California Courts of Appeal Reports
PEOPLE, v. BOUDAMES, A110355 (Cal.App. 12-22-2006) THE
PEOPLE, Plaintiff and Respondent, v. JOSEPH BOUDAMES,
Defendant and Appellant. A110355 Court of Appeal of
California, First District, Division Five December 22,
2006 Certified for Partial Publication[fn*]
[fn*] Pursuant to California Rules of Court, rules 976(b)
and 976.1, this opinion is certified for publication with
the exception of sections II, III, and IV of Background and
sections I, II, and III of Discussion.
[EDITORS’ NOTE: PURSUANT TO CALIFORNIA RULES OF COURT,
RULES 976(b) AND 976.1 THIS OPINION IS CERTIFIED FOR
PARTIAL PUBLICATION. THE SHADED TEXT BELOW REPRESENTS THE
ORIGINAL OPINION AND IS PROVIDED FOR REFERENCE PURPOSES
ONLY.]
Appeal from the Superior Court of San Francisco County, No.
181987, Hon. James J. McBride.
Bill Lockyer, Attorney General Robert R. Anderson, Chief
Assistant Attorney General Gerald A. Engler, Senior
Assistant Attorney General Martin S. Kaye, Supervising
Deputy Attorney General Christopher W. Grove, Deputy
Attorney General, Counsel for plaintiff and respondent.
Steven S. Lubliner, under appointment by the Court of
Appeal, Counsel for defendant and appellant.
Hon. James J. McBride
Joseph Boudames appeals his conviction by jury verdict of
two counts of failing to pay sales taxes (Rev. & Tax. Code,
§ 7153.5) and one count of bribery (Pen. Code,
§ 67.5, subd. (b)). He contends the bribery
conviction must be reversed because it was the result of
entrapment, there is insufficient evidence to support the
failure-to-pay convictions, and the restitution order
incorrectly includes statutory penalties. In the published
portion of our opinion, we address whether a penalty
assessment imposed under Penal Code section 1202.4,
subdivision (a)(2) or a penalty imposed under Revenue and
Taxation Code 6591 may be included in victim restitution
ordered pursuant to Penal Code section 1202.4, subdivision
(f).[fn1]
BACKGROUND
I. Overview
Appellant was the president of a retail computer store in
San Francisco. When an auditor from the California Board of
Equalization (Board), conducting a sales and use tax audit
of the business, informed appellant he had a possible sales
tax arrearage of $160,000, appellant implicitly offered the
auditor a bribe if he would submit an audit report showing
a substantially lower arrearage. Under a clandestine
investigation supervised by the Department of Justice, the
auditor ultimately agreed with appellant to submit a bogus
audit showing a $7,000 arrearage, in exchange for
personally receiving a payment of $10,000. Following the
exchange, appellant’s offices were searched, numerous
records were seized, and he was charged with and found
guilty of bribery and two felony counts of underreported
taxes of more than $25,000 for a consecutive 12month
period: April 1997 to March 1998 and April 1998 to March
1999.
II. Audit of Appellant’s Business
Appellant was president of Boudames Business Machines,
doing business as Bay Area Computers (BAC), a retail
computer store. He also had a computer business in Lebanon
and traveled there frequently.
In February 1998, Jaime Barragan, a business tax specialist
employed by the Board, was assigned to conduct a “regular
sales and use tax” audit of BAC for the years 1996 to
1997.[fn2] A retailer selling personal property in
California is required to impose a sales tax on all gross
receipts and to file sales tax returns four times per year
with the Board. The return is due 30 days after the end of
each quarter. (Rev. & Tax Code, § 6451.) Generally,
for the quarter at issue, the return lists the retailer’s
total gross sales, taxable and nontaxable; purchases
subject to use tax, i.e., goods purchased out of state and
brought into California; and allowable deductions. Taxable
sales are calculated by adding gross sales plus goods
subject to use taxes and subtracting allowable deductions.
The primary purpose of an audit is to determine an accurate
sales tax and compare it to the sales tax reported by the
retailer.[fn3] For a business such as BAC, Barragan expected
to find as source documents for the audit a “pretty formal
set of books and records,” which would include such items
as sales invoices, purchase invoices, a sales journal
summarizing the sales invoices, a general ledger, financial
statements, and income tax returns.
