United States v. Anthony J. Gricco, William T. McCardell in 00-2179

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (Dist. Court Nos. 99-cr-00202-1 and 99-cr-00202-2) District Court Judge: Clarence C. Newcomer[Copyrighted Material Omitted][Copyrighted Material Omitted][Copyrighted Material Omitted][Copyrighted Material Omitted][Copyrighted Material Omitted]

F. Emmett Fitzpatrick (Argued), 926 Public Ledger Building 610 Chestnut Street Philadelphia, PA 19106, for Appellant William T. McCardell (No. 00-2179).

Peter Goldberger (Argued), Pamela A. Wilk, Esq., 50 Rittenhouse Place Ardmore, PA 19003-2276, for Appellant Anthony J. Gricco (No. 00-2149).

Michael R. Stiles, U.S. Attorney, Walter S. Batty, Jr., Louis D. Lappen (Argued), Richard J. Zack (Argued), Office of the United States Attorney, 615 Chestnut Street, Ste. 1250 Philadelphia, PA 19106-4476, for Appellee.

Before: Alito and Mckee and KRAVITCH,* Circuit Judges

Appellants Anthony Gricco and Michael McCardell were convicted of conspiracy to defraud the United States, tax evasion, and making false tax returns. All of the charges related to the conspirators' failure to report on their personal income tax returns money that had been stolen from airport parking facilities. We affirm the appellants' convictions, but we vacate their sentences and remand for further sentencing proceedings and resentencing.

From 1990 to 1994, Anthony Gricco was the regional manager for private companies that contracted with the Philadelphia Parking Authority to operate the parking facilities at the Philadelphia International Airport. Gricco was responsible for the general operation of the facilities, including the hiring of employees and the collection of parking fees. Michael McCardell, Gricco's brother-in-law, was Gricco's chief assistant. McCardell oversaw the day-to-day activities of the tollbooths and picked up money from the cashiers at the end of their shifts.

The parking facilities at the airport used automated ticket machines as well as cashiers. Upon entering a lot, a customer would take a ticket from a machine. The date and time would be printed on the ticket and encoded in the magnetic strip on the back. To leave the lot, the customer would drive to a tollbooth and the ticket would be put into another machine. This machine would read the date and time of issuance, calculate the length of time that the customer had parked in the lot, and display the parking fee owed. The customer would then pay the cashier in the tollbooth. At the end of a shift, each cashier would bundle together the tickets and cash received and put them in a brown bag labeled with the cashier's name and the number of the tollbooth. Each cashier would also place in the bag a tape from the ticket-reading machine that provided a record of the tickets that the machine had processed. The supervisors then would forward the bags to Gricco's assistants.

In early 1990, Gricco, McCardell, and others made a plan to steal money by substituting customers' real tickets with replacement tickets showing false dates and times of entry. A customer who had parked in the lot for a long period of time would have a real ticket reflecting a high parking fee. On leaving the lot, the customer would pay this fee to the cashier. However, instead of inserting the real ticket into the ticket-reading machine, a cashier participating in the scheme would insert a replacement ticket, and the machine would calculate the parking fee based on the false date and time stamped on the replacement ticket. This replacement ticket would indicate that the customer had parked for only a short period of time, and thus the parking fee would be much lower. The thieves would pocket the difference between the amount paid by the customer and the amount of the fee shown on the replacement tickets.

Michael Flannery, a technician for the company responsible for maintaining the ticket machines, provided the replacement tickets. Flannery also disabled the fare displays on the ticket-reading machines so that customers could not see that the parking fees that they were paying were higher than the fees recorded by the machines.

Flannery initially supplied Gricco with replacement tickets by removing tickets from the ticket-issuing machines and then resetting the counters on those machines. In the beginning, Flannery obtained 30 tickets a day using this method, and one cashier, enlisted by Gricco, used the replacement tickets to steal cash. Gricco scheduled either McCardell or David Million, another supervisor, to oversee the tollbooth plaza at which this cashier worked. Gradually, more corrupt cashiers were enlisted, and eventually Flannery began printing counterfeit tickets.

