                                                                           F I L E D
                                                                    United States Court of Appeals
                                                                            Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                            APR 6 2000
                                   TENTH CIRCUIT
                                                                       PATRICK FISHER
                                                                                 Clerk

 UNITED STATES OF AMERICA,

          Plaintiff-Appellee,
 v.                                                       No. 98-8102
                                                   (D.C. No. 97-CR-0038-B)
 LOWELL LEE WORMAN,                                  (District of Wyoming)

          Defendant-Appellant.




                                ORDER AND JUDGMENT *


Before ANDERSON and EBEL, Circuit Judges and CROW, ** District Judge.


      Appellant Lowell Lee Worman (“Worman”) was convicted of four counts

of willfully filing a false federal income tax return in violation of I.R.C. §

7206(1). On appeal, Worman argues that the funds not reported on his federal

income tax returns from 1991 to 1994 were valid partnership distributions on

which he did not owe taxes. He also argues that there was an impermissible


      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

      **
        The Honorable Sam A. Crow, District Judge, United States District Court
for the District of Kansas, sitting by designation.
variance, prejudicial to his defense, between the indictment and the evidence

presented at trial. Finally, he argues that the district court improperly computed

the tax loss for purposes of his sentencing. We affirm the district court’s

conviction and sentence.



                                 BACKGROUND

      The charges against Worman stem from Worman’s position as general

manager of Farmers’ Cooperative Association of Gillette (“Coop”) from 1991 to

1994, and from Worman’s involvement with Whelchel Trucking, a trucking

company formed in 1982 by Ernie Whelchel, Worman’s brother-in-law at the

time. The Coop is a non-profit business operation through which ranchers and

farmers from northeastern Wyoming cooperate in marketing their crops, storing

their crops, and buying supplies. Worman’s duties at the Coop included running

the business, keeping the books, paying suppliers of goods and services, and

reporting to the Coop’s board of directors.

      From 1982 to 1994, Whelchel Trucking hauled products for the Coop as the

Coop’s exclusive hauler. As general manager of the Coop, Worman was

responsible for paying Whelchel Trucking for the services Whelchel provided to

the Coop. Evidence at trial indicated that over a period of several years Worman

used Coop checks that should have been used to pay off Coop’s debts to Whelchel


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Trucking to provide payments to himself and to his credit card company. One

practice Worman used was writing Coop checking account checks to MBNA, the

issuer of his personal credit card and line of credit, but listing a different payee

on the check stub. At trial, this practice was called “stubbing.” Worman would

list the payments in the Coop’s books as business expenses and then subtract the

payments from the amounts the Coop owed Whelchel Trucking. 1 Worman did not

report these payments on his federal income tax returns from 1991 to 1994.

      From 1983 to 1988, Ernie Whelchel filed U.S. Partnership Returns of

Income for Whelchel Trucking. These returns, signed under penalty of perjury by

Ernie Whelchel, indicated that Ernie Whelchel and Lee Worman each had a fifty

percent interest in Whelchel Trucking. At trial, the government and Ernie

Whelchel claimed that Worman was in fact never a partner at Whelchel Trucking,

and that the only reason Worman was listed as a partner on the returns was

because Worman had asked Ernie Whelchel in 1982 if he could use some of the

tax deductions that Whelchel Trucking was unable to use. Ernie Whelchel stated

at trial that he agreed to let Worman claim the deductions and then falsely listed

Worman as a partner because of their friendship. Worman, on the other hand,

maintained that he was a true partner in Whelchel Trucking.



      Worman’s practice of deducting the payments from the amounts the Coop
      1

owed to Whelchel Trucking indicates that he was essentially taking money from
Whelchel Trucking, not from the Coop.

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      In 1989, Ernie Whelchel changed his practice and did not file a partnership

tax return for Whelchel Trucking; instead, he instructed H&R Block, who

prepared his tax return, to treat the company as a sole proprietorship and to report

Whelchel Trucking income on his own return. Ernie Whelchel stated that he

made this change because he had discovered that sharing deductions probably was

not legal. In 1990 and 1991, Whelchel Trucking income was reported on Ernie

and Dorothy Whelchel’s joint individual income tax return. When Dorothy

Whelchel (Worman’s sister) and Ernie Whelchel divorced in 1992, however, a

partnership tax return was again filed for Whelchel Trucking. This return

indicated that Ernie Whelchel was a thirty-three percent partner and Dorothy

Whelchel was a sixty-seven percent partner. In 1993 and 1994, all income from

Whelchel Trucking was reported on Dorothy Whelchel’s individual income tax

return. Worman reported no income from Whelchel Trucking from 1989 to 1994.

      At trial, Worman did not challenge the allegations that he made payments

to himself from Coop funds that should have been paid to Whelchel; rather, he

argued that he was a partner in Whelchel Trucking, and that therefore he was

entitled to those payments as distributions from the partnership. According to

Worman, no taxes were due on those payments because they did not exceed his

basis in the partnership.




