Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. BA249220, Curtis B. Rappe, Judge. Affirmed in part, reversed in part and remanded.
Ralph H. Goldsen, under appointment by the Court of Appeal, for Defendant and Appellant.
Bill Lockyer and Edmund G. Brown, Jr., Attorneys General, Mary Jo Graves and Dane R. Gillette, Chief Assistant Attorneys General, Pamela C. Hamanaka, Assistant Attorney General, Susan S. Pithey and Thomas C. Hsieh, Deputy Attorneys General, for Plaintiff and Respondent.
MANELLA, J.
INTRODUCTION
Appellant was convicted of three counts of tax evasion and three counts of money laundering, and acquitted of insurance fraud. He contends the trial court incorrectly instructed the jury on the definitions of money laundering and tax evasion, and erroneously allowed the aggregation of money laundering transactions for purposes of sentence enhancement, resulting in punishment for legitimate transactions. Appellant contends there was insufficient evidence of criminal activity as a predicate to the money laundering charges, and insufficient evidence that he engaged in or authorized the transactions on which the money laundering and tax charges were based. Appellant also contends that the prosecutor engaged in misconduct during summation, and that restitution was not properly imposed or correctly calculated. Appellant’s final contention is that the sentence as to count 22 for money laundering must be vacated, because the sole aggravating factor cited by the trial court in imposing the upper term of imprisonment -- planning and sophistication -- was not found by a jury beyond a reasonable doubt.
We invited additional briefing regarding the effect of Cunningham v. California (2007) 549 U.S. 270 (Cunningham) on appellant’s sentence. We also invited additional briefing on the effect of People v. Sandoval (2007) 41 Cal.4th 825 (Sandoval) and People v. Black (2007) 41 Cal.4th 799 (Black II), if any. In light of those authorities, we conclude the imposition of the upper term based upon a court finding of planning and sophistication cannot stand.
We also conclude that remand is necessary to recalculate restitution. We conclude that although the tax evasion instruction was incomplete, any error was harmless beyond a reasonable doubt. We reject appellant’s remaining contentions, and remand to the trial court to resentence appellant on count 22 and to recalculate victim restitution.
PROCEDURAL BACKGROUND
Appellant was charged by amended information with conspiring with Solomon Morris Davis and Marilyn Kay Hill to commit insurance fraud (count 1). Appellant was also charged with 20 counts of insurance fraud (counts 2-21), in violation of Penal Code section 550, subdivision (a)(1), five counts of money laundering (counts 22, 34-37), in violation of Penal Code section 186.10, subdivision (a), three counts of felony failure to file tax returns (tax evasion) for tax years 1999, 2000, and 2001 (counts 26-28), in violation of Revenue and Taxation Code section 19706, and a single count of filing a false tax return (count 32). With regard to the insurance fraud counts, the information specially alleged the offenses were related felonies within the meaning of the sentence enhancing provision of Penal Code section 186.11, subdivision (a)(3). With regard to the money laundering counts, the information alleged that in committing the offenses, appellant conducted transactions exceeding a value of $2,500,000, within the meaning of the sentence enhancing provision of Penal Code section 186.10, subdivision (c)(1)(D).
All further statutory references are to the Revenue and Taxation Code, unless otherwise indicated.
After a joint jury trial with codefendants Davis and Hill, the jury was unable to reach a verdict on the conspiracy charge against appellant, and the trial court declared a mistrial as to count 1. The trial court granted appellant’s motion for acquittal pursuant to Penal Code section 1118.1, as to count 32, filing a false return for 1999, in violation of section 19705, subdivision (a). The motion was denied as to all other counts.
The jury acquitted appellant of counts 2 through 21, the insurance fraud charges, and found the related-felonies allegation not true. The jury also acquitted appellant of money laundering in 2002 and 2003 (counts 36 & 37). The jury convicted appellant of three counts of money laundering in 1999, 2000, and 2001 (counts 22, 34, 35), and three counts of tax evasion for tax years 1999, 2000, and 2001 (counts 26, 27, 28). The jury found true the special allegation that the value of the money laundering transactions exceeded $2,500,000.
Codefendant Davis was convicted on all but two of the charges against him, and the jury found the special allegations to be true. On May 13, 2005, he was sentenced to 12 years in prison. Although Davis timely filed a notice of appeal, his appeal was eventually dismissed due to his failure to file an opening brief, but later reinstated and severed from this appeal. His appeal is pending in this court in case No. B203571. The jury was unable to reach a verdict with regard to the charges against Hill.
Appellant brought a motion for new trial, based upon a claim of ineffective assistance of trial counsel. New counsel was appointed. After an evidentiary hearing at which trial counsel and appellant testified, the trial court denied the motion.
On July 8, 2005, appellant was sentenced to the upper term of three years as to count 22, and a consecutive middle term of eight months as to count 34, with the middle term of each other offense to run concurrently. In addition, the court imposed a four-year enhancement pursuant to Penal Code section 186.10, subdivision (c)(1)(D). Appellant timely filed a notice of appeal. On August 12, 2005, following a hearing, the trial court ordered appellant to make restitution to the Franchise Tax Board (Tax Board) in the sum of $34,780.30. This court granted appellant’s motion for relief from default, and allowed him to file a tardy notice of appeal from the restitution order.
After the appeal was fully briefed, appellant filed, in propria persona, a petition for writ of habeas corpus, now pending in this court as In re Robert Doran Belshaw, No. B202887. Without issuing an order to show cause, we requested a preliminary response from respondent, and allowed additional briefing by appellant. Concurrently with the filing of this opinion, we deny the petition in a separate order.
FACTS
1. Evidence of Fraudulent Insurance Claims
Appellant, a lawyer, and codefendants Solomon Davis and Marilyn Kay Hill were charged with running an insurance fraud scheme, partly from appellant’s office suite at 3699 Wilshire Boulevard, Suite 695, which he shared with Davis, and partly from Davis’s office at Total Medical Health Care (Total Medical), a medical clinic operated by Davis and Hill. Davis recruited car owners to act as injured drivers and others to act as injured passengers, and staged automobile accidents by cruising the freeway, identifying tailgaters, and causing them to collide with the coconspirators’ cars. After each collision, the car owner exchanged insurance information with the tailgating driver.
Davis ran Mighty Roar Entertainment, a music business, as well as his real estate company, Prestigious Management Services, Inc., from suite 695.
Davis initially directed the “injured” recruits to the office on Wilshire Boulevard and then to Total Medical. Eventually, Davis took the recruits only to Total Medical. There, they saw one of the doctors employed by the clinic, falsely complained of symptoms, and received a course of treatment for soft tissue injury, usually heat treatments. Insurance claims were then submitted, ostensibly from appellant, with final medical reports ostensibly signed by physicians employed by Total Medical. The physicians’ signatures on final medical reports were either forged or applied with a cut, paste, and copy method.
None of the participants in the staged collisions met with appellant, and none could connect appellant directly with the scheme. Some observed appellant at the law offices, but did not have dealings with him. No witness placed appellant at Total Medical, and the physicians employed there denied communicating with him or sending him reports.
