest done for purpose of questioning). That the agents here were executing a warrant, supported by probable cause, militates against application of the exclusionary rule. Compare New York v. Harris, 495 U.S. at 1819 (defendant arrested without warrant in violation of Fourth Amendment; later statements not suppressed because there was probable cause for his arrest) with *43 Brown v. Illinois, 422 U.S. 590 (1975) (defendant arrested without probable cause and without warrant; later statements suppressed). Finally, defendant--who was not under arrest--was given his Miranda warnings before making any statements. See Brown v. Illinois, 422 U.S. at 603 (Miranda warnings an important, but not controlling factor).

III.

THERE WAS SUFFICIENT EVIDENCE TO SUPPORT EACH COUNT OF CONVICTION

A. Standard of Review

Several defendants appeal denial of their motions for judgment of acquittal at the close of the government's case and at the close of all evidence. The standard for review of such determinations is whether all the evidence, viewed in the light most favorable to the government, would have permitted any rational trier of fact to have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319 (1979); United States v. Manarite, 44 F.3d 1407, 1411 (9th Cir. 1995) (applying Jackson to motions for judgment of acquittal). The reviewing court must assume that the jury determined the credibility of witnesses, resolved evidentiary conflicts, and drew reasonable inferences in a manner which supports the verdicts. United States v. Gillock, 886 F.2d 220, 222 (9th Cir. 1989).

*44 B. There was Sufficient Evidence to Convict Weaver and Ford of Conspiring to Defraud the Internal Revenue Service.

Ford (D.Br. 85-88) and Weaver (D.Br. 53-61) claim there was insufficient evidence to convict them of conspiring to defraud the IRS by concealing Ladum's income. They both assert that, even when viewed in the light most favorable to the government, the evidence fails to show a tax motive for their actions.

Defendants' claims invoke this Circuit's decision in United States v. Krasovich, 819 F.2d 253 (9th Cir. 1987). In that case, Krasovich was charged in one count of a multi-defendant, multi-count indictment with conspiring to defraud the IRS by hiding assets of two drug dealers. The trial evidence showed Krasovich knew his codefendants were involved in the drug trade and that he had placed some of their assets in his name. The court found this insufficient to show an intent to conceal the assets from the IRS, as opposed to some other purpose such as concealing the drug business. Id. at 255-256. There was nothing to show that Krasovich knew the purpose of the concealment was to evade taxes.

Krasovich does not pronounce a new rule for tax conspiracies. In fact, it cited the standard principle that the existence of a conspiratorial agreement or common goal may be inferred from the evidence. Id. at 255. It merely found the evidence in one case insufficient to show a common purpose.

*45 Subsequent cases have shown how little is needed to infer a common purpose. In United States v. Ayers, 924 F.2d 1468 (9th Cir. 1991), a father and son were indicted for conspiracy to defraud IRS. The evidence showed that both were involved in large scale cash transactions, which were in excess of income reported on their individual tax returns. The court found this sufficient to uphold the conspiracy conviction of the son, despite acquittal of the father. Id at 1482-1483.

Similarly, in United States v. Fulbright, 105 F.3d 442 (9th Cir. 1997), defendant was convicted of conspiring to impede federal officers, in violation of 18 U.S.C. § 372. There was no direct evidence of a conspiracy. But defendant and his coconspirators had sent identical intimidating correspondence to judges, and defendant had provided other forms filed by his codefendants. After citing Krasovich, the court found:

"The coordinated actions of the codefendants are strong circumstantial evidence of an agreement. The likelihood that these actions were not driven by an agreement is extremely remote."... The jury could reasonably infer from the defendants' concerted actions that "all the parties [were] working together understandingly, with a single design for the accomplishment of a common purpose."

Id. at 448 (citations omitted).

*46 In the present case, Ford and Weaver were tied to the conspiracy both by the direct testimony of their former coconspirators and by the concerted action of which they were an important part. Even the uncorroborated testimony of an accomplice is enough to sustain a conviction unless the testimony is incredible or insubstantial on its face. United States v. Lai, 944 F.2d 1434, 1440 (9th Cir. 1991), cert. denied, 502 U.S. 1062 (1992). There was ample evidence that their actions were motivated by a common design to conceal Ladum from IRS.

Ford was the nominee at two separate stores. That he was not the true owner of them is established by the testimony of coconspirators. Ford was nominee at Dave's Shop from 1983 to 1986. Ben Miles took over Dave's Shop in late 1986 at Ladum's request and had a profit splitting agreement (RT 1122-1140; G.Exh. 23- 5). Northouse preceded Ford as nominee at The Money Man. He unequivocally testified that Ladurn was the true owner and enjoyed a substantial share of the profits. When Northouse left town, Ladum asked Money Man employee Paul Perry to open the store the next day. Perry was met by Ford, who, according to Ladum, was his new nominee (RT 1250-1253). In late 1992, Mathis succeeded Ford at The Money Man (RT 3614-3617). Ladum told Mathis he was removing Ford because he was having management problems. Ladum said he had put a lot of money into *47 the store and that Ford was not returning enough on the investment (RT 3615). Ford created a phony sales document representing the transfer (RT 3618- 3622; G.Exh. 23-29).

The record was replete with testimony that one of the purposes for Ladum's use of nominees was cheating on his taxes. Several of the conspirators attended meetings at which the tax object was explicit, as were its means of implementation. Nominees were to make no reference to Ladum on their returns; they were to report only minimal income. (RT 723-724, 755-757, 940, 1325-1332, 1354-1360). While it is true Ford was not placed at those meetings, he acted in concert with the other nominees. His tax returns for 1989 and 1990 falsely claimed on Schedules C that he was the sole proprietor of The Money Man (G.Exhs. 1-31, 1-32). Precisely the same acts of concealment were employed by Hong and Van Vliet. It is difficult to imagine clearer proof that tax evasion was the common plan.

The proof against Weaver was equally strong. He became nominee at Abe's Shop after Northouse's 1989 departure (RT 3508, 3978-3979). Northouse identified the store as Ladum's, and Northouse insisted that he neither sold nor transferred Abe's to Weaver, because he had no real interest in it (RT 796-797).

*48 While supposedly the owner, Weaver made only a few appearances at Abe's between July 1989 and October 1992 (RT 3549-3550, 3555). Ladum was there daily, hiring employees, moving inventory between stores, pricing jewelry and coins, assisting customers, counting cash and taking it with him (RT 3551-3553, 3563, 3578-3583). Ladum directed employees to use the Abe's checking account not only to pay store bills, but to cover personal expenses, such as college tuition for Ladum's nephew (RT 3565-3570).

Weaver showed concert of action with his fellow nominees in concealing Ladum from the IRS. He did not report any of the business operations of Abe's on his tax returns (G.Exhs. 1-23 to 1-26). Like Hong and Van Vliet, Weaver lied when approached by authorities. In June 1990, he told an IRS agent that he had acquired Abe's from Northouse by evicting him and that he was the sole owner of the store. He explained away Ladum's involvement by saying Ladum provided advice to make the shop more profitable and that Ladum ran Abe's in his absence (RT 3978-3980). In a second interview with IRS agents in December 1993, Weaver insisted again that he, not Ladum, was the owner of Abe's (RT 4011- 4019). Weaver created a false lease for Mathis to give to the grand jury and encouraged him to lie (RT 3708).

*49 Clearly, there was sufficient evidence from which a jury could conclude Ford and Weaver joined their codefendants in a conspiracy to conceal Ladum's income from the IRS. Indeed, the evidence is considerably stronger than that found sufficient by this court in Ayers.

C. There Was Sufficient Evidence to Convict Ladum of Obstruction of Justice.

Ladum seeks reversal of his conviction for obstruction of justice, in violation of 18 U.S.C. § 1503, on the grounds that the statute does not apply to attempts to influence witnesses and that there was insufficient evidence in any event. These claims lack merit

Ladum was charged with "corruptly endeavor[ing] to influence, obstruct and impede the due administration of justice in the appearance of Patrick Mathis before a federal grand jury" which was investigating him. Such conduct has long been viewed as properly prosecutable under the "omnibus" clause of § 1503. [FN9] See United States v. Gates, 616 F.2d 1103, 1105, 1107 (9th Cir. 1980) (providing grand jury witness a false. story violated § 1503). Any effort to urge witnesses to give false testimony or to withhold or destroy evidence, could support a conviction. *50 United States v. Williams, 874 F.2d 968, 981 (5th Cir. 1989); United States v. Lynch, 806 F.2d 1443, 1445 (9th Cir. 1986).