Gricco, McCardell, Million, and Flannery expanded their scheme over the next four years. At first, Gricco enlisted cashiers who had engaged in a similar but smaller scheme in 1988. Eventually Gricco recruited about 15 other cashiers to participate. Flannery delivered the counterfeit tickets that he manufactured to Gricco, McCardell, or McCardell's wife. McCardell then distributed the replacement tickets to the corrupt cashiers, and at the end of their shifts, McCardell picked up the stolen money and forwarded it to Gricco, who distributed the money among the participants. The cashiers received a portion of the proceeds stolen during their shifts, and the rest was divided into four equal shares for Gricco, McCardell, Million, and Flannery.

The leading participants in the scheme did not report their unlawful income on their federal income tax returns. Gricco kept his money in a safe, loaned cash to others and received repayments in the form of checks or money orders, gave cash to family members, and placed real estate under his family members' names. Through a real estate broker named Ludwig Cappozi, Gricco purchased several properties for cash. Capozzi also engaged in real estate transactions with McCardell's wife, who used cash to purchase properties under both her own and McCardell's name.

The cashiers involved in the scheme also failed to report their unlawful income on their income tax returns. They did not deposit their embezzled funds into banks for fear of being detected by the Internal Revenue Service. Gricco cautioned some cashiers not to put their money in banks, and he advised Flannery and Million to invest in real estate through Capozzi.

The scheme ended in September 1994, when the Philadelphia District Attorney's Office executed search warrants at the airport. In July 1996, the Commonwealth of Pennsylvania brought state charges of theft, forgery, and unlawful use of a computer against Gricco, McCardell, Flannery, Million, and numerous cashiers. The cashiers waived their right to a jury trial and were convicted in the Philadelphia Court of Common Pleas. After a three-day jury trial, Gricco, McCardell, and Million were acquitted, and the judge dismissed Flannery's case.

In April 1999, a federal grand jury returned an indictment against Gricco, McCardell, Million, and Flannery for conspiracy to defraud the United States by obstructing the lawful function of the Internal Revenue Service in the collection of federal income taxes, in violation of 18 U.S.C. S 371; tax evasion, in violation of 26 U.S.C.S 7201; and making false federal income tax returns, in violation of 26 U.S.C. S 7206(1). Prior to trial, Million and Flannery pleaded guilty and agreed to testify for the prosecution. Gricco and McCardell proceeded to trial.

The jury found Gricco and McCardell guilty on all counts. The government submitted a sentencing memorandum asserting that the total amount stolen between 1990 and 1994 was $3.4 million and that the tax loss was $952,000 (i.e., 28% of $3.4 million). The presentence reports adopted the conclusion that the tax loss was $952,000 and applied the base-offense level corresponding to that amount. Gricco and McCardell submitted written objections to these calculations, as well as to various other statements in the presentence report concerning their roles in the airport theft.

The district court held a sentencing hearing. The court first briefly paraphrased the parts of the presentence reports relating to the sentencing enhancements. The court gave Gricco and McCardell an opportunity to present evidence for sentencing purposes, but they declined and instead rested on their written submissions. The court then stated that it had read each party's arguments and would adopt the facts set out in the presentence reports.

The district court sentenced Gricco to 120 months of imprisonment and McCardell to 108 months of imprisonment. The court also sentenced each defendant to three years of supervised release, a $75,000 fine, and $700 in special assessments. Gricco and McCardell appealed.

The appellants contend that their convictions for conspiracy are not supported by sufficient evidence. The appellants were convicted for a so-called "Klein" conspiracy1 -- a conspiracy to defraud the United States by obstructing the lawful function of the Internal Revenue Service in assessing and collecting federal income taxes. See United States v. Shoup, 608 F.2d 950, 956 (3d Cir. 1979).

