United States Court of Appeals For the First Circuit

No. 20-1093

UNITED STATES OF AMERICA,

Appellee,

v.

JOHN H. NARDOZZI,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Lynch, Lipez, and Kayatta, Circuit Judges.

Seth Kretzer for appellant. Mark S. Determan, Attorney, Tax Division, with whom Richard E. Zuckerman, Principal Deputy Assistant Attorney General, S. Robert Lyons, Chief, Criminal Appeals and Tax Enforcement Policy Section, Katie Bagley, Attorney, Tax Division, Joseph B. Syverson, Attorney, Tax Division, and Andrew Lelling, United States Attorney, were on brief, for appellee.

June 24, 2021 LYNCH, Circuit Judge. Defendant John Nardozzi appeals

from his convictions for one count of conspiracy to defraud the

United States, in violation of

, and eight counts

of aiding or assisting in the filing of a false tax return, in

violation of

(2). He further challenges the

district court's imposition by reference of the conditions of

supervised release stated in the United States Probation Office's

("Probation's") Presentence Report ("PSR"), and the district

court's imposition of restitution without setting a specific

payment schedule at the time of sentencing. We find that his

challenges are meritless and affirm.

I.

Before his indictment in 2018, Nardozzi was a Certified

Public Accountant ("CPA") with over forty years' experience.

Beginning in 2008, he operated his own accounting firm. Nardozzi

provided tax preparation and tax return filing services to Brian

Joyce ("Joyce"), his wife Mary Joyce, and Joyce's law firm, Brian

A. Joyce, Attorney-at-Law, P.C. ("the Joyce law firm"). At the

time, Brian Joyce was a Massachusetts state senator.

In December 2017, a federal grand jury indicted Joyce on

113 felony counts, including racketeering, extortion, fraud, money

laundering, and conspiracy to defraud the IRS. The indictment

alleged that Joyce solicited payments from businesses in exchange

for political favors, and then falsely characterized those

- 2 - payments as legitimate legal fees paid to the Joyce law firm.

Joyce died in September 2018, before his case went to trial.

One month after Joyce was indicted, on January 18, 2018,

a grand jury indicted Nardozzi for his role in preparing and filing

tax returns on behalf of Brian and Mary Joyce, and the Joyce law

firm. As described, the indictment charged him with conspiracy to

defraud the United States and eight counts of aiding or assisting

in filing false tax returns.

Conspiracy to defraud the United States by impeding the

IRS's assessment and collection of taxes is commonly known as a

Klein conspiracy. United States v. Mubayyid,

(1st

Cir. 2011); see also United States v. Klein,

(2d Cir.

1957). "To prove a Klein conspiracy, the government is required

to establish both 'an agreement whose purpose was to impede the

IRS . . . ,' and the knowing participation of each defendant in

that conspiracy." Mubayyid,

(emphases omitted)

(quoting United States v. Adkinson,

(11th Cir.

1998)).

Aiding or assisting in the filing of a false tax return

requires proof that the defendant "[w]illfully aid[ed] or

assist[ed] in, or procure[d], counsel[ed], or advise[d] the

preparation or presentation under, or in connection with any matter

arising under, the internal revenue laws, of a return, affidavit,

- 3 - claim, or other document, which is fraudulent or is false as to

any material matter."

(2).

At trial, the evidence against Nardozzi was

overwhelming. The government presented evidence that Nardozzi had

prepared and filed tax returns on behalf of Joyce, Mary Joyce, and

the Joyce law firm which defrauded the United States by

misreporting income and mischaracterizing transactions, costing

the government $598,362.80 in tax revenue.