FN9. The statute provides: "Whoever... corruptly... endeavors to influence, obstruct, or impede, the due administration of justice" shall be guilty of a felony.

In 1982, Congress passed the Victim-Witness Protection Act. That statute contained a new provision, 18 U.S.C. § 1512, which prohibited witness tampering. Congress also amended § 1503 to remove all specific references to witnesses. In United States v. Lester, 749 F.2d 1288 (9th Cir. 1984), this court held that these combined statutory changes had not removed non-coercive witness tampering from the scope of § 1503. The basis for this ruling was that § 1512 applied only to forceful or coercive witness tampering. Id at 1293. Yet the omnibus clause of § 1503 had long been interpreted to prohibit non-coercive witness tampering, such as providing a false story to a witness. Id. at 1294 (citing Gates). The court concluded that Congress had not intended to place such conduct beyond any prosecution. While protection of witness may have been removed from § 1503, protection of the administration of justice was not. Id. at 1295.

Section 1512 was amended in 1988 so that its provisions clearly covered noncoercive witness tampering. Defendant claims this amendment implicitly removed such tampering from the reach of § 1503, and removed the underpinnings of Lester.

*51 The principal difficulty with this argument is that § 1503 was left unchanged by that 1988 amendment. If its language covered non-coercive witness tampering before the amendment, the same statutory language must still apply to the same conduct. The mere fact that § 1512 now explicitly covers corrupt witness tampering does not change this interpretation. Overlapping statutes do not create an ambiguity; rather, they show congressional intent to enact co-existing statutes, from which the government is free to choose. United States v. Batchelder, 442 U.S. 114, 123 (1979). Implied repeals are disfavored, and are found only when no other construction is reasonable. United States v. Borden, 308 U.S. 188, 189-90 (1939).

Defendant's argument does find some support in United States v. Aguilar, 21 F.3d 1475 (9th Cir. 1994) (en banc). There, the court confronted an obstruction conviction premised on conduct pre-dating the 1988 amendments, so Lester clearly applied. However, in interpreting the scope of § 1503, the court looked to the language of the 1988 amendment for aid. In the process, the court noted that the amendment had "eliminated the problem ... discussed in Lester" and that it "explicitly shifted the prohibition of such 'corrupt persuasion' of a witness to section 1512." Id. At 1485-1486. Neither of these observations was necessary to *52 the ultimate holding, namely, that making false statements to a potential grand jury witness could not amount to "corruptly influencing" a witness.

This holding was rejected by the Supreme Court. In United States v. Aguilar, 115 S. Ct. 2357 (1995), the court refused to limit the scope of "corruptly influencing" in the manner the Ninth Circuit had. In fact, it stated that "[w]ere a defendant with the requisite intent to lie to a subpoenaed witness ... the defendant has endeavored to ... obstruct justice." Id. at 2362. Instead, the court held that a defendant's conduct need only meet "a 'nexus' requirement--that the act must have a relationship in time, causation or logic with the judicial proceedings." Id. at 2362. While agreeing that the conviction should be reversed, the Supreme Court did so because there was no showing that defendant knew his false statements would be presented to the grand jury. Id. at 2363. The court declined to consider whether the 1988 amendments had affected the scope of § 1503. Id. at 2362 n.1.

The limited force of the Ninth Circuit's observations in Aguilar is substantially outweighed by the holdings of other courts. Three circuits have held that the 1988 amendment of § 1512 did not affect the reach of § 1503. Each was untroubled by the overlap of statutes and declined to find an implicit repeal of the omnibus clause. United States v. Tackett, 113 F.3d 603, 610-611 (6th Cir. 1997); *53 United States v. Maloney, 71 F.3d 645, 659 (7th Cir. 1995); United States v. Kenny, 973 F.2d 339, 343 (4th Cir. 1992).

Three additional circuits have joined the Ninth Circuit in holding that the original 1982 enactment of § 1512 did not exclude all witness-tampering prosecution from § 1503. These courts relied on the absence of any change in the omnibus clause of § 1503. United States v. Moody, 977 F.2d 1425, 1424 (11th Cir. 1992); United States v. Branch, 850 F.2d 1080 (5th Cir. 1988), cert. denied, 488 U.S. 1018 (1989); United States v. Risken, 788 F.2d 1361 (8th Cir.), cert. denied, 479 U.S. 923 (1986).

Only one circuit, the Second, has held to the contrary. It held that the 1982 act removed all witness tampering from § 1503. United States v. Hernandez, 730 F.2d 895, 899 (2d Cir. 1984). This decision now appears contrary to the language in the Supreme Court's decision in Aguilar, quoted above. The court found that coercive conduct aimed at a witness could meet its nexus requirement. After the 1988 amendment, but before the decision in Aguilar, the Second Circuit reaffirmed its position. United States v. Masterpol, 940 F.2d 760, 763 (2d Cir. 1991).

The 1988 amendment to § 1512 was a reaction to Hemandez. Congress sought to make non-coercive witness tampering prosecutable in the Second Circuit. *54 But in so doing, it displayed both its belief that § 1503 provided for such prosecutions and no intention to change § 1503. United States v. Tackett, 113 F.3d at 610-61 1. The section-by-section analysis of the bill stated that the amendments to § 1512:

... are intended, therefore, merely to include in section 1512 the same protection of witnesses from non-coercive influence that was (and is) found in section 1503. It would permit prosecution of such conduct in the Second Circuit, where it is not now permitted, and would allow such prosecutions in other circuits to be brought under section 1512 rather than the catch-all provision of section 1503.

134 Cong. Rec. S17,369 (1988) (quoted in, Tackett, 113 F.3d at 611).

In sum, the clear weight of authority holds that § 1503 continues to apply to non-coercive witness tampering. That being the case, Ladum's conviction must be affirmed. Clearly, there was sufficient "nexus" here between Ladum's conduct and the grand jury. He knew Mathis had been subpoenaed to the grand jury, told him to lie, and helped invent a phony story. The Ninth Circuit has held precisely this conduct violative of § 1503. Gates, 616 F.2d at 1105, 1107.

But here the conduct went beyond non-coercive witness tampering to include creating phony evidence. In response to Mathis' 1993 grand jury subpoena, Ladum *55 held a "yuk session" in the back room of Division Cash (RT 3681-3683). Ladum told Mathis that several witnesses, including his mother, had lied to the grand jury, and Mathis could do it too (RT 3684-3688). After Mathis' initial appearance, another "yuk session" was held, and Mathis told Ladum that he had 72 hours to produce business records in response to the subpoena (RT 3696- 3697). Mathis, knowing that the business records could not account for Ladum's infusion of money and merchandise into the business, suggested that he alter the records to make it appear he had more profit, thus covering Ladum's involvement (RT 3703). Ladum told Mathis to do this, even suggesting that Mathis take all the paper clips off the records and scramble them in an effort to further confuse the grand jury (RT 36973698, 3782; G.Exhs. 70-4, 70-6). Mathis testified that he would not have altered these records and presented them to the grand jury without first obtaining Ladum's express consent and approval (RT 3786). Ladum also told Mathis to have Weaver create a false, backdated lease, get Grigonis to sign it, and present this to the grand jury as well (RT 3698-3703; G.Exh. 704). Mathis did so (RT 3698-3703). Certainly, participating in a scheme to provide phony documents remains within the scope of § 1503. Thus, the conviction should be affirmed.

*56 Finally, defendant argues that these false records cannot support a conviction because they were never presented to the grand jury (D.Br. 30). But actual presentation is not required, so long as defendant endeavored to give the documents to the grand jury. As the Supreme Court stated in Aguilar, 115 S. Ct. at 2363, "conduct [is] punishable where the defendant acts with an intent to obstruct justice, and in a manner that is likely to obstruct justice, but is foiled in some way. Where a defendant with the requisite intent [lies] to a subpoenaed witness who is ultimately not called to testify, or who testifies but does not transmit the defendant's version of the story, the defendant has endeavored to, but has not actually, obstructed justice."

