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United States v. Smith

United States Court of Appeals, Eighth Circuit

December 16, 2019

United States of America Plaintiff- Appellee
v.
Darrell Smith Defendant-Appellant

          Submitted: September 27, 2019

          Appeal from United States District Court for the Northern District of Iowa - Waterloo

          Before SMITH, Chief Judge, WOLLMAN and ERICKSON, Circuit Judges.

          SMITH, Chief Judge.

         In July 2017, Darrell Smith pleaded guilty to wire fraud, in violation of 18 U.S.C. § 1343.[1] The district court[2] sentenced him to a term of 151 months' imprisonment. On appeal, Smith challenges the district court's calculation of his criminal history score. Smith contends that the district court erred by counting his prior tax-related conviction. We affirm.

         I. Background

         For many years, Smith worked as a broker and an investment advisor at several investment firms. In 2008, Smith and his partner formed an Iowa-based investment partnership-named Energae, LP ("Energae")-to invest in various biofuel companies. Energae bought a 49 percent interest in an ethanol production plant called Permeate Refining, LLC ("Permeate"), which was owned by Randy Less.

         A. Prior Conviction

         As Permeate's majority holder, Less delegated some management and control over Permeate's corporate payroll to Smith. The law required Permeate to withhold employment taxes from the taxable wages of its employees and to file the appropriate tax returns with the Internal Revenue Service (IRS). Smith and Less withheld employment taxes from the taxable wages of Permeate's employees, but Smith and Less did not pay those taxes to the IRS in the fiscal quarters for 2011 and 2012. In total, they failed to account for and pay over $502, 683.

         In January 2016, Smith and Less were indicted for various crimes. Smith pleaded guilty to one count of failure to account for and pay over employment taxes and was sentenced to 13 months' imprisonment.

         B. Offense of Conviction

         In 2013, a client for Smith's former employer, Multi-Financial Services Corporation, filed a complaint against Smith, alleging that Smith had purchased investments without the client's authorization. An investigation revealed that Smith had intentionally devised and executed a scheme to defraud several of his investment clients beginning in 2010 and continuing through at least April 2013. He stole money from his investment clients' accounts and transferred the stolen funds to Energae. Energae, in turn, used the stolen funds to pay expenses related to Permeate's operations and to invest in other entities.

         At various times, Smith used pre-signed, blank authorization forms or forged his clients' signatures in order to effectuate the unauthorized transfer of funds. He also diverted funds from his investment clients' accounts using checks. He often used wire and mail transfer to send and deposit the stolen funds into Energae's accounts. During the course of Smith's fraudulent scheme, he stole over $2.4 million from 10 investment clients.

         In May 2017, the government charged Smith with wire fraud. Shortly thereafter, he pleaded guilty to the charge pursuant to a plea agreement. Smith's plea agreement reserved the right to contest the probation office's determination of his criminal history and relevant category under the Guidelines. In the presentence investigation report (PSR), the probation office recommended adding two criminal history points for Smith's prior ...


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