[00:00:00] Speaker 03:
is United States versus Sandoval, number 242107.

[00:00:05] Speaker 03:
And counsel, I see you are ready to go.

[00:00:10] Speaker 05:
I am.

[00:00:11] Speaker 05:
Thank you, Your Honor.

[00:00:13] Speaker 05:
Before I begin, I was hoping that I could reserve three minutes of my time for rebuttal.

[00:00:19] Speaker 03:
Well, you will see how that goes, but we'll try.

[00:00:22] Speaker 05:
Thank you.

[00:00:23] Speaker 05:
I appreciate that.

[00:00:25] Speaker 05:
This case involves a charge of 35 felonies against James Sandoval.

[00:00:30] Speaker 05:
All arise from his receipt of social security disability benefits for his disabling medical conditions, which include end stage emphysema, though there are others as well.

[00:00:41] Speaker 05:
The bulk of this appeal, if only numerically, is sufficiency of the evidence as to the 33 counts of theft of government property in violation of 18 USC 641.

[00:00:51] Speaker 05:
He was specifically charged with stealing SSDI benefits over the 33 months from June of 2017 to February of 2020.

[00:01:01] Speaker 05:
In the jury instruction that was given at trial, it's jury instruction number 11, the very first element is whether those benefits payments belonged to the government.

[00:01:09] Speaker 05:
It's an essential element.

[00:01:11] Speaker 05:
Mr. Sandoval, if he was entitled to receive those benefits under the SSA regulations, would not have committed theft because they wouldn't belong to the government.

[00:01:21] Speaker 05:
Thus far, everyone is in agreement, including the district court's opinion in this case.

[00:01:26] Speaker 05:
The regulations create the entitlement to those benefits, and they also take it away.

[00:01:32] Speaker 05:
Entitlement is the word that's used in the regulations, including in 20 CFR 404.316, which defines when entitlement to disability benefits begins.

[00:01:41] Speaker 05:
and ends, those regulations and specifically 316B4 and D raise a preliminary question of whether you have a disabling impairment and not contested that he does.

[00:01:55] Speaker 05:
If so, all these other regulations also attach and they create a trial work period and a re-entitlement period.

[00:02:02] Speaker 05:
All told, this creates years of entitlement for a genuinely disabled person like Mr. Sandoval.

[00:02:08] Speaker 04:
At the trial, there was evidence that Mr. Sandoval had significant gainful employment for a significant period of time.

[00:02:19] Speaker 04:
Is that right?

[00:02:20] Speaker 05:
The evidence at trial was focused on substantial gainful activity.

[00:02:26] Speaker 05:
However, for a person who has a disabling impairment, like Mr. Sandoval, who also was receiving payments for over 24 months, the standards are different as to what substantial gainful activity means.

[00:02:39] Speaker 05:
In this case, with those facts being established, it means a certain threshold of income.

[00:02:44] Speaker 05:
But income is defined in a very specific way for a self-employed person like Mr. Sandoval.

[00:02:48] Speaker 05:
So it's a numerical threshold that he has to meet.

[00:02:52] Speaker 05:
And it requires not a number of hours worked or a number of years worked, but instead what he is making.

[00:02:57] Speaker 05:
And that is not only just the gross revenues that he takes in, but also it has to reflect the expenses to pay.

[00:03:04] Speaker 04:
I didn't see anywhere in your brief where, and we looked,

[00:03:08] Speaker 04:
where there was a case that said that the government had to prove net income.

[00:03:16] Speaker 05:
Do you have such a case?

[00:03:18] Speaker 05:
I don't think that it's a matter of finding a case where the facts are specifically the same because it's the type of defendant that this is.

[00:03:26] Speaker 05:
His entitlement to benefits is different because of his disabling impairment and the length of time that he was receiving benefits.

[00:03:32] Speaker 05:
So unless there's another case in which another defendant was situated like that, I wouldn't expect to see the countable income test become as central as it did to this trial.

[00:03:41] Speaker 03:
So the answer is no, that you don't have a case where countable income is the deciding factor?

[00:03:50] Speaker 05:
No, but I think there are cases and I think

[00:03:53] Speaker 05:
in terms of looking at what the elements of entitlement are, what makes you entitled to these benefits or not, it does hinge on the regulations.

[00:04:01] Speaker 05:
And for him, in particular, those regulations mean satisfying the accountable income test.

[00:04:07] Speaker 05:
And there are, I mean, even I think I cited United States versus Anderson, which is not a criminal case, but is a preponderance standard wherein incorporation of an SSA determination in the past

[00:04:18] Speaker 05:
Is that sufficient to even meet a preponderance standard?

[00:04:20] Speaker 02:
On administrative determination?

[00:04:25] Speaker 02:
Right.

[00:04:25] Speaker 02:
What about tax evasion cases?

[00:04:27] Speaker 02:
It seems like it would arise all the time.