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      The jury found Worman guilty of four counts of filing a false individual

income tax return in violation of I.R.C. § 7206(1). He was sentenced to twenty-

four months imprisonment for each count, to run concurrently, followed by one

year of supervised release. He also was ordered to pay a special assessment of

$400. In denying Worman’s motion for judgment of acquittal notwithstanding the

verdict, the district court found the following: (1) the evidence was sufficient for

a rational trier of fact to find that Worman was never a partner in Whelchel

Trucking, and that therefore the amounts he received from 1991 to 1994 were

taxable; (2) even if Worman was a partner at one time, there was sufficient

evidence for a rational trier of fact to find that the partnership terminated prior to

the tax years for which Worman was prosecuted, and that therefore the amounts

he received from 1991 to 1994 were taxable; (3) the indictment against Worman

was not too vague and there was no variance between the charges in the

indictment and the evidence produced at trial such that Worman would have been

unfairly surprised by the government’s theory at trial; and (4) Worman was not

unfairly prejudiced by the court’s comments about embezzled income. See United

States v. Worman, No. 98-CR-038-B (D.Wyo. Nov. 3, 1998).

      On appeal, Worman maintains that there was insufficient evidence for the

jury to find that he was never a partner in Whelchel Trucking or, alternatively, if

such a partnership had ever existed, it terminated prior to the tax years for which


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he was prosecuted. He also maintains that there was an impermissible variance,

prejudicial to his defense, between the indictment and the evidence presented at

trial. Worman further argues that the district court incorrectly computed, for

sentencing purposes, the tax loss that resulted from his conduct.

      We have jurisdiction pursuant to 28 U.S.C. § 1291 and 18 U.S.C. § 3742

and we now affirm Worman’s conviction and sentence.



                                   DISCUSSION

I. Partnership Claim

      “[I]n reviewing the sufficiency of the evidence to support a jury verdict,

this court must review the record de novo and ask only whether, taking the

evidence--both direct and circumstantial, together with reasonable inferences to

be drawn therefrom--in the light most favorable to the government, a reasonable

jury could find the defendant guilty beyond a reasonable doubt.” United States v.

Voss, 82 F.3d 1521, 1524-25 (10th Cir. 1996) (internal quotations omitted).

      Worman maintains that the evidence clearly showed that he was a partner in

Whelchel Trucking and that the partnership did not terminate prior to the years

for which he was prosecuted. In fact, he argues, as he must, that there was

insufficient evidence for a reasonable jury to find otherwise. Worman then argues

that if he was a partner in an existing partnership with Whelchel Trucking from


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1991 to 1994, the funds he provided to himself should be viewed as valid

partnership distributions, which, if they did not exceed his basis in the

partnership, would not be taxable. See I.R.C. § 731(a)(1). An analysis of

Worman’s argument devolves into two questions for purposes of this appeal: (1)

Was there sufficient evidence for a reasonable jury to find that Worman was

never a partner in Whelchel Trucking?; and (2) If not, was there sufficient

evidence for a reasonable jury to find that Worman’s partnership interest in

Whelchel Trucking terminated prior to 1991?

      The record contains sufficient evidence from which a jury could reasonably

conclude that Worman was never a partner in Whelchel Trucking, and therefore

that the funds he paid to himself constituted income that should have been

reported. Ernie Whelchel testified at trial that Worman was never a partner in

Whelchel Trucking. He provided an explanation for the contradiction between

that testimony and the tax returns that listed Worman as a partner when he

testified that he only listed Worman as a partner so that Worman could take

advantage of unused tax deductions. If the jury believed the evidence that the

partnership returns showing Worman as a partner were merely to enable Worman

to gain tax advantages, the conclusion that Worman was never a valid partner

follows from the principle that an arrangement that is merely a device for tax




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avoidance and otherwise is without substance will not be recognized as a valid

partnership. See Commissioner v. Tower, 327 U.S. 280, 287-89 (1946).

      In addition, from the evidence that Worman used Coop checks to pay his

own expenses and concealed that practice from the Coop through “stubbing,” a

jury could reasonably conclude that Worman was attempting to hide an

embezzlement scheme rather than acting as a partner who was taking a

partnership distribution to which he believed he was entitled.

      Although Worman argues that “bald assertions” by Ernie Whelchel are

insufficient to create a question of fact for the jury on the partnership issue, his

argument fails. The contradictions in the evidence between the tax returns listing

Worman as a partner and the testimony by Ernie Whelchel at trial created a triable

issue of fact for the jury. Taking the evidence, together with reasonable

inferences to be drawn therefrom, in the light most favorable to the government, a

reasonable jury could have found that Worman was in fact never a partner in

Whelchel Trucking. That finding adequately supports the conclusion that the

unreported funds constituted income that should have been reported.