In order for a Klein conspiracy to exist, an agreed-upon objective must be to impede the IRS. Ingram v. United States, 360 U.S. 672, 679-80 (1959). This need not be the sole or even a major objective of the conspiracy. Id. In addition, impeding the IRS need not be an objective that is sought as an end in itself: an intent to hide unlawful income from the IRS in order to conceal an underlying crime is enough. See, e.g., United States v. Furkin, 119 F.3d 1276, 1280-81 (7th Cir. 1997). Moreover, in a Klein conspiracy case, as in other conspiracy prosecutions, the objectives of the conspiracy may sometimes be inferred from the conduct of the participants. See, e.g., United States v. Applewhaite, 195 F.3d 679, 684 (3d Cir. 1999). In the end, however, the evidence must be sufficient to prove beyond a reasonable doubt that impeding the IRS was one of the conspiracy's objects and not merely a foreseeable consequence or collateral effect. See United States v. Goldberg, 105 F.3d 770, 774 (1st Cir. 1997) ("[M]ere collateral effects of jointly agreed-to activity, even if generally foreseeable, are not mechanically to be treated as an object of the conspiracy.") United States v. Adkinson, 158 F.2d 1147, 1154 (11th Cir. 1998) (The government must "prove that there was an agreement whose purpose was to impede the IRS (the conspiracy), and that each defendant knowingly participated in that conspiracy."(emphasis omitted)). In determining whether the evidence is sufficient, we must of course view the proof in the light most favorable to the verdict and ask whether any rational jury could have found that the government met its burden. See, e.g., United States v. Frorup, 963 F.2d, 41, 42 (3d Cir. 1992). In this case, the government contends that the evidence is sufficient to meet this standard and relies chiefly on three categories of circumstantial proof.

First, the government relies on evidence that Gricco, McCardell, and other participants in the scheme did not report their illicit income. This evidence of parallel individual conduct has some probative value for present purposes, but it is plainly not enough by itself to show an agreed-upon objective to impede the IRS. It would not be at all surprising if all of these participants independently reached the conclusion that it would be best not to report their illicit income -- either because they feared attracting investigative attention or because they simply wanted to keep the money that they would have been required to pay in taxes if the extra income had been reported. Accordingly, the mere fact that participants in the scheme did not report the income in question cannot reasonably be viewed as giving rise to a strong inference that the participants agreed upon this course of action.

Second, the government points to evidence that Gricco and Capozzi, the real estate broker who assisted him in purchasing property, structured various financial transactions so as to avoid the filing of currency transaction reports.2 In addition, the government notes that on one occasion Gricco told Million never to "put any large sums of money in the bank, to be careful with that, especially anything over $10,000 because that would generate a report the bank would send to the IRS." Gov't Brief at 40. This proof has some probative significance for present purposes because Gricco's desire to avoid the filing of currency transaction reports could have stemmed from a fear that such reports would interfere with his plan to evade the payment of taxes on the illicit income. We recognize, however, that the value of this evidence is limited. The appellants were not convicted of conspiring to violate the anti-structuring statutes, see 31 U.S.C. S 5322-23, but with conspiring to obstruct the IRS in the assessment and collection of taxes, and structuring does not necessarily result in the evasion of taxes.

The government's best evidence against Gricco is testimony that he told various participants not to deposit their illicit income in a bank but instead to purchase safes for their homes. These individuals testified that they followed this advice because they did not want to attract the attention of the IRS. It is likely that a person who acquires illegal cash and places that cash in a home safe, rather than a bank, will not report the cash as income on his or her tax returns. Accordingly, a rational jury could infer that Gricco knew that the participants to whom he gave this advice would, in all likelihood, not pay tax on their illicit income.

The difficult question is whether a rational jury could go further and find that Gricco not only foresaw that this would occur but actually intended for it to occur. Although the question is close, we conclude that the evidence, viewed as a whole, could persuade a rational jury to make such a finding. A rational jury could conclude that, if participants in the embezzlement scheme had reported their illicit income, this might have sparked an investigation that might have ultimately led to Gricco. Thus, not only did Gricco have strong grounds to foresee that the participants he advised would not report their illegal income, but a rational jury could conclude that he had also a reason to desire this result and that the result was something that he specifically intended. Viewing all of the evidence against Gricco together, we hold that it is sufficient to support his conspiracy conviction.

We reach the same conclusion respecting McCardell. McCardell admitted that Gricco told him to purchase a safe and that he did so. A rational jury could infer that McCardell agreed upon the objective of not reporting or paying taxes on the illicit income because to do so would have created a risk of discovery. We cannot say that the evidence against McCardell is insufficient as a matter of law.

