Thursday, April 15, 2010
As April 15th was approaching, an increasing number of tax related cases were being prosecuted. Here are just a few recent DOJ Press Releases:
Will this deter future criminality?
Saturday, November 21, 2009
Previously granted oral argument (see here), lawyers for Wesley Snipes appeared in the 11th Circuit this past week to argue the case. A report of the argument sounded like it was a "hot" bench with questions regarding the venue and some about the "good faith" jury instructions. See also Greg Bluestein (AP), Wesley Snipes appeals 3 tax convictions in Georgia.
Sunday, August 30, 2009
Some folks are voicing an opinion on the UBS settlement and what may result from it. Check out the following:
- Reuters, Reactions to UBS tax deal
- Tax.com, Law Professors Express Concern over UBS Settlement
- TaxProfBlog, Tax Profs Criticize UBS Settlement
We have also watched with interest the IRS' efforts to promote voluntary disclosure by US taxpayers prior to IRS' commencement of examination. With the lure of amnesty in the form of no criminal action and reduced civil penalties, the IRS hopes taxpayers will come forward "voluntarily." This general concept is equally laudable. However, the IRS' promise to keep open the September 23 amnesty deadline for taxpayers who come forward even after they receive notice from UBS that their names are about to be revealed is the point at which we depart company with IRS policy.
They state later in their letter:
Our law school operates a low income taxpayer clinic. In the last few years, we have seen an increase in the assertion of penalties against the poorest, least sophisticated taxpayers with virtually negligible room for negotiation by the IRS. It would seem that a blanket program of offering reduced penalties and no criminal action to wealthy, sophisticated tax dodgers who come forward on the eve of their names being turned over to the IRS and with prior knowledge of the forthcoming disclosure, is suggestive of something less than even handed tax administration.
Wednesday, August 26, 2009
"According to the indictment, [these individuals] helped wealthy American clients conceal their assets by establishing sham and nominee offshore entities to hide their U.S. clients' assets and income while allowing these clients to still control the assets and make investment decisions."
Other interesting posts on UBS-
Sharona Coutts, ProPublica, UBS and the Taxpayers’ Hidden Billions
WebCPA Staff, Former UBS Banker Sentenced to 40 Months
Friday, August 21, 2009
UBS entered into a deferred prosecution with DOJ (see here). The agreement included that UBS would provide the U.S. government "with the identities of, and account information for, certain United States customers of UBS’s cross-border business." The process initially moved slowly. Eileen C. Mayer, Chief of IRS-Criminal Investigation, called one prosecution "the tip of the iceberg." (see here). An issue that needed to be resolved involved an agreement between the US and Swiss government. That agreement has been reached. This is a copy of the US-Swiss Agreement - Download US-Swiss Agreement Declararaions Signed. The Bank's Agreement with DOJ is here - Download Bank_agreement
(esp)(w/ hat tips to Tiffany M. Joslyn of NACDL and Peter Hardy of Post & Schell).
Wednesday, August 19, 2009
Watching a part of NBC's Today Show of the interview with Richard Hatch (Survivor) (for background see here) and then hearing that he is arrested shortly thereafter, certainly has a chilling effect. Hatch, on house arrest, did an interview with the media. Listening to Hatch, the media, and his attorney, it sounds like permissions had been granted to do this interview (see here) but I have no information to confirm whether it was or was not. And why shouldn't an interview be allowed - after all even those in prison should be entitled to some First Amendment rights. Is this related to prison security? And if so, does it make a difference that he is no longer in prison? Or was this one of the conditions of this house arrest? And if he violated one of the conditions of his house arrest, why would he chance this now?
Shortly after the interview, the media reports that he was taken from his home back to prison. What is problematic here is that during the interview he not only proclaims his innocence but also claims that anti-gay bias drove this prosecution.
This latter claim needs to be investigated, and an investigation that occurs apart from DOJ individuals associated with the past administration. When someone is on the back end of their prison time (doing house arrest), the last thing they would want to do is jeopardize their ability to return to society. Someone needs to look at whether different treatment is being given to gay collars.