At some point Davis stopped sending recruits to the suite he shared with appellant, but he continued to operate from there. Total Medical receptionist Bianca Lopez testified that Davis kept an office at the clinic and another at the law offices of Robert D. Belshaw. Insurance claims were sent to insurance carriers from appellant’s office, and the proceeds of the claims were issued to appellant. The prosecution presented evidence that the claims files of one defrauded insurance carrier, 21st Century Insurance Company, contained a letter ostensibly from appellant as attorney for some of the Davis claimants, as well as notes indicating that an adjuster had had discussions with the attorneys. Medical bills and reports were submitted with a letter from appellant’s office, settlement offers were mailed to appellant’s office, and there were telephone calls to and from the law offices, although the files did not reflect the name of the contact person. Ultimately, 21st Century settled the claims, and issued checks made payable jointly to each claimant and appellant.
Similarly, evidence showed that Mercury Insurance Group settled claims of several insureds linked to Davis’s operation. Settlement checks were made payable jointly to appellant (or the “Law Office of Robert Belshaw”) and the claimant.
At trial, one of Davis’s recruits, Sheryl Culbert, was shown one of the insurance company checks, as well as a check drawn on appellant’s trust account, made payable to her. Culbert testified that her endorsement was a forgery.
Other evidence of forgery came from witness Bryan J. Thomas, an attorney who sublet an office for several months in the suite shared by Davis and appellant. He worked mostly at home and used no secretarial services there. Thomas left when he became aware that someone had been using his name without permission, and had forged his signature on letters and other documents. At trial, Thomas was shown a legal file containing a letter stating that Thomas represented Total Medical’s chiropractor, Joanne Bagby-DiGiorgio. The letterhead purported to be Thomas’s, and the letter contained a signature purporting to be his. Thomas denied the file or signature was his, denied representing Bagby or knowing her, and denied doing legal work for Total Medical.
2. Evidence Relating to Money Laundering
The prosecution submitted evidence that client trust accounts in appellant’s name were used to launder funds relating to the insurance fraud scheme. Pursuant to a search warrant, the California Department of Insurance and the Tax Board seized files and documents from appellant’s office suite. The documents in evidence included ledgers, bank statements, and cancelled checks relating to the client trust accounts at Bank of America and Washington Mutual, as well as bank signature cards and a deposit slip purporting to bear appellant’s signature. The Washington Mutual bank statements had been mailed to appellant, addressed to the Law Offices of Robert D. Belshaw, 3699 Wilshire Boulevard, Suite 695.
Certain bank statements covering the years 2002 and 2003 were found in Davis’s office in suite 695. No statements or checks for the years 1999, 2000, or 2001 were found in Davis’s office.
More than $2,700,000 was deposited into the trust accounts in 1999, 2000, and 2001, most of it insurance proceeds. Prosecution evidence included spreadsheets summarizing the deposits between 1999 and 2001 of insurance company and other checks into the trust accounts held in appellant’s name, as well as checks written on the accounts and made payable to appellant, Total Medical, Mighty Roar Entertainment, Prestigious Management Services, and others.
3. Evidence Relating to Tax Evasion
Appellant did not file tax returns from 1996 through 2001, other than an amended 1999 return, on which there was no signature. Appellant filed the amended 1999 tax return in October 2003, when he filed his original 2000, 2001, and 2002 returns.
In calculating appellant’s taxable income, Tax Board Special Agent Paul Murphy first examined the monies deposited into appellant’s client trust accounts, including all deposits of insurance company checks in 1999, 2000, and 2001. He then examined the checks written on the trust accounts made payable to appellant. Those bearing an endorsement in appellant’s name totaled approximately $329,000. Checks endorsed by others or negotiated by Davis or one of his entities were not treated as income to appellant.
Murphy did not testify as to the amount of any tax due in any of the affected years, but claimed that a failure to file a tax return could be charged as a misdemeanor or a felony. A simple failure to file a return subjects the taxpayer only to a monetary penalty, and therefore may not be charged as a felony. (See § 19701, subd. (a); Pen. Code, § 17, subd. (a) [A crime punishable with imprisonment in state prison is a felony; all other crimes or public offense are misdemeanors or infractions].) However, appellant was convicted not under section 19701, but under section 19706, which may be either a felony or misdemeanor. Section 19706 is violated by any taxpayer who, “within the time required . . ., willfully fails to file any return or to supply any information with intent to evade any tax imposed . . . .”
Appellant did not testify or submit evidence of his taxable income, exemptions, or deductions for the relevant years.
DISCUSSION
1. Appellant’s Contentions
Appellant contends that the jury instructions defining tax evasion and money laundering were erroneous, and that the trial court erroneously instructed the jury as to the sentence enhancement for money laundering. Appellant challenges the sufficiency of the evidence of criminal activity as a predicate to the money laundering charges. He contends that substantial evidence did not establish that he controlled the trust accounts in his name, or that he received the proceeds of the checks written to him. Appellant also contends that the prosecutor engaged in misconduct during summation, and that restitution was not properly imposed or correctly calculated. Appellant’s final contention is that the sentence as to count 22 must be reversed, because the sole aggravating factor cited by the trial court in imposing the upper term of imprisonment -- planning and sophistication -- was not found by a jury beyond a reasonable doubt.
2. Money Laundering Instruction
Appellant contends that the trial court erred in instructing the jury in the words of Penal Code section 186.10, the money laundering statute, because its language appears to criminalize the use of funds derived from a lawful source -- “clean money.” (Pen. Code, § 186.10, subd. (a)(1).) Penal Code section 186.10, subdivision (a), defines money laundering as one or more monetary transactions of a specified value, made through one or more financial institutions within a specified period, “(1) with the specific intent to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on of any criminal activity, or (2) knowing that the monetary instrument represents the proceeds of, or is derived directly or indirectly from the proceeds of, criminal activity . . . .”
“‘Transaction’ includes the deposit, withdrawal, transfer, bailment, loan, pledge, payment, or exchange of currency, or a monetary instrument, as defined by subdivision (d), or the electronic, wire, magnetic, or manual transfer of funds between accounts by, through, or to, a financial institution . . . .” (Pen. Code, § 186.9, subd. (c).)
Appellant contends that because the statute’s first example of money laundering is at odds with the “generally-understood concept” of the expression, the Legislature could not have intended to criminalize the use of funds derived from a lawful source. Appellant makes this contention despite the language of the statute, which does not require money intended to promote or facilitate criminal activity to have been derived from an unlawful source. The statute is clear and unambiguous: “the requisite mens rea of a specific intent to promote or facilitate criminal activity [does] not require the money be derived from an illegal source.” (People v. Mays (2007) 148 Cal.App.4th 13, 30 (Mays); Pen. Code, § 186.10, subd. (a).) “‘If there is no ambiguity in the language of the statute, “then the Legislature is presumed to have meant what it said, and the plain meaning of the language governs.” [Citation.]’” (Mays, supra, at p. 29.) We agree with the court in Mays that Penal Code section 186.10, subdivision (a), is unambiguous: California law criminalizes financial transactions with funds that may have come from a lawful source -- clean money -- if used to facilitate, carry on, or promote criminal activity. (See Mays, at p. 30.)
Because the statute is clear, we need not resort to the legislative history materials offered for judicial notice by the parties. We must give effect to the plain meaning of the words of the statute before resorting to such extrinsic aids. (Burden v. Snowden (1992) 2 Cal.4th 556, 562.) “‘“The plain language of the statute establishes what was intended by the Legislature.”’ [Citation.]” (People v. Johnson (2006) 38 Cal.4th 717, 723-724.)