In addition to the conspiracy count, Gricco and McCardell were each convicted of multiple counts of tax evasion, in violation of 26 U.S.C. S 7201, and making false tax returns, in violation of 26 U.S.C. S 7206(1). Gricco and McCardell contend that their convictions for violating S 7201 and S 7206(1) merge and that the district court therefore erred in entering judgments of convictions and sentences under both provisions.

Neither Gricco nor McCardell raised this argument in the district court, and therefore our review is governed by Fed. R. Crim. Proc. 52 (b), which provides that "[p]lain errors or defects affecting substantial rights may be noticed although they were not brought to the attention of the court." In order to reverse under Rule 52(b), "[t]here must be an `error' that is `plain' and that `affect[s] substantial rights.' " United States v. Olano, 507 U.S. 725, 732 (1993). "Moreover, Rule 52(b) leaves the discretion to correct the forfeited error within the sound discretion of the court of appeals, and the court should not exercise that discretion unless the error " `seriously affect[s] the fairness, integrity or public reputation of judicial proceedings." ' " Id. (citations omitted).

In this case, the parties' briefs focus primarily on the question whether the district court committed any sort of error at all, and both sides advance reasonable arguments relating to that question. Whether a defendant may be punished under two separate statutory provisions for the same act or transaction depends on the intent of the lawmakers. See Ball v. United States, 470 U.S. 856, 861 (1985). It is presumed, however, that punishment under both provisions was not intended if the provisions proscribe the "same offense," see, e.g., Rutledge v. United States, 517 U.S. 292, 297 (1996), and whether two provisions proscribe the same offense is generally determined by applying the rule set out in Blockburger v. United States, 284 U.S. 299, 304 (1932), which asks whether each offense requires proof of an element that the other does not. If each offense contains such an element, it is presumed, subject to rebuttal, that multiple punishment is allowed. See Rutledge, 517 U.S. at 297; Blockburger, 284 U.S. at 304.

In the present case, the government argues that the offenses of tax evasion (26 U.S.C. S 7201) and making a false return (26 U.S.C. S 7206(1)) each contain an element that the other lacks. The offense of tax evasion requires proof of an attempt to evade the payment of a tax that is due, whereas the offense of making a false return does not require proof of this element: a taxpayer who makes a material misstatement of fact on a return may be convicted under 26 U.S.C. S 7206(1) even if the taxpayer pays the full amount that is due. Similarly, the offense of making a false return requires proof of a false statement on a return, whereas a violation of 26 U.S.C. S 7201 may be shown even if the taxpayer did not file a return at all.

The defendants argue, however, that the Blockburger test merely raises a presumption that Congress meant to permit punishment under both provisions, that many other circuits have held that the offenses of tax evasion and making a false return merge when they are based on the same act,3 and that the Supreme Court in Sansone v. United States, 380 U.S. 343, 349 (1965), stated that the offense of filing a false return, in violation of 26 U.S.C. S 7203, may be a lesser included offense of tax evasion in some circumstances.

We find it unnecessary in this case to decide whether the district court committed an error in entering judgments of conviction and imposing sentences on both offenses. Assuming for the sake of argument that the district court erred, we conclude that the other prongs of the test under Rule 52(b) are not met. The sentences imposed on Gricco and McCardell for making false returns are concurrent to their sentences for tax evasion, and thus the former sentences do not increase the length of their incarceration. The only immediate practical effects of the concurrent sentences on the S 7206(1) counts are special assessments totaling $700 for each defendant. Recently, in United States v. Roberts, 262 F.3d 286, 292-94 (4th Cir. 2001), the court held that concurrent sentences and small special assessments were insufficient to show that the defendants' substantial rights had been affected by an alleged error and did not provide an adequate basis for the court, in the exercise of its discretion, to notice an error under Rule 52(b). We reach the same conclusion here. We do not believe that Gricco and McCardell have suffered a deprivation of "substantial rights," and in the exercise of our discretion, we decline to entertain the argument that the defendants did not raise below.