[00:04:30] Speaker 02:
I don't file a tax return, and the government says, well, Bob, you should have filed a tax return.

[00:04:36] Speaker 02:
I say, well, I didn't net enough income.

[00:04:40] Speaker 02:
Would there be any reason to differentiate those cases?

[00:04:45] Speaker 05:
I'm not sure.

[00:04:46] Speaker 05:
I think that under a part of the SSA regulations, incorporate the tax code, and that's where the normal business expenses standards come from.

[00:04:54] Speaker 05:
So I think that there is a lot of overlap in that kind of analysis as to what it would be that you would owe.

[00:05:00] Speaker 05:
So if the government is saying, you owe a certain amount, and here, substantial gainful activity requires a certain amount, then it would have to be proven.

[00:05:07] Speaker 02:
Well, what about if it's a criminal case?

[00:05:10] Speaker 02:
And the question is the same one that Judge McHugh posed.

[00:05:14] Speaker 02:
Does the government have the burden to demonstrate that there are these deductions that would cause someone with $1.9 million of gross over five years to not even have $14,000 of net income for purposes of the obligation under criminal law to file a tax return?

[00:05:37] Speaker 05:
I think that under Morissette, you're looking at an element, an essential element

[00:05:41] Speaker 05:
this crime being the entitlement to benefits or not, whether or not... In this case and in the tax evasion cases.

[00:05:47] Speaker 05:
Right.

[00:05:47] Speaker 05:
You're looking at something that is the government's burden to prove beyond a reasonable doubt because it is the determining factor in whether or not he was entitled to those benefits.

[00:05:59] Speaker 04:
Can the government prove by circumstantial evidence?

[00:06:02] Speaker 04:
Sure, and I think that is... And so they put on evidence that there was a whole lot of money coming through, that he was pocketing some of the cash instead of putting it into the bank accounts, and testimony from people who did his books about actual amounts that were coming in.

[00:06:21] Speaker 04:
At that point, isn't it his job to come in and say, yeah, but I had all these expenses?

[00:06:29] Speaker 05:
I think there was some evidence about his expenses.

[00:06:32] Speaker 05:
I think ultimately it is the government's burden to prove beyond a reasonable doubt that threshold was passed.

[00:06:39] Speaker 04:
Well, he controlled all that information, didn't he?

[00:06:42] Speaker 04:
And every time they asked for information like, what do you pay your suppliers, he said it was a trade secret.

[00:06:51] Speaker 05:
Well, in his bank records, which they did obtain pursuant to subpoena, a lot of that information already exists.

[00:06:57] Speaker 05:
And they did talk to

[00:06:59] Speaker 05:
several of those suppliers, and there were some testimony from them at trial as to some extremely high costs for some of these materials.

[00:07:06] Speaker 03:
Why isn't it probative circumstantial evidence that he transferred funds from the business accounts to his personal account, and in addition to that,

[00:07:22] Speaker 03:
that he transferred funds from the business accounts to his mother's accounts.

[00:07:29] Speaker 03:
Is that not probative?

[00:07:33] Speaker 05:
I wouldn't say that it's not probative, but it's not going to the heart of the question about countable income.

[00:07:39] Speaker 05:
And that's moving money between the accounts, in fact, creates an illusion that there is more money than there is.

[00:07:45] Speaker 03:
Yeah, but he's the one who's doing the transfer.

[00:07:48] Speaker 03:
And why couldn't?

[00:07:50] Speaker 03:
the jury reasonably infer that he's trying to hide income.

[00:07:57] Speaker 05:
They could.

[00:07:57] Speaker 03:
And on top of that, you've got his lies to the investigators during the February 2020 interview, where he's pretty much telling them that he's running a thriving business.

[00:08:14] Speaker 05:
Yes.

[00:08:15] Speaker 05:
And I think all of that can be considered by the jury.

[00:08:18] Speaker 05:
And we're not trying to say that circumstantial evidence

[00:08:20] Speaker 05:
could not be considered by the fact finder at all.

[00:08:23] Speaker 05:
I think what's important though is that the fact finder did not know what conclusion they were trying to reach about this entitlement because they weren't told what income was in a way that was clear and decisive.

[00:08:33] Speaker 05:
So they didn't know what they were looking at those numbers for.

[00:08:36] Speaker 05:
They didn't know whether they were supposed to be taking expenses into account.

[00:08:40] Speaker 05:
And they didn't know what number they were supposed to be looking for in determining that entitlement.

[00:08:44] Speaker 05:
And that is part of the reason why, to bring me to the second point that's made in the briefing.

[00:08:49] Speaker 04:
You wanted an instruction on net income, but there was no evidence put on by your client of the expenses.

[00:09:01] Speaker 04:
So there was no evidence by which the jury could calculate net income.

[00:09:06] Speaker 04:
And so typically you don't give a jury instruction for non-existent evidence.

[00:09:12] Speaker 05:
There was evidence put on throughout the government's case in chief on cross-examination chiefly.