Barragan arranged to meet with appellant on May 12, 1998,
at the BAC store. After Barragan reviewed with appellant
the nature of BAC’s business, appellant showed him monthly
stacks of paper sales invoices. He explained that they were
his only records for purposes of an audit. He further
explained that his bookkeeper prepared the quarterly
returns by adding the invoices on an adding machine and
that the adding machine tapes were then destroyed.
Using his own adding machine, Barragan added up BAC’s first
quarter 1996 taxable sales invoices. He could not reconcile
his addition with the figures in the first quarter return
for 1996. Because, as he informed appellant, the invoices
were inadequate records for conducting the audit, he
developed a spreadsheet to capture the data from the
invoices: sales date, customer, amount of sale, taxable or
exempt sale, etc. He entered the information from the first
quarter of 1996 into the spreadsheet, and requested
appellant do likewise with the invoices for the remaining
audit period, April 1996 to March 1998, and to send him the
results on a floppy disc. They agreed to resume the audit
after appellant completed Barragan’s request. Appellant
provided Barragan the sales summary spreadsheets a few at a
time over several months. When Barragan received a summary,
he verified the calculations. The information regarding
total sales, taxable subtotals, etc. was consistent between
the invoices themselves and the spreadsheets appellant
prepared.
Subsequent to his May 1998 meeting with appellant, Barragan
requested BAC’s 1996 and 1997 income tax returns and bank
statements from January 1996 to March 1998. The total sales
reported on the income tax returns for the years 1996 and
1997 were $1,786,375 greater than the sales reported on the
sales tax returns for the same period. There was also a
discrepancy of approximately $1,000,000 between the January
1996 through March 1998 bank deposits and the sales
reported on the sales tax returns for that period.
Barragan and appellant met again on September 3, 1998. He
requested appellant to provide support for all transactions
over $200 for the audit period that were not assessed a
sales tax. He also asked appellant to identify the
differences between the bank deposits and the amounts
reported on sales tax returns.
They met again on December 2, 1998. Appellant provided
some documentation to support exempt sales. After Barragan
deducted deposits exempt from sales tax from the bank
statements, the bank deposits for the two year audit period
were $1,889,269 greater than the sales reported on the
sales tax returns for the same period. If the discrepancy
between the bank deposits and the sales tax returns
remained unexplained, the outstanding assessed taxes would
be approximately $160,000. In Barragan’s opinion, a
discrepancy of that size was unusual for a company the size
of BAC. In his experience, discrepancies were normally
resolved either because they were satisfactorily explained
or because the taxpayer agreed to pay the taxes on the
unreported sales. If the taxpayer disagreed, the matter was
forwarded to the Board’s appeals process.
As with personal income taxes, the greater the number of
allowable exemptions and deductions, the lesser the amount
of sales tax owed. During their December 2 meeting,
Barragan discussed non-taxable exemptions with appellant
and the ways he could produce documents to support such
exemptions. He used the analogy of the transfer of a car as
illustrative of the nature of exemptions and deductions. His
purpose of the illustration was to explain to appellant
that “one little fact in [the] whole scenario could change
the exemption as being taxable or exempt.” As he explained
to appellant, when the purchaser of a car registers the car
with the Department of Motor Vehicles (DMV) as its new
owner, the purchaser has to pay a use tax, which is based on
the amount the purchaser paid the seller. However, as
Barragan’s illustration continued, the situation is altered
if the person receives the car as a gift. In that case the
person will not pay any tax when he registers the car with
the DMV as its new owner because the value to the new owner
is zero.
Appellant responded to Barragan’s car transfer illustration
by making a statement to the effect that if Barragan “took
care of the audit, a gift of a car would be in order for”
him. Barragan replied indignantly, ” `Hey, don’t say that
even if you are kidding.’ ” Appellant commented that
Barragan took the matter seriously, but it was not that
serious to him. He then left the room where he and Barragan
had been working, leaving Barragan to work alone.
At the end of the December 2 work day, Barragan met with
appellant to give him a progress report and discuss the
plans for their work the following day, December 3.
Appellant informed Barragan he had additional documentation
to support additional nonsales deposits. Jokingly he added,
” `Now, Jaime, I want you to consider everything I have
given you, be fair. . . . Why don’t you make me an amount
that I can pay? I’ll be happy. You will be happy. And
everybody is happy.’ ” In view of appellant’s earlier
remarks about the gift of a car and his own earlier
advisement to take the matter seriously, Barragan perceived
the last remark as a thinly veiled offer of a bribe. As of
December 1998, Barragan had worked for the Board for
approximately 16 years; he had never before been offered a
bribe.
