     Case: 18-10302      Document: 00515148494         Page: 1    Date Filed: 10/07/2019




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                    United States Court of Appeals
                                                                             Fifth Circuit

                                      No. 18-10302                         FILED
                                                                     October 7, 2019
                                                                      Lyle W. Cayce
UNITED STATES OF AMERICA,                                                  Clerk

              Plaintiff - Appellee

v.

PRITESH PATEL, also known as Tony Patel,

              Defendant - Appellant




                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 4:16-CR-267-1


Before SOUTHWICK, WILLETT, and OLDHAM, Circuit Judges.
PER CURIAM: *
       Pritesh Patel pled guilty to two counts of aiding and assisting in the
preparation of false tax returns. On appeal, his only claims of errors concern
his sentence. He challenges the district court’s application of the sophisticated-
means enhancement and its calculation of tax loss. We AFFIRM.




       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                  No. 18-10302
              FACTUAL AND PROCEDURAL BACKGROUND
      Patel operated a tax-preparation business in Arlington, Texas. During
tax years 2007 through 2011, Patel prepared fraudulent tax returns for his
clients that improperly claimed education credits. After an Internal Revenue
Service (“IRS”) investigation, Patel was indicted on 12 counts of aiding and
assisting in the preparation of false tax returns. Patel pled guilty to two counts
and the other counts were dismissed.
      The Government’s first sample of returns estimated a $4,805,820.50 tax
loss. To arrive at this figure, the Government reviewed 100 income tax returns
prepared by Patel in 2010. All claimed an education credit. A key part of the
government’s evidence was the absence of the T-1098 Tax Form for many who
claimed the credit. Educational institutions are required to file that form when
a taxpayer pays educational expenses. The Government found that only 46 of
the reviewed returns — or 46 percent — had a corresponding Form 1098-T on
file with the IRS. Therefore, it concluded that 54 percent of the returns were
fraudulent. Accordingly, the Government determined that of the total
education credits of $9,802,317 claimed by Patel’s clients for tax years 2007
through 2010, 54 percent — or $4,805,820.50 — were fraudulent.
      Patel pointed out that the sample contained 99 tax returns, not 100, but
more importantly, that 63 of the taxpayers were actually entitled to the
education credits even though a Form 1098-T for some of them was missing
from the sample. The Government conceded that the sample contained 99
returns and that there were inaccuracies about missing Form 1098-T’s in that
sample.   To remedy these errors, the Government had the IRS Scheme
Development Center (“SDC”), which was not the source of the data for the
original sample, conduct a second sample. This second sample yielded an
estimated tax-loss amount of $6,707,011.50. We discuss later the relevant
details of this second sample.
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                                 No. 18-10302
      Patel objected to the second sample and to the sophisticated-means
enhancement. The district court overruled his objections and applied the
sophisticated-means enhancement. Patel appealed.


                                 DISCUSSION
I.    Tax-loss calculation
      The base-offense level for a tax-fraud offense is determined by
calculating the loss that was the object of the offense.        UNITED STATES
SENTENCING GUIDELINES §§ 2T1.1(a), (c), 2T4.1 (2018).          The Guidelines’
commentary states that when “the amount of the tax loss may be uncertain,”
the district court may “make a reasonable estimate” of the loss “based on the
available facts.” Id. § 2T1.1, cmt. n.1. A district court’s loss calculation is a
finding of fact reviewed for clear error. United States v. Johnson, 841 F.3d 299,
303 (5th Cir. 2016). A district court’s method of determining the amount of
loss is an application of the Guidelines which we review de novo. United States
v. Harris, 597 F.3d 242, 250–51 (5th Cir. 2010). “To prevail on an argument
that the district court’s calculation of tax loss was clearly erroneous, a
defendant must introduce evidence to contradict or rebut the alleged improper
computation of the loss.” Johnson, 841 F.3d at 303.
      The Government estimated the tax loss in the following manner. An IRS
agent testified that he identified the Patel-prepared tax returns by using an
electronic filing identification number (“EFIN”), an employer identification
number, and a preparer taxpayer identification number (“PTIN”) registered to
Patel and his business by the IRS. According to the agent, for the 2007 tax
year, Patel filed 1019 tax returns claiming education credits in the amount of
$1,289,281. For tax year 2008, the agent determined that Patel filed 1631 tax
returns claiming education credits in the amount of $2,058,341.