[00:09:17] Speaker 05:
where the price of gold was discussed.

[00:09:20] Speaker 05:
The employees that were working there were discussed.

[00:09:24] Speaker 05:
The expenses, again, they were extremely high, even just month to month to one supplier that were put into evidence by the defense.

[00:09:32] Speaker 05:
So that was in evidence.

[00:09:34] Speaker 05:
But the question that the jury was supposed to answer, they didn't know to ask.

[00:09:37] Speaker 05:
And that was, what is income under the SSA regulatory standards, which is not just gross revenue.

[00:09:43] Speaker 03:
It's something different.

[00:09:44] Speaker 03:
Well, to the extent that

[00:09:47] Speaker 03:
the agency and here I'm referring to Ms.

[00:09:50] Speaker 03:
Coleman and her testimony to the extent that the systems that they use there rely on IRS data and based on those systems there was finding on the part of the agency

[00:10:08] Speaker 03:
that the SGA threshold had been exceeded, not once, but month after month after month.

[00:10:17] Speaker 03:
Again, maybe it isn't a clincher on net income, but why isn't it, again, circumstantial evidence?

[00:10:25] Speaker 03:
I mean, it's this concept of building a case brick by brick.

[00:10:30] Speaker 03:
Isn't that another brick that establishes their case?

[00:10:34] Speaker 05:
I'm glad you brought that up because the IRS evidence was retracted.

[00:10:38] Speaker 05:
So the decui as she called it.

[00:10:41] Speaker 03:
What do you mean retracted?

[00:10:43] Speaker 05:
So initially when Ms.

[00:10:45] Speaker 05:
Coleman made her administrative determination, the IRS records indicated a high level of income for Mr. Sandoval.

[00:10:51] Speaker 05:
She took that number.

[00:10:52] Speaker 05:
She averaged it over the course of months.

[00:10:55] Speaker 05:
And that was the entire basis for her determination of his self-employed income.

[00:10:58] Speaker 03:
I thought that she testified that that was not the entire basis.

[00:11:02] Speaker 05:
She testified that that was the entire basis at the time of the administrative determination, but that at trial she was willing to state a new basis, and that was reliance on Agent Palmer's report, which included reference to bank records that I believe Agent Paler reviewed, that Agent Palmer wrote about, and she didn't actually see it.

[00:11:22] Speaker 03:
By the way, coming back to Judge McHugh's initial question, I noticed on the IRS letter

[00:11:27] Speaker 03:
Mr. Sandoval that it did list Traditions as his employer.

[00:11:32] Speaker 03:
I think she asked you whether the evidence showed that Traditions was his employer.

[00:11:37] Speaker 03:
That's what it says.

[00:11:38] Speaker 05:
I'm not sure if you're referring to the standard for self-employed versus employed.

[00:11:45] Speaker 03:
I'm just saying that the IRS letter says that Traditions was his employer.

[00:11:49] Speaker 05:
Oh, yes, and I think that was established by the evidence and he was self-employed and Traditions is his name in the business.

[00:11:57] Speaker 03:
Well, I don't see anything about a retraction.

[00:11:59] Speaker 03:
In fact, Ms.

[00:12:00] Speaker 03:
Coleman testified, I'm looking at her testimony right now,

[00:12:05] Speaker 03:
that the letters that came in in 2022 said those come in when someone has amended their taxes.

[00:12:14] Speaker 03:
So did he amend his tax returns?

[00:12:18] Speaker 05:
You know, I don't recall the exact circumstances.

[00:12:20] Speaker 05:
This did not come out of trial at all.

[00:12:22] Speaker 05:
So it's not in the record.

[00:12:23] Speaker 03:
Well, she said these happened when they amend their taxes.

[00:12:26] Speaker 03:
That happened at trial.

[00:12:27] Speaker 03:
She said that.

[00:12:28] Speaker 03:
It was uncontradicted testimony.

[00:12:29] Speaker 05:
Well, she didn't know that.

[00:12:32] Speaker 05:
She wasn't familiar with that.

[00:12:33] Speaker 03:
But was there any rebuttal to that?

[00:12:36] Speaker 03:
Yes.

[00:12:37] Speaker 03:
She testified as someone who knows how everything works.

[00:12:40] Speaker 03:
She looks at all these data systems in the residence and said, when these letters come in, it's because taxes have been amended.

[00:12:47] Speaker 05:
Well, I think that, first of all, she had not actually reviewed those tax records.

[00:12:53] Speaker 05:
She was just aware that they had changed.

[00:12:55] Speaker 05:
And again, if you look at volume 5 in, I believe it's page 119, when she testifies about the fact that she relied on the decuids, 119 to 120, for determining that amount of self-employed income when she was reviewing this case initially.

[00:13:11] Speaker 05:
So she did use those numbers, and she did rely on them, and they did change.

[00:13:15] Speaker 05:
And she acknowledged all that.

