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United States of America v. John Psihos

June 15, 2012

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
JOHN PSIHOS, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 08 CR 1026--Blanche M. Manning, Judge.

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

ARGUED DECEMBER 8, 2011

Before MANION, ROVNER, and TINDER, Circuit Judges.

John Psihos pleaded guilty to four counts of making false statements in a tax return. The district court determined that the tax loss was $837,724 and sentenced Psihos to 24 months' imprison- ment, which was the low end of the applicable guideline range. The court also ordered Psihos to pay $837,724 in restitution. Psihos appeals, arguing that the tax loss was only $22,292.27; that the restitution amount was erroneous; and that the district court procedurally erred in sentencing him within the guideline range without addressing his argument for an outside-the-guidelines sentence. We affirm.

I.

John Psihos immigrated to the United States from Greece in his early twenties. He eventually opened his own restaurant and later went on to own three restaurants in the Chicago area: Flanagan's (the most successful of the three), Cafe Oceana, and Full Moon. Flanagan's and Full Moon were organized together as one S-Corporation and Cafe Oceana was set up as a separate S-Corporation. Psihos was apparently a good employer, assisting employees in need; he was also very generous to those in the community, helping with various charitable causes.

While hard-working and generous, Psihos was also operating illegally, at least when it came to his tax ob- ligations. Psihos kept two sets of books for Flanagan's, and for (at least) the four tax years of 2001-2004, he sub- stantially underreported his gross receipts. The govern- ment discovered the tax fraud when Psihos listed Flanagan's for sale through a real estate brokerage com- pany. A fact sheet prepared by the broker calculated Flanagan's average monthly gross receipts at $170,000 and average annual gross receipts at $2,040,000. This netted an average yearly operating profit of $554,840. Based on the discrepancy between Psihos's tax filings and this information, the IRS dispatched undercover agents to pose as potential buyers.

The undercover agents, posing as a husband and wife interested in purchasing Flanagan's, individually or together met with Psihos three times in April and May of 2005. During these meetings, Psihos explained how he kept track of the actual receipts at Flanagan's. He ex- plained that each night at closing, the managers would bring him envelopes with all of the money, receipts, register tapes, and payout information. He would then provide this material to Wendy, one of his managers, who would prepare a weekly summary report. Psihos showed these summary reports to the undercover agents, along with the envelopes from which these summaries were prepared. Psihos stated that he had these records showing what he was "actually getting" from the restau- rant going back to 2001.

On May 31, 2005, agents executed a search warrant at one of Psihos's restaurants and seized, among other items, the weekly summary sheets. Later they also seized from a storage shed the envelopes detailing Flanagan's nightly sales and cash payouts. IRS revenue agents re- viewed the weekly summary sheets and cross-referenced those figures with the nightly figures listed on the enve- lopes. Based on these records, the revenue agents calcu- lated the gross receipts actually collected at Flanagan's for the tax years 2001-2004. In calculating the gross re- ceipts, the IRS made adjustments based on any cash overages/shortages noted, as well as based on the amounts noted on the envelopes as improperly entered or listed as cash payouts. The government's calculation was as follows:

Year Net Receipts Gross Receipts Unreported Receipts

Per IRS Per Return Per IRS

2001 $2,021,304.37 $1,420,405.00 $600,899.37

2002 $2,003,204.59 $1,323,240.00 $679,964.59

2003 $2,007,044.71 $1,298,778.00 ...


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