Appellant also contends that the money laundering verdicts must be reversed, because the jury acquitted him of insurance fraud, and the only other criminal activity urged by the prosecution to have been promoted or facilitated was tax evasion. Appellant contends that the evidence supported only misdemeanor convictions for failure to file a tax return, a mere omission which, appellant argues, cannot support a money laundering charge. However, the jury’s acquittal of appellant on the insurance fraud charges and its inability to reach a verdict on the conspiracy charge did not preclude it from finding that appellant was aware of Davis’s insurance fraud. Nor did the acquittal and inability to reach a verdict prevent the jury from concluding that appellant had engaged in or authorized monetary transactions into and out of client trust accounts in order to facilitate such criminal activity. (See Pen. Code, § 186.10, subd. (a)(1).)
The trial court did not instruct the jury that tax evasion would support a money laundering conviction, and the only criminal activity charged in the money laundering counts of the information was insurance fraud. It was the prosecutor who argued, without objection, that a conviction could be based upon either insurance fraud or tax evasion.
As the trial court observed at the new trial motion, “a jury might well find Mr. Belshaw was not part of [Davis’s] scheme but he was part of a scheme to cover that up . . . .”
Moreover, even if the verdicts were inconsistent, as appellant contends, reversal would not be required. “As a general rule, inherently inconsistent verdicts are allowed to stand. [Citations.] For example, ‘if an acquittal of one count is factually irreconcilable with a conviction on another, or if a not true finding of an enhancement allegation is inconsistent with a conviction of the substantive offense, effect is given to both.’ [Citation.] Although “‘error,” in the sense that the jury has not followed the court’s instructions, most certainly has occurred’ in such situations, ‘it is unclear whose ox has been gored.’ [Citation.] It is possible that the jury arrived at an inconsistent conclusion through ‘mistake, compromise, or lenity.’ [Citation.] Thus, if a defendant is given the benefit of an acquittal on the count on which he was acquitted, ‘it is neither irrational nor illogical’ to require him to accept the burden of conviction on the count on which the jury convicted. [Citation.]” (People v. Avila (2006) 38 Cal.4th 491, 600, quoting United States v. Powell (1984) 469 U.S. 57, 65, 69 & People v. Santamaria (1994) 8 Cal.4th 903, 911.)
Appellant contends this is not simply a question of inconsistent verdicts, but a verdict that could have been based on either a correct theory or an incorrect alternate theory, requiring reversal absent an indication in the record upon which theory the verdict was based. (See generally People v. Guiton (1993) 4 Cal.4th 1116, 1122.) Appellant’s contention presupposes the jury was improperly instructed in the words of Penal Code section 186.10, making it possible to convict on an incorrect theory. However, we have rejected that contention, holding that section 186.10 criminalizes financial transactions with funds, regardless of the source, intended to facilitate criminal activity. (See Mays, supra, 148 Cal.App.4th at p. 30.) We conclude that the jury was correctly instructed on money laundering, and that appellant’s acquittal of insurance fraud was, at most, an inconsistent verdict which does not undermine his conviction for money laundering. (See People v. Guiton, supra, 4 Cal.4th at p. 1122.)
3. Sufficiency of the Evidence of Money Laundering
Appellant contends the evidence was insufficient to support his money laundering convictions. Appellant does not dispute the evidence showing that proceeds of the insurance scheme were deposited into client trust accounts held in his name, or that checks were written on the accounts and made payable to himself, Total Medical, and others. Rather, he contends that as no exhibit authenticating his signature was introduced into evidence, the jury could not have found the trust accounts were established by him, authorized by him or under his control. In light of testimony from other individuals that their signatures were forged, appellant asserts it was “plausible” that appellant’s signature too was forged on “demand letters, settlement checks, bank deposits, withdrawals, and even account documents.”
At trial, appellant’s counsel did not suggest the client trust accounts were not appellant’s, but rather that he was unaware of the activity in the accounts. Acknowledging that appellant had multiple accounts, counsel argued in closing that while appellant “didn’t do the right thing with his attorney/client trust account[s]” and had been “careless and irresponsible in [the] manner in which he handled his business,” he “didn’t really know what was going on.”
It is undisputed that no authenticated evidence of appellant’s signature was introduced in evidence. Our inquiry does not end there, however. Extensive circumstantial evidence was introduced that trust accounts established in appellant’s name -- the statements and checks of which were regularly sent to his attention at his law office -- were used to launder millions of dollars in fraudulently obtained insurance proceeds. As the trial court reasoned in denying appellant’s motion for judgment of acquittal, the question was not whether appellant’s signature on any document was genuine, but whether the jury could reasonably infer from the volume of deposits and withdrawals to the trust accounts in his name that appellant was aware of the transactions and had authorized them.
We agree with the trial court’s reasoning. First, despite what the jury might “plausibly” have concluded, it was not compelled to find appellant had been the victim of forgeries on demand letters, settlement checks, bank deposits, withdrawals and signature cards establishing client trust accounts in his name. More important, even “forged” signatures on account documents would not have compelled a finding that appellant was unaware of -- or lacked control over -- the deposits and withdrawals into and out of such accounts.
To determine whether substantial evidence supports a finding that he authorized money laundering transactions, we must review not only the evidence cited by appellant, but the whole record “in the light most favorable to the judgment below to determine whether it discloses substantial evidence -- that is, evidence which is reasonable, credible, and of solid value -- such that a reasonable trier of fact could find the defendant guilty beyond a reasonable doubt.” (People v. Johnson (1980) 26 Cal.3d 557, 578.) We do not reweigh the evidence; instead, we “must draw all inferences in support of the verdict that can reasonably be deduced from the evidence.” (People v. Culver (1973) 10 Cal.3d 542, 548.) “‘The test . . . is not whether there is substantial conflict, but rather whether there is substantial evidence in favor of the respondent. If this “substantial” evidence is present, no matter how slight it may appear in comparison with the contradictory evidence, the judgment will be affirmed. . . .’” (In re Gustavo M. (1989) 214 Cal.App.3d 1485, 1497, italics omitted.)
The evidence established that an ongoing insurance fraud scheme of several years’ duration was conducted out of suite 695, the suite appellant and Davis shared and from which appellant conducted his law practice. The size and layout of the suite do not suggest that Davis could have kept appellant in ignorance for several years. Although Davis had a separate office in the suite, there was a common reception area staffed by a receptionist. The reception area led to work cubicles, which were doorless and separated by partitions no more than five or six feet high. The office had what appeared to be common break, storage, conference, and copy rooms. During the time the insurance scheme was ongoing, the defrauded insurance companies telephoned appellant’s office, and mailed settlement claims and checks to appellant. The trust accounts into which the insurance proceeds were deposited were held in appellant’s name, and checks by which the proceeds were withdrawn were personalized with appellant’s name and address. Millions of dollars in insurance proceeds flowed into and out of the client trust accounts in appellant’s name. More than $300,000 of checks on the accounts were made payable to appellant alone. Bank statements and checks on the accounts were mailed to appellant, addressed to the Law Offices of Robert D. Belshaw, 3699 Wilshire Boulevard, Suite 695.