[00:13:17] Speaker 05:
And then she said that is usually when somebody amends their taxes.

[00:13:20] Speaker 05:
But the process that... Well, she didn't say usually.

[00:13:22] Speaker 05:
Well, I don't recall exactly what her order was.

[00:13:25] Speaker 03:
I'm going to read it to you.

[00:13:26] Speaker 03:
These letters come when someone has amended their taxes.

[00:13:30] Speaker 05:
Okay.

[00:13:30] Speaker 05:
And I think if we can assume that the basis of the administrative determination initially is reliable because the IRS numbers are reliable, then whatever process the IRS used for creating the new numbers, for allowing those to be amended in that way, must be equally reliable.

[00:13:46] Speaker 03:
So why couldn't the jury infer that Mr. Sandoval filed a fraudulent amendment?

[00:13:54] Speaker 05:
I think that is so attenuated.

[00:13:55] Speaker 03:
Why is that?

[00:13:56] Speaker 03:
They've already cut off his benefits.

[00:13:58] Speaker 03:
He's lied to the investigators.

[00:14:01] Speaker 03:
Why wouldn't he do something like that?

[00:14:03] Speaker 03:
Why couldn't the jury reasonably infer that?

[00:14:05] Speaker 03:
I'm not saying he did.

[00:14:06] Speaker 03:
I'm just saying why couldn't the jury infer that?

[00:14:09] Speaker 05:
To assume that he must have lied.

[00:14:11] Speaker 03:
Infer.

[00:14:12] Speaker 03:
Infer.

[00:14:13] Speaker 05:
Well, I think it's premised on an assumption that if you have

[00:14:16] Speaker 05:
some number that this administrative determination is based on, and it changes.

[00:14:20] Speaker 05:
The bottom drops out from under it.

[00:14:22] Speaker 05:
Then it must have been through fraud.

[00:14:23] Speaker 03:
Well, that isn't the whole story.

[00:14:24] Speaker 03:
That isn't the whole story.

[00:14:26] Speaker 03:
This didn't happen until after the benefits had ended.

[00:14:29] Speaker 03:
And then he comes back in.

[00:14:30] Speaker 05:
My time is nearly up.

[00:14:33] Speaker 03:
I understand that, counsel.

[00:14:34] Speaker 03:
I've got a question that I'd like you to answer about the amendment to the tax information.

[00:14:41] Speaker 05:
I don't think that it is.

[00:14:43] Speaker 05:
It would satisfy the government's burden of proof beyond a reasonable doubt to assume that it is a fraudulent exercise that he changed his.

[00:14:53] Speaker 05:
There wasn't even any evidence that he was responsible for the change in the IRS tax forms.

[00:14:57] Speaker 05:
That was just testimony by, again, a witness who had not been privy to that process and does not work for the IRS.

[00:15:04] Speaker 05:
So that's, I think, too attenuated as a basis for this man's conviction on 33 felony counts.

[00:15:09] Speaker 01:
Thank you.

[00:15:10] Speaker 01:
Thank you, counsel.

[00:15:11] Speaker 01:
Could I ask?

[00:15:11] Speaker 01:
Yes.

[00:15:11] Speaker 01:
I know we're out of time.

[00:15:12] Speaker 01:
Could I ask one question?

[00:15:13] Speaker 01:
I know you're ahead of time, but I just have one question.

[00:15:18] Speaker 02:
You're referring to the testimony from Ms.

[00:15:19] Speaker 02:
Colonel 119, and in that whole excerpt, she is talking about things, as I understand it, that she was relying on.

[00:15:26] Speaker 02:
At the beginning of that excerpt on page 110, she is talking about what she had asked Mr. Sandoval to try to see if she could reduce something, but I didn't get that information out, question.

[00:15:39] Speaker 02:
So after you had this conversation, you didn't revise your determination.

[00:15:43] Speaker 02:
answer correct.

[00:15:44] Speaker 02:
There was nothing provided that would allow me to even go in and make corrections, nothing other than disclaimers.

[00:15:50] Speaker 02:
As Judge McHugh was asking earlier, all of the information about his deductions, his lease payments, what he was paying to the jewelers that are making jewelry for him, what he's paying in payroll, all of that is information that is available to him.

[00:16:07] Speaker 02:
And the government, presumably, through the strong arm of the law, can subpoena or just ask the guy.

[00:16:13] Speaker 02:
And Ms.

[00:16:13] Speaker 02:
Coleman apparently testified that she had asked the guy and he didn't come forward with any information to say, yeah, you can deduct these expenses.

[00:16:23] Speaker 02:
Why can't we reasonably infer that

[00:16:27] Speaker 02:
Even if the government has the burden, you can reasonably infer that he did not have deductions that would reduce his debt to below $14,000 per year over this time period from 2017 to 20, because he didn't provide any of that information upon request from Ms.

[00:16:45] Speaker 02:
Coleman.