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      Next, the agent determined the validity of these claimed education
credits for those two tax years. To do so, the agent examined an IRS database
for the Form 1098-T, which would reflect that an educational institution
received a relevant payment from the taxpayer. When the agent could not
locate a Form 1098-T on file to correspond with the education credit claimed
by a taxpayer, the education credit was categorized as false.
      Based on this process, the agent determined that 509 of the 1019 tax
returns Patel filed for tax year 2007, or almost exactly half, did not have a
corresponding Form 1098-T on file with the IRS. For tax year 2008, 59 percent
did not have a corresponding form. Using 50 percent as the figure for each
year, the agent calculated the tax loss for 2007 through 2011 to be
$6,707,011.50.
      Patel objected to the Presentence Report’s (“PSR”) recommendation that
a tax loss of over six million dollars had occurred. The district court found the
figure to be “a reasonable estimate based on the available facts.” Patel renews
his objection on appeal. The Government counters that the method it used to
estimate Patel’s tax loss produced a reasonable estimate, which is all that is
required by the Guidelines.
      According to Patel, the Government’s premise for its calculations that
the absence of a Form 1098-T equates to a fraudulent education tax credit is
incorrect. Patel relies on the first sample performed by the Government, which
made the same assumption and overlooked many of the forms. Thus, Patel
reasons that the second sample must be flawed too. Further, two documents
produced by the National Association of College and University Business
Officers show that educational institutions sometimes lose or misidentify a
taxpayer identification number (“eTIN”) on the Form 1098-T. Finally, Patel
argues the second sample itself contained errors where data on an IRS
spreadsheet was incorrectly entered.
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                                  No. 18-10302
      In our analysis, we start with the fact that, though Patel produced
evidence that he had Form 1098-T’s that were missing from the first sample,
he offered no similar evidence for the second sample that surveyed different
tax-year returns. We do not agree with the district court that the errors in the
first sample were irrelevant to the second. Indeed, those errors raise questions
about the significance of a missing Form 1098-T. Nevertheless, Patel needed
to show that the Government’s second sample did not bear sufficient indicia of
reliability on which to base an estimate.
      To support that the second sample contains significant errors, Patel
relied on the National Association of College and University Business Officers
Advisory Report, which indicated that educational institutions sometimes fail
to provide a student’s correct TIN number on a Form 1098-T. The Government
introduced evidence that the highest taxpayer identification error rate due to
educational institutions’ mistakes from tax year 2009 through 2012 was just
3.6 percent. That figure does not correlate at all to the error rate in the initial
sample, but it is affirmative evidence supporting the methodology that was not
directly rebutted. Thus, although error rates are relevant and indeed indicate
that the tax-loss estimate is imperfect, Patel has not shown that the tax-loss
estimate was unreasonable. See Johnson, 841 F.3d at 305.
      Finally, at sentencing, Patel questioned the IRS agent about the
purported errors in the second sample’s spreadsheet. The agent defended the
spreadsheet entries and explained why the spreadsheet did not contain the
kinds of errors Patel claimed. After Patel concluded this line of questioning,
the district court asked the agent whether the “objections or the substance of
them ha[d] caused [him] to change [his] opinion on the fairness and
reasonableness of the estimate.”      The agent still believed it to be “a fair
estimate.” Patel fails to support that any error was material to the final tax-
loss estimate. See Johnson, 841 F.3d at 305.
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II.    Sophisticated-means enhancement
       A defendant’s offense level is increased two levels if the offense involved
“sophisticated means.” U.S.S.G. § 2T1.4(b)(2). That phrase is defined as
“especially complex or especially intricate offense conduct pertaining to the
execution or concealment of an offense.”         Id. § 2T1.4, cmt. n.3.      The
determination is a factual finding, which this court reviews for clear error.
United States v. Clements, 73 F.3d 1330, 1340 (5th Cir. 1996). The PSR itself
“generally bears sufficient indicia of reliability” to be competent evidence.
United States v. Narviz-Guerra, 148 F.3d 530, 537 (5th Cir. 1998). “Bald,
conclusionary statements do not acquire the patina of reliability by mere
inclusion in the PSR.” Id. (quoting United States v. Elwood, 999 F.2d 814, 817–
18 (5th Cir. 1993)).
       According to the PSR, Patel filled out applications for several PTINs
using employees’ information without their knowledge. Patel would use these
PTINs to prepare tax returns. “This allowed [Patel’s business] to prepare a
large number of returns each year without the IRS knowing Patel was the
preparer.”
       Patel says the district court erred in finding that the offense involved
sophisticated means. Specifically, he argues that “there is no evidence as to
how many returns used the PTINs in question or whether they were used on
any of the returns allegedly claiming a false education credit.” He also asserts
that prior to 2011, all tax preparers had to use the PTIN of the business owner.
As such, he applied for PTINs in the name of others only for the 2011 tax year.
Finally, Patel argues that according to the IRS agent’s testimony, registering
multiple PTINs did not aid in masking his scheme.
       First, although Patel used only his and his wife’s PTINs in filing returns
from 2008 through 2010, Patel used the PTINs of two other individuals to file
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                                  No. 18-10302
approximately 270 tax returns in 2011, in addition to the 870 returns he filed
using his wife’s PTIN that year. The PSR does not state which of the 270 tax
returns filed under the other two employees’ names, if any, fraudulently
claimed an education credit. This, though, does not show clear error. The
district court reasonably estimated that 50 percent of the tax returns Patel
filed were fraudulent. It would therefore be unreasonable to find that all 270
tax returns were not fraudulent. Even if none of the 270 returns he prepared
under the others’ names were fraudulent, he still took steps to “obscure the
link between the” actual false tax returns and himself by decreasing the total
number of prepared tax returns with his PTIN. Clements, 73 F.3d at 1340.
      Next, at the sentencing hearing, the agent testified that regardless of
which PTIN is used by a tax preparer, a return can be traced back to the tax
preparer by using an EFIN. Indeed, the agent traced all the returns filed by
Patel via one EFIN registered to him. The agent’s testimony was in the context
of explaining how, after the scheme was discovered, he was able to verify the
fraudulent returns Patel was responsible for filing. Patel ineffectively relies
on the agent’s testimony.
      Patel has failed to show that the district court’s finding was clearly
erroneous.   One circuit has concluded that the “essence of [sophisticated
means] is merely deliberate steps taken to make the offense more difficult to
detect.” United States v. Kontny, 238 F.3d 815, 821 (4th Cir. 2001). We have
upheld sophisticated-means enhancements when defendants have used the
names of other people to make it more difficult for their offenses to be detected,
even if that method was not by itself particularly sophisticated. E.g., United
States v. Conner, 537 F.3d 480, 492 (5th Cir. 2008); United States v. Wright,
496 F.3d 371, 379 (5th Cir. 2007); Clements, 73 F.3d at 1340.
      Patel took deliberate steps to make his offense more difficult for the IRS
to detect. He used PTINs of other employees without their knowledge to
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                               No. 18-10302
prepare tax returns. This allowed Patel to prepare a larger number of tax
returns in 2011 without the IRS knowing that he was the sole preparer.
     AFFIRMED.




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