After leaving the BAC office that evening, Barragan
telephoned his supervisor and informed him about the
attempted bribe. On his supervisor’s advice, he then
telephoned the Board’s Internal Security Division and was
told to postpone the BAC audit.
On December 14, 1998, David Doidge, a special agent with
the California Department of Justice, contacted Barragan.
Doidge asked if he “was willing to participate in an
investigation to see if in fact down the line the evidence
could be gathered that would support a bribery situation.”
He explained that Barragan was not to “lead anything. Just
respond to him [i.e., appellant].” Barragan agreed. For
purposes of the bribery investigation, Barragan was
directed by his supervisor to follow the instructions of
Doidge and the Department of Justice personnel.
Barragan arranged to meet appellant on February 3, 1999, to
receive additional documentation. He did not anticipate
having discussions with appellant that day; rather, he
planned only to review the documents appellant would be
providing and to make adjustments. At the February 3
meeting, Barragan told appellant there remained “quite a
material amount that needed to be reconciled” between BAC’s
sales as shown on the income tax returns and the sales as
shown on the sales tax returns. He asked for appellant’s
authorization to contact appellant’s accountant to learn
how the BAC income tax returns were prepared, because doing
so might shed light on the differences between the income
tax and sales tax returns. That evening after his meeting
with appellant, Barragan met with Agent Doidge. They
discussed entrapment, and Doidge specifically instructed
him not to initiate the subject of bribery. Rather, Doidge
instructed Barragan to react to appellant’s statements,
discussing the specifics of bribery freely if appellant
brought up the subject.
Early in the morning of February 4, 1999, Doidge notified
Barragan that the monitoring operation had been cancelled.
Barragan had made some specific plans that he needed to
conduct on the BAC premises that day, so, pursuant to his
Board training and guidelines, he returned to the BAC
office on February 4 to continue his review of its records.
He found appellant upset with his accountant and blaming
the accountant and former colleagues for causing his
problems. Appellant also remarked that he wished Barragan
would concentrate on the sales invoices he had provided and
not pay attention to the bank deposit reconciliation.
Barragan brought up the work schedule he and appellant had
discussed in December, when Barragan had given appellant a
worksheet on which to set out data for non-sales deposits.
As of February 4, appellant had not yet prepared the
worksheet. Barragan agreed to provide him additional time
to do so if he signed a statute of limitations waiver.
Appellant signed the waiver letter.
During their February 4 discussions appellant stated,
“Well, Jaime, you need to help me with this problem. I need
to get it behind me so I can concentrate on making money.”
Barragan thought he was already doing everything possible
to help appellant resolve the audit. He continued to
emphasize to appellant the importance of gathering all
documentation to support exemptions, which would provide an
explanation for the discrepancy between the bank deposits
and the sales tax returns. Appellant again asked for
Barragan’s help. Barragan asked the nature of the help he
wanted. Appellant replied that he was willing to pay a
smaller amount, and Barragan could assist him in preparing
an audit report that reflected a much smaller amount than
they had previously discussed. Barragan responded, “Are we
talking about the same thing?” Appellant replied, “Yes.” He
looked Barragan “straight in the eyes,” and said, ” `Hey,
Jaime, don’t screw me. We need to trust each other.’ ”
Appellant commented how officials were bribed in Lebanon and
that he was used to taking care of problems with the
government “by doing that.” He indicated that he knew the
rules were different in the United States and that he was
afraid. Barragan told him not to worry, said he “would
think about it,” and would “get back to him.” Later in the
day, appellant came to the desk where Barragan was working
and said something about ” `Green is beautiful,’ ”
referring to money. When Barragan left the BAC office at
the end of the day, appellant said, ” `Jaime, you really
need to help me.’ ” Barragan did not reply but gave him an
encouraging look that he might do so.
Also on February 4, Barragan met Maurice Carron,
appellant’s accountant. Carron explained that he had
prepared the BAC income tax returns based on the BAC bank
deposits.
At Agent Doidge’s instructions, Barragan prepared and sent
to Doidge a detailed report of his February 4 dealings with
appellant. On February 18, 1999, at Doidge’s instructions,
Barragan left a message with appellant that he would like
to schedule an appointment. They spoke by telephone on
February 19. Barragan told appellant he had “decided to
help him.” He then told appellant he needed to know how much
appellant was willing to pay. When appellant sounded
nervous and said he did not want to discuss the matter on
the telephone, Barragan asked, “Do you know what G’s are?”