[00:16:46] Speaker 05:
I think that that is evidence that can be used by the jury, but it also is significant, again, to note the standard in which that is meaningful.

[00:16:57] Speaker 05:
And again, the jury was just not instructed as to what to do with that information.

[00:17:01] Speaker 05:
If there was an obligation on Mr. Sandoval as part of the administrative process to disclose his expenses, my understanding and my recollection of the testimony is that he said that he made no income, so that it was just zeroed out.

[00:17:14] Speaker 05:
And so he didn't misrepresent expenses.

[00:17:17] Speaker 05:
He wasn't asked that in a specific way.

[00:17:20] Speaker 05:
It wasn't clear to me that Ms.

[00:17:21] Speaker 05:
Coleman understood

[00:17:22] Speaker 05:
that the countable income test applied to him.

[00:17:25] Speaker 05:
And so she didn't ask that like that.

[00:17:27] Speaker 05:
And he wasn't withholding information as I read the testimony, but instead just saying there was zero income.

[00:17:32] Speaker 03:
OK.

[00:17:33] Speaker 05:
Thank you.

[00:17:34] Speaker 05:
Thank you.

[00:17:36] Speaker 03:
Thank you, counsel.

[00:17:41] Speaker 00:
Good morning, your honors.

[00:17:42] Speaker 00:
Counsel, may it please the court.

[00:17:43] Speaker 00:
My name is Christopher Houghton.

[00:17:45] Speaker 00:
I'm here on behalf of the United States.

[00:17:46] Speaker 00:
I'm an AUSA in Albuquerque, the district of New Mexico.

[00:17:50] Speaker 00:
After a four-day trial, during which the United States presented 13 witnesses and a mountain of circumstantial evidence, the jury unanimously convicted defendant of all 35 federal counts.

[00:18:07] Speaker 00:
Those crimes fall into two categories.

[00:18:09] Speaker 00:
The 33 theft of government property counts, one through 33, and then the two false statement counts, 34 and 35.

[00:18:16] Speaker 00:
They're different brands of false statements, but they're both false statements.

[00:18:20] Speaker 00:
34 being the 1001 and 35 being the false statement on a Social Security disability form under 42 USC 408.

[00:18:31] Speaker 00:
After Mr. Sandoval was convicted, he was sentenced to 15 months in prison.

[00:18:36] Speaker 00:
That represented the low end of the guideline range and three years supervised release.

[00:18:42] Speaker 00:
He was given two financial penalties.

[00:18:46] Speaker 00:
One was a special penalty assessment for $3,500 and the other was a restitution for approximately $55,000 representing the payments during the charged period for the 33 counts.

[00:19:00] Speaker 00:
Defendant raises a whole host of issues in this appeal.

[00:19:05] Speaker 00:
The first the court was really driving at, which was the sufficiency of the evidence as to counts 1 through 33.

[00:19:12] Speaker 00:
And it's the United States position that the case law supports reliance on circumstantial evidence.

[00:19:18] Speaker 00:
The United States was in a particularly difficult position akin to tax evasion cases where

[00:19:26] Speaker 00:
There isn't a full accounting of the business and so we're relying on the us did the United States subpoena any of that information We did your honor.

[00:19:36] Speaker 00:
Yes, we subpoenaed.

[00:19:37] Speaker 00:
That's how we ended up with the bank records.

[00:19:40] Speaker 00:
Yes, your honor We did not I don't believe subpoena the the mother's bank records nor did we go through the process to get the tax returns or the landlord I mean the lease payments the traditions store to the landlord and

[00:19:55] Speaker 00:
That's correct.

[00:19:56] Speaker 00:
We did not seek that information.

[00:19:58] Speaker 00:
We could have.

[00:20:00] Speaker 02:
And you could have subpoenaed his public payroll records.

[00:20:03] Speaker 02:
Did you do that?

[00:20:05] Speaker 00:
I'm sorry.

[00:20:05] Speaker 00:
If he had payroll records.

[00:20:10] Speaker 02:
He had people.

[00:20:12] Speaker 00:
Yes, but there was some significant evidence that he was concealing his financial doings.

[00:20:20] Speaker 02:
You know, Ms.

[00:20:20] Speaker 02:
Hall's testimony, but my question is, whatever Ms.

[00:20:24] Speaker 02:
Hall has testified, he was paying people to sell jewelry in his two tradition stores, right?

[00:20:32] Speaker 00:
That's accurate, yes.

[00:20:33] Speaker 02:
And I'm sure they weren't doing it pro bono, so he had payroll records that you could have subpoenaed.

[00:20:39] Speaker 00:
That's true too, Your Honor.

[00:20:41] Speaker 02:
So with your subpoena power, why is it unreasonable to say, well, we're not going to just guess that if he pulls in hundreds of, you know,

[00:20:53] Speaker 02:
This Hall said he pulled in $150,000, $200,000 in one year gross, presumably.

[00:21:01] Speaker 02:
His expenses are probably not going to bring that down to $14,000.