Here, Mathis was subpoenaed to bring documents to the grand jury. When he failed to do so, he was told during his grand jury testimony to produce the records later at the U.S. Attorney's Office. He discussed his plan with Ladum and subsequently delivered the documents (RT 3777-3783, 3949-3950). This is sufficient to establish an endeavor to present false documents to the grand jury.

D. There Was Sufficient Evidence to Convict Ladum and Grigonis of Money Laundering.

Ladum and Grigonis were convicted of bankruptcy fraud (Count 20). The essence of the charge was that Ladum had concealed his interest in the stores and the real property housing them from the bankruptcy court. Grigonis allegedly had *57 assisted him by claiming he was the sole owner of the real property housing the stores and that he had purchased it without any funds from Ladum (ER 37-44). Neither defendant raises any challenge to those convictions on appeal. [FN10]

FN10. Grigonis claims his acquittal on false statement and false tax return charges means the jury concluded these properties were his, purchased with money he saved (D.Br. 94). Were that true, the jury would have acquitted him of the bankruptcy fraud as well. At most, the acquittals create an inconsistency of verdicts, which cannot be the basis for a challenge to a count of conviction. United States v. Powell, 469 U.S. 57, 66 (1984).

In Counts 21-30, Ladum and Grigonis were charged with laundering the proceeds of their bankruptcy fraud, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). [FN11] Specifically, the counts charged that the stores, the funds they produced, and the real property housing them were proceeds of the bankruptcy fraud. The counts further alleged that Ladum and Grigonis concealed the ownership and control of the bankruptcy fraud proceeds by directing the store nominees to write "rent" checks *58 from the store funds to Grigonis, who in turn would make mortgage payments with the funds (ER 45-48). These financial transactions perpetuated the illusion that Grigonis was the true owner of the real properties.

FN11. 18 U.S.C. § 1956(a)(1)(B)(i) states in pertinent part:

Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts ... a financial transaction which in fact involves the proceeds of a specified unlawful activity,... knowing that the transaction is designed in whole or in part ... to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of the specified unlawful activity ... shall be guilty of a crime.

Ladum (D.Br. 31-35) and Grigonis (D.Br. 88-98) challenge the sufficiency of the evidence on two elements of the money laundering charges. First, they claim there was insufficient evidence that the rent checks involved the use of a financial institution in interstate commerce. Second, they allege the rent checks did not constitute proceeds of the bankruptcy fraud. Both claims lack merit.

1. There was sufficient evidence of interstate commerce.

Each count of money laundering alleges that defendants engaged in a "financial transaction," namely, the depositing of "rent checks." The term "financial transaction" is defined in the money laundering statute as follows:

a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree.

18 U.S.C. § 1956(c)(4)(B). The jury was instructed the government had the burden of proving this beyond a reasonable doubt (RT 5698). Proof that a transaction employs a utility of interstate commerce is sufficient to satisfy this element. United *59 States v. Ripinsky, 109 F.3d 1436, 1445 (9th Cir. 1997). [FN12] Only minimal proof of the financial institution's involvement in interstate commerce is required. Id., (citing United States v. Peay, 972 F.2d 71, 74 (4th Cir. 1992), cert. denied, 506 U.S. 1071 (1993)). See also United States v. Rone, 598 F.2d 564, 573 (9th Cir. 1979) (interpreting RICO statute, 18 U.S.C. § 1962(c)), cert. denied, 445 U.S. 946 (1980).

FN12. Grigonis contends that the only way of proving interstate commerce is by showing FDIC insurance (D.Br. 95-98). None of the cases cited for this proposition hold that FDIC insurance is the only way of proving interstate commerce, and Ripinsky, is clearly to the contrary.

This standard is easily met. Indeed, in Ripinsky, this court seemed satisfied with proof that "some of the deposits were made at large, well-known institutions such as Wells Fargo Bank." 109 F.3d at 1445. The deposits here were made at U.S. National Bank, and the checks were drawn on First Interstate Bank and Security Pacific Bank.

One court has held that the name of the bank alone may establish that it is an instrumentality of interstate commerce. See United States v. Leslie, 103 F.3d 1093, 1102 (2d Cir. 1997) (presence of word "Federal" in bank's name sufficient to establish interstate commerce in money laundering prosecution). In this case, the "rent" checks were deposited into Grigonis' account at U.S. National Bank of Oregon (G.Exhs. 11-66 to 11-71). The use of the word "National" in the bank's *60 name establishes that it is involved in interstate commerce. A bank can use the name "National" only as allowed by statute. 18 U.S.C. § 709. "National" banks are creatures of federal statute, 12 U.S.C. § 21 et seq., recognizing the supreme power of Congress to regulate the economy. See McCulloch v. Maryland, 4 Wheat. 316, 4 L. Ed. 579 (1819). Just as participation in the FDIC establishes interstate commerce, see United States v. Peay, 974 F.2d at 74-75, participation in the national banking system does as well. See United States v. Sullivan, 274 U.S. 256, 258-59 (1927) (banking transaction in the Federal Reserve System affects entire system, even if no loss). Clearly, U.S. National Bank is an instrumentality of interstate commerce.

Much more was shown about the nature of U.S. National Bank. Inscriptions on bank documents may be considered in establishing its status. United States v. Alen, 88 F.3d 765, 769 (9th Cir. 1996) (FDIC status proved by notations on bank statements). Grigonis' September 1990 bank statement describes U.S. Bank as "a subsidiary of U.S. Bancorp, the largest financial services holding company headquartered in the Pacific Northwest" (G.Exh. 11-76). Other statements indicate that account holders can obtain cash from automatic teller machines in other states (March 1988), purchase travelers checks (November 1988), access account *61 information and transfer funds over the telephone (May 1988 and May 1989), invest in an IRA (February 1989), finance the purchase of a car, boat or recreational vehicle (April 1988), or obtain a credit card (November 1991). Clearly, this bank was doing business in interstate commerce. See United States v. Brown, 31 F.3d 484, 489 n.4 (7th Cir. 1994) (bank which processes credit card charges clearly operates in interstate commerce).

In addition, Grigonis used his checking account for interstate activities. The government introduced five checks written on the account which were cleared through banks in California, Washington and Canada (G.Exh. 11-76). Grigonis also deposited a check received from a New Jersey business (ER 87-93). This establishes the bank was an instrumentality of interstate commerce. See United States v. Ripinsky, 109 F.3d at 1444 (citing, United States v. Kunzman, 54 F.3d 1522, 1526 (10th Cir. 1995) (services purchased from out-of-state companies sufficient), and United States v. Lovett, 964 F.2d 1029, 1038 (10th Cir. 1992) (transfer of funds across state lines and purchase of goods in interstate commerce sufficient)).

Moreover, in addition to his checking account, Grigonis had a line of credit secured by real estate at U.S. Bank (G.Exh. 11-27). A business involved in loaning *62 money secured by real property clearly affects interstate commerce. Se Russell v. United States, 471 U.S. 858 (1985) (business involved in renting real property affects interstate commerce).

Finally, the court may look to the character of the banks on which the rent checks were drawn to determine whether U.S. National Bank was an instrumentality of interstate commerce. Leslie, 103 F.2d at 1102. Here, the "rent" checks were drawn on First Interstate Bank of Oregon and Security Pacific Bank of Oregon (G.Exhs. 11-66, 11-68). There was proof First Interstate issued cashier's checks out of California (G.Exh. 6-1) and received deposits from out of state (G.Exhs. 8-40, 843, 8-49, 8-51, 8-53). In addition, checks written on First Interstate accounts were deposited in other states (G.Exhs. 8- 114, 8-115, 8-117).

These indicia of interstate activities occurred before, during and after the transactions, obviating any claim that U.S. National Bank may not have been an instrument of interstate commerce at the times of the rent checks. See D.Br. 34-35.

2. There Was Sufficient Evidence to Establish the "Proceeds" Element of the Money Laundering Charges.

Grigonis (D.Br. 88-94) and Ladum (D.Br. 35) also argue that the rent payments were not "proceeds" within the meaning of the statute and did not *63 "promote" the underling offense. [FN13] The latter complaint is a misnomer. The indictment charged that the rent checks concealed the bankruptcy fraud under 18 U.S.C. § 1956(a)(1)(B)(i). It did not charge promotion under the separate statutory provision of § 1956(a)(1)(A)(i) (ER 46). There was sufficient evidence to establish both that the rent checks were "proceeds" and that they "concealed" the underlying bankruptcy fraud offense.