See Today MSNBC.com, ‘Survivor’ Richard Hatch is back behind bars -Mere hours after TODAY interview, reality show star taken into custody; see also Matt Caputo, Daily News, 'Survivor's' Richard Hatch arrested after Today Show with Matt Lauer; says anti-gay bias drove feds
Saturday, August 15, 2009
UBS entered into a deferred prosecution agreement with the government (see here). The agreement included that UBS would provide the U.S. government "with the identities of, and account information for, certain United States customers of UBS’s cross-border business." Things initially moved slowly as an agreement needed to be reached regarding the release of information in light of privacy laws (see here). But with these two steps apparently settled according to press reports, it is not surprising to see an individual reaching a plea agreement with the government for failure to disclose UBS Swiss bank accounts to the IRS. A DOJ Press Release reports that this individual "admitted that he failed to pay at least $200,000 in federal income taxes and that he now owes the government interest and penalties."
One has to wonder if the government action of proceeding against individuals with Swiss accounts that were not properly reported to the IRS, will assist the US economy. Eileen C. Mayer, Chief of IRS-Criminal Investigation, called this prosecution "the tip of the iceberg."
Sunday, June 28, 2009
Actor Wesley Snipes has been granted oral argument in the 11th Circuit Court of Appeals. Snipes was convicted of misdemeanor tax counts and found not guilty of other conspiracy and tax fraud counts following a jury trial (see here). The oral argument is scheduled for November 2009. Last year (September - September reporting period) less than 16% of all Eleventh Circuit criminal appeals were disposed of on the merits following oral argument (1258 total criminal cases, 1059 terminated after submission on the briefs, and 199 terminated after oral argument see here). Representing Snipes are Philadelphia area Attorney Peter Goldberger, former president of the National Association of Criminal Defense Lawyers Carmen Hernandez, Daniel Meachum (of Atlanta), and Linda Moreno (of Tampa). For a discussion of one of the issues likely to be raised on appeal, see here.
Sunday, April 19, 2009
Discussed here are recent DOJ press releases related to tax charges and pleas - all immediately prior to the April 15th tax deadline. But the government was fortunate that this result occurred after the 15th - Helio Castroneves was found not guilty of all six counts of tax evasion at his recent trial. See AP, Castroneves not guilty of tax evasion;Jay Weaver & David Ovalle, Miami Herald, Helio Castroneves found not guilty in tax-evasion trial
The government can use tax charges filed near the 15th to stimulate compliance with the law. It can serve as a general deterrence to future criminality. Having a "not guilty" of tax related offenses near this same time, certainly would not be beneficial to the government. But Castroneves' jury result of "not guilty" was immediately after the 15th.
The jury did not reach a verdict on the conspiracy charge against Castroneves, but the conspiracy charge was premised on the tax evasion charge so it presents difficult issues for the prosecution if they do decide to try again. The conspiracy count was worded "to defraud the United States for the purpose of impeding, impairing, obstructing, and deteating the lawful government functions of the Internal Revenue Service of the United States Department of Treasury in the ascertainment, computation, assessment, and collection of United States income taxes." (See Indictment) Hopefully prosecutors will not spend tax money trying to convince a jury that the inchoate crime of conspiracy does not require a completed act. Section 371 does require an overt act and the rejection of the substantive offenses sends a loud message to the government here.
Tuesday, April 14, 2009
One can easily tell that tax day is getting near by just looking at the DOJ Press Releases. Although tax prosecutions occur year round, one can't help but notice the many appearing around April 15th. In a way this publicity is good, because what better way to achieve general deterrence then publicizing the ramifications of not filing a tax return, or filing an improper one. Although some of these are indictments, and the individuals are of course presumed innocent until convicted, if they are, here are some of the latest press releases -
DOJ Press Release, Disbarred Maryland Attorney Pleads Guilty to Preparing False Tax Returns
Wednesday, April 1, 2009
Defendant Wesley Snipes made a Motion for Limited Travel for Work Obligations. He sought permission to travel outside the United States for work on two films (Gallowwalker and Game of Death). The government objected to this post trial bail "on the grounds that Defendant Snipes traveled to Dubair, United Arab Emirates, in late November 2008 without obtaining prior permission from the Court." The court acknowledged that Snipes had violated his conditions of release for several reasons including "failing to notify his Pretrial Services Officer when his trip to Bangkok was canceled." But as the court noted, "[w]hile it does appear that on two occasions Defendant Snipes exceeded his travel conditions as set forth in his terms and conditions of release and the Court's July 2, 2008 Order, it is also true as pointed out in Defendant Snipes' moving papers that he has never failed to appear at the many proceedings in this case where his presence was required." In the end, the court granted the motion but did place restrictions on Snipes.
