Free Sentencing Memo (Supporting Documents) - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona DANIEL R. DRAKE Assistant U.S. Attorney Two Renaissance Square 40 N. Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Arizona State Bar No. 003781 Telephone (602) 514-7500 [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA United States of America, CR-04-0350-PHX-PGR Plaintiff, v. John Delo Nichols, Defendant. GOVERNMENT'S SENTENCING MEMORANDUM

The United States respectfully submits this memorandum for the Court's consideration

16 in sentencing defendant John Delo Nichols. 17 18 19 20 21 22 23 24 25 26 27 28 The delay in sentencing for the purpose permitting defendant to file true and accurate personal and corporate tax returns has not produced the desired results. On April 26, 2005, defendant entered a guilty plea to one count of Willful Failure to File a Return, a Class A misdemeanor, in violation of 26 U.S.C. 7203. Because of the complexity of the case and the detailed accounting required to determine the precise tax loss, the parties stipulated that the loss was more than $40,000 for the purposes of sentencing. Determination of the precise amount of unpaid taxes due and owing was purposefully left to the Internal Revenue Service ("IRS") and defendant to sort out in an anticipated administrative proceeding. (Plea Agreement, Paragraph 2a.) The parties anticipated that defendant might be ordered to file true and accurate personal and corporate tax returns with the IRS for all calendar years from 1997 to April 2005. (Plea Agreement, Paragraph 3.) Defendant sought to do so prior to sentencing, and sought

continuances in order that he might.

Case 2:04-cr-00350-PGR

Document 40

Filed 09/14/2006

Page 1 of 4

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Following the change of plea, sentencing was set for July 11, 2005, some 14 months ago.

2 While some of the delay during the 14 months between the original sentencing date and the 3 current setting of September 18, 2006, is attributable to the unavailability of one attorney or the 4 other due to scheduling matters, much of that delay has resulted from defendant's efforts to 5 compile records and file the returns mentioned in the Plea Agreement. (See various Motions to 6 Continue, Clerk's Docket ## 20, 24, 28, 32, 34, 36, and 38.) Defendant wanted to file the 7 returns prior to sentencing. (See Docket # 32, Paragraph 6.) He filed those returns in late June 8 2006, shortly prior to a sentencing date of June 26, 2006.. 9 The returns given to the IRS included Forms 1040 (personal returns) for defendant and

10 his spouse, Joan F. Nichols, for the calendar years 1996 through 2005. The returns were filed 11 under Married, Filing Separately status, with each reporting income based on community 12 property laws. Two small boxes of work papers were submitted along with the returns. 13 Revenue Agent Kathleen Cornelius reviewed the returns and the work papers, and has concluded 14 the returns provided are not true and accurate. 15 16 The returns filed are not true and accurate. A comparison of the figures derived from the Special Agent's Report ("SAR"), those

17 listed on an income allocation sheet furnished by defendant, and the figures on the Forms 1040 18 filed by defendant shows they do not correlate. The SAR covered four years: 1996, 1997, 1998, 19 and 1999. Defendant's income allocation sheet shows allocated incomes for those years 20 exceeding the amounts reported on the Forms 1040 for defendant and his spouse by $22,349; 21 $13,824; $39,386; and $115,694, respectively. (See Attachment A, titled Exhibit F1, which 22 compiles information from the SAR, defendant's income allocation sheet, and the Forms 1040.) 23 In short, the numbers don't add up, raising questions about the accuracy of the returns. 24 Secondly, the materials submitted by defendant do not include all the accounts where

25 putative income was deposited, based on the accounts identified and analyzed in the SAR. The 26 supporting documents furnished by defendant include two or three accounts for each year, even 27 though there were other known accounts receiving deposits. The appearance and disappearance 28 of massive gifts, refunds, and other transfers in 2000, 2002, and 2005, some as large as 2
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1 $222,000, while there were none shown in other years, raises another question, especially since 2 the net effect of those entries is to reduce the income to be allocated each year to roughly 3 $130,000 to $160,000. (See Attachment A and Attachment B, defendant's Income Allocation 4 sheet.) 5 Finally, while the original Freedom Church of Revelation had its Section 501(c)(3) Tax

6 Exempt Status revoked and the founder of that church, Frank John Conti, was prosecuted for tax 7 evasion and failure to file returns as defendant well knows, defendant persists in claiming as 8 charitable expenses items which are not. The chart of accounts showing how defendant 9 classified expenses reflects that only one of more than 50 accounts and sub-accounts was 10 classified as "personal." (See Attachment C, and marked as Exhibit C.) Parsonage allowances 11 were given to defendant and his offspring or in-laws and claimed by defendant as charitable 12 expenses. Homes were owned in at least three states; Arizona, Oklahoma, and Pennsylvania, 13 and "charitable monies" were used to make down payments and mortgage payments for family 14 members living in those properties. 15 16 Conclusion. There is no basis at this point to conclude defendant is entitled to avoid or reduce the

17 stipulated amount of tax loss. Nor is there reason to believe defendant has filed true and accurate 18 tax returns for the calendar years 1996 through 2005. Accordingly, the Court should consider 19 including the requirement that defendant file true and accurate returns and cooperate fully with 20 the Internal Revenue Service, as a condition of supervised release or probation. 21 In addition, the amount of delay and the defendant's conduct during that time suggest he

22 is deserving of a sentence of imprisonment longer than that recommended by the Presentence 23 Report writer when she completed her report in July 2005, and revised it in December 2005. 24 Defendant has been given enough time and rope to hang himself. He has done just that. He has 25 shown a lack of remorse, contrition, or acceptance of responsibility. He has persisted in the 26 same course of conduct that brought him before this Court in the first instance. 27 /// 28 /// 3
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Accordingly, the Court should fashion a sentence sufficient to reflect the seriousness of

2 the offense, promote respect for the law, provide just punishment for the offense, and to afford 3 adequate deterrence to criminal conduct by this defendant or others following in his footsteps, 4 remembering that he held himself out as a minister and guide for others. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4
Case 2:04-cr-00350-PGR Document 40 Filed 09/14/2006 Page 4 of 4
s/Daniel R. Drake Daniel R. Drake I hereby certify that on September 14, 2006, I served the attached document by fax on the following person who is not a registered participant of the ECF system: Lisa Miller, United States Probation Officer Donald W. MacPherson Attorney for Defendant s/Daniel R. Drake Daniel R. Drake I hereby certify that on September 14, 2006, I electronically transmitted the attached document to the Clerk's Office using the ECF system for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants:

Respectfully submitted this 14th day of September, 2006.

PAUL K. CHARLTON United States Attorney District of Arizona /S Daniel R. Drake DANIEL R. DRAKE Assistant U.S. Attorney