FN13. Although defendants argue the court should have dismissed on this ground, the standard of review cited is one for sufficiency (D.Br. 88), and factual arguments based on trial developments are presented (D.Br. 94). Accordingly, the government is treating this as a sufficiency complaint. Because the indictment employed the language of the statute, and because bankruptcy fraud is a specified unlawful activity, the indictment is sufficient. United States v. Levine, 970 F.2d 681, 685-686 (10th Cir. 1992).

Proceeds are "funds obtained from prior, separate criminal activity." United States v. Savage, 67 F.3d 1435, 1441 (9th Cir. 1995). Thus, payments from fraud victims are proceeds, id. at 1442, as is the inflated balance in a bank account resulting from a check kite, United States v. Estacio, 64 F.3d 477, 480 (9th Cir. 1995), cert denied, 116 S. Ct. 1356 (1996). [FN14]

FN14. "Proceeds" also includes property commingled with proceeds, United States v. Marbella, 73 F.3d 1508 (9th Cir. 1995), or property purchased with proceeds, United States v. Werber, 787 F. Supp. 353 (S.D.N.Y. 1992).

*64 Defendants argue that only the stores which were concealed from the bankruptcy court could constitute "proceeds." Income earned by those stores (on which the rent checks were drawn) are characterized as "derivative" of the proceeds and, therefore, beyond the statute. No authority is cited for this "derivative proceeds" argument (D.Br. 88-94).

In fact, it is contrary to the express provisions of the Bankruptcy Code. The Bankruptcy Code defines the property of the estate to include "proceeds, product, offspring, rents, or profits of or from property of the estate ...." 11 U.S.C. § 541(a)(6). [FN15] Thus, income earned by a business after the filing of a bankruptcy petition is part of the property of the estate. In re Fitzsimmons, 725 F.2d 1208 (9th Cir. 1984). The proceeds of Ladum's bankruptcy fraud thus included not just the stores, but the "funds received by those businesses" as the indictment alleged.

FN15. Excluded from this are "earnings from services performed by an individual debtor." In a sole proprietorship, this phrase has been construed to exclude only the salary of the debtor, not the income generated by the entire business. In Re Fitsimmons, 725 F.2d 1208, 1211 (9th Cir. 1984).

This principle has been applied in two money laundering prosecutions. In United States v. West, 22 F.3d 586, 591 n.13 (5th Cir.), cert. denied, 513 U.S. 1020 (1994), defendant committed bankruptcy fraud by transferring a note he held on real property to a corporation and selling two cars which he had concealed from *65 bankruptcy. The note payments and car payments were then charged as money laundering. On appeal, defendant claimed these payments could not be "proceeds," because they were the result of lawful property sales in which the purchasers were not culpable. The court disagreed, noting that defendant got the payments only because he had concealed the assets which produced them. "[T]he checks at issue resulted from West's concealment of assets and, therefore, constituted the proceeds of West's bankruptcy fraud." Id. at 591. Obviously, the checks at issue in the present case "resulted from," and would not have been possible, but for the bankruptcy fraud. Accordingly, they are proceeds.

The second case is United States v. Levine, 970 F.2d 681 (10th Cir. 1992), in which defendant committed bankruptcy fraud by concealing personal and business assets after the failure of his furniture business. He was convicted of money laundering for receiving and secreting four tax refund checks payable to a business and to him personally. He claimed that the checks did not constitute proceeds, because they were legitimate refunds, not money resulting from unlawful activities. The court found that the creditors and the bankruptcy estate were entitled to the moneys, and that accordingly, they were from an unlawful source; "they emanated from a bankruptcy fraud." Id. at 686. The access that Ladum and Grigonis enjoyed *66 to the income of the second-hand stores just as surely "emanated from" the bankruptcy fraud.

The manner in which these proceeds were handled clearly concealed the fraud. This circuit has found sufficient proof of concealment when assets are placed in nominee names, United States v. Golb, 69 F.3d 1417, 1422 (9th Cir. 1995), and payments are passed through a series of bank accounts to avoid detection. United States v. Chesney, 10 F.3d 641, 644 (9th Cir. 1993). Defendants did both here.

Finally, defendants argue that these transactions could not constitute money laundering because the underlying crime was complete (D.Br. 93-94). In fact, the law requires completion of the underlying offense before there can be a money laundering offense. Savage, 67 F.3d at 1441-42.

IV.

THE DISTRICT COURT'S SENTENCING DETERMINATIONS WERE CORRECT.

A. Standard of Review

Several defendants appeal their sentences. The district court's interpretation and application of the guidelines is reviewed de novo, while the court's factual findings are reviewed for clear error. United States v. Karterman, 60 F.3d 576, 580 (9th Cir. 1995). As needed, specific standards of review are noted below.

*67 B. The District Court Properly Found That the Entire Loss From the Conspiracy Was Attributable to Ford.

Ford appeals attribution of the tax losses from the entire conspiracy to him. He asserts there was no evidence of skimming at his stores, that he withdrew from the conspiracy, and that he could not have known or foreseen what was occurring at the other stores. Each of these claims lacks merit.

The court found that the tax loss exceeded $550,000, relying upon methodology proposed by the government and adopted in the PSR (RT 5900; Ford PSR ¶¶ 75-80; G.Exh. 1 - Sentencing). The guidelines authorize the court to make a reasonable estimate based on the available facts. U.S.S.G. § 2T1.1, Comment. (n. 1). In so doing, the court may calculate tax loss as a percentage of gross income. U.S.S.G. § 2T1.1(c), Comment. (n.1).

Much of the calculation was premised on proof at trial that defendants underreported their gross receipts. While their tax returns claimed costs of goods sold as high as 77% of gross receipts, various store employees testified that costs of goods sold were only between 10% and 40% (RT 4127-4128, 5796- 5801; G.Exh. 1 - Sentencing).

The government estimated true gross receipts by assuming cost of goods sold was actually 50% of gross receipts (RT 5796-5797). Thus, a corrected gross *68 receipts figure was arrived at by doubling the cost of goods reported on the tax returns. This figure was then reduced by reported gross receipts to arrive at underreported gross receipts. This calculation produced unreported gross receipts of $1,349,524 by Van Vliet at Division Cash for 1988 - 94; $549,698 by Hong at Columbia Cash for 1987 - 1993; and $207,206 by Ford at The Money Man for 1989 - 92 (RT 5801-5802; G.Exh. 1 - Sentencing).

In addition, the testimony of several former nominees established additional unreported net income from various stores they managed, totaling $194,953 (RT 5802-5805; G.Exh. 1 - Sentencing). Finally, records seized from Abe's showed $973,750 in unreported income during 1990 - 92 (RT 5807-5808). The government totaled these figures and arrived at a tax loss of $931,595, based on 28% of unreported gross receipts (RT 5808; G.Exh. 1 - Sentencing). The court reduced the figure to one that exceeded $550,000, reasoning that since Ladum failed to file returns in certain years, the tax loss would be 20% rather than 28% of the unreported gross (RT 5900). This was a reasonable estimate, based on trial testimony and a conservative calculation by the government.

The court was not required to make a specific factual finding of the amount of loss attributable to Ford. In *69United States v. Melvin, 91 F.3d 1218, 1226 (9th Cir. 1996), defendant claimed that the court erred by adopting the presentence report's calculation of the loss attributable to him, rather than making specific findings. The court rejected this contention, holding that the trial court was not required to make express factual findings beyond the evidence documented in the PSR. Id. at 126. The same is true in the present case.

Defendant's claim that he should not be held accountable for all the losses of the conspiracy is unavailing. Under U.S.S.G. § IB1.3(a)(1)(B), a defendant is responsible for all reasonably foreseeable acts and omissions of his coconspirators in furtherance of the execution of their jointly undertaken criminal activity. United States v. Lorenzo, 995 F.2d 1448, 1460 (9th Cir.), cert. denied, 510 U.S. 1006 (1993); U.S.S.G. § 1B1.3(a)(1)(B). This requires a determination of the scope of the criminal activity the defendant agreed to undertake. U.S.S.G. § 1B1.3, Comment. (n.2).

