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United States of America v. Dewayne Preacely

December 7, 2012

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
DEWAYNE PREACELY, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 CR 77--Suzanne B. Conlon, Judge.

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

ARGUED OCTOBER 22, 2012

Before BAUER and ROVNER, Circuit Judges, and RANDA, District Judge.*fn1

DeWayne Preacely pleaded guilty in 2009 to one count of tax fraud in violation of 26 U.S.C. § 7206(2). The district court sentenced him to 18 months' imprisonment to be followed by a three- year term of supervised release. After his release from prison, the district court revoked Preacely's supervised release when the court concluded that he had violated a special condition of his supervised release prohibiting him from participating in his former occupation of taX preparer. Preacely appeals from the district court's deci- sion to sentence him to a nine-month term of re-imprison- ment followed by an additional three months of super- vised release.

I.

The facts on appeal are simple and undisputed. By way of brief background, Preacely's underlying convic- tion stemmed from his involvement in procuring fraudu- lent tax refunds for clients of his business, Personal Tax. Preacely's clients received illegitimate refunds by in- cluding on their tax returns items such as nonexistent business losses and dependents. Thus, in addition to the standard conditions of supervised release, Preacely's 2009 conviction contained the following special condi- tion of supervised release: "Defendant is not to act di- rectly or indirectly as a tax preparer during the term of supervised release except for his own family." When the district court imposed the special condition of super- vised release, Preacely's counsel asked the following question by way of clarification: "Judge, may he own the business if he himself does not prepare any taxes himself?" The court responded, "No. No. I think he has compromised his integrity with a significant number of fraudulent tax returns, and you should not engage in the business of tax preparation directly or indirectly."

Preacely was released from prison and began his term of supervised release in October 2010. Shortly thereafter, he transferred ownership of Personal Tax, at least on paper, to his wife. In early 2012, Preacely received a new probation officer, Mary Pierpauli. Pierpauli met with Preacely in February 2012, at which time she asked him about his involvement with Personal Tax. Preacely told Pierpauli that he no longer worked for Personal Tax, and that he was self-employed as a book- keeper.

Meanwhile, the IRS had initiated another investigation of Personal Tax after discovering that in 2011, 99.5% of the 1,762 tax returns filed by Personal Tax claimed refunds--of which over half were claims of self-employ- ment income for alleged in-home childcare providers or beauticians. During its investigation, the IRS sent an undercover agent to Personal Tax; when the agent was there he inquired about a job and asked to speak to the vice-president. He was directed to Preacely, who told the undercover agent that if he had inquired earlier during the tax season Preacely would have hired him.

As part of its investigation the IRS also executed a search warrant at Personal Tax and interviewed a number of Personal Tax employees. The picture that emerged from these interviews painted Preacely as con- siderably involved in the business operations of Personal Tax. It came to light that Preacely hired employees, in- stalled computer software and trained employees to use it, signed employee paychecks, handled at least one complaint from a client, and had answered employees' questions while they prepared tax returns. Based on this information, the government moved for an arrest warrant and a rule to show cause why Preacely's super- vised release should not be revoked. A probation officer submitted a report charging Preacely with two Grade C violations of his supervised release: (1) lying to his proba- tion officer by denying that he worked for Personal Tax, and (2) acting indirectly as a tax preparer through his involvement with Personal Tax. The recommended range of re-imprisonment for a Grade C violation is between three and nine months.

In March 2012, the district court held a rule to show cause hearing. Preacely essentially conceded the facts outlined by the government, but argued that they failed to establish that he had acted "directly or indirectly as a tax preparer." Instead, he contended that he had been involved only administratively with the business by doing things such as dropping off food, office supplies, and signing paychecks (because his name had always been on the account). He maintained that such behavior was not prohibited by the specific terms of his super- vised release, and also argued that if the supervised release term were intended more broadly to bar his affiliation with Personal Tax entirely then it should have specified as much. He also argued that the special condition of supervised release, unless narrowly construed to bar only the direct or indirect preparation of tax returns, was ambiguous and violated his due process rights.

The district court was unimpressed with Preacely's arguments and found by a preponderance of the evidence that he had violated the terms and conditions of his supervised release. The court chastised Preacely for taking the position that he had not violated the terms of his supervised release, noting that the evidence established that he was "running a tax preparer's busi- ness." The court further noted that Preacely's narrow view of the term of supervised release coupled with his lie to the probation officer "violated the very essence of the punishment imposed in this case." The court thus sentenced Preacely to a nine-month term of re-imprison- ment. Preacely appeals.

II.

Our review of a sentence for violating a term of super- vised release is highly deferential. Indeed, we have noted that "it might be comparable to 'the narrowest judicial review of judgments we know,'" which is judicial review of prison disciplinary sanctions. United States v. Robertson, 648 F.3d 858, 859 (7th Cir. 2011) (quoting United States v. Kizeart, 505 F.3d 672, 675 (7th Cir. 2007)). The district court may revoke supervised release if a violation of a condition of supervised release is proven by a preponderance of the evidence. 18 U.S.C. § 3583 (e)(3). We review the revocation of supervised release only for an abuse of discretion, and we re- view the district court's factual findings supporting that revocation for clear error. United States v. Musso, 643 F.3d 566, 570 (7th Cir. 2011).

Preacely's primary argument on appeal is that the evidence adduced at his revocation hearing did not establish by a preponderance of the evidence that he acted directly or indirectly as a tax preparer. Unsur- prisingly, to support his argument Preacely takes the most narrow possible view of what he was forbidden from doing by the special term of supervised release. Specifically, he argues that he was simply performing "administrative duties" associated with running ...


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