From such evidence the jury could reasonably infer that appellant was aware of the mail and telephone correspondence coming in and going out of his law offices, as well as the financial transactions being carried on in his name. The jury could reasonably disbelieve appellant’s theory that he did not know that his name, address and signature were being used to promote criminal activities. The jury could reasonably infer that appellant had control over the trust accounts and either made the transactions personally or authorized Davis to do so. We conclude that substantial evidence supports the money laundering verdicts.
4. Tax Evasion
Appellant contends his convictions for failing to file tax returns with the intent to evade taxes, in violation of section 19706, must be reversed because the trial court failed to instruct the jury that a tax deficiency was an element of the offense. Appellant also suggests that because the jury was not instructed to find a tax deficiency, his conviction must be reduced to a misdemeanor.
The court instructed the jury, in relevant part, as follows:
“Any person . . . who within the time required by or under the provisions of the . . . tax laws willfully fails to file any tax return with intent to evade any tax imposed by . . . tax law is guilty of a violation of Revenue and Taxation Code section 19706, a crime.
“In order to prove this crime each of the following elements must be proved:
“One, a person was required to file a tax return with the Franchise Tax Board, two, that person failed to file the tax return within the time required by the Franchise Tax Board, three, this failure to file the tax return within the required time was done with the specific intent to evade a tax, and, four, that person acted voluntarily and in an intentional violation of a known legal duty.”
An individual must file a tax return if his or her gross income exceeds $10,000, if unmarried, or $20,000, if married. (§ 18501, subd. (a)(3).) Murphy examined the checks drawn upon the three trust accounts found in Davis’s office and determined that those payable to appellant exceeded the minimum reportable amounts in 2000, 2001, and 2002.
A violation of section 19706 may be punished either as a felony or a misdemeanor, and is committed when a taxpayer, “within the time required . . ., willfully fails to file any return or to supply any information with intent to evade any tax imposed . . . .” (§ 19706.) Another division of this court recently held that a tax deficiency is an element of a violation of section 19706, and that the jury must be so instructed. (People v. Mojica (2006) 139 Cal.App.4th 1197, 1205, 1208 (Mojica).) The court determined the California statute was substantially identical to the federal tax evasion statute (26 U.S.C., § 7201), and noted, “the federal statute has long been interpreted to require proof that the alleged tax evader actually owed some taxes. [Citations.]” (Mojica, at pp. 1202, 1204-1205, citing Lawn v. United States (1958) 355 U.S. 339, 361 & United States v. Dack (7th Cir. 1984) 747 F.2d 1172, 1174.) The federal statute, like the California statute, requires an intent to evade a “tax imposed by this title.” (26 U.S.C., § 7201; see § 19706.) That language requires establishing a tax deficiency. (Mojica, supra, 139 Cal.App.4th at pp. 1202-1203, citing U.S. v. Silkman (8th Cir. 1998) 156 F.3d 833, 835.)
The jury in this case was instructed with CALJIC No. 7.66, which was in effect at the time of trial. The 2007 revision now states that among the elements required to prove tax evasion under section 19706 is the element that the “person had a tax deficiency, that is, actually had some amount of tax that was due and owing.”
Respondent concedes that the instruction given to the jury did not include the element of a tax deficiency. “The trial court must instruct even without request on the general principles of law relevant to and governing the case. [Citation.] That obligation includes instructions on all of the elements of a charged offense. [Citation.]” (People v. Cummings (1993) 4 Cal.4th 1233, 1311.) Respondent also acknowledges that the failure to instruct on an element of the crime is reviewed under the constitutional standard of harmless error set forth in Chapman v. California (1967) 386 U.S. 18, 24 (Chapman). (See Neder v. United States (1999) 527 U.S. 1, 8-15 (Neder); People v. Sakarias (2000) 22 Cal.4th 596, 624-624.) Under the Chapman standard, it must appear “beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained.” (Chapman, at p. 24.) In the context of an omitted element, “where a reviewing court concludes beyond a reasonable doubt that the omitted element was uncontested and supported by overwhelming evidence, such that the jury verdict would have been the same absent the error, the erroneous instruction is properly found to be harmless.” (Neder, at p. 17; see also pp. 19-20 [Tax returns significantly understating income necessarily established materiality of false statements, making failure to instruct jury on element of materiality harmless].) Respondent contends the error was harmless beyond a reasonable doubt. We agree.
Respondent contends appellant conceded a tax deficiency because his attorney stated at the post-conviction restitution hearing, “I’m not going to sit here and say he owes nothing.” Assuming arguendo that a post-conviction admission could show a defendant did not contest an issue at trial, counsel’s statement was not an admission. Ambiguous or incidental statements of counsel do not constitute admissions which bind the defendant, unless they are part of a formal stipulation. (People v. Kiney (2007) 151 Cal.App.4th 807, 815; see People v. Jackson (2005) 129 Cal.App.4th 129, 161.)
Under federal law, evidence of unreported taxable income is sufficient to prove a tax deficiency. (United States v. Beall (7th Cir. 1992) 970 F.2d 343, 346.) The prosecution need not show any particular amount of tax owed; once it is established the defendant had unreported taxable income in some amount, the burden shifts to the defendant to show his deductions would eliminate any tax liability. (See Mojica, supra, 139 Cal.App.4th at pp. 1203, 1208; U.S. v. Silkman, supra, 156 F.3d at pp. 836-837; United States v. Beall, supra, 970 F.2d at p. 346; United States v. Bender (9th Cir. 1979) 606 F.2d 897, 898.)
“The most obvious method of proving a taxable source would be to present evidence of the precise origin of the income, for example, a cancelled check by which a certain employer paid a defendant for services rendered.” (United States v. Penosi (5th Cir. 1971) 452 F.2d 217, 219.) Here, the prosecution did just that. Murphy testified he examined appellant’s trust accounts, including all checks deposited into the accounts from 1999 through 2003, in order to verify the entries on spreadsheets prepared by the Department of Insurance. Murphy verified the name of the payor, the date of the deposit, and the amount of each deposit. The spreadsheets relating to deposits in 1999, 2000, and 2001 into the trust accounts held in appellant’s name, show deposits totaling more than $2,700,000, mostly in insurance proceeds.
Having determined that all the checks deposited into the trust accounts came from third-party payors, rather than existing funds relating to income in prior years, Murphy examined the checks written on the Bank of America and Washington Mutual trust accounts and made payable to appellant, in order to determine appellant’s income. He did not include checks made payable to others. The amount made payable to appellant in 1999 was $113,146.90; in 2000 the total was $117,253.55; in 2001, the total was $99,062.81. These figures, which did not exceed the funds deposited into the trust accounts in the corresponding year, established that in each relevant tax year, appellant had income from taxable sources, for a total unreported income of more than $329,000.
As it was shown that appellant received taxable income in the form of personal draws from a taxable source, the prosecution met its burden to prove a tax deficiency. (See U.S. v. Black (D.C. Cir. 1988) 843 F.2d 1456, 1459-1460 [Defendant’s payments from corporate account for personal expenses were deemed personal draws and thus, income to defendant].) To refute this showing, it would have been appellant’s burden to come forward with evidence of exemptions and deductions negating any tax. (See Mojica, supra, 139 Cal.App.4th at pp. 1203, 1208; U.S. v. Silkman, supra, 156 F.3d at pp. 836-837; United States v. Beall, supra, 970 F.2d at p. 346; United States v. Bender, supra, 606 F.2d at p. 898.) “Once the Government has established its case, the defendant remains quiet at his peril.” (Holland v. United States (1954) 348 U.S. 121, 138-139.)