In United States v. Melvin, 91 F.3d at 1226, defendant claimed the trial court erroneously held him responsible for the total amount of loss for each of five fraudulent schemes. He noted that the schemes amassed money prior to his entry into the organization and after he had left. Because trial evidence showed Melvin's involvement in the creation of these schemes, the court properly concluded that *70 profits from all of them were reasonably foreseeable to him. Id. at 1226-1227. The court also rejected Melvin's contention that he should not be held responsible for losses after he was fired from the organization in 1989. Withdrawal from a conspiracy requires that a defendant act affirmatively to defeat or disavow the purpose of the conspiracy, such as reporting the scheme to authorities. Id. at 1226-1227.

Ford was a member of the conspiracy continuously from 1983 to sentencing. He operated Dave's Shop from 1983 to 1986 (RT 1122-1140, 2434, 3193; G.Exh. 23- 25). He worked at Abe's and acted as floater between the stores, filling in for other employees (RT 980-981, 997, 3509; G.Exh. 23-28). Between July 1989 and late 1992, Ford was nominee at The Money Man (RT 3614-3617). While there was no direct testimony regarding skimming at The Money Man during Ford's tenure, there was overwhelming circumstantial evidence. Mathis and Northouse, the nominees on either side, described strikingly similar operational methods, despite the fact they did not know one another. They both skimmed receipts, split profits with Ladum, and filed false tax returns (RT 731-735, 745-747, 757-758, 798-801, 3616-3617, 3643-3644, 3678). In all respects, Ford acted in concert with them. He filed tax returns claiming to be the sole owner, reporting minimal income, and *71 claiming improbably high costs (G.Exhs. 1- 31 to 1-34). This was sufficient to show his involvement in and knowledge of underreporting. From December 1992 to March 1993, Ford helped Mathis at The Money Man (RT 3618). After that, Ford ran a car-hocking business out of the back room, continuing to do so until the day of sentencing (RT 3651-3652).

The court had ample evidence showing that a total loss exceeding $550,000 was reasonably foreseeable to Ford. There was no evidence that he withdrew from the conspiracy by repudiating or disavowing its purpose. Indeed, he was associated with it up to the moment the government actually seized the real property and shut him down in December 1996.

C. The District Court Properly Enhanced Ladum's and Weaver's Sentences For Receipt of Income from Criminal Activities

Ladum (D.Br. 30) and Weaver (D.Br. 49) appeal the district court's enhancement of their guideline scores for receipt of more than $10,000 income from criminal activities pursuant to U.S.S.G. § 2T1.1(b)(1). This enhancement was applied because both defendants were involved in illegal gun sales.

Weaver claims this enhancement is appropriate only when the criminal activity has resulted in a conviction. He also maintains that the section applies only to the defendant whose duty it was to report the income. Ladum claims that the gun *72 sales generated no income, and therefore, the section does not apply. He also disputes the income calculation. These arguments lack merit.

Contrary to Weaver's claim, a prior conviction is not a prerequisite to a "criminal activity" enhancement under § 2T1.1(b)(1). [FN16] Karterman, 60 F.3d at 580. Karterman was convicted of tax evasion and filing false tax returns but acquitted of drug offenses. Nevertheless, the trial court applied the two-level enhancement under § 2T1.1(b)(2), finding that defendant's unreported income came from drug sales. The Ninth Circuit affirmed, stating that, because a sentencing court may consider facts not charged, proven or introduced at trial, no conviction for "criminal activity" should be required. Id. at 580.

FN16. Application Note 3 to this guideline states that "criminal activity" means any conduct constituting a criminal offense under federal, state, local or foreign law.

On September 4, 1989, Weaver applied for and received a federal firearms license for Abe's Shop, but failed to disclose Robert Ladum as a partner or responsible person in the business, and falsely stated that he had acquired the business from Northouse (RT 796-797; G. Exh. 16-4).

The "criminal activity" engaged in by Ladum and Weaver was fraudulently obtaining a federal firearms license and using that false license to purchase and sell *73 guns. Persons dealing in firearms must first receive a license from the Secretary of the Treasury, and knowingly providing false information on a license application is a five year felony. 18 U.S.C. § 924(a)(1)(A). It is also a crime to deal in firearms without a valid license. 18 U.S.C. § 922(a).

Ladum relies on United States v. Ford, 989 F.2d 347, 350 (9th Cir. 1993) to support his claim that, in order for the enhancement to apply, the crime committed must have directly produced the illegal income (D.Br. 36-37). Here, the illegal gun sales generated a portion of unreported income from Abe's. The government presented a calculation showing profits on gun sales for the period January 1 to April 26, 1990, totaling more than $21,000. This calculation was based on records seized from Abe's in 1990 (RT 5969; SER 1). ATF Special Agent Glenn then used the Blue Book of Gun Values to determine sales prices (SER 1). She applied these values to guns that were actually disposed of during the period January 1 to April 26, 1990, arriving at a conservative profit figure (SER 1). She also determined that interest charges on guns pawned during the same four month period were $3,896 (SER 1). Obviously, if these numbers were extrapolated to cover the entire *74 operating history of Abe's, the total would be huge. No income from Abe's for any year was reported by Ladum, Weaver, or anyone else.

Ladum complains the $25,000 figure prepared by the government fails to take costs into consideration. This is not true. The $25,000 figure is profit for a four-month period in 1990, which was calculated by subtracting sales price from cost of goods sold (SER 1). Ladum suggests the figure should be reduced to take into consideration other business operating costs. But the tax guidelines do not require the government to employ such precise calculations. Rather, they permit the government to use gross income figures and to make reasonable estimates.. See U.S.S.G. § 2T1.1(c), Comment. (n.1).

Weaver claims the enhancement should apply only to defendant Ladum, because the illegal unreported income belonged to him. This ignores Weaver's conviction for conspiracy. The tax conspiracy guideline applies the base offense level and the specific offense characteristics of § 2T1.1(b)(1). U.S.S.G. § 2T1.9, Comment. (n.2). Weaver, therefore, is responsible for the reasonably foreseeable conduct of his coconspirator in furtherance of the execution of their jointly undertaken criminal activity. United States v. Lorenzo, 995 F.2d 1448, 1460 (9th Cir.), cert. denied, 510 U.S. 1006 (1993). The court was entitled to rely on *75 information presented against his codefendant in applying a specific offense characteristic. Id. at 1460. Here, it was appropriate to hold Weaver accountable for the fact that he helped generate illegal income.

D. The District Court Properly Denied Grigonis' Motion for a Minor Role Reduction.

Grigonis appeals the district court's refusal to adjust his offense level downward by two levels for his role in the offense, claiming he should have received an adjustment pursuant to U.S.S.G. § 3B1.2(b) as "a minor participant in any criminal activity." The commentary defines minor participant as "any participant who is less culpable than most other participants" and whose part in committing the offense "makes him substantially less culpable than the average participant." U.S.S.G. § 3B1.2, Comment. (n.3). A district court's finding that a defendant does not qualify for minimal or minor participant status is reviewed for clear error. United States v. Gillock, 886 F.2d 220, 222 (9th Cir. 1989) (per curiam).

Defendant has the burden of proving, by a preponderance, facts which warrant a downward adjustment under this section. U.S. v. Davis, 36 F.3d 1424, 1435 (9th Cir. 1994), cert. denied, 513 U.S. 1171 (1995). Less culpability than other codefendants does not necessarily entitle a defendant to a role adjustment. *76 United States v. Benitez, 34 F.3d 1489, 1498 (9th Cir. 1994), cert. denied, 513 U.S. 1197 (1995). He must show he was substatially less culpable than the average coparticipant in the case at hand. Id at 1497 (emphasis added). The role adjustments described in § 3B1.2 are to be used infrequently. United States v. Hoac, 990 F.2d 1099, 1105-1106 (9th Cir. 1993), cert denied, 510 U.S. 1120 (1994).

Grigonis offers no evidence other than his contention that his acquittal on false tax return and false statements counts means the jury must have believed he was the true owner of the second-hand store properties, and hence is less culpable (D.Br. 98-99). Courts have consistently refused to consider such arguments.