McCardell challenges the sufficiency of the evidence supporting his convictions for tax evasion, in violation of S 7201, and making false returns, in violation of S 7206(1). In considering this argument, we must again view the evidence in the light most favorable to the verdict and ask whether a reasonable jury could find beyond a reasonable doubt that McCardell committed these offenses. See Frorup, 963 F.2d at 42.

At least ten participants in the underlying scheme testified that McCardell was involved in the thefts. In addition, Robert Walker, an investigator from the New Jersey Division of Criminal Justice, testified that from 1991 to 1994, McCardell spent $161,000 in excess of documented income.

App. at 998. IRS agent Frank Bucci took figures from Million's testimony about the proceeds that he received each year (which should be the same as McCardell's proceeds since they received equal portions) and compared these figures to the sums that McCardell had reported on his tax returns. App. at 1065-66. Agent Bucci concluded that the discrepancy between the two sets of numbers gave rise to an additional tax liability of $57,761 for the years 1992, 1993, and 1994. App. at 1059. McCardell does not dispute that he signed the tax returns, which contain declarations that the signatures were made under penalty of perjury. App. at 1140. Taken together, this evidence is sufficient to establish that McCardell attempted to evade taxes and made false returns. There is substantial evidence from which a rational factfinder could find beyond a reasonable doubt that the elements of both S 7201 and S 7206(1) were proven.

Both appellants claim that the district court made erroneous evidentiary rulings relating to the prior state prosecution. First, they argue that the federal government was collaterally estopped from introducing evidence of the thefts because the appellants had already been acquitted of theft charges in state court. We reject this argument because collateral estoppel does not apply in successive prosecutions by different sovereigns. United States v. Bell, 113 F.3d 1345, 1351 n.6 (3d Cir. 1997); United States v. Pungitore, 910 F.2d 1084, 1106 n.18 (3d Cir. 1990). It is well settled that there is no violation of the Double Jeopardy Clause or the Due Process Clause in successive prosecutions for the same offense by the federal government and a state government. See, e.g., Abbate v. United States, 359 U.S. 187, 194 (1959); Bartkus v. Illinois, 359 U.S. 121, 137 (1959); United States v. Lanza, 260 U.S. 377, 382 (1922). Since different sovereigns are permitted to prosecute the same defendant for the same crime,"[i]t would be anomalous indeed if a sovereign were allowed the greater power of reprosecuting individuals for offenses for which they had been acquitted but were denied the lesser power of proving the underlying facts of such offenses." United States v. Tirrell, 120 F.3d 670, 677 (7th Cir. 1997).

Second, the appellants argue that the district court erred in refusing to admit evidence of their state acquittals. It is well established, however, that evidence of prior acquittals is generally inadmissible. See, e.g., United States v. De La Rosa, 171 F.3d 215, 219 (5th Cir. 1999); United States v. Marrero-Ortiz, 160 F.3d 768, 775 (1st Cir. 1998); United States v. Thomas, 114 F.3d 228, 249-50 (D.C. Cir. 1997); Prince v. Lockhart, 971 F.2d 118, 122 (8th Cir. 1992); United States v. Jones, 808 F.2d 561, 566 (7th Cir. 1986); United States v. Irvin, 787 F.2d 1506, 1516-17 (11th Cir. 1986); United States v. Sutton, 732 F.2d 1483, 1492 (10th Cir. 1984); McKinney v. Galvin, 701 F.2d 584, 586 n.5 (6th Cir. 1983); United States v. Viserto, 596 F.2d 531, 537 (2d Cir. 1979). "A judgment of acquittal is relevant to the legal question of whether the prosecution is barred by the constitutional doctrine of double jeopardy or of collateral estoppel. But once it is determined that these pleas in bar have been rejected, a judgment of acquittal is not usually admissible to rebut inferences that may be drawn from the evidence that was admitted." United States v. Viserto, 596 F.2d 531, 537 (2d Cir. 1979). "[A]lso a judgment of acquittal is hearsay. The Federal Rules of Evidence except from the operation of the hearsay rule only judgments of conviction, Rule 803(22), not judgments of acquittal." Id. See also, e.g., 2 McCormick on Evidence, S 298 (John W. Strong ed., 5th ed. 1999). Judgments of acquittal, however, are still inadmissible in large part because they may not present a determination of innocence, but rather only a decision that the prosecution has not met its burden of proof beyond a reasonable doubt. Finally, even if the judgments of acquittal were admissible, exclusion under Fed. R. Evid. 403 would be justified -- and highly recommended--because the danger of jury confusion would greatly outweigh the evidence's limited probative value.4 See, e.g., De La Rosa, 171 F.3d at 219-20.

