Argued: March 20, 2019
from the United States District Court for the Western
District of North Carolina, at Charlotte. Max O. Cogburn,
Jr., District Judge. (3:15-cr-00225-MOC-DCK-1)
Joel Pollack, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER
& SAUBER, LLP, Washington, D.C., for Appellant.
Elizabeth Ray, OFFICE OF THE UNITED STATES ATTORNEY,
Asheville, North Carolina, for Appellee.
E. Murphy-Johnson, MILLER & CHEVALIER CHARTERED,
Washington, D.C., for Appellant.
Andrew Murray, United States Attorney, OFFICE OF THE UNITED
STATES ATTORNEY, Charlotte, North Carolina, for Appellee.
WILKINSON, HARRIS, and QUATTLEBAUM, Circuit Judges.
WILKINSON, CIRCUIT JUDGE.
Patrick Sutherland appeals from his convictions for filing
three false tax returns and obstructing a grand jury
proceeding. Sutherland principally contends that providing
fabricated loan documents to a U.S. Attorney's office was
too distant from an ongoing grand jury proceeding to meet the
nexus requirement set forth in United States v.
Aguilar, 515 U.S. 593 (1995), and Marinello v.
United States, 138 S.Ct. 1101 (2018). The district court
properly instructed the jury on the nexus requirement,
however, and the jury's determinations pursuant to that
instruction were based on the substantial evidence presented
at trial. For the reasons that follow, we affirm.
case involves the defendant's attempts to avoid paying
taxes, and his subsequent efforts to cover up those crimes.
Sutherland owned or operated several insurance businesses
that sold products out of the United States and Bermuda. He
routed his international transactions though Stewart
Technology Services (STS), a Bermuda company. Defendant
claims that his sister, Beverly Stewart, owned and controlled
STS, but Sutherland actually managed all its day-to-day
affairs. Despite allegedly owning a multi-million-dollar
business, Stewart worked at the Best Western hotel in Cody,
Wyoming for less than $10 an hour. At one point, she was
unable to pay a $600 fee without her hotel earnings.
2007 and 2011, STS sent Sutherland, his wife, or companies
that he owned more than $2.1 million in wire transfers. In
each of the tax years 2008, 2009, and 2010, STS and
Sutherland treated these wire transfers in inconsistent
manners that provided Sutherland tax advantages. See J.A.
1252-62 (Government exhibit 12A, which compiles information
from 127 wire transfers). To wit, Sutherland treated the vast
majority of the wire transfers from STS to his companies as
bona fide loans or capital contributions, which ordinarily
are not taxable income for their recipient. By contrast, STS
treated nearly all of the wire transfers as expenses that had
been paid to Sutherland. If the wire transfers were in fact
expenses paid to Sutherland, as STS recorded them, then
Sutherland and his companies should have reported the wire
transfers as taxable income. Far from reporting them as
income, however, Sutherland either treated the transfers from
STS to him and his wife as bona fide loans or failed to
account for them in his general ledger altogether. In the
end, Sutherland did not report the $2.1 million as income on
his tax returns.
treatment of the STS transfers mirrored his treatment of
other income. Indeed, the defendant seemed to think that
marking income as a capital contribution or loan was a
foolproof scheme. For example, three Sutherland companies-
Insigne Consulting, Insigne, Inc., and XYZ Entertainment-sent
almost $42, 000 to Kryotech Holdings, another Sutherland
company, between 2007 and 2009. The paying companies recorded
each transfer as a non-taxable marketing expense, while
Kryotech treated the payments as non-taxable capital
contributions. The net result: none of Sutherland's
companies would pay taxes on those funds. Similarly, Insigne,
Inc., received more than $125, 000 in taxable fees from
another firm, Global Financial Synergies, between 2006 and
2010-yet Sutherland described the majority of them as
nontaxable capital contributions. Come tax day, despite the
millions of dollars flowing through his accounts, Sutherland
reported just $88, 979 of income in 2008; $16, 669 in 2009;
and $72, 415 in 2010.
scheme was short lived. In April 2012, Sutherland was served
with grand jury subpoenas seeking financial records from his
companies, including Insigne Consulting, Insigne Financial
Services, Insigne, Inc., Kryotech Holdings, and XYZ
Entertainment. Just three months later, Sutherland's
attorney sent to the U.S. Attorney's office a letter that
purported to explain away a large number of transactions
relating to the subpoenaed materials. With respect to the
wire transfers from STS to Sutherland's companies, the
letter said that each transfer was a loan ...