In United States v. Powell, 469 U.S. 57 (1984), defendant was acquitted on charges of conspiring to distribute cocaine and possession of cocaine, but found guilty of using a telephone to facilitate the conspiracy. The court refused to overturn these inconsistent verdicts merely because they could not be reconciled. Id. at 62-69. Such verdicts may have been based on mistake, compromise or leniency but to review them would be pure speculation or would require inquiries into a jury's deliberations which would undermine its collective judgment and the finality of verdicts. Id. at 67 (citations omitted). This court has invoked Powell frequently. See Dallas v. Arave, 984 F.2d 292, 295 (9th Cir. 1993) (court would not speculate *77 as to reasons for verdict where defendant, who was acquitted of first and second degree murder, but convicted of voluntary manslaughter, maintained that jury must have believed he acted in self-defense); United States v. Hart, 963 F.2d 1278, 1281 (9th Cir. 1992) (court refused to speculate about manner in which jury decided to acquit defendant of cocaine distribution charge but convicted on conspiracy to distribute cocaine, and reinstated jury's guilty verdict on the conspiracy).

Defendant thus seeks what courts consistently have refused: speculation into a jury's verdict. At worst, what the jury did here was inconsistent. By convicting Grigonis of bankruptcy fraud, it found that the properties in his name were not his own. But the court simply may not speculate or base a sentencing determination on such inconsistency.

While seeking such speculation, Grigonis ignores the evidence. He was an important and equal player in the conspiracy. In 1985, Grigonis agreed to purchase real estate to house the expanding second-hand store empire, using Ladum's money and Weaver's real estate experience (RT 664-665, 686, 702-708, 751, 5895). In a mere 18-month period from December 1985 to May 1987, Grigonis, an electrician making $40,000 per year, spent over $92,000 to purchase the five second-hand stores (RT 1852, 4068-4069, 4073-4078; G.Exhs. 54-1, 54-18). Grigonis told his *78 pastor, Charles Reagan, that he had a partner in the second-hand stores, and proceeded to describe Ladum (RT 1852-1855, 1861, 1864, 1869). From 1985 through the July 1996 verdicts, Grigonis held title to the properties, collected rent from store nominees, paid the mortgages, and took the write-off on his tax returns (RT 751-754, 3655-3662, 4058-4061; G.Exhs. 1-8 to 1-13, 11-66 to 11-74).

Ladum told Northouse that the properties had been placed in Grigonis' name (RT 752). Indeed, he warned Northouse to pay the rent in a timely fashion, because "without Dave we wouldn't have a place to put our stores" (RT 751). When Northouse left in 1989, Grigonis helped Ladum gain access to the stores by signing contracts with the alarm company as the landlord and pretending to evict Northouse (RT 1616-1632, 1643-1647; G.Exhs. 24-10, 24-18, 24-27, 24-34).

Grigonis also acted as Ladum's banker. Ladum refused to use bank accounts because they left a paper trail for the IRS. Grigonis pumped large sums of cash through his personal bank account for Ladum projects such as the lodge. Grigonis funneled $22,000 to the escrow company for the purchase of the lodge in 1988, taking a $10,000 loan against his own home for one of the payments (RT 4069-4070, 4081; G.Exhs. 54-3, 54-4). Another $78,000 passed through his personal account for Lodge remodeling and operating expenses (RT 4117-4118; G.Exh. *79 54-10). During 1985 - 1988, huge sums of cash were deposited to these bank accounts, many times just prior to transactions being made (G.Exhs. 54-2, 54-11).

Grigonis played an instrumental role in the bankruptcy proceedings as well. He lied under oath to the bankruptcy trustee about Ladum's interest in the properties and about funneling money through his accounts to the lodge (RT 3069-3100; G.Exhs. 15-4, 15-4A). After the discharge, Grigonis perpetuated the fraud on the bankruptcy court, the trustee, and the creditors by continuing to hold title to Ladum's properties solely in his name and by paying the underlying mortgages with store proceeds (RT 3756, 4058-4061; G.Exhs. 11-66 to 11-74).

Clearly, Grigonis was crucial to the success of the conspiracy as well as the bankruptcy fraud. His role was anything but minor. The court's denial of the two-level adjustment was thoroughly appropriate.

E. The District Court Properly Calculated Ford's Criminal History.

Ford claims that his 1985 convictions for violation of local ordinances were part of the instant federal conspiracy charges and thus should not have been used to enhance his criminal history score (D.Br. 81-85). This claim was properly denied.

At sentencing, Ford's criminal history included one point for a June 1985 conviction for purchasing regulated property, and one point for an October 1985 *80 conviction for unlawfully selling regulated property (Ford PSR ¶ 118, 120). Because the instant offense occurred while defendant was on probation for these ordinance violations, an additional two points were assessed pursuant to U.S.S.G. § 4A1.1(d)(2), for total criminal history points of four and a Criminal History Category of III (Ford PSR ¶ 123).

Defendant claims he should not have received points for these convictions because neither constituted a "prior sentence" within the meaning of U.S.S.G. § 4A1.1. "Prior sentence" is defined in § 4A1.2(a)(1) as "any sentence previously imposed ... for conduct not part of the instant offense." Application Note 1 to § 4A1.2 further instructs: "Conduct that is part of the instant offense means conduct that is relevant conduct to the instant offense under § 1B1.3 (Relevant Conduct)." Because defendant's prior convictions were not part of his relevant conduct, the district court properly counted them in his criminal history calculation.

The Ninth Circuit recently rejected an argument similar to defendant's in United States v. Buchanan, 59 F.3d 914 (9th Cir.), cert. deied, 116 S. Ct. 430 (1995). Buchanan was convicted of mail fraud resulting from a scheme in which he sold automobiles, kept the proceeds, claimed the cars had been stolen, and sought insurance reimbursement. He was assessed one criminal history point for a state *81 conviction for unlawful alteration of a vehicle identification number ("VIN"). He argued that the conduct underlying the state "VIN" conviction was part of the federal mail fraud offense and thus the state offense should not have counted as criminal history. In rejecting Buchanan's claim, this court found an insufficient degree of similarity and connection between the state and federal offenses, despite the fact both involved fraud and a common participant. The state offense was a "discrete identifiable illegal act" because the VIN alteration was not part of any charges in the indictment and had not resulted in the filing of a fraudulent insurance claim, the basis of the federal indictment. Id. at 918.

Other circuits have ruled similarly. United States v. Oser, 107 F.3d 1080 (3d Cir. 1997) (prior currency reporting conviction was "prior sentence," even though it was overt act listed in drug conspiracies, because currency offense did not affect offense level for the drug conspiracies); United States v. Hopson, 18 F.3d 465, 468469 (7th Cir.), cert. denied, 512 U.S. 1243 (1994) (drug possession was "prior sentence" at sentencing for drug conspiracy, because specific possession incident not mentioned in indictment, and it involved different victims, criminal goals and societal harms); United States v. Escobar, 992 F.2d 87, 89-90 (6th Cir. 1993) (drug possession convictions "prior sentences" at sentencing for continuing criminal *82 enterprise and drug conspiracy, because prior convictions not mentioned in the federal indictment, not an element of the federal charges, and not occurring on same date as the specific acts forming the basis of the continuing criminal enterprise charge).

Ford's prior convictions were distinct from the convictions here. The object of the conspiracy was impeding the IRS's determination of Ladum's taxes (CR 173). Ford also filed false tax returns by affirmatively stating he was the sole owner of The Money Man. The ordinance violations involved Ford's failure to fill in certain information on police property forms, and his sale of regulated second-hand property prior to the expiration of a waiting period (Ford PSR ¶ 118, 120). These violations were not pled in the indictment and were not used to prove any element of the instant offenses. Indeed, they were not presented at trial. It is true that the ordinance violations took place during the course of the conspiracy, and the offenses are somewhat similar in character because they involve record keeping. But the offenses involve different victims--local authorities versus IRS--and two different societal interests--the regulation of stolen property versus tax collection. Even the records involved were very different: police property records versus income tax returns.

*83 Finally, and perhaps most important, the prior convictions were not used as "relevant conduct" under § B 1.1 for calculating the total offense level (PSR ¶ 106-105). Thus, Ford essentially wants his prior convictions to be disregarded, affecting neither his offense level nor his criminal history. The authorities cited above do not permit such a result.

F. The District Court's Discretionary Refusal to Depart Downward for Overrepresentation of Ladum's Criminal History Category Is Not Appealable.