[00:21:06] Speaker 02:
So we're going to deprive this man of his liberty, send him to prison, because I just don't think in the jewelry business your profit margins are that thin.

[00:21:19] Speaker 02:
Why in the world would we adopt such a barbarian standard when the government could easily have proven what his expenses were?

[00:21:32] Speaker 00:
Judge Bacharach, I don't disagree with the court that there

[00:21:36] Speaker 00:
were many things, and this is true of many investigations, that the government can do to prove a case.

[00:21:44] Speaker 00:
But the test isn't what could you have done in addition to what you did.

[00:21:48] Speaker 00:
The test is whether it's sufficient what you showed to the jury and whether the jury could reasonably infer.

[00:21:55] Speaker 01:
All right.

[00:21:55] Speaker 01:
Let me ask you.

[00:21:56] Speaker 01:
You go ahead, Judge McHugh.

[00:21:57] Speaker 04:
Well, the question I have sort of dovetails on that, which is,

[00:22:01] Speaker 04:
How did the jury know that he couldn't just look at gross revenue to determine whether he was entitled to these funds?

[00:22:11] Speaker 04:
Were they ever told that?

[00:22:13] Speaker 00:
Yes, Judge McHugh.

[00:22:16] Speaker 00:
The testimony was developed primarily through Ms.

[00:22:19] Speaker 00:
Coleman.

[00:22:20] Speaker 00:
There was significant cross-examination about that fact that it's for profit, right?

[00:22:25] Speaker 00:
It's not gross.

[00:22:26] Speaker 00:
Income and so that idea was developed there.

[00:22:29] Speaker 00:
She acknowledged that they ever instructed on that they were never instructed that was yes, we have any reason to believe that the jury understood the difference between Profit and gross revenue other than then the fact that I think most people understand that Judge McHugh that most people report their taxes and most people understand that

[00:22:50] Speaker 00:
the difference between gross and net.

[00:22:52] Speaker 00:
And I think that's what Judge Browning leaned on when he denied that instruction.

[00:22:57] Speaker 00:
In part, he said that's a term that people understand.

[00:23:01] Speaker 00:
Well, you said profit.

[00:23:05] Speaker 03:
Can we say even now, looking back at the trial record, how much profit the business made in any given year?

[00:23:16] Speaker 00:
Very difficult to say.

[00:23:18] Speaker 00:
But the question wasn't, what is the exact profit that was made?

[00:23:23] Speaker 00:
The question was, is it reasonable to infer, based on the circumstantial evidence, that whatever that profit was, whatever the net earnings were, exceeded what was a very low threshold per month?

[00:23:35] Speaker 03:
Well, in the appellant's brief, on page 9, it says that the business lost money.

[00:23:42] Speaker 00:
Is there any basis for saying that?

[00:23:44] Speaker 00:
I believe they base it on some of the evidence they developed in cross of the government's witnesses that there are expenses.

[00:23:53] Speaker 00:
But no, there wasn't any evidence put on that these were his exact business expenses.

[00:23:58] Speaker 00:
For example, there was a supplier that we called who was supplying Mr. Sandoval with jewelry, Lonnie Schroeder.

[00:24:08] Speaker 00:
And he testified that he pretty regularly did custom jewelry projects for Mr. Sandoval.

[00:24:13] Speaker 00:
And it seemed like that was the bulk of Mr. Sandoval's work.

[00:24:17] Speaker 00:
If you look at, and this is in the volume three of the supplemental volumes that we provided, exhibit 50, which is an Excel summary, you can see there that

[00:24:32] Speaker 00:
Mr. Schroeder was earning about $2,000 to $4,000 a month or so from Mr. Sandoval, and so the time period those records show from June of 2017 all the way to December of 2019 show about $40,000 in jewelry.

[00:24:52] Speaker 02:
That Sandoval was paying to Schroeder?

[00:24:54] Speaker 00:
Correct.

[00:24:55] Speaker 02:
And so how much was Sandoval selling that jewelry for?

[00:25:00] Speaker 00:
Well, we also had some indication.

[00:25:05] Speaker 00:
His products ranged from, I think the testimony from Ms.

[00:25:09] Speaker 00:
Dow was anywhere from 500 to in the tens of thousands.

[00:25:13] Speaker 02:
So you have, maybe I'm just

[00:25:18] Speaker 02:
You see you're saying, okay, Mr. Schroeder is testifying that I charged Sandoval X number of dollars for this jewelry.

[00:25:26] Speaker 02:
And I'm trying to just think, okay, well, how is the jury going to process that to have anything to do with this case?

[00:25:32] Speaker 02:
And the only way that I can think of that that would have anything to do with the case is if then the government says, and for that jewelry that Schroeder made for Sandoval, Sandoval then turned around and sold that for 100K.

[00:25:46] Speaker 02:
or 90K.