Placing the burden on the defendant to prove his deductions and exemptions does not violate due process, as those items are within his own knowledge, so long as he did not provide that information to the taxing authority. (See Holland v. United States, supra, 348 U.S. at p. 138.) “[I]t is not incumbent on the prosecution to adduce positive evidence to support a negative averment the truth of which is fairly indicated by established circumstances and which if untrue could be readily disproved by the production of documents or other evidence probably within the defendant’s possession or control. [Citations.]” (Rossi v. United States (1933) 289 U.S. 89, 91-92.)
Appellant cites the appellate court’s conclusion in Mojica that the instructional error was not harmless even with strong evidence of taxable income, because “if [defendant] had known ahead of time about the tax deficiency requirement and its concomitant defense, he might well have put on a stronger case concerning proof of his claimed deductions and expenses.” (Mojica, supra, 139 Cal.App.4th at p. 1208.) Appellant contends that like the defendant in Mojica, he might have presented a stronger case, with proof of his claimed deductions and expenses, had the jury been instructed that it was required to find a tax deficiency.
We are not persuaded. Appellant’s defense was one of ignorance and noninvolvement. In closing argument, his counsel urged the jury to find that appellant had been taken advantage of by Davis, that he was unaware of the insurance scheme, that he was ignorant of monies flowing through his client trust accounts, and that he had received none of the proceeds. In light of appellant’s disavowal of any knowledge of or involvement in any aspect of the scheme, he had no reason to offer evidence of business deductions reducing his tax liability. Indeed, any such evidence would have been wholly inconsistent with his defense. We conclude the omission of an instruction that a tax deficiency must be found was harmless beyond a reasonable doubt, and reject appellant’s suggestion that his conviction be reduced to a misdemeanor failure to file tax returns.
5. Prosecutorial Misconduct
Appellant contends that the prosecutor committed prejudicial misconduct in summation by arguing that appellant should have known of the transactions in the client trust accounts, because the rules of professional conduct require attorneys to maintain an accounting of monies in such accounts. The prosecutor argued in relevant part as follows: “Mr. Belshaw is an attorney and as an attorney he has certain duties and responsibilities to his client. . . . [T]he reason that you use the word trust in a client trust account is because the money coming from the settlements into the client trust account [is in] there in trust. It’s not the attorney’s money. . . .” Appellant did not object until the prosecutor argued, “Now, one of his duties, obviously, in terms of the client trust account is to balance the books, to reconcile. Very strict about that because we don’t want the attorneys keeping the money.” At this point, appellant objected on the ground the argument misstated the evidence. Without ruling on appellant’s objection, the trial court instructed the jurors that, “your recollection of the evidence controls.” Appellant contends the court erred, because there had been no evidence adduced regarding the rules.
Appellant claims the prosecutor’s remarks might have misled or confused the jury on a “‘nerve-center issue,’” viz., whether appellant was aware of the trust accounts. He contends that by arguing that the rules of professional conduct require attorneys to be aware of trust account transactions, the prosecutor invited the inference that appellant was aware of the transactions in the accounts simply because he was an attorney. This, appellant argues, was an appeal to the passion and prejudice of the jury, suggesting appellant was guilty because he was a lawyer.
Appellant contends this was a close case, because the jurors deliberated almost 70 hours, and were unable to reach a verdict on some counts. We do not find it unusual that jurors in a month-long trial with three defendants and a 37-count information deliberated 70 hours.
Although rules relating to professional conduct were not in evidence, we do not construe the prosecutor’s remarks as arguing facts not in evidence, as appellant suggests; rather, the prosecutor made a statement of law. Attorneys do, in fact, have a legal duty to keep appropriate records of client trust account transactions. (Bus. & Prof. Code, § 6091.) The prosecutor accurately stated that those rules require attorneys to balance or reconcile client trust accounts. (See Rules Prof. Conduct, rule 4-100(B)(3) & Stds.) As the California State Bar Rules of Professional Conduct are binding on all members of the State Bar, we reject appellant’s suggestion that lawyers cannot be assumed to be aware of them. (Rules Prof. Conduct, rule 1-100.)
We take judicial notice of the rules of professional conduct for members of the State Bar. (See Evid. Code, § 451, subd. (c).)
Not every reference to matters outside the record is misconduct. (People v. Martinez (1987) 191 Cal.App.3d 1372, 1385.) For example, “counsel during a summation may state matters not in evidence, but which are common knowledge or are illustrations drawn from common experience, history or literature.” (People v. Sassounian (1986) 182 Cal.App.3d 361, 396.) It is misconduct for a prosecutor to misstate the law, although prejudice is easily avoided by a timely request for an instruction correcting the misstatement. (People v. Pike (1962) 58 Cal.2d 70, 98.) However, an accurate statement of law on which the jury has not been instructed is misconduct only where the prosecution invites the jury to draw an erroneous or improper inference from the law. (See People v. Pike, supra, 58 Cal.2d at pp. 97-98.) The suggestion that an attorney should know what transactions were entered in his client trust account is neither erroneous nor improper. The argument did not imply the law requires attorneys to be aware of fraudulent accounts opened without their knowledge by means of identity theft and forgery, or that an attorney would be guilty of money laundering or tax evasion whenever such accounts were opened, regardless of the attorney’s knowledge or participation.
We do not agree that the remarks implied appellant was guilty solely because he was an attorney. The prosecutor also argued facts which were in evidence, in order to show appellant was aware of the accounts, not solely because he was an attorney, but because he was the attorney from whose offices the scheme was carried out. Indeed, after appellant objected to the argument, the prosecutor stated: “Now -- so Mr. Belshaw has put up a defense that he was duped. Well, there is evidence to the contrary. It’s his law practice. It’s under his name. When you walk through that door, it’s the Law Offices of Robert Doran Belshaw. When you look at the stationery, it’s the Law Office of Robert Doran Belshaw. By all accounts he was on the premises full-time other than, of course, when he had to go to court and litigate or do some other matters, but he was there, unlike attorney Bryan Thomas who testified he was only there . . . six hours once a week. . . . So what does that mean? That means Mr. Belshaw would have you believe he was a vegetable. He didn’t know what was going on. . . .” Thus, the prosecutor did not imply that any attorney would have known what Davis was up to; rather, he implied that, under such circumstances, appellant must have known.
Moreover, when appellant objected on the ground that the rules of professional conduct were not in evidence, the trial court admonished the jurors without request, reminding them that their own recollection of the evidence controlled. Further, before closing arguments began, the trial court had instructed the jury as follows:
“[L]et me just make some comments about argument. As you may recall, when we were selecting the jury in this case, I indicated to you that the statements of the attorneys are not evidence. . . . And that includes the final arguments. But, as I told you before, that doesn’t mean that what the attorneys say does not have some importance. It just means that you have to be careful to box that off and put it in a category different from evidence. . . . I just want to caution you that[] a large part of your job is evaluating the evidence and deciding what inferences you draw from it. When the attorneys argue they may be drawing their own inferences. . . . And that may or may not be the inference you draw. . . .”