At sentencing, Ladum's criminal history was increased because of a conviction for draft evasion, despite the fact he had received the benefit of a blanket Presidential pardon. Although he contested that inclusion below (ER 97-C), defendant does not now dispute that ruling. He does claim, however, that his request for a downward departure pursuant to U.S.S.G. § 4A1.3, on the ground that this conviction resulted in an overrepresentation of his criminal history, was ignored by the sentencing court. In fact, the record reveals the court exercised its discretion not to depart, a decision which is not appealable. United States v. Rivera, 996 F.2d 993, 997 (9th Cir. 1993). If the sentencing court did not recognize it had authority to depart, then of course a remand would be necessary. United States v. Dickey, 924 F.2d 836, 839 (9th Cir.), cert denied, 502 U.S. 943 (1991).

*84 Ladum's draft presentence report did not include his draft evasion conviction, evidently because of the intervening pardon (ER 97-C). The government objected, asserting that Application Note 10 of U.S.S.G. § 4A1.2 required its inclusion. [FN17] While conceding the force of that argument, defendant nonetheless sought a departure (ER 97-C). It is in this context that the following dialogue occurred, of which defendant quotes only a part:

FN17. Application Note 10 states (emphasis added):

A number of jurisdictions have various procedures pursuant to which previous convictions may be set aside or the defendant may be pardoned for reasons unrelated to innocence or errors of law, e, g., in order to restore civil rights or to remove the stigma associated with a criminal conviction. Sentence resulting from such convictions are to be counted.

MS. FAY: Your Honor, I think the only other thing besides the matter that the court has already dealt with, is Mr. Ladum's criminal computation.

THE COURT: Well, after review of the materials, the court -- notwithstanding that its 25 years ago, I think the court is required to take that into account, which would make this a category 2.

MR. FEINER: Your Honor, am I correct in terms of you saying that you feel you have no choice in the matter?

*85 THE COURT: It's my understanding, Mr. Feiner.

MR. FEINER: I -- I have otherwise urged the court.

THE COURT: I know.

MR. FEINER: I repeat that request.

THE COURT: I understand.

(RT 6004-6005) (emphasis added).

Clearly, the record reflects a two-step process in which the court first held it must include the prior conviction in defendant's criminal history category, as the government had argued. Defense counsel, in the portion of the transcript omitted from his brief, then directed the court to his other argument and repeated that request. This plainly referred to the departure argument. The court indicated its awareness of that request and assessed defendant's criminal history category at level II (RT 6008).

Further support for the conclusion that the court was exercising its discretion can be obtained from the written findings of fact. The court acknowledged all objections contained in defendant's letters, and even attached copies (ER 66). It addressed a number of specific disputes-not including the departure--and otherwise *86 adopted the presentence report as its own findings and conclusion. The PSR addressed this issue as follows:

However, I believe there are mitigating factors as well, including the fact that Ladum's 24-year-old conviction for Failure to Submit to Induction, which was granted a presidential pardon, has placed him in a Criminal History Category II. I do not believe the conviction causes an overrepresentation issue, but it is sufficiently mitigating to warrant a midrange sentence.

(Ladum PSR, December 5, 1996, Addendum at 2-3).

Ultimately, the court arrived at a lower guideline range than the PSR and sentenced at the lowest end of that range (ER 66-67). To the extent some mitigation for defendant's criminal history might be appropriate, he has already received it.

The court's findings are adequate. In United States v. Garcia-Garcia, 927 F.2d 489 (9th Cir. 1991), defendant sought a downward departure for mitigating circumstances, but the court sentenced him within the guideline range without otherwise commenting on the request. In affirming the sentence, this court held that it would assume from the district court's silence that it was aware of its ability to depart and chose not to. It held that the district court has no obligation affirmatively *87 to state that it has authority to depart when it sentences within a guideline range instead of departing. It held the refusal to depart not appealable. Id. at 490.

Here, the record was not silent, but rather, contained several references indicating the court's awareness of its ability to depart. There is no indication, on the other hand, that the court felt itself constrained to a certain result on the departure issue, as opposed to the raw criminal history score. This issue, therefore, is not appealable.

G. The District Court Properly Imposed Fines On Ladum and Weaver.

The district court's determination that a defendant has the ability to pay a fine is reviewed for clear error. United States v. Favorito, 5 F.3d 1338, 1339 (9th Cir. 1993). Both Ladum and Weaver challenge the district court's imposition of fines as part of their sentences.

Ladum claims that the court erred by failing to establish that he had the ability to pay a $15,000 fine within 90 days of sentencing (D.Br. 42). His argument is meritless.

U.S.S.G. § 5E1.2(a) states, "The court shall impose a fine in all cases, except where the defendant establishes that he is unable to pay and is not likely to become able to pay any fine." Defendant bears the burden of proving that he is unable to *88 pay a fine. Faorito, 5. F.3d at 1339; United States v. Ortland, 103 F.3d 539, 548 (9th Cir. 1997) (vacated and remanded on other grounds). This burden is not met if the evidence presented by defendant merely creates a "conflict in the information before the court." Favorito, 5 F.3D at 1339. Where the record fails to show a defendant's inability to pay a fine, or that he is "not likely" to be able to pay a fine, and there is evidence supporting the contrary conclusion, the court may impose a fine within the guideline range. Ortland, 109 F.3d at 548 (9th Cir. 1997).

Defendant failed to meet this burden below and essentially ignores it here. Ladum's conviction carried a total offense level of 31, which pursuant to U.S.S.G. § 5E1.2(c)(3), established a fine range of $15,000 to $500,000 (Ladum PSR ¶¶ 30, 157; CR 888). The presentence report recommended a fine within the guideline range, noting that defendant appeared to have made significant income between 1983 and 1996 (Ladum PSR ¶ 148).

Merely proclaiming his indigence, defendant refused to give financial information to the presentence writer (Ladum PSR ¶ 136; ER 97-H). As evidence of indigency, he claimed the government would soon be forfeiting the second-hand store properties and his mansion, and that he had appointed counsel since 1992 (ER *89 97-H, 97-I). Counsel also objected to the imposition of a fine during the sentencing hearing but offered no evidence or testimony regarding indigence (RT 6006).

This argument essentially seeks to perpetuate the fraud which Ladun has been practicing for 15 years. Throughout that time he has claimed to have nothing: no income, no interest in income-producing stores, no property. The government established the falsity of those claims beyond a reasonable doubt. The claims of indigency which got him appointed counsel were part of that fraud.

Defendant attempts to pick apart the trial record in an effort to claim there was no showing of his ability to pay. But this ignores the most significant fact: Ladum's stores were in operation up to the time of sentencing. To stand silent in the face of that fact alone is a failure to meet his burden.

Indeed, there was ample proof of defendant's ability to pay. The PSR indicated that since his 1994 arrest, Ladum had been earning a living selling second-hand goods and conducting garage and estate sales, something he has done for years. Only some of this income had been accounted for (Ladum PSR ¶¶ 140, 146, 147). To require of the government a full accounting of Ladum's income is to reward Ladum for his continuing mastery of deceit.

*90 The trial evidence showed that Ladum earned substantial sums through the second-hand stores, "estate sales" and selling coins and jewelry well into the 1990s (RT 2610-2613, 2627-2634, 2638-2649, 3564, 3574-3577, 3580-3581). Ladum bought out his deceased father's former business partners by making over $80,000 in secret payments in 1990 and 1991 (G.Exh. 54-13). Abe's Shop took in approximately $3,000 in profit daily through 1992 (RT 3563). If the store needed cash, Ladum would either drop in and replenish the register or direct employees to buckets of cash hidden in the store (RT 3563-3564). Ladum had over $21,600 in college tuition and living expenses for his nephew paid out of the stores during this time period (RT 3567-3569, 4072; G.Exh. 54-14). In 1993, Ladum gave Mathis $12,000 in cash and merchandise to start his tenure at the Money Man (RT 3643-3644). In October 1994, an IRS agent observed Ladum taking a wad of money from the cash register at Division Cash (RT 3957-3963).

Clearly, there was substantial evidence on which the court could order Ladum to pay the minimum guideline fine, and an absence of any showing to the contrary.

