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United States v. Oestreich

April 18, 2002

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
BONNIE OESTREICH, ALSO KNOWN AS BONNIE REES, ALSO KNOWN AS BONNIE P. DUKE AND GEORGE A. OESTREICH, DEFENDANTS-APPELLANTS.



Appeals from the United States District Court for the Southern District of Illinois. Nos. 4:99CR40021-002 & 4:99CR40021-001--James L. Foreman, Judge.

Before Fairchild, Cudahy, and Coffey, Circuit Judges.

The opinion of the court was delivered by: Fairchild, Circuit Judge.

Argued April 17, 2001

George and Bonnie Oestreich, married from June 1992 to February 1996 and active in a tax protest group "We the People," which advocated hiding assets and violating tax laws, were convicted of conspiring to defraud the United States for the purpose of impeding the lawful functions of the Internal Revenue Service in the ascertainment, computation, assessment, and collection of income and Social Security taxes. 18 U.S.C. sec. 371. George was also convicted of seven counts of willfully failing to file tax returns. 26 U.S.C. sec. 7203.

The Guideline applicable to the conspiracy is U.S.S.G. sec. 2T1.9, which directs the use of sec. 2T1.1 (or sec. 2T1.4).

I. George's Appeal

The probation officer computed a base offense level of 19 under sec. 2T1.1 (tax loss) and added 8 levels not contested on appeal for a total offense level of 27. Because George's Criminal History Category was I, the resulting range of imprisonment was 70-87 months. The sentence imposed was 70 months, a combination of 60 months on the conspiracy count and a consecutive 10 months on one of the counts for failure to file.

On appeal George disputes part of the calculation of tax loss. He does not challenge the tax loss figures of $130,600 (based on estimated income 1991-1998) nor $55,041 (unpaid self-employment taxes 1991-1998) nor $69,791 (refunds im properly claimed in 1993 for income tax paid in 1989 and 1990.) He does object to the inclusion of an administrative claim for $1,000,000 filed in June 1996. If the $1,000,000 is properly included, the base offense level of 19 and the total of 27 are correct; if not, the base offense level would be 16, the total 24, and the resulting range 51-63 months. Table, U.S.S.G. sec. 2T4.1.

The probation officer included the $1,000,000 claim on the premise that it fell "within the meaning of U.S.S.G. sec. 2T1.1(c)(4) [('If the offense involved improperly claiming a refund to which the claimant was not entitled, the tax loss is the amount of the claimed refund to which the claimant was not entitled.')]." It was not, however, a claim for refund, but a totally ineffective claim for damages.

The claim was entitled "Administrative claim for damages and return of all property, 26 U.S.C. sec. 7433(d)(1)." It and accompanying documents, referred to as "codicils," contained much tax protester gibberish attempting to deny liability for federal income tax and social security contributions. The sec. 7433 referred to, in its form when George filed his claim on June 7, 1996, authorized an action for damages against the United States if an officer of the Internal Revenue Service, in collection of tax, recklessly or intentionally disregards a provision of Title 26 or a regulation thereunder. Recoverable damages were the lesser of $100,000 or actual damages and costs. The action may be brought only within 2 years of the accrual of the right. Pub. L. 100-647, Title VI, sec. 6241(a), Nov. 10, 1988, 102 Stat. 3747. George presumably got his $1,000,000 figure from an amendment which had passed in the House on April 16, 1996, but was not enacted until July 30, and then applicable only to subsequent actions by officers or employees of the IRS. Pub. L. 104-168, Title VIII, sec. 801, July 30, 1996. Subsection (d)(1) denied judgment unless plaintiff had exhausted administrative remedies within the IRS. George's claim stated that it was an attempt to correspond with administrative remedies and cited 26 C.F.R. sec. 301.7433(e)(i) through (v), "Procedures for an administrative claim." That regulation, then and now, limited administrative recovery to the lesser of $100,000 or actual damages plus costs. The indictment, Count 1, par. 21, refers to the claim as "correspondence . . . in which Oestreich purported to make an administrative claim," and on appeal the government characterized the claim as "an administrative claim for damages." (Br. at 7.)

A claim for refund would be governed by 26 U.S.C. sec. 7422 and 26 C.F.R. sec.sec. 301.6402-2 and -3, neither of which was invoked here.

George's claim did not assert that any officer or employee of the IRS had ever recklessly or intentionally disregarded any provision of the law or a regulation or that damage resulted. The only accusation of anyone was that Congress had perpetrated fraud, coercion and fear. It was a nullity even as a claim for damages. We conclude that it was error to include the $1,000,000 as a claimed refund and therefore a tax loss.

George Oestreich had objected in district court to including the claim for damages as tax loss, and the government concedes that the standard of review as to him is whether the inclusion was clearly erroneous.

The probation officer had included a statement that "if the Court determines that the $1,000,000 claim filed against the Internal Revenue Service was so frivolous as not to be taken seriously by that agency, the Court may depart [downward under U.S.S.G. sec. 5K2.0]." Both Oestreichs argue on appeal that the district court erred in failing to consider or grant a downward departure. The failure is not reviewable by this court unless it resulted from an alleged ly erroneous conclusion of law. United States v. Williams, 198 F.3d 988, 994-95 (7th Cir. 1999). Here the probation officer's statement concerning departure was in the record before the ...


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