Gricco argues that the district court erred in admitting evidence of his role in an earlier, separate scheme to embezzle money from the airport. Gricco contends that the district court should have excluded this evidence under Federal Rule of Evidence 404(b) because the government offered the evidence solely to show Gricco's propensity for criminal activity.

In a pre-trial memorandum, the government revealed that it intended to introduce evidence that in 1988 Gricco had employed three cashiers to embezzle money from airport parking facilities using counterfeit replacement tickets that he provided to them. Government's Trial Memorandum, reproduced in Gricco Br. at A18. The government argued that this evidence was admissible under Rule 404(b) because it "help[ed] establish Gricco's plan to steal money from the Airport, his opportunity to do so, his relationship with members of the scheme, and his intent and knowledge." Id. at A20. At trial, the cashiers who had participated in the earlier theft testified concerning Gricco's role in that plot. The government offered this testimony to show that, prior to the commencement of the scheme involved in this case, Gricco already knew that he could steal money from the parking facilities using counterfeit tickets and that he knew that he could rely on the cashiers who had participated in the earlier scheme. The government stated that the probative value of this evidence outweighed any unfair prejudicial effect because the evidence "does not suggest that the jury should reach a decision based on an improper basis; rather, the evidence is integral to establish the scheme." Id. at A19.

The district court ordered that the evidence of the prior theft could be used only to establish "the relationship between Gricco and the cashiers he hired to steal, his opportunity to run the scheme to steal, and his intent and knowledge about the scheme." District Court's Pretrial Order, reproduced in Gricco Br. at A6.2. The district court also cautioned the jury on the limited use of the evidence and instructed it not to draw any inferences of bad character from it. App. at 218-19, 1402-04.

A trial court's evidentiary rulings under Rule 404(b) "may be reversed only when they are clearly contrary to reason and not justified by the evidence." United States v. Murray, 103 F.3d 310, 316 (3d Cir. 1997) (citation and quotation omitted). Even under this standard, we are doubtful about the propriety of admitting evidence of Gricco's involvement in the prior scheme.

In order to admit evidence under Rule 404(b), "the proponent must clearly articulate how that evidence fits into a chain of logical inferences, no link of which may be the inference that the defendant has the propensity to commit the crime charged." United States v. Himelwright, 42 F.3d 777, 782 (3d Cir. 1994). Here, Gricco was on trial for tax offenses, not theft. While the evidence of the prior thefts may have been relevant to show an intent to commit further thefts, it is questionable whether this evidence was relevant to show an intent to commit the tax offenses. See id. ("In order to admit evidence under the`intent' component of Rule 404(b), intent must be an element of the crime charged and the evidence offered must cast light upon the defendant's intent to commit the crime.") (emphasis added). Nor was evidence of the earlier scheme particularly relevant to show Gricco's opportunity to carry out his tax offenses or the knowledge needed to do so.

We find it unnecessary, however, to decide whether the district court erred in admitting the evidence, because it is "highly probable that the evidence... did not contribute to the jury's judgment of conviction," Murray, 103 F.3d at 319 (quoting previous Third Circuit precedent), and its admission was therefore harmless. Because there was overwhelming evidence in the form of the co-conspirators' testimony to establish the 1990-1994 scheme to steal from the Parking Authority, we are convinced that the jury would have found that Gricco derived unlawful gains from this scheme even without any evidence that Gricco had participated in the earlier scheme. Accordingly, the admission of the Rule 404(b) evidence is not a ground for reversal.