      We therefore do not need to reach the second question of whether, if

Worman were a partner in Whelchel Trucking, there was sufficient evidence for a

reasonable jury to conclude that the partnership terminated prior to 1991. From

the evidence that Worman was never a partner in Whelchel Trucking, the jury


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could have reasonably found Worman guilty beyond a reasonable doubt of

willfully filing tax returns in violation of I.R.C. § 7206(1).



II. Variance

      We review de novo the issue of whether a variance existed between the

charges in the indictment and the evidence presented at trial. See United States v.

Williamson, 53 F.3d 1500, 1512 (10th Cir. 1995).

      “A variance arises when the evidence adduced at trial establishes facts

different from those alleged in an indictment.” United States v. Hanzlicek, 187

F.3d 1228, 1232 (10th Cir. 1999) (citation omitted). “[N]o variance occurs when

the government’s theory on which the case was tried is the same as that charged

in the indictment.” United States v. Meyers, 95 F.3d 1475, 1485 (10th Cir. 1996).

      Worman predicates his variance argument on a difference between the

theory the government presented to the grand jury that he embezzled money from

his employer, Coop, and its theory at trial that he was not a partner in Whelchel

Trucking and that he had embezzled money from Whelchel Trucking when he

credited his embezzled payments to amounts owed by the Coop to Whelchel

Trucking. In both the indictment and at trial, however, Worman was simply

charged with underreporting income in violation of I.R.C. § 7206(1). The

government’s theory in both the indictment and at trial was that Worman made


                                          -9-
payments to himself using Coop checks and then willfully filed false tax returns

that did not report those payments as income. The government presented

evidence that (1) Worman realized income when he used Coop checks “stubbed”

to Whelchel Trucking to pay his personal expenses; (2) Worman failed to report

this income; and (3) Worman acted knowingly and willfully in filing false federal

income tax returns. This evidence supported the indictment’s charge of

“reporting no ‘Other Income’ on the appropriate line of his tax return” when he

“well knew and believed, he received other income . . . which was not reported.”

Worman had sufficient notice from the indictment of what the government would

attempt to prove at trial. Accordingly, we find that the government’s theory on

which the case was tried was the same as that charged in the indictment and that

therefore there was no variance between the indictment and the evidence

presented at trial.



III. Tax Loss

       We review the district court’s factual findings for clear error and its legal

interpretation of the sentencing guidelines de novo. See United States v. Norman,

129 F.3d 1393, 1398 (10th Cir. 1997). “To constitute clear error, we must be

convinced that the sentencing court’s finding is simply not plausible or

permissible in light of the entire record on appeal, remembering that we are not


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free to substitute our judgment for that of the district judge.’” United States v.

Morales, 108 F.3d 1213, 1225 (10th Cir. 1997) (quoting United States v. Torres,

53 F.3d 1129, 1144 (10th Cir. 1995)).

      For an offense that involves filing a tax return in which gross income was

underreported, the Sentencing Guidelines provide that “the tax loss shall be

treated as equal to 28% of the unreported gross income . . . unless a more accurate

determination of tax loss can be made.” U.S.S.G. §2T1.1(c)(1)(A). Worman

makes two arguments in claiming that the court incorrectly computed the tax loss

that resulted from his failure to report income. We find both of those arguments

unpersuasive.

      First, Worman argues that he should have been given credit for his

partnership basis and his share of partnership liabilities. As discussed above,

there was sufficient evidence to support the finding that Worman was never a

partner in Whelchel Trucking. Thus, he is not entitled to credit for his

partnership basis and his share of partnership liabilities. Therefore, Worman’s

first argument fails.

      Second, Worman argues that the district court incorrectly calculated the

amount of unreported income from Worman’s 1991, 1992, 1993, and 1994 federal

tax returns. To support this argument, Worman first contends that the district

court should have calculated the unreported income from Worman’s “distributive


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share of partnership income not from the money distributed.” Again, because

there was sufficient evidence to support the finding that Worman was never a

partner in Whelchel Trucking, this aspect of Worman’s second argument is

unpersuasive.

      Worman next contends as part of his second argument that the district

court’s calculations were incorrect because they should have calculated the tax

loss at “28% of the unreported gross income” instead of adopting the

government’s $42,632 tax loss figure. The sentencing guidelines state that the

twenty-eight percent figure shall be used “unless a more accurate determination of

tax loss can be made.” U.S.S.G. §2T1.1(c)(1)(A). The district court made a

finding, adequately supported by the evidence presented at trial, that the tax loss

was $42,632. That finding was not clearly erroneous. Thus, we also find this

aspect of Worman’s second argument unpersuasive.

      We therefore conclude that the district court did not improperly compute

Worman’s tax loss for purposes of sentencing when it calculated that loss at

$42,632.



      For the foregoing reasons, we AFFIRM Mr. Worman’s conviction and

sentence.


                                       ENTERED FOR THE COURT

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David M. Ebel
Circuit Judge




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