Thus, jurors were told to consider only the facts they knew were in evidence, and to draw their own inferences. “Jurors are presumed to understand and follow the court’s instructions. [Citation.]” (People v. Holt (1997) 15 Cal.4th 619, 662.) “The crucial assumption underlying our constitutional system of trial by jury is that jurors generally understand and faithfully follow instructions. [Citation.]” (People v. Mickey (1991) 54 Cal.3d 612, 689, fn. 17.)
Under the circumstances, there was no reasonable likelihood the jurors would have construed the remarks as implying appellant was guilty simply because he was a lawyer. Thus, were we to find that the remarks amounted to misconduct, we would find them to have been harmless. (See People v. Clair (1992) 2 Cal.4th 629, 662-663.)
6. Instruction re Aggregation of Transactions
Appellant contends the trial court erroneously instructed the jury with regard to the sentence-enhancing allegation of Penal Code section 186.10, subdivision (c)(1)(D), which requires the imposition of an additional term of imprisonment of four years when the value of the transactions exceeds $2,500,000. Between 1999 and 2001, insurance proceeds deposited into the trust accounts and checks coming out of the trust accounts and negotiated by Total Medical, Mighty Roar, and Prestigious Management amounted to more than $2,500,000. Appellant contends, however, that the instruction was error because it did not limit the aggregation of transactions to illegal transactions.
The trial court instructed the jury in the words of the information, as follows:
“Now, it’s further alleged that at the time of the commission of the crimes charged in counts 22 and 34 through 37 that Solomon Morris Davis and Robert Doran Belshaw committed the offense of money laundering with the specific intent to conduct transactions exceeding the value of $2,500,000.
“If you find defendants guilty of the crimes charged in counts 22 and 34 through 37 you must determine whether or not the truth of this allegation has been proved.”
Appellant claims there was evidence that the proceeds of legitimate claims had been deposited into the trust accounts along with the proceeds of fraudulent claims. Thus, appellant argues, this omission allowed the jury to aggregate legitimate funds with laundered funds.
As a preliminary matter, we reject the premise of the argument that all funds legitimately earned must always be excluded from the aggregate amount. Funds, however derived, deposited with the intent to facilitate an illicit business are not legitimate, just as funds withdrawn with the intent to pay for the expenses of an illicit business are not legitimate. (Mays, supra, 148 Cal.App.4th at p. 30.)
At appellant’s request, we have taken judicial notice of legislative history materials relating to the 1994 amendment to Penal Code section 186.10, which inserted the enhancement provisions. (See Stats. 1994, ch. 1187, § 2.) A committee analysis of Assembly Bill No. 3205 describes the amendment as imposing “enhancements for illegal money laundering when the amount of the illegal transaction is [$2,500.000].” (Assem. Com. on Pub. Safety, Analysis of Assem. Bill No.3205 (1993-1994 Reg. Sess.) April 19, 1994, p. 1.) We agree with appellant’s assessment that no contrary description of the subject transactions appears in the legislative history, and we accept for purposes of this discussion that the $2,500,000 must consist of “illegal transactions.” However, that description does not exclude, as appellant suggests, the transactions involving funds derived from a legitimate source, used to carry on, promote, or facilitate criminal activities. (See Mays, supra, 148 Cal.App.4th at p. 30.)
Respondent contends the instruction was a correct statement of the law as far as it went, and that appellant has forfeited this assignment of error by his failure to object or request clarifying instructions. “The general rule provides that in defining the elements of a crime it is enough for the court to instruct in the language of the statute when the defendant fails to request an amplification thereof. [Citation.] But that rule is always subject to the qualification that ‘An instruction in the language of a statute is proper only if the jury would have no difficulty in understanding the statute without guidance from the court.’ [Citation.]” (People v. Failla (1966) 64 Cal.2d 560, 565.)
Respondent contends there was no reasonable likelihood the jury would understand the instruction as permitting the inclusion of lawful transactions in calculating the $2,500,000. We agree. The jury was instructed that it must find appellant “committed the offense of money laundering with the specific intent to conduct transactions exceeding the value of $2,500,000.” It would have added nothing to instruct the jury it must find appellant harbored “the specific intent to conduct [money laundering] transactions exceeding the value of $2,500,000,” because the instruction, as written, told the jury that the intent to conduct transactions exceeding the value of $2,500,000 must have coincided with the commission of the offense of money laundering. The amended information read: “It is further alleged that in the commission of the above offenses of money laundering . . ., [appellant] did conduct transactions of a value exceeding $2,5000,000 within the meaning of Penal Code section 186.10[, subdivision] (c)(1)(D).” Thus, the special allegation of the amended information, which was before the jury as an exhibit, fairly informed the jury that the enhancement applied only to transactions which violated the law. No reasonable juror would understand the instruction as allowing a finding that appellant “committed the offense of money laundering with the specific intent to conduct [lawful] transactions exceeding the value of $2,500,000.” Such a construction would create a non sequitur. We conclude that a reasonable jury would have no difficulty in understanding the statute; thus, an objection was required to preserve the issue for appeal. (See People v. Failla, supra, 64 Cal.2d at p. 565.)
The enhancement “may be imposed with respect to an accusatory pleading charging multiple violations of this section, regardless of whether any single violation charged in that pleading involves a transaction or attempted transaction of a value [of $2,500,000], if the violations charged in that pleading arise from a common scheme or plan and the aggregate value of the alleged transactions or attempted transactions is of [such] value . . . .” (Pen. Code, § 186.10, subd. (c)(2)(B).)
We also observe the trial court instructed the jury how to aggregate transactions for purposes of Penal Code section 186.10, subdivision (b), which provides: “Notwithstanding any other law, for purposes of this section, each individual transaction conducted in excess of five thousand dollars ($5,000), each series of transactions conducted within a seven-day period that total in excess of five thousand dollars ($5,000), or each series of transactions conducted within a 30-day period that total in excess of twenty-five thousand dollars ($25,000), shall constitute a separate, punishable offense.” The court instructed: “[T]he jury must determine the aggregate value of the transactions that are violations of the money laundering statute . . . . Multiple violations of this offense may only be aggregated together if the violations arise from a common scheme or plan. . . .” It is unlikely the jury understood the method of aggregating transactions under Penal Code section 186.10, subdivision (c)(1)(D), to be any different from the method described in subdivision (b).
Appellant concedes his failure to object or request additional instructions, but invokes Penal Code section 1259, which permits an appellate court to “review any instruction given, refused or modified, even though no objection was made thereto in the lower court, if the substantial rights of the defendant were affected thereby.” This rule permits review without an objection in the trial court, when an instruction is an erroneous statement of law (People v. Duran (2001) 94 Cal.App.4th 923, 942-943), or the instruction has the effect of omitting an element of the crime. (People v. Guerra (2006) 37 Cal.4th 1067, 1138.)
