White Collar Crime Prof Blog

USB Agreement & US-Swiss Agreement

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).

Gay Collars - Perhaps An Investigation Is Needed

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

(esp) 

"The Tip of the Iceberg" - A Plea in the UBS Swiss Accounts

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."

(esp)

Wesley Snipes Gets Oral Argument in the 11th Circuit

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. 

(esp) 

Race Car Driver Not Guilty of Tax Evasion

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.

(esp)

April 15th - Tax Day Is Approaching

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, Louisiana Tax Defier Convicted on Federal Tax Charges -Defendant Had Filed Millions of Dollars in Fictitious Liens to Harass Law Enforcement

DOJ Press Release, Federal Court Blocks Chicago Tax Preparation Firm from Claiming Improper Tax Credits -Tax Preparer Allegedly Claimed Fraudulent Fuel Tax Credits for Customers

DOJ Press Release, Bronx Return Tax Preparer Indicted for Aiding in Preparation of False Tax Returns

DOJ Press Release, Disbarred Maryland Attorney Pleads Guilty to Preparing False Tax Returns

And of course, one also finds DOJ issuing this week the highlights of the 2008 year, which includes mention and reference to the  UBS deferred prosecution agreement.

(esp)

Snipes Holds Onto Bail - Just Barely

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.

Snipes was represented by Carmen Hernandez, Linda Moreno, Dan Meachum and Peter Goldberger.

Court's Order -  Download 520_OrdGrantTrav 033109

(esp)

Major Criminal Tax Fraud Trial Results In Complete Defense Victory

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.

(esp)

Will Tax Be A New "In" Crime & What Are the International Implications

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)

Who Says White Collar Sentences Are Dropping Below the Guidelines?

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)

The Other Four in the Stein-KPMG Related Case

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

(esp)

Tax Shelters

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)

Government Files Cross Appeal in Wesley Snipes Case

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)

Wesley Snipes Gets Bond on Appeal

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 -

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)

Granted

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)

(esp)

Addendum - Order - Download snipes_order.pdf

Commentary on the Wesley Snipes Sentence

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.

(esp)

Wesley Snipes Gets 36 Months

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.

Just in - the Orlando Sentinel - Wesley Snipes Sentenced to 36 Months; see also CFNEWS 13 here; CNN - Snipes Gets the Max here Stay tuned for Commentary.

(esp)(w/thanks to Whitney Curtis)

Former IRS "Revenue Agent" Sentenced to a Year

A press release of the U.S. Attorney's Office for the Southern District of New York reports that "a former Internal Revenue Service (“IRS”) Revenue Agent -- was sentenced [ ] in Manhattan federal court to a year in jail for carrying out a scheme to obstruct the IRS by fraudulently attempting to sell to other taxpayers, and fraudulently using on his own personal income tax returns, tax losses belonging to a separate company he controlled."

Press Release - Download willner20sentencing20pr.pdf

(esp)

Former IRS Agent Pleads

A Press Release of the US Attorneys Office for the Middle District of California reports on the charging of a former IRS Agent "in relation to a securities fraud scheme that took more than $10 million from hundreds of victims across the country." The release also notes that there was a plea to "a two-count information that accuse[d] him of conspiracy to commit securities fraud and subscribing to a false tax return."  The plea agreement provides for a guilty plea to these two felony counts.

(esp)

Government Asks for 36 Months for Snipes

The government filed its sentencing brief (see here - Download usa_sentencing_memo_re_snipes.pdf ) in anticipation of the forthcoming Wesley Snipes sentencing hearing set for April 24, 2008. The brief calls for the court to impose a sentence of "36 months’ imprisonment and a fine of at least $5 million."  It also requests the court to deny bail pending appeal.  See Professor Doug Berman's Sentencing Law & Policy for his comments on this brief.

(esp) (w/ a thanks to Whitney Curtis)

Tax Cases Are "In" This Week

With April 15th just around the corner, it is not surprising to see DOJ filing an increased number of tax cases.  This increased prosecution, right before the tax deadline, is like an advertisement that deterrence is the government's aim.  The following is a sampling of some of the recent tax cases:

DOJ Press Release - Federal Court Bars Oregon Family and Associate From Promoting Tax Fraud Scheme

DOJ Press Release - Federal Permanently Court Bars Michigan Man from Preparing Tax Returns

DOJ Press Release - Federal Court in Seattle Permanently Shuts Down "Warehouse Bank" Tax Defier Operation with $28 Million in Deposits over Four Years

DOJ Press Release - Imprisoned Missouri Tax Preparer Permanently Barred From Preparing Federal Tