                           In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

Nos. 06-2037, 06-2038 & 06-2175
UNITED STATES OF AMERICA,
                                            Plaintiff-Appellee,
                               v.

JAMES FIFE and KAREN KRAHN,
                                   Defendants-Appellants.
                        ____________
           Appeals from the United States District Court
     for the Northern District of Indiana, Hammond Division.
             No. 04 CR 60—James T. Moody, Judge.
                        ____________
ARGUED SEPTEMBER 25, 2006—DECIDED DECEMBER 12, 2006
                   ____________


 Before BAUER, KANNE and WOOD, Circuit Judges.
  KANNE, Circuit Judge. James Fife pled guilty to four
counts of willfully making and subscribing a false in-
come tax return in violation of 26 U.S.C. § 7206(1). Karen
Krahn, Fife’s wife, pled guilty to one count of willfully
aiding and assisting in the preparation and presentation
of a false income tax return in violation of 26 U.S.C.
§ 7206(2). In calculating Fife’s advisory Sentencing
Guidelines range, the district court imposed a two-point
increase in offense level for abuse of a position of trust
pursuant to U.S.S.G. § 3B1.3, and a two-point increase
for the use of sophisticated means pursuant to U.S.S.G.
§ 2T1.1(b)(2). For Krahn, the district court also imposed
2                        Nos. 06-2037, 06-2038 & 06-2175

the two-point increase for the use of sophisticated means
pursuant to U.S.S.G. § 2T1.1(b)(2). Fife and Krahn were
sentenced to forty-six and twenty-four months respec-
tively; they now appeal the imposition of their sentences.
Finding no error in the district court’s sentencing deter-
mination, we affirm.


                    I. BACKGROUND
  Fife, a lawyer, served as the special assistant to the
mayor of East Chicago, Indiana from the mid-1990’s until
2003. In this capacity, Fife was responsible for consult-
ing on matters pertaining to finance, budget, taxation,
personnel, and legislation, lobbying the Indiana General
Assembly, representing the city on matters involving
riverboat gambling, and acting as a liaison between the
city and other federal, state and local government agen-
cies. Fife had no immediate supervisor, and was afforded
broad discretion in performing his duties for the city. The
city provided Fife with a handsome salary, health benefits,
a city credit card, office supplies and equipment, secre-
tarial staff, telephone, transportation, and agreed to
indemnify and defend Fife in any action arising from or
in connection to his services for the city.
  In the late 1990’s, Fife created four Indiana corpora-
tions: Midwest Government Associates, Corporation for
Project Development and Consulting, Project Develop-
ment Enterprises, and Seracon Corporation. On paper,
Fife’s sister, Janice Miksich, served in varying capacities
for each of these corporations, including incorporator,
president and secretary, or director and registered agent.
In reality, Miksich had no involvement with these corpora-
tions outside of signing the incorporation documents.
Miksich’s home address was used as the registered office
for two of the corporations, and the other two were
simply registered to post office boxes. Fife’s corporations
Nos. 06-2037, 06-2038 & 06-2175                           3

did not have physical offices, nor did they maintain
accounting journals. The sole client of these four corpora-
tions was the city of East Chicago and its related entities.
None of Fife’s corporations filed tax returns with the IRS,
and Fife did not individually claim the more than $700,000
paid to the corporations. In short, the corporations were
merely shells, used to conceal the large fees Fife was
reaping from his dealings with the city.
  Krahn joined the scheme in 1997, incorporating KLK
Enterprises and listing herself as the owner. Krahn, who
had other full-time employment, was the only employee
of KLK and there is no evidence that the corporation
ever incurred any legitimate business expenses nor did
KLK file tax returns. Krahn and Fife contend that KLK
provided office supplies to Fife’s corporations, even though
the city provided office supplies to Fife. Meanwhile, Fife’s
corporations entered into contracts with the city for
services identical to those which Fife was personally
providing to the city. Thus, Fife was paid twice for these
services. Finally, a sixth corporation, the C Corporation
owned by Gregory Cvitkovich, became involved when
bribes were paid to Fife and KLK in exchange for a
sludge removal contract with the city. Fife and Krahn
both used the money that was funneled through their five
corporations for personal use.
  In late 2001, Fife hired the accounting firm of Weichman
& Associates to prepare his and Krahn’s 2000 and 2001
joint tax returns, and Fife’s 1998 and 1999 individual
returns which he had previously failed to file. Fife did not
disclose the existence of any of the corporations to the
accountants. The accountants were unaware of the corpo-
rations until 2003, when they received a federal grand jury
subpoena requesting books and records for Fife’s four
corporations, at which time the accountants began creat-
ing accounting journals for the entities. The journals
were composed based upon incomplete bank statements,
4                         Nos. 06-2037, 06-2038 & 06-2175