For the first time on appeal, Weaver alleges the trial court erred by imposing a $10,000 fine without determining his ability to pay (D.Br. 52-53). Failure to raise *91 an issue in the district court is reversible only for plain error. United States v. Bosch, 951 F.2d 1546, 1548 (9th Cir. 1991).

The court set Weaver's total offense level at 22, which resulted in a fine range of $7,500 to $75,000 (RT 5955; CR 898; U.S.S.G. § 5E1.2(c)(3)). The court imposed a $10,000 fine, payable within 90 days of sentencing (RT 5955; CR 898).

The presentence report listed Weaver's employment as a firefighter earning $50,000 per year, with a total net worth of $48,650 (Weaver PSR ¶¶ 131, 132). Defendant was not completely candid with the presentence writer, however. The government provided additional information he omitted from his financial statement: a judgment of $37,676 he won in a recent lawsuit; a $33,000 interest in a $50,000 loan his wife made to Grigonis; three pieces of commercial real estate; and a $15,000 down payment and note for $45,717, which represented proceeds from the 1994 sale of another piece of property (Weaver PSR ¶ 132). Defendant contested none of these additions to his net worth, either in his objection letter to the Probation Office or at the sentencing hearing (Weaver PSR; RT 5772-6016). Likewise, there was no objection to the court's imposition of the fine amount. Defendant's only concern, raised after the court pronounced the sentence, was that he could not pay within the 90-day time frame established by the court (RT 6958). *92 But he presented no evidence demonstrating his inability to pay within the set period. In view of the showing that Weaver had a significant positive net worth, the court's imposition of the fine, payable within 90-days, was not plain error.

H. The Criminal Forfeiture Did Not Violate The Eighth Amendment

Grigonis asserts that forfeiture of the real property housing the stores violated the Eighth Amendment (D.Br. 99-102). The district court correctly ordered the forfeiture of the property as it was not unconstitutionally excessive.

A district court's interpretation of federal forfeiture law is reviewed de novo. United States v. Bajakajian, 84 F.3d 334, 336 (9th Cir. 1996).

Criminal forfeitures, as a form of monetary punishment, are subject to the Eighth Amendment's limitations under the Excessive Fines Clause. Alexander v. United States, 509 U.S. 544, 559 (1993). The Ninth Circuit has developed a two-pronged approach for determining whether forfeiture of property constitutes an excessive fine. United States v. Real Property Located in El Dorado County, 59 F.3d 974, 982 (9th Cir. 1995). First, the property must have been an "instrumentality" of the crime, and second, the worth of the property must be "proportional" to the culpability of the owner. Id.

*93 Under the "instrumentality" test, the forfeited property must have a sufficiently close relationship to the illegal activity, that is, the property has been tainted by its unlawful use. Id. (citing Austin v. United States. 509 U.S. 602 (1993) (Scalia, J., concurring)). The burden is on the government to show a substantial connection between the property and the offense. United States v. Real Property Located in El Dorado County, 59 F.3d at 985.

The forfeited properties here were the properties where three stores were located: The Money Man, Division Cash and Columbia Cash. The nexus between the property and the illegal activity is strong. The forfeited properties represent, first, the proceeds of illegal activity for which Grigonis was convicted, namely, the bankruptcy fraud. They were assets illegally and secretly withheld from the bankruptcy estate by Ladum and Grigonis, and should have been made available to pay creditors. Second, the jury found these properties were involved in the money laundering offenses, counts 21 - 30, of which Grigonis also was convicted. All the forfeiture did here was accomplish what should have happened in the bankruptcy proceeding years ago.

Grigonis argues that his acquittal on false tax return and false statement charges requires the conclusion that the forfeited properties have no nexus to illegal *94 activity (D.Br. 101). This merely repeats the same inconsistency of verdicts argument discussed above. If the jury thought the properties legitimately were Grigonis', he would not have been convicted on the bankruptcy fraud. Any inconsistency between the tax and bankruptcy charges cannot be the basis for speculation or relief here. See United States v. Powell, 469 U.S. 57 (1984).

Circuit courts have uniformly concluded that the forfeiture of property which constitutes proceeds of illegal activity is not punitive, and therefore, does not violate the Excessive Fines Clause of the Eighth Amendment; it simply parts the owner from the fruits of the criminal activity. United States v. Alexander, 108 F.3d 853, 858 (8th Cir. 1997) (upholding forfeiture of proceeds obtained directly or indirectly from racketeering activities); United States v. Various Computers and Computer Equipment, 82 F.3d 582, 589 (3d Cir. 1996) (forfeiture of proceeds is not punishment); United States v. Buchanan, 70 F.3d 818, 830 n.12 (5th Cir. 1995) (forfeiture of drug proceeds does not constitute punishment; Eighth Amendment prohibition against excessive fines not applicable); United States v. Wild, 47 F.3d 669, 676 (4th Cir. 1995) (an excessiveness challenge can never be mounted against property constituting or derived from proceeds).

*95 The Ninth Circuit concurs with this logical analysis. In United States v. Feldman, 853 F.2d 648, 663-64 (9th Cir. 1988), this court upheld a sentence ordering restitution of $1,986,990 and forfeiture of the same amount. Forfeiture of the amount of insurance fraud proceeds received by defendant was not excessive. Id. at 664. "[W]hen the district court orders that the defendant forfeit the profits gained from illegal activity, it is hard to imagine how such a forfeiture could" violate the Eighth Amendment. Id. at 663; see United States v. Real Property, Titled in the Names of Godfrey Soon Bong Kang and Darrell Lee, 120 F.3d 947, 950 (9th Cir. 1997) (forfeiture of real property which housed an illegal gambling business was "substantial connection between the property and the offense.") Here, the forfeited properties were the profits of the bankruptcy fraud.

Once the instrumentality prong has been satisfied, defendant has the burden to show that the forfeiture is grossly disproportionate given the nature and extent of his criminal culpability. United States v. Real Property Located in El Dorado County, 59 F.3d at 985. In determining proportionality, several factors must be considered, including: the fair market value of the property; the intangible subjective value of the property (e.g., whether it is the family home); the hardship to the defendant including the effect of the forfeiture on defendant's family or financial *96 condition; whether the owner was negligent or reckless in allowing the illegal use of the property; whether the owner was directly involved in the illegal activity and to what extent; the harm caused by the illegal activity; the duration of the illegal activity; and the effect on the community. Id. at 985-986.

Grigonis has failed to demonstrate these forfeitures are grossly disproportionate to the criminal activity for which he has been convicted. He helped Ladum cheat bankruptcy creditors out of $940,000 (RT 2909-2912, 3136- 3137; G.Exh. 15-1). They did so by lying about assets that were acquired through an enterprise founded on deception and fraudulent practices. The three properties subject to forfeiture have an approximate total fair market value of $500,000, [FN18] far *97 less than the loss Grigonis caused the victims of the bankruptcy fraud. The benefit reaped by Grigonis was his continued ability to assist Ladum in hiding the assets, while at the same time, enjoying the tax benefits that property ownership brings.

FN18. The fair market value is calculated as follows:

Property at 6614 S.E. 82nd

Property at 8500 N.E. Columbia

Property at 12398 S.E. Division

(CR 795). Defendant did not challenge these figures below.

These properties are commercial properties, not family homes, and their forfeiture causes no hardship to the defendant. He is only losing property that was not his and should have been lost to the bankruptcy court anyway. Defendant was not negligent in allowing the use of this property in criminal activity; he was criminally culpable in helping to conceal it. The crime, which spanned several years, deprived many legitimate creditors of money and violated the integrity of the bankruptcy court.

Defendant failed to meet his burden to show disproportionality. He now argues, without factual support, that the forfeiture "is unduly harsh on David Grigonis and his family because it represents the loss of his entire life's savings" (D.Br.101). These properties were not legitimate life savings, but were properties which rightfully belonged in the bankruptcy estate to pay legitimate creditors.

*98 CONCLUSION

For the above reasons, the judgment of the district court should be affirmed.

*99 STATEMENT OF RELATED CASES

Pursuant to Rule 28-2.6(a) of the United States Court of Appeals for the Ninth Circuit, counsel for plaintiff-appellee hereby states there are no related cases.

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. Echols Doyle FORD, David C. Grigonis, Daniel Hong, Robert E. Ladum, Ronald D. Van Vliet, and James R. Weaver, Defendants-Appellants.

1997 WL 33551357