Appellant said, “yes,” Barragan asked, “how many,” and
appellant replied, “10.” Barragan replied the figure
sounded “awfully low,” and asked “subject to negotiations?”
When appellant replied, “yes,” Barragan explained he would
make plans to meet again in several days. Barragan
considered the February 19 telephone discussion a
continuation of the February 4 conversation at which they
discussed the subject of the bribe, when Barragan said he
would “get back” to appellant on the matter.
Pursuant to a plan devised with Doidge, Barragan arranged
to meet appellant at the BAC offices on February 26, 1999,
to continue the audit. He met with Doidge and other law
enforcement personnel on February 25 to get instruction on
the monitoring equipment and technique. He was also
instructed that, to preclude entrapment, he was to avoid
leading conversations with appellant regarding the bribe
and instead respond to appellant’s lead.
Barragan began the February 26 meeting with appellant by
discussing the various outstanding discrepancies between
the sales tax returns and the bank deposits and income tax
returns. He told appellant that his exposure was
potentially $160,000. Appellant replied that there were
still adjustments to be made that would reduce the amount to
$80,000. He added that he could probably enter into an
agreement with the Board to pay less. Barragan asked how
much he wanted to pay the Board; he replied, “6,000.” He
and Barragan ended up agreeing that appellant would pay
Barragan $12,000. When Barragan asked if he “had the money”
in the office, appellant asked, “Well, where is my letter,”
referring to a bogus audit report. They agreed that
appellant would pay $6,000 that day, and $6,000 when he
received the bogus audit. Appellant went to a back room,
returned, and said he had only $3,000. Barragan replied he
would owe $9,000 when Barragan provided the audit. Appellant
gave Barragan $3,000 in cash. After agreeing to meet at a
later date to provide the bogus audit report, Barragan left
the BAC office. He gave the cash to Doidge at the
Department of Justice offices.
On March 13, 1999, Barragan telephoned appellant to say the
bogus audit report would be delayed because he had jury
duty.
On March 24, 1999, appellant called him to get a status
report; he appeared satisfied with Barragan’s reply that he
was still working on the audit.
Pursuant to Doidge’s subsequent instructions, Barragan, in
a recorded telephone conversation, arranged to meet
appellant on April 6, 1999, to deliver the bogus report,
and ascertained that appellant had “the rest of the money.”
On April 6, Barragan gave appellant the bogus report at the
BAC office. Appellant complained that the $7,000 amount of
back taxes listed as owed was higher than the $6,000 amount
to which he had originally agreed. Barragan replied that he
had to make the amount look realistic in order not to raise
suspicions, and, in the “interests of getting this done,”
proposed reducing the outstanding amount of the bribe from
$9,000 to $8,000. He agreed to appellant’s $7,000
counteroffer, reassured appellant that no one at the Board
knew of their arrangement, and told appellant he would
submit the bogus report to the Board for review and
ultimate billing. Appellant then gave Barragan $7,000 in
cash. Barragan departed and gave the cash to Doidge.[fn4]
On June 3, 1999, appellant left a telephone message with
Barragan asking him to call. Pursuant to Doidge’s
instructions, Barragan recorded his June 8, 1999 return
call. During their telephone conversation appellant told
Barragan that several agents had conducted a search of the
BAC office and his house on June 1, 1999, pursuant to a
search warrant. He assured Barragan that the subject of the
bribe had not arisen during the searches.
Asked at trial what he would have done had appellant not
raised the subject of a bribe, Barragan replied that he
would have conducted the audit as he usually did, and
“eventually cranked out an audit report reflecting my
findings.” He received no rewards or incentives for
participating in the bribery investigation.
III. Seizure of BAC Records
On June 3, 1999, the BAC offices were searched pursuant to
a search warrant. The officers seized numerous boxes of
records and a point-of-sale computer system. The records
included a single daily sales journal for the first quarter
of 1999. Jeffrey Benbrook, a forensic computer specialist
and a senior investigator with the Board who participated
in the search, made digital duplicates of the data
contained in the computer hard drives. He copied the invoice
database onto an electronic spreadsheet and printed the
individual sales invoices from the point-of-sale hard
drives.
IV. Horton Testimony
Kenneth Horton is a business tax specialist with the Board,
who qualified as an expert in sales tax documentation and
auditing. Following the seizure of the BAC records, he
conducted a sales tax fraud investigative audit of two
12-month periods, April 1997 through March 1998, and April
1998 through March 1999. He examined the BAC income tax
returns, bank deposits, and sales tax returns for these
periods.