check registers, deposit slips, and canceled checks, with
the accountants relying on Fife’s explanations for the
expenses. The district court found that from 1998 to 2001,
Fife failed to report $892,509 in taxable income, resulting
in a tax loss of $384,840. Krahn was responsible for a tax
loss of $242,569 for her false joint returns with Fife, and
for diverting $164,000 of Fife’s income through her and
KLK’s bank accounts in 1998 and 1999.
  At sentencing, Fife conceded that his base offense level
was eighteen, based on a tax loss of between $200,000 and
$400,000 pursuant to U.S.S.G. § 2T1.1(a)(1) and the
U.S.S.G. § 2T4.1 Tax Table. An additional two points
were added for failing to report income in excess of $10,000
gained by criminal activity, which in this case was a
violation of Indiana’s conflict of interest laws. The district
court further found that Fife had abused a position of
trust as special assistant to the mayor of East Chicago by
using his broad discretionary power to funnel lucrative
contracts to his shell corporations, the fruits of which he
concealed from the IRS. This finding yielded a two-point
increase pursuant to U.S.S.G. § 3B1.3. Additionally, the
district court added two more points pursuant to U.S.S.G.
§ 2T1.1(b)(2), finding that Fife’s use of shell corporations
and concealment from his accountants warranted a
sophisticated means enhancement. With a three-point
reduction for acceptance of responsibility, Fife’s total
offense level was twenty-one. Combined with a criminal
history category of I, Fife’s advisory Sentencing Guidelines
range was thirty-seven to forty-six months. Given the
duration, complexity, and public nature of Fife’s acts, the
district court imposed a sentence at the top of the guide-
lines range: forty-six months.
  Krahn’s base offense level was likewise eighteen. She
received a two-point enhancement for the use of sophisti-
cated means pursuant to U.S.S.G. § 2T1.1(b)(2), and a
three-point reduction for acceptance of responsibility.
Nos. 06-2037, 06-2038 & 06-2175                           5

Krahn’s total offense level was thus seventeen; and, with
a criminal history category of I, her advisory guidelines
range was twenty-four to thirty months. Given the level
and nature of Krahn’s involvement in the crimes, the
district court imposed a sentence at the bottom of the
advisory guidelines range: twenty-four months.


                      II. ANALYSIS
  On appeal, Fife challenges his two-point increase for
abuse of a position of trust pursuant to U.S.S.G. § 3B1.3.
Both Fife and Krahn challenge their two-point increases
for the use of sophisticated means pursuant to U.S.S.G.
§ 2T1.1(b)(2). We review the district court’s interpreta-
tion and application of the Sentencing Guidelines de novo,
and its findings of fact for clear error. United States v.
Ellis, 440 F.3d 434, 436 (7th Cir. 2006) (citing United
States v. Bothun, 424 F.3d 582, 586 (7th Cir. 2005));
United States v. Baldwin, 414 F.3d 791, 798 (7th Cir. 2005)
(discussing sentencing review post-Booker).


 A. Abuse of Position of Trust
  A two-point increase in the Sentencing Guidelines
offense level is indicated where the defendant has “abused
a position of public or private trust . . . in a manner that
significantly facilitated the commission or concealment of
the offense.” U.S.S.G. § 3B1.3. “This court employs a two-
part test to determine whether the abuse of trust guide-
line is appropriate under a particular set of facts: (1)
whether the defendant occupied a position of trust, and (2)
whether the defendant’s abuse of that position of trust
significantly facilitated her commission [or concealment]
of the crime.” United States v. Cruz, 317 F.3d 763, 766 (7th
Cir. 2003). District courts need not be overly formal when
determining whether a given position is one of trust;
6                        Nos. 06-2037, 06-2038 & 06-2175