The government presented evidence that Joyce used his

law firm to pay personal expenses, such as tuition, credit card

bills, vacations, car purchases, and shopping expenses, and

Nardozzi then classified those payments as tax-deductible business

expenses, reducing the Joyce law firm's taxable income by

approximately $2.2 million over a four-year period. IRS revenue

agent James McCurdy testified that this defrauded the government

out of $793,982 in corporate taxes.1

1 IRS revenue agent McCurdy testified that this amount was offset by an overpayment of $195,619.20 on Joyce's personal tax returns between 2011 and 2014, resulting in the total net loss to the government of $598,362.80 during that period. At trial, the government's theory was that Nardozzi prepared and filed returns for Joyce that characterized business income as personal income in order to benefit from the lower effective individual tax rate. Nardozzi then misused tax devices to minimize Joyce's and his wife's individual tax obligations. Consequently, when IRS revenue agent McCurdy calculated the Joyces' actual tax obligation between 2011 and 2014, he found that the Joyces had overpaid taxes on their individual incomes but had avoided a much larger amount in corporate taxes owed by the Joyce law firm.

- 4 - The government presented evidence Nardozzi prepared and

filed tax documents that assigned $390,000 of the Joyce law firm's

revenue to Mary Joyce -- even though she performed no work for the

firm -- to inflate her allowable tax-deductible SEP-IRA2

contributions. By increasing the maximum tax-deductible

contribution, the returns prepared and filed by Nardozzi allowed

the Joyces to claim an additional $267,807 in deductions on their

personal returns, impeding the IRS's accurate assessment of taxes

against them.

Nardozzi also prepared and filed a return on behalf of

Joyce which improperly classified a $427,000 stock purchase as an

IRA rollover. This fraudulently allowed Joyce to avoid paying any

taxes or early withdrawal penalties on $217,500 withdrawn from

Joyce's SEP-IRA and $105,125 withdrawn from Mary Joyce's SEP-IRA

(with the remaining funds for the stock purchase coming from other

sources).

Nardozzi failed to properly report on Joyce's 2014

return -- which he prepared and filed -- Joyce's use of

approximately $150,000 of business funds to pay off a personal

loan as taxable income. Nardozzi does not dispute on appeal that

2 SEP-IRA stands for "Simplified Employee Pension Individual Retirement Arrangement." West's Tax Law Dictionary § S1175 (2021). A SEP-IRA allows a self-employed business owner to provide retirement benefits to both the business owner and his or her employees. Id. Individuals may make pre-tax contributions to the SEP-IRA out of the income they earn from the business.

- 5 - each of these instances "impede[d] the IRS." Mubayyid,

(emphasis omitted) (quoting Adkinson,

).

On counts two through eight, the government also

introduced evidence of at least eight separate incidents where

Nardozzi prepared and filed tax returns that omitted or

mischaracterized income for Joyce, his wife, or his law firm.

Nardozzi does not contest on appeal that the returns prepared and

filed by Nardozzi were false.

The government further introduced at trial evidence of

Nardozzi's awareness of the particular tax considerations for a

C-corporation, such as the Joyce law firm. Nardozzi had, for

example, discussed the problem of "double-taxation" between

personal and corporate taxes for a C-corporation in a journal

article and at seminars.

Nardozzi's trial counsel argued in defense that Nardozzi

relied on the information provided to him by Joyce's bookkeepers,

or by Joyce directly, and that Nardozzi was "out of the loop."

Nardozzi's counsel argued to the jury in closing that Nardozzi

"relied on what the bookkeepers told him" and he did not act with

"criminal intent."

On October 16, 2019, the jury returned a verdict of

guilty on all counts. On January 9, 2020, the district court held

a sentencing hearing. At his sentencing Nardozzi stated he had

read and understood the PSR prepared by Probation. The district

- 6 - court imposed a sentence of 18 months' imprisonment, and stated,

"[y]ou're subject, during the 3 years of supervised release, to

all of the mandatory conditions of supervision and the special

conditions set forth in Paragraphs 1 through 8 on Page 23 of the

[PSR]."3 Nardozzi did not object. The district court also ordered

Nardozzi to pay restitution in the amount of $598,362.80. It then

issued a written judgment which stated, among other things, that

Nardozzi would pay restitution according to a "court-ordered"

schedule. Nardozzi again did not object, either at sentencing or

in response to the written judgment. On January 15, 2020, Nardozzi

filed this timely appeal.