Horton observed that the total gross sales reported to the
Board on the quarterly returns for these two audit periods
was substantially lower than the sales reported on the
income tax returns and the bank deposits. He concurred with
Barragan’s analysis that there was no explanation for the
discrepancies between the reported gross sales in the sales
tax returns and the reported income and bank account
deposits. In his experience with the hundreds of audits he
has performed, there are usually differences between the
reported gross sales in the sales tax return and the income
reported on the income tax return, but the difference is
generally not large, or, if large, can be explained.
To conduct his audit, Horton compared the paper sales
invoices that appellant had provided Barragan with the
sales recorded on the BAC point-of-sale computer system. He
understood from investigator Benbrook that the
point-of-sale computer system captures the sales data
immediately at the time of the sale; consequently the
information stored on the computer system’s hard drive
reflects the transaction most accurately. Horton observed a
“night and day” difference between some of the paper
invoice sales and the sales as recorded in the computer.
For example, one paper invoice number listed “Labor $10”;
the computer record of the same invoice number listed “Sale
of notebook computer for 3,000.” The sales tax on the
latter invoice would be considerably more than the sales
tax, if any, on the former. He also observed that some
paper invoices on which “void” had been written, appearing
to indicate the return of merchandise, did not have an
appropriate credit entry in the computer records.
Horton explained there are intermediate steps in
determining how a stack of paper invoices relates to the
information reported on a sales tax return. The
intermediate steps are generally some type of summary
record and constitute an “audit trail.” Horton was unable to
determine where the paper invoices “flowed into gross sales
and ultimately the sales tax figures” shown on the sales
tax returns.
Given the “really peculiar differences” Horton had noted
between some of the paper and computer-recorded invoices,
he conducted a test by comparing the paper invoices and the
computer-recorded invoices for January, February, and May
1998.[fn5] When the amount in the computer system invoice
differed from the amount on the paper invoice, Horton
attempted to contact the customer to verify the sale. If a
customer verified that a piece of merchandise had been
returned, if the computer record did not list a payment for
a “void” paper invoice, or if there was other verification
of a returned item, such as a MasterCard credit, Horton
gave BAC a credit for the amount toward sales tax owed.
Based on the credits and other corrections Horton “allowed
for” in the three-month test period, such as voided sales
and returned items that were not entered into the computer,
he determined that appellant was entitled to a “favorable
adjustment” of 14.01 percent from the amount of
computer-recorded sales tax for those three months, i.e., a
14.01 percent reduction of the sales tax captured on the
computer. Horton applied the 14.01 percent adjustment to
the computer-recorded taxes for the entire audit period.
The result of this calculation was the amount of sales tax
Horton believed appellant actually owed on taxable sales.
The amount of taxes actually owed, minus the amount of sales
tax reported on the BAC tax returns, was the amount of
underreported sales taxes. Under Horton’s formula, the
underreported amount for April 1997 to March 1998 was
$56,982. The underreported amount for April 1998 to March
1999[fn6] was $32,272.
Horton further tested the reasonableness of the
underreported taxes by comparing the computer-recorded
gross sales with the gross sales reported on the BAC income
tax returns. The computer-recorded sales were $107,000
greater than the income tax return sales, a 3.6 percent
downward adjustment on the income tax returns. Horton opined
that the 3.6 percent represented credits from returned
merchandise and voided receipts. He considered this formula
“probably a more accurate way” of calculating the
percentage of error, but, out of “an abundance of caution,”
he chose the more favorable 14.01 percent in determining
the underpaid taxes.
During the search, Horton seized a daily sales journal for
the first quarter of 1999, January to March. No other
comparable daily sales journals for other periods were
found during the search. The sales journal listed invoice
number, amount, and form of payment for individual sales,
and the total sales for each day. In Horton’s opinion, such
daily sales journals are helpful in establishing an audit
trail. Appellant testified that this sales ledger showed
that sales should be discounted by 28 percent rather than
the 14.01 percent Horton and the Board had applied to this
quarter. Horton had not used the ledger to determine his
discount figure of 14.01 percent because the ledger, unlike
the computer recorded invoices, did not “break out” the
sales tax. In his opinion the ledger was not reliable for
determining sales taxes because it did not list the
customer or the amount of sales tax collected, which are
important factors in determining taxability. He did not
understand from the entries in the ledger how appellant had
calculated the 28 percent discount, which he classified as
an unreliable figure.