Where no such error is shown, as here, an appellate court may review the issue in its discretion, if appellant establishes he would have been entitled to a reversal had he preserved the issue. (People v. Abbaszadeh (2003) 106 Cal.App.4th 642, 649-650.) In order to show instructional error affected his substantial rights within the meaning of Penal Code section 1259, appellant must demonstrate that the error resulted in a miscarriage of justice under the Watson standard. (People v. Anderson (2007) 152 Cal.App.4th 919, 927.) Under that standard, a miscarriage of justice occurs when it appears a result more favorable to the appealing party would have been obtained in the absence of the alleged error. (Watson, at p. 836; see Cal. Const., art. VI, § 13.)
People v. Watson (1956) 46 Cal.2d 818.
Appellant suggests the evidence did not support a finding that the money laundering transactions exceeded $2,500,000, because there was evidence that the proceeds of legitimate insurance claims were deposited into the trust accounts along with the proceeds of fraudulent claims, and because compelling, uncontradicted evidence showed Davis had control of the accounts and all the transactions. Appellant does not cite uncontradicted and compelling evidence of Davis’s sole control, and he has made no effort to summarize or cite testimony or the many insurance and medical files in evidence to show what amounts were shown to have been derived from legitimate insurance claims.
In short, appellant would have us find the record does not support a finding of more than $2,500,000 in laundered funds, based solely upon his conclusion that it does not. Appellant’s failure to develop a prejudice argument supported by the record justifies a refusal to give any further consideration to appellant’s challenge to the enhancement instruction. (See People v. Abbaszadeh, supra, 106 Cal.App.4th at pp. 649-650; cf. Mays, supra, 148 Cal.App.4th at pp. 33-34 [defendant claiming no substantial evidence of proper allocation of commingled funds as legitimate or illegitimate bears burden to so demonstrate by references to the appellate record].)
As the record consists of 21 volumes of reporter’s transcripts and six boxes of exhibits, appellant’s expectation is manifestly inadequate to overcome the presumption that the record supports the jury’s finding. (See People v. Dougherty (1982) 138 Cal.App.3d 278, 282-283.)
Moreover, we discern no prejudice under the Watson standard. We have already concluded the jury could reasonably infer that appellant signed or authorized, with the intent to facilitate, promote, or carry on Davis’s fraudulent scheme, the checks made payable to or negotiated by Davis, Total Medical, or Prestigious Management, and that he authorized the use of his trust accounts. Between 1999 and 2001, deposits of insurance proceeds into appellant’s trust accounts and checks coming out of the trust accounts and negotiated by Total Medical and Prestigious Management amounted to more than $2,500,000. Given defense counsel’s argument that all appellant’s legitimate trust transactions were made in a separate account that was not in evidence, and that the accounts in evidence were used by Davis, the jury could reasonably conclude that all the transactions in the trust accounts in evidence were related to the insurance fraud scheme. Thus, it is unlikely that a differently worded instruction would have brought about a more favorable result. (See People v. Watson, supra, 46 Cal.2d at p. 836.)
As the trial court commented at the restitution hearing: “[T]he evidence at trial basically showed that this whole operation was a scam. That’s not to say that there weren’t any particular cases but far and above most of what was going in and out of their office was a result of . . . phony claims. . . . [I]t may well be that what the jury found is that this was a completely fraudulent operation . . . .”
7. Restitution
Appellant challenges the manner in which restitution was determined and the amount imposed, arguing that the tax due should not have been determined without reference to deductions for lawful business expenses. He contends that the Tax Board witness incorrectly applied section 17282 in order to disregard the need to consider deductions or exemptions, based upon her erroneous assumption that appellant was guilty of insurance fraud, despite his acquittal of that offense.
Citing Blakely v. Washington (2004) 542 U.S. 296, appellant contends that all restitution is punishment which may not be imposed absent a jury determination of the proper amount. We reject appellant’s contention insofar as it encompasses a victim restitution order. Victim restitution is not a form of punishment. (People v. Harvest (2000) 84 Cal.App.4th 641, 647.) Where authorized, a restitution order is reviewed for abuse of discretion. (People v. Mearns (2002) 97 Cal.App.4th 493, 498.) So long as “there is a factual and rational basis for the amount of restitution ordered by the trial court, no abuse of discretion will be found by the reviewing court.” (People v. Dalvito (1997) 56 Cal.App.4th 557, 562.)
Victim restitution is not to be confused with restitution fines, which are a form of punishment. (People v. Hanson (2000) 23 Cal.4th 355, 361-362; see Pen. Code, § 1202.4.)
At the post-conviction restitution hearing, Tax Board Special Agent Nubia Parada testified she had calculated the tax due and the penalty assessment for tax years 1999, 2000, and 2001. She calculated taxes of $5,230.11 for 1999, $14,911.63 for 2000, and $12,431.66 for 2001. She started with $256,000, a portion of the income calculated by Agent Murphy, determined from the checks payable to appellant which were not shown to have been negotiated by others. With regard to each year’s income, she gave appellant the standard deduction of $5,422 and extension credit, deducted payments made, and added a penalty of 75 percent. In addition, she testified the investigation took 26 hours of Murphy’s time, but she did not calculate her own time. The total assessment was $33,678.35. The trial court allowed $1,104.95 for investigation, and entered a restitution order of $34,780.30.
Taking a conservative approach, Nubia did not include the $72,908 in checks made payable to appellant from the Washington Mutual account.
Thus, Parada calculated the tax deficiency based upon the evidence of appellant’s unreported income. An express jury finding was unnecessary, as payment of a tax debt is civil remedy to be determined by the court. (See People v. Harvest, supra, 84 Cal.App.4th at p. 647.) Further, “‘the court is not limited to the transaction or amounts of which the defendant is actually convicted.’ [Citation.] Our Supreme Court also held that ‘[t]here is no requirement the restitution order be limited to the exact amount of the loss in which the defendant is actually found culpable, nor is there any requirement the order reflect the amount of damages that might be recoverable in a civil action.’ [Citations.]” (People v. Balestra (1999) 76 Cal.App.4th 57, 64.)
Appellant contends Parada should have deducted the business expenses shown on appellant’s tardily filed tax returns for the years in question, and that she erroneously relied on her opinion that section 17282 required her to omit any consideration of his business expenses. Parada’s opinion regarding the applicability of section 17282 to the restitution hearing was and is irrelevant to the issues here. As the trial court observed, it was appellant’s burden to demonstrate an entitlement to any deductions, and he failed to do so.
Section 17282, subdivision (a), provides: “In computing taxable income, no deductions . . . shall be allowed to any taxpayer on any of his or her gross income directly derived from illegal activities as defined [in enumerated statutes]; nor shall any deductions be allowed to any taxpayer on any of his or her gross income derived from any other activities which directly tend to promote or to further, or are directly connected or associated with, those illegal activities.” (Italics added.) The enumerated statutes do not include insurance fraud, money laundering, or tax evasion.
So long as a defendant has been given advance notice of the items, amounts and sources of the claimed restitution, the burden shifts to the defendant to refute them. (In re S. S. (1995) 37 Cal.App.4th 543, 546.) “‘It is fundamental . . . that the extent of allowable deductions is dependent exclusively upon legislative grace[,] and . . . a taxpayer claiming a deduction bears the burden of proving the facts on the basis of which such deduction is allowable under the applicable statutory provision. [Citations.]’ [Citation.]” (Krumpotich v. Franchise Tax Bd. (1994) 26 Cal.App.4th 1667, 1671.) Appellant was not prevented by section 17282 from showing he owed no tax or less tax, but he did not attempt to do so. Further, the trial court did not exclude evidence of appellant’s business deductions, because he proffered none.
