## Facts

- Michael I. Monus served as President and Chief Operating Officer of Phar-Mor, Inc., a rapidly expanding discount drugstore chain.
- As Phar-Mor’s financial condition deteriorated, Monus and others were alleged to have concealed losses through large-scale financial-statement fraud, including manipulating inventory and falsifying accounting records to mislead lenders and investors.
- The government also alleged that Monus diverted company funds to the World Basketball League (WBL), an entity in which he had a personal ownership interest.
- The tax charges were based on the theory that Monus failed to report taxable income associated with the diverted funds on his 1990 and 1991 federal income tax returns.
- At trial, an IRS agent testified as an expert that, assuming Monus embezzled funds and diverted them to the WBL while holding an ownership interest, the diverted funds would constitute taxable income.
- Monus was convicted by a jury on all counts of a 109-count indictment, including conspiracy, bank fraud, wire fraud, mail fraud, interstate transportation of property obtained by fraud, filing false tax returns, and obstruction of justice.

## Issues

1. Whether the district court improperly admitted IRS expert testimony that (on assumed facts) diverted/embezzled funds would be taxable income, thereby invading the jury’s role or stating an impermissible legal conclusion.
2. Whether the evidence was sufficient to sustain the convictions across the fraud, tax, and obstruction offenses.
3. Whether the sentence had to be vacated because the district court failed to adequately explain and support its Sentencing Guidelines loss calculation and address objections to the presentence report.

## Decision

- The Sixth Circuit affirmed Monus’s convictions on all 109 counts.
- The court held the IRS agent’s testimony was admissible expert opinion because it was presented in hypothetical form, left factual determinations to the jury, and assisted on technical tax consequences.
- The court rejected challenges to the sufficiency of the evidence supporting the convictions.
- The court vacated the sentence and remanded for resentencing, directing the district court to explain how it calculated loss and to address the defendant’s sentencing objections.

## Legal Principles

- Expert testimony may explain technical tax consequences through hypotheticals that assume disputed facts, so long as the expert does not decide those facts or directly opine that the defendant is guilty.
- An expert does not improperly “usurp” the jury’s function when the jury remains responsible for deciding whether the assumed facts are true.
- In complex financial cases, a sentencing court must make reviewable findings and clearly explain the methodology used to calculate loss under the Sentencing Guidelines, including resolving and responding to objections to the presentence report.

## Conclusion

The Sixth Circuit upheld Monus’s wide-ranging fraud, tax, and obstruction convictions, ruled that hypothetical IRS expert testimony on taxability was permissible, and required resentencing because the district court did not adequately explain its Guidelines loss calculation or resolve related objections.


United States v. Monus, 128 F.3d 376 (6th Cir. 1997)