Court's Order - Download 520_OrdGrantTrav 033109
Saturday, March 7, 2009
This past week a U.S. Virgin Island (USVI) federal jury returned not guilty verdicts on all twenty-six counts in a major federal criminal tax fraud trial. The government alleged that three individuals created and promoted Kapok, a USVI limited partnership, in order to unlawfully obtain tax benefits from a USVI economic development program. The program provided a 90 percent federal income tax credit for eligible companies and individuals. Also charged were a St. Louis area auto dealer and several companies affiliated with the defendants. The government alleged a loss of more than $75 million in federal income taxes from Kapok's participating partners.
Blair G. Brown, a partner in Washington, DC's Zuckerman Spaeder, led the defense of one of the individual's accused, with assistance from associate Lani Cossette. "This case should never have been a criminal prosecution," said Mr. Brown. "The legal standards for USVI residency and qualifying income under the economic development program were vague. All of the defendants did their best in relying on the guidance of experts. The jury also correctly understood that the defendants and similar partnerships brought substantial economic benefits to the USVI."
"The defense was a real team effort that melded the strengths of all defense counsel. Sticking together and pounding our themes-vague standards, reliance, disclosure, and benefits to the USVI-were essential," added Mr. Brown. The defense presented only two witnesses, and none of the defendants testified.
Also representing the same person as Brown were Clyde Kuehn from Belleville, Ill., and USVI local counsel Lee Rohn. Other defense counsel were William Lucco of Edwardsville, Ill.; Chuck Meadows and Josh Ungerman of Dallas; Robert Webster of Dallas; Robert Smith of Dallas; and Gordon Rhea of Mt. Pleasant, S.C. The government was represented by Assistant U.S. Attorneys from the Southern District of Illinois, where the case was originally indicted before its transfer to the USVI, and the U.S. Department of Justice Tax Division.
Sunday, November 2, 2008
The Washington Post article by David S. Hilzenrath titled, IRS, Justice Target Undisclosed Assets in Swiss Accounts raises the question of whether the veil will be further lifted over bank accounts held in Switzerland, and will there be prosecutions in the U.S. for individuals who placed funds abroad in efforts to evade U.S. taxation? This remains to be seen, although Mr. Hilzenrath provides information on current happenings.
An interesting question can arise when DOJ tries to secure information that might result in a violation of foreign law if the information is provided to DOJ. In the past courts have been split on whether the production of documents should be permitted when there is a possible violation of the secrecy laws of another country. The Restatement (Third) of Foreign Relations Law of the United States section 442(1)(c) provides:
"In deciding whether to issue an order directing production of information located abroad, and in framing such an order, a court or agency in the United States should take into account the importance to the investigation or litigation of the documents or other information requested; the degree of specificity of the request; whether the information originated in the United States; the availability of alternative means of securing the information; and the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located. (emphasis added).
One Fifth Amendment case DOJ is likely to cite to is United States v. Balsys, 524 U.S. 666 (1998). There may also be questions as to whether operations in the U.S. make a difference. The Permanent Subcommittee on Investigations Report on Tax Haven Banks Hiding Billions From IRS can be found here. UBS continues to be in the news. (See previously from June 08, Linnley Browning, NYTimes, Wealthy Americans Under Scrutiny in UBS Case ).
(esp)(w/ a hat tip to Mark Johnson)
Saturday, September 27, 2008
Despite recent Supreme Court opinions that provide some flexibility when sentencing a convicted defendant, guideline sentences appear to be part of a culture that is not changing. A recent white collar case that demonstrates a court not departing below the guidelines, is the recent sentencing of T. Milton Street. A brother of former Philadelphia Mayor John F. Street, T. Milton Street received a sentence of 30 months for his convictions for tax charges. (see Emilie Lounsberry, Philadelphia Inquirer, T, Milton Street Sr. gets 30 months for dodging taxes) The trial was an unusual one, with the accused arguing the unconstitutionality of the tax code (see here). The jury failed to convict the accused of the fraud charges brought by the government, and also did not convict of all the tax charges that had been brought. (see here). In addition to the stiff tax sentence, the court failed to grant the accused bail pending his appeal. (see Michael Hinkelman, Philadelphia Inquirer, T. Milton Street Sentenced to 30 Months) This does not, however, preclude him from asking the appellate court for bail.
(esp)(w/ a hat tip to Peter Goldberger)
Monday, September 15, 2008
Defendants are not always successful in KPMG related cases before Judge Kaplan. The four remaining defendants in the case found that out this past week when their claims of due process violations were denied.