With regard to the portion of the restitution order that was proper victim restitution, we conclude that there was a factual and rational basis for the amount ordered by the trial court; accordingly, we find no abuse of discretion. (See People v. Dalvito, supra, 56 Cal.App.4th at p. 562.)
However, as to the penalty portion of the order, we agree with appellant’s contention that the restitution award was improper punishment. A sentencing court is not authorized to include penalties assessed by the Tax Board in the victim restitution order. (People v. Boudames (2006) 146 Cal.App.4th 45, 50-51.) The unauthorized penalty portion of the order must be vacated and recalculated by deducting the 75 percent penalty imposed on the tax deficiency. (See id. at pp. 53-54.)
People v. Boudames was decided after the trial court issued its restitution order, and this argument was not raised at the hearing. However, no objection was necessary to preserve a challenge to the unauthorized portion of the order. (See People v. Young (1995) 38 Cal.App.4th 560, 564, fn. 5.)
8. Cunningham Error
The trial court sentenced appellant to the upper term of imprisonment (three years) as to the 1999 money laundering transaction charged in count 22 of the information, a consecutive middle term (eight months) as to count 34, the second money laundering count, enhanced by four years pursuant to Penal Code section 186.10, subdivision (c)(1)(D), and to concurrent terms as to the remaining counts. Appellant contends his sentence violates his federal constitutional right to due process and a jury trial, because in choosing to impose the upper term, the court relied on a factor not found by a jury, viz., that the manner in which the crime was carried out showed planning and sophistication. (See Blakely v. Washington, supra, 542 U.S. at p. 303; Apprendi v. New Jersey (2000) 530 U.S. 466, 490 (Apprendi).)
“[T]he Federal Constitution’s jury-trial guarantee proscribes a sentencing scheme that allows a judge to impose a sentence above the statutory maximum based on a fact, other than a prior conviction, not found by a jury or admitted by the defendant. [Citations.]” (Cunningham, supra, 549 U.S. at pp. 274-275.) At the time of appellant’s conviction, California’s determinate sentencing law (DSL) provided for a lower, middle, and upper term, and required the sentencing court to order imposition of the middle term, unless there were circumstances in aggravation or mitigation of the crime. (Pen. Code, § 1170, subd. (b).) In Cunningham, the United States Supreme Court held that because the upper term could be imposed only when the trial judge found an aggravating circumstance, the statutory maximum under the DSL was the middle term. (Cunningham, supra, 549 U.S. at p. 288.) Thus, as the DSL permitted a trial court to impose the upper term based on facts found by the court, rather than by a jury beyond a reasonable doubt, it violated a defendant’s Sixth and Fourteenth Amendment right to a jury trial. (Id. at pp. 293-294.)
The Legislature has since amended the statute in response to Cunningham to give the sentencing court discretion to choose any one of the three terms. (See Stats. 2007, ch. 3, § 2, eff. March 30, 2007.) All further references in this opinion to the DSL or to section 1170 are to the former Penal Code section 1170, in effect at the time of appellant’s conviction, unless otherwise indicated.
Respondent contends the facts amounting to planning and sophistication are necessarily reflected in the jury’s verdict, because the jury found the money laundering counts involved numerous transactions and vast amounts of money -- more than $2,500,000. Thus, respondent argues, the aggravating factor was impliedly found by the jury, and there was no Cunningham error. We disagree. The jury was not instructed to find planning or sophistication, and those factors were not directly at issue at trial. Thus, the jury did not find beyond a reasonable doubt that count 22 was committed with planning and sophistication, and the trial court’s use of this factor to impose the upper term was Cunningham error. (See Sandoval, supra, 41 Cal.4th at pp. 837-838.)
Respondent contends any error was harmless. Cunningham error is reviewed for harmless error under the standard applied to federal constitutional error in Chapman v. California (1967) 386 U.S. 18, which requires the reviewing court “to determine whether it appears ‘beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained.’ [Citation.]” (Sandoval, supra, 41 Cal.4th at p. 838.) The United States Supreme Court has suggested that in applying the Chapman test to sentencing factors not found by the jury, courts should be guided by the analysis in Neder, supra,527 U.S. 1. (See Washington v. Recuenco (2006) 548 U.S. 212, 219-221.) Neder held, in relation to an instruction which omitted an element of the charged crime, that the error may be found harmless where the evidence of the omitted element was overwhelming and uncontested, such that the reviewing court can conclude that the jury’s verdict would have been the same absent the error. (Neder, supra, at pp. 16-17.)
As recently stated by the California Supreme Court: “[I]f a reviewing court concludes, beyond a reasonable doubt, that the jury, applying the beyond-a-reasonable-doubt standard, unquestionably would have found true at least a single aggravating circumstance had it been submitted to the jury, the Sixth Amendment error properly may be found harmless.” (Sandoval, supra, 41 Cal.4th at p. 839.) However, the court cautioned reviewing courts to take into account the differences between a failure to instruct the jury on an element of the crime, where the parties were aware during trial that the element was at issue, and Cunningham error, where the issue may not have been raised until the final probation report or the prosecutor’s sentencing memorandum. (Sandoval, at pp. 839-840.) Because the facts underlying aggravating circumstances are not elements of the crime, they are not part of the charge or directly at issue in the trial, giving the defendant less reason or opportunity during trial to challenge the evidence supporting them. (Ibid.)
The jury’s verdicts leave open the degree of appellant’s involvement with Davis and the insurance scheme. While the scheme most certainly involved planning and sophistication, appellant’s involvement was necessarily found by the jury to be more attenuated than Davis’s. Whether, if asked, the jury would have concluded that appellant’s decision to allow his client trust accounts to be used to launder the proceeds of Davis’s scheme involved planning and sophistication, we cannot say. Nor can we conclude that appellant’s failure to file tax returns with the intent to evade taxes necessarily required planning and sophistication.
Further, the prosecutor’s sentencing memorandum did not cite planning or sophistication, and focused primarily on the evidence that had been presented against Davis. The probation report cited planning and sophistication, but it did not specify the facts amounting to planning or sophistication, and it recommended the middle term. Finally, the trial court did not articulate the facts upon which it based the finding that appellant’s crime had been carried out with planning and sophistication.
Accordingly, we must remand for resentencing on count 22 “in a manner consistent with the amendments to the DSL adopted by the Legislature,” and guided by the sentencing rules amended to conform to the current version of the DSL. (Sandoval, supra, 41 Cal.4th at p. 846; see Pen. Code, § 1170, subd. (c), as amended by Stats. 2007, ch. 3, § 2; Pen. Code, § 1170.3, as amended by Stats. 2007, ch. 3, § 4.)
In Sandoval, the court pointed out that the new scheme may afford the trial court somewhat greater discretion than the former to select the upper or lower term. (Sandoval, supra, 41 Cal.4th at p. 855.)
DISPOSITION
The restitution order and the sentence on count 22 are reversed, and the matter is remanded to the superior court for resentencing on count 22 and reduction of the amount ordered as restitution, by deleting the 75 percent penalty and reinstating the remainder. In all other respects, the judgment is affirmed.
We concur: WILLHITE, Acting P. J. SUZUKAWA, J.