9th Circ. Guts Restitution Order in Tax Fraud Case

     PASADENA, Calif. (CN) — A tax preparer convicted on dozens of counts of fraud cannot be forced to pay restitution in another tax fraud case in which he was not ultimately convicted, the Ninth Circuit ruled Thursday.
     At the age of 68, Neil Thomsen was convicted by a jury of 32 federal offenses arising from a tax fraud scheme in which he filed false tax returns using stolen identities from former clients and co-workers.
     Before the trial commenced in his first case, Thomsen was also indicted in a separate case on charges of conspiring with three co-defendants to defraud the United States by claiming fraudulent income tax refunds. Thomsen neither pleaded guilty to nor was convicted on any of the charges in this case.
     In sentencing Thomsen to 15 years in federal prison in the first case, a federal judge also ordered restitution in the amount of $515,257 to be paid to the Internal Revenue Service, which included the $197,922 restitution calculated in the second case against Thomsen and his three co-defendants.
     The second indictment against Thomsen was later dismissed, leading to his appeal that he should not be held responsible for the restitution payment in that case.
     Although it was once the case that a defendant could be required to pay restitution only to the victims of the offenses for which he was convicted, this is no longer always true according to U.S. Senior District Judge Mark Bennett, sitting by designation for the Northern District of Iowa, who wrote the opinion for the Ninth Circuit panel.
     The Ninth Circuit issued a ruling in 2015 stating that when a conviction includes a scheme or conspiracy as an element of the offense, the restitution order may include acts of related conduct for which the defendant was not convicted.
     “The disputed factual question, here, is whether the district court properly found that all of the losses alleged by the United States as the basis for restitution, including losses from conduct charged only in the second case, were losses from ‘related conduct,'” Bennett said.
     Thomsen correctly pointed out that the United States repeatedly refers to his “multi-year fraudulent scheme,” but nowhere identifies evidence establishing that the scheme charged in the second case was the same scheme charged in the first case, the panel said.
     “At most, the United States has shown that both schemes were designed to obtain tax refunds by fraud and that Thomsen was involved in both of them. That is not enough,” Bennett said.
     The frauds in the first case were accomplished by Thomsen himself and in California using the mail, whereas the frauds charged in the second case involved different victims, at least three other defendants working in multiple states, and were accomplished by wire fraud, Bennett noted.
     “(T)he district court clearly erred in holding that the conduct at issue in the second case was sufficiently ‘related’ to the conduct at issue in the first case to warrant inclusion of losses in the second case in the order for restitution,” Bennett said.
     The trial court also made several errors in sentencing Thomsen, including considering the “intended loss” from the second case, imposing an identity theft enhancement, and using the incorrect guideline in determining the number of victims, the panel said.
     Thomsen is also entitled to acquittal on the two counts for aggravated identity theft during and in relation to a felony passport card fraud offense.
     The statute in question states that for a defendant to be convicted, he must knowingly forge or falsely make any “immigrant or nonimmigrant” visa or “other document prescribed by statute or regulation for entry into or as evidence of authorized stay or employment in the United States,” Bennett wrote.
     Bennett concluded that the statute is limited to the type that an alien might use to validly enter and work in the United States, not a passport.
     The case is remanded for redetermination of both the order of restitution and sentence of incarceration.

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