I write today about a recent case, United States v. O'Doherty, 643 F.3d 209 (7th Cir. 2011), about a commodities trader who "paid for the services of a fraudulent tax consultant, and, under that individual's guidance, he did not file individual income tax returns for the better part of a decade." O'Doherty claimed that the Government violated the plea agreement by raising relevant conduct for noncharged years. The Court applied a straightforward contractual interpretation of the plea agreement to reject that claim. O'Doherty claimed also that his tax fraud did not involve sophisticated means. The Court rejected that applying a standard interpretation of sophisticated means. I think the more interesting issue on appeal was the issue of how the Probation Office determined the tax loss in the PSR.
The tax loss must be proved by a preponderance of the evidence. And, sentencing determinations are not bound by the rules of evidence that might otherwise apply. Thus, hearsay evidence that otherwise might be excluded may be used if persuasive by a preponderance of the evidence. The sentencing court determined the tax loss based upon the PSR. On appeal, O'Doherty urged that reliance the PSR alone was not evidence that the sentencing court could rely upon to support a finding by the required preponderance of the evidence. The court of appeals stated his argument (fn. 4) as follows:
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