The issue is a fascinating one, and one previously seen in cases such as Scrushy and Stringer - the sharing of information in a parallel proceeding. The court held that "[i]t is well-established that as a general rule, '[t]he prosecution may use evidence acquired in a civil action in a subsequent criminal proceeding unless the defendant demonstrates that such use would violate his constitutional rights or depart from the proper administration of criminal justice.'"
In denying the defense motion to dismiss the case, the court held that a reliance on other cases was "misplaced" in that in each of the cases cited by the defense, "the court emphasized that (1) there was no bona fide civil investigation, and (2) the defendant was deceived by the government during the civil investigation." With "no such allegations in this case" the court denied the defense motion to dismiss.
Memorandum and Order - Download 20080910_order_re_6103_tj252.pdf
Sunday, July 27, 2008
Professor Camilla Watson of University of Georgia School of Law, speaking on a panel at the Southeast Association of Law Schools Conference (SEALS), discussed tax shelters and some of the recent criminal indictments related to tax shelters. She noted that they are "only as good as the ethics of those who put it together." In looking at what academics could do to assist to insure an ethical environment she suggested putting the course of professional responsibility in the first year and moving aspects of professional responsibility into other courses, particularly business courses.
(esp)(blogging from SEALS '08 in Palm Beach, Florida)
Friday, May 30, 2008
The government filed a Notice of Cross-Appeal in the Wesley Snipes case (see below). How far this will get, however, remains to be seen. Certainly there are several questions that one has to ask here -
- What could they possibly be appealing? Snipes received the prison sentence the government asked for (see here)- three years. (see here) They can't appeal the jury's failure to convict on the counts he was acquitted on. Thus, the only remaining basis could possibly be the court's failure to impose any fine, or to make "restitution" (payment of delinquent taxes) a special condition of supervised release. Would they really make this a basis for a cross-appeal?
- Has this cross-appeal been through the approval process of the Solicitor General's office? And if so who approved it? (Paul Clements announced he was stepping down - see here)
Notice of Government Cross-Appeal - Download Snipes.pdf
(esp - from Firenze, Italy)
Thursday, May 22, 2008
The court has given Wesley Snipes bond pending his appeal. (see here) This is not surprising as the case is a tax case of someone who would not be considered a flight risk.
But it is always interesting to see, in white collar cases, who gets bond on appeal and who gets it denied -
Former Atlanta Mayor Bill Campbell - no bail pending appeal on a tax case (see here)
Jamie Olis (Dynegy)
Former Tyco Executives Dennis Kozlowski and Mark Swartz (see post here -but they were in the state system)
I. Lewis "Scooter" Libby (but sentence was commuted by the President)
Former Adelphia Communications executives John and Timothy Rigas (but now in prison - see here)
Bernie Ebbers (Worldcom) (now in prison - see here)
Martha Stewart (but she elected to go into the prison system sooner and finshed her sentence)
Governor George Ryan (but denied on cert petition)
Addendum - Order - Download snipes_order.pdf
Saturday, April 26, 2008
Wesley Snipes received the maximum sentence for his convictions, a sentence of three years (see here). Co-defendants who were found guilty of conspiracy to defraud the IRS and presenting a false claim to the IRS received 10 years and 4 years and 6 months. A likely question on appeal will be whether Wesley Snipes deserved to receive the maximum penalty as his sentence.
"'Snipes' long prison sentence should send a loud and crystal clear message to all tax defiers that if they engage in similar tax defier conduct, they face joining him and his co-defendants, . . . , as inmates in prison,' said Nathan J. Hochman, Assistant Attorney General of the Justice Department's Tax Division." (see press release). But some may question whether an individual should receive the maximum sentence in order to provide deterrence to others. And should a person's celebrity status, warrant the imposition of a harsher sentence?
See also Doug Berman's Sentencing Law & Policy here.
Thursday, April 24, 2008
The government asked for 3 years (see here) in a memo that focused on the criminal activity that formed the basis of the convictions against Snipes. It's a memo filled with numbers. In contrast, the defense asked for probation in memo that very much focused on the individual (see here-Download snipes20sentencing20memorandum.pdf) The defense memo was accompanied with letters in support, something that is common in white collar cases. (see here - Download snipes20exhibits.pdf ). As noted by Professor Paul Caron on the Tax Prof Blog, there are an array of letters including the celebrity letters. (see here) One very thoughtful letter caught my eye as it was written by Marc Greenberg, professor of law and director of the intellectual property program at Golden Gate University Law School. Now the decision rests in the hands of the judge. Stay tuned.
(esp)(w/thanks to Whitney Curtis)