McCardell argues that the district court erred in admitting out-of-court statements under the co-conspirator exception to the hearsay rule.5 See Fed. R. Evid. 801(d)(2)(E). In making this argument, McCardell's brief cites a passage in the trial transcript in which McCardell's counsel objected when a cashier began to relate certain statements made to her by Gricco. McCardell Br. at 34. McCardell's attorney objected on the ground that there had been no evidence of Gricco's participation in a conspiracy and that Gricco's out-of-court statements were therefore inadmissible hearsay. App. at 92. The district court overruled the objection after the government assured the court that it would establish the existence of a conspiracy. App. at 92.

We hold that Gricco's statements were properly admitted against McCardell under Rule 801(d)(2)(E), which governs statements by "a coconspirator of a party during the course and in furtherance of the conspiracy." To admit statements under this rule, it must be shown by a preponderance of the evidence that "(1) a conspiracy existed; (2) the declarant and the party against whom the statement is offered were members of the conspiracy; (3) the statement was made in the course of the conspiracy; and (4) the statement was made in furtherance of the conspiracy." United States v. Ellis, 156 F.3d 493, 496 (3d Cir. 1998). In this case, as we have held, the evidence sufficed to show that McCardell and Gricco both were members of a conspiracy having as one of its objectives the impeding of the IRS. In addition, the evidence very clearly showed that they were both members of a conspiracy to steal money from the airport. This latter conspiracy provided an additional basis for admitting co-conspirator statements even though this theft conspiracy was not charged in the indictment. See id. at 497 (statements are admissible pursuant to Rule 801(d)(2)(E) even if the basis for admission is a conspiracy different from the one charged). Thus, the district court did not err in admitting Gricco's statements.

The appellants raise numerous challenges to their sentences. We vacate the sentences and remand for a new calculation of the tax loss. On remand, the district court should make specific findings of fact rather than merely adopting the Presentence Reports (PSRs), as it did at the sentencing hearing.

Federal Rule of Criminal Procedure 32(b)(6) permits a sentencing court to accept a presentence report as its findings of fact, but there is an exception for"any unresolved objection" to the presentence report."For each matter controverted, the court must make either a finding on the allegation or a determination that no finding is necessary because the controverted matter will not be taken into account in, or will not affect, sentencing." Fed. R. Crim. P. 32(c)(1). We have stated that "[a] finding on a disputed fact or a disclaimer of reliance upon a disputed fact must be expressly made.... This Rule is strictly enforced and failure to comply with it is grounds for vacating the sentence." United States v. Electrodyne Sys. Corp., 147 F.3d 250, 255 (3d Cir. 1998).

Before the district court, the appellants disputed almost all of the factual bases for sentencing, including the amount of tax loss, which dictated their base offense level. The PSRs did not detail how the tax loss was calculated, and the district court's brief statement that it was adopting the PSRs was inadequate to satisfy Rule 32(c)(1)'s requirements.6 Although defense counsel stated at the sentencing hearing that they would rely on their written objections rather than orally present their arguments, the district court should have made specific findings regarding the disputed facts that were relevant to sentencing.

For tax offenses, a defendant's base offense level is determined by the tax loss. U.S.S.G. SS 2T1.1(a)(1), 2T1.9.7 If the offenses involved underreporting of gross income on a personal tax return, the tax loss is treated as equal to 28% of the unreported income, unless a more accurate determination of the tax loss can be made. U.S.S.G. S 2T1.1(c)(1)(A). The base offense level is 18 for a tax loss of more than $550,000 but less than $950,000. The base offense level is 19 for a tax loss of more than $950,000 but less than $1,500,000. The PSRs for Gricco and McCardell applied a base offense level of 19, based on a tax loss of $952,000. This amount was calculated by taking 28% of $3.4 million, the total sum of money that the government asserted was stolen from the airport.

The PSRs adopted this $3.4 million figure from the government's sentencing memorandum. As we detail below, the sentencing memorandum was inadequate and inaccurate.8

The Sentencing Guidelines provide that the base offense level shall be determined based on relevant conduct, which includes the defendant's own conduct and, "in the case of a jointly undertaken criminal activity (a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy), all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity, that occurred during the commission of the offense of conviction, in preparation for that offense, or in the course of attempting to avoid detection or responsibility for that offense." U.S.S.G. S 1B1.3(a)(1)(B). In order to be included in determining the defendant's offense level,