rather, they should look beyond labels, to the nature of
the position the defendant is in and the responsibilities
entrusted to him. United States v. Snook, 366 F.3d 439,
445 (7th Cir. 2004); United States v. Mabrook, 301 F.3d
503, 510 (7th Cir. 2002) (citing United States v. Davuluri,
239 F.3d 902, 908 (7th Cir. 2001)).
  Fife incorrectly argues that because his crime is tax
evasion, and the United States government is the direct
victim of his crime, the abuse of position of trust enhance-
ment is only proper if it was the United States that
placed him in a position of trust. This interpretation is
too narrow. The city of East Chicago and its people were
also victims of Fife’s fraudulent scheme. He used the
position they placed him in to funnel public funds to
himself and his shell corporations for personal use, mak-
ing those funds unavailable for other lawful purposes. See
United States v. Bhagavan, 116 F.3d 189, 193 (7th Cir.
1997) (“The fallacy in these arguments is the notion that
there can be only one victim of a tax evasion scheme—the
United States—and thus that the § 3B1.3 enhancement
can never apply in tax evasion cases.”) (citing United
States v. Stewart, 33 F.3d 764, 769 (7th Cir. 1994)).
  Fife did indeed occupy a position of trust given the
broad discretion he had in consulting for, and represent-
ing the city. He abused this position by causing the city
to pay his corporations for work which the city was al-
ready paying him. Finally, Fife’s abuse of his position as
special assistant to the mayor significantly aided him in
committing and concealing his tax evasion by diverting
funds to his shell corporations. The district court did not
err in its interpretation or application of the Sentencing
Guidelines, nor did it clearly err in its factual findings.
The two-point enhancement for the abuse of a position
of trust was proper.
Nos. 06-2037, 06-2038 & 06-2175                             7

  B. Sophisticated Means
  Under the Sentencing Guidelines, a two-point increase
in offense level is indicated for tax crimes “[i]f the offense
involved sophisticated means.” U.S.S.G. § 2T1.1(b)(2).
Sophisticated means are those which are more complex
than those involved in the run-of-the-mill tax evasion case.
United States v. Furkin, 119 F.3d 1276, 1284 (7th Cir.
1997). The Guidelines specifically include the use of
corporate shells in an exemplary list of sophisticated
means. U.S.S.G. § 2T1.1 cmt. n.4. See also United States
v. Newell, 239 F.3d 917, 921 (7th Cir. 2001). Fife and
Krahn contend that their scheme cannot possibly be
considered “sophisticated”. Corporations are necessarily
issued Federal ID Numbers which are assigned by the
IRS, thereby putting the IRS on notice that tax returns
should be expected from the entity. The argument goes
that if Fife and Krahn intended to conceal taxable income,
creating corporations with Federal ID numbers would
be the “dumbest” thing they could do. This argument
confuses “sophisticated” for “intelligent”. The sophisticated
means enhancement does not require a brilliant scheme,
just one that displays a greater level of planning or
concealment than the usual tax evasion case. United States
v. Kontny, 238 F.3d 815, 821 (7th Cir. 2001) (“In light of its
purpose and context, we think ‘sophistication’ must refer
not to the elegance, the ‘class,’ the ‘style’ of the de-
frauder—the degree to which he approximates Cary
Grant—but to the presence of efforts at concealment that
go beyond . . . the concealment inherent in tax fraud.”);
United States v. Minneman, 143 F.3d 274, 283 (7th Cir.
1998); United States v. Madoch, 108 F.3d 761, 766 (7th Cir.
1997).
  Fife and Krahn obtained payments from East Chicago
by exploiting Fife’s position with the city; they created
corporate shells through nominee ownership and funneled
payments through these shells to conceal such payment;
8                         Nos. 06-2037, 06-2038 & 06-2175

they failed to disclose the existence of the corporations to
their own accountants until the firm was served with a
subpoena for accounting journals, at which point they
submitted incomplete banking records to recreate corpo-
rate activities that it appears never existed. The district
court properly applied the Sentencing Guidelines and
found that Fife and Krahn used sophisticated means in
the commission and concealment of their offenses. We find
no clear error in that determination.


                    III. CONCLUSION
  For the foregoing reasons, the sentences imposed by
the district court on James Fife and Karen Krahn are
AFFIRMED.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit




                  USCA-02-C-0072—12-12-06