[00:25:47] Speaker 02:
And so he was making a sizable profit on Schroeder's handmade jewelry.

[00:25:52] Speaker 02:
Do we have any evidence like that?

[00:25:53] Speaker 00:
There was some evidence.

[00:25:55] Speaker 00:
So when the same jewelry that Schroeder made.

[00:25:59] Speaker 00:
I believe we call Mr. Schroeder after Ms.

[00:26:01] Speaker 00:
Dow.

[00:26:01] Speaker 00:
So Ms.

[00:26:02] Speaker 00:
Dow testified to some pieces that she herself purchased.

[00:26:06] Speaker 00:
Mr. Schroeder took a look at some of those photographs and recognized some of them as his work.

[00:26:12] Speaker 00:
And so as I recall the testimony, there was somewhere in the $10,000 range, but I have to go back to that volume of the transcript.

[00:26:20] Speaker 00:
But if you pair those two pieces together, the customer with the supplier, you can see at least some indication of the profit.

[00:26:28] Speaker 00:
The other indication as to profit would be in that same exhibit 50, if you go by categories by month of just money coming into one of his business accounts,

[00:26:39] Speaker 00:
The ranges from June of 2017 to about May of 2018 are in the range of $40,000, $28,000.

[00:26:49] Speaker 00:
This is per month, ranging all the way up to $62,000.

[00:26:53] Speaker 00:
And the smallest that we see there is about $16,000.

[00:26:56] Speaker 00:
And so what the United States tried to do was to show the jury just how well Mr. Sandoval was doing at this business.

[00:27:05] Speaker 02:
In his growth sales.

[00:27:06] Speaker 00:
Correct, and then juxtaposing that with what is a very low substantial gainful employment amount, which is about $1,200 or so per month.

[00:27:17] Speaker 02:
What was the testimony at trial about the industry average profit margin for the handmade jewelry, upscale jewelry business?

[00:27:26] Speaker 00:
I don't believe that testimony came in.

[00:27:28] Speaker 00:
There could be some of that testimony in the cross of Mr. Schroeder.

[00:27:32] Speaker 02:
So this man deliberately

[00:27:36] Speaker 02:
hangs in the balance on what a jury is going to, yes, well, if he pulled in $150,000, I don't really have any idea what the profit margin might be.

[00:27:49] Speaker 02:
Maybe it's 1%.

[00:27:51] Speaker 02:
Maybe it's 80%.

[00:27:51] Speaker 02:
But if a guy pulls in $150,000 or $60,000 in a trade show and he's going all over the country, surely he must have more than $14,000 of net.

[00:28:05] Speaker 02:
And you're saying that goes beyond the realm of speculation?

[00:28:09] Speaker 02:
That's something that is proof beyond a reasonable doubt, even if accrediting circumstantial evidence?

[00:28:15] Speaker 00:
That's right, Your Honor.

[00:28:16] Speaker 00:
We did ask the jury to make that determination.

[00:28:18] Speaker 00:
The other big indicator that he was not eligible, meaning he knew he wasn't making under that amount, is that he hid this from Social Security for years.

[00:28:31] Speaker 00:
On all the forms in the interview, he wasn't saying,

[00:28:35] Speaker 00:
I have this business.

[00:28:36] Speaker 00:
Trust me, I'm not doing very well.

[00:28:38] Speaker 00:
I just like doing it, but I'm not making any money.

[00:28:41] Speaker 00:
And in fact, once you go through the expenses, I'm under $1,200.

[00:28:44] Speaker 00:
He consistently just lied about it completely.

[00:28:48] Speaker 02:
And that's $34 and $35.

[00:28:51] Speaker 00:
But I think you could also use it, Your Honor, for $1 through $33 in that part of that jury instruction said,

[00:28:57] Speaker 00:
that we didn't need to prove that he knew it wasn't the United States benefits.

[00:29:03] Speaker 00:
We needed to prove that he knew he wasn't eligible to receive it.

[00:29:08] Speaker 00:
And so part of the big indicators was that he was concealing this throughout this time period.

[00:29:13] Speaker 00:
I think we'd have a much different case.

[00:29:15] Speaker 00:
I'm sorry, Your Honor.

[00:29:15] Speaker 03:
I'm sorry.

[00:29:16] Speaker 03:
Why don't you finish your thought, and then I'll go on.

[00:29:18] Speaker 00:
I think we'd have a much different case if all you had were the financial records.

[00:29:24] Speaker 00:
He had made attempts to reveal that to Social Security, but here you have evidence that he was concealing this.

[00:29:32] Speaker 03:
So I want to ask you a question about the jury instruction.

[00:29:35] Speaker 03:
The appellant argues that the testimony at trial reflected that even the witnesses were confused about what income is.

[00:29:49] Speaker 03:
and that that would be a basis on which to help the jury understand by giving the instruction.

[00:29:57] Speaker 03:
Why isn't that a good argument?