3 These are: "1. You are prohibited from engaging in an occupation, business, or profession that would require or enable you to prepare taxes or provide consultation on tax issues. 2. You are prohibited from consuming any alcoholic beverages. 3. You must participate in a mental health treatment program as directed by the Probation Office. 4. You must participate in a program for substance abuse counseling as directed by the Probation Office, which program may include testing, not to exceed 104 drug tests per year to determine whether you have reverted to the use of alcohol or drugs. 5. You must pay the balance of any fine or restitution imposed according to a court-ordered repayment schedule. 6. You are prohibited from incurring new credit charges or opening additional lines of credit without the approval of the Probation Office while any financial obligations remain outstanding. 7. You must provide the Probation Office access to any requested financial information, which may be shared with the Financial Litigation Unit of the U.S. Attorney's Office. 8. You shall be required to contribute to the costs of evaluation, treatment, programming, and/or monitoring (see Special Condition # 3 & 4), based on the ability to pay or availability of third- party payment."

- 7 - II.

This court reviews the sufficiency of the evidence de

novo, construing the evidence in the light most favorable to the

verdict. United States v. Stepanets,

(1st Cir.

2021). Reversal is appropriate only if "no rational jury could

have found that the government proved the [offense] element[s]

beyond a reasonable doubt."

This court "review[s] conditions of supervised release

for abuse of discretion." United States v. DaSilva,

(1st Cir. 2016) (quoting United States v. Del Valle-Cruz,

(1st Cir. 2015)). We ordinarily review the district

court's restitution order under the same standard. See United

States v. Montalvo-Cruz,

(1st Cir. 2014).

Where a defendant fails to raise an issue to the district

court, this court reviews only for plain error. See United States

v. Serrano-Beauvaix,

(1st Cir. 2005). To establish

plain error, a defendant must show "(1) that an error occurred

(2) which was clear or obvious and which not only (3) affected the

defendant's substantial rights, but also (4) seriously impaired

the fairness, integrity, or public reputation of judicial

proceedings." United States v. Duarte,

(1st Cir.

2001) (citing Johnson v. United States,

(1997)

(additional citations omitted)).

- 8 - III.

Nardozzi first argues that the government failed to

introduce sufficient evidence that he knowingly conspired to

defraud the United States or that he willfully aided or assisted

Joyce in filing false tax returns. He next argues that the

district court erred by incorporating the conditions of supervised

release recommended by Probation in the PSR by reference, rather

than describing each of those conditions orally at sentencing.

Nardozzi also says the district court erred by failing to impose

at the time of sentencing a specific schedule for the payment of

restitution. None of these arguments has merit.

Nardozzi argues that "there was no evidence of [a]

conspiratorial agreement between Joyce and Nardozzi" and that as

to all counts there is insufficient evidence that Nardozzi acted

either knowingly or willfully.4 We disagree. There is ample

evidence in the record from which the jury could have concluded

there was a conspiratorial agreement between Joyce and Nardozzi.

4 Nardozzi also argues that Joyce and Nardozzi lacked any financial motive for the misstatements on Joyce's returns. He states "Nardozzi was convicted for what had to be one of the least efficacious tax-fraud conspiracies in history" because Joyce made overpayments on his personal taxes for three of the four years of returns covered by Nardozzi's indictment. As we have described, this ignores the fact that the Joyce law firm reduced its taxable income by approximately $2.2 million over the same period, dwarfing any overpayment on Joyce's personal returns. Nardozzi does not challenge on appeal the district court's conclusion that the tax returns which he prepared and filed on behalf of Joyce underpaid the IRS by a net total of $598,362.80.