[00:30:00] Speaker 00:
I don't think it's a bad argument, Judge Matheson, to say that there could have been an instruction that helped the jury.

[00:30:08] Speaker 00:
The instruction left off with the government is required to prove that he's not entitled to the benefits.

[00:30:15] Speaker 00:
The witness testimony explained the test about eligibility.

[00:30:20] Speaker 04:
Witness testimony?

[00:30:22] Speaker 04:
I mean, juries are instructed by the judge.

[00:30:26] Speaker 04:
Is there anywhere that this jury was told

[00:30:30] Speaker 04:
He's not entitled to these benefits if his net, not gross, income exceeded this threshold.

[00:30:39] Speaker 00:
Not in the instructions, Judge McHugh.

[00:30:41] Speaker 00:
No.

[00:30:42] Speaker 04:
So they're supposed to extrapolate that from some testimony they heard from a witness.

[00:30:48] Speaker 00:
I think in some ways the instructions

[00:30:52] Speaker 00:
are generic.

[00:30:53] Speaker 00:
The pattern instruction is even more generic than the one that was given in this case.

[00:30:57] Speaker 00:
This case actually went down into eligibility.

[00:31:00] Speaker 00:
The pattern just says, prove its government property.

[00:31:02] Speaker 00:
And then

[00:31:05] Speaker 00:
Judges try to fashion what I think is a reasonable balance between defining every single term, explaining every single test, and allowing those things to be given in testimony.

[00:31:17] Speaker 00:
Here I would say, Judge McHugh, there was no dispute as to what the test was.

[00:31:22] Speaker 00:
That evidence came in unrefuted.

[00:31:25] Speaker 00:
And also in closing, the defense was able to actually read the regulations to the jury.

[00:31:33] Speaker 00:
And the United States didn't dispute it and say, no, no, no, that's not correct.

[00:31:37] Speaker 00:
You can rely on gross income.

[00:31:39] Speaker 00:
Well, we embraced that burden that it was net income.

[00:31:42] Speaker 03:
So we have this combination of some but a dearth of evidence on expenses that could be used to calculate net income.

[00:31:55] Speaker 03:
We don't have a jury instruction on income.

[00:31:58] Speaker 03:
And I take it there was no expert financial

[00:32:03] Speaker 03:
the analyst witnessed to help the jury understand whether there was accountable income.

[00:32:11] Speaker 03:
So just in terms of the core of your argument, why is it that there was sufficient evidence?

[00:32:24] Speaker 00:
Why there was sufficient evidence or on this question about the jury instruction or sort of been together?

[00:32:29] Speaker 03:
What I'm suggesting is this is all coalescing.

[00:32:32] Speaker 00:
Right.

[00:32:33] Speaker 00:
And Judge Matheson, I take us back to there was evidence that he was, and I see, please continue.

[00:32:41] Speaker 00:
I'm over, OK, thank you.

[00:32:43] Speaker 00:
There was evidence about his business practices, that he pocketed money, that he concealed money, that he didn't report money.

[00:32:50] Speaker 00:
There was evidence going years back that he'd been doing this and lying to Social Security about it.

[00:32:55] Speaker 00:
And so with the financial evidence that we did show, that corroborated

[00:33:01] Speaker 00:
What you could infer from him simply concealing is that he knew he was ineligible to receive these benefits.

[00:33:10] Speaker 04:
So we have the lies that support the other convictions.

[00:33:17] Speaker 04:
And your argument, as I'm understanding it, is that because he lied, we can infer that he wasn't entitled to the benefits.

[00:33:28] Speaker 04:
and that, therefore, you didn't have to prove that he wasn't entitled to the benefits?

[00:33:35] Speaker 00:
In a way, Judge McHugh, but I'm not saying that far.

[00:33:37] Speaker 00:
And it sort of gets to the questions you were asking opposing counsel.

[00:33:44] Speaker 00:
The lies about whether he was earning any income at all,

[00:33:52] Speaker 00:
corroborate that he knew he was over that threshold, and that's why he was concealing it.

[00:33:58] Speaker 04:
He knew he was working, right?

[00:34:00] Speaker 04:
And he said he wasn't working.

[00:34:02] Speaker 04:
But unless he sat down and did all the... I mean, the section of the brief from the appellants that Judge Matheson read, their position is that business was losing money when you tally all this up.

[00:34:18] Speaker 04:
So, you know, maybe he didn't even need to lie.

[00:34:22] Speaker 04:
But it seems to me that's not his lie, doesn't seem to me to be a substitute for your requirement to prove an element of the crime.

[00:34:32] Speaker 00:
I don't think it's a substitute, Judge McHugh, but it's corroborative.

[00:34:36] Speaker 00:
And so when those two things are put together, I believe that the jury can infer from that circumstantial evidence that we met our burden.

[00:34:45] Speaker 03:
Thank you, counsel.

[00:34:46] Speaker 03:
I think you both came in at about the same, so we're going to consider the case submitted and counsel are excused.