- 9 - "[I]t is a 'well-established legal principle that a conspiracy may

be based on a tacit agreement shown from an implicit working

relationship.'" Mubayyid,

(quoting United States

v. Patrick,

(1st Cir. 2001)). Nardozzi was an

experienced CPA, with particular knowledge of the tax consequences

of a C-corporation such as the Joyce law firm. Nardozzi repeatedly

mischaracterized personal expenses on Joyce's returns as business

expenses, allowing Joyce to claim millions of dollars in business

tax deductions. In at least two instances -- the early withdrawal

of SEP-IRA funds for Joyce's one-time $427,000 stock purchase and

the use of business funds to pay off a personal loan -- Nardozzi

expressly informed Joyce that the transaction would have negative

tax consequences. When Joyce objected to paying additional taxes,

Nardozzi, knowing it was illegal to do so, followed Joyce's wishes

and reported these transactions in a way that avoided any increased

taxes.

These facts also support the jury's conclusion that

Nardozzi's conduct was knowing and willful. See United States v.

Marek,

(1st Cir. 2008) ("[P]urely circumstantial

evidence can support an inference of knowledge." (quoting United

States v. Lachman,

(1st Cir. 2008))). A jury could

easily conclude that Nardozzi knew that personal expenses could

not be claimed as business deductions and knew the tax implications

of Joyce's financial dealings. A jury could also conclude that

- 10 - Nardozzi understood the consequences of Joyce's dealings based on

Nardozzi's proposal to create backdated corporate minutes

declaring a dividend that could be used to reduce or eliminate

Joyce's personal loan. The government's case is made even stronger

by the fact that Nardozzi expressly advised Joyce that certain

transactions would have adverse tax consequences, but the return

misrepresented those transactions to avoid increased tax

liabilities. In these circumstances, the jury verdict is well

supported by the record at trial.

Nardozzi next argues that the district court erred by

stating that Nardozzi was "subject, during the [three] years of

supervised release, to all of the mandatory conditions of

supervision and the special conditions set forth in Paragraphs 1

through 8 on Page 23 of the [PSR]" without repeating each of those

conditions orally at sentencing.

Under any standard of review, this argument fails.

Mandatory or recommended conditions of release may be incorporated

by reference in the district court's written judgment after

sentencing. See United States v. Tulloch,

(1st

Cir. 2004) (per curiam), as amended (Sept. 17, 2004). In Tulloch

this court stated, "a mandatory . . . condition [of supervised

release] may be included in the written sentencing judgment without

having been mentioned at sentencing" and "the standard supervised

release conditions set out in the United States Sentencing

- 11 - Guidelines may be adopted by reference at the sentencing hearing."

The district court must raise non-standard conditions of

supervised release at sentencing. United States v. Sepúlveda-

Contreras,

(1st Cir. 2006). The district

court need not orally describe each of the non-standard conditions

at the sentencing hearing, however. As the Fifth Circuit stated

in United States v. Diggles,

(5th Cir.), cert.

denied,

(2020), on which Nardozzi relies, "adoption

of a written list of proposed conditions provides the necessary

notice."

"A sentencing court pronounces supervision

conditions when it orally adopts a document recommending those

conditions."

. The district court's express oral

adoption of the conditions of supervised release set out in the

PSR satisfies the standards in Tulloch, Sepúlveda-Contreras, and

Diggles. There was no error in the district court's adoption of

the terms of supervised release in the PSR by reference.

Finally, Nardozzi argues that the district court erred

by failing to impose a specific schedule for payment of restitution

at the time of sentencing. This was not error.5 In United States

5 In any event, because Nardozzi failed to object to the imposition of restitution, our review is only for plain error. Serrano-Beauvaix,

. Nardozzi has not even attempted to show how the district court's failure to set out a specific restitution payment schedule at sentencing affected his substantial rights, so he has failed to demonstrate plain error. Cf. United States v. Sawyer,

(7th Cir. 2008).

- 12 - v. Morán-Calderón,

(1st Cir. 2015), this court held

that if the district court does not set a schedule for restitution

at sentencing it must make its "reservation of authority explicit."

at 52 (quoting United States v. Merric,

(1st

Cir. 1999)). Here, the district court did so. It stated that any

future payment schedule would be "court-ordered." Nardozzi points

to no authority stating that such a reservation of authority is

inadequate.

IV.

The judgment of the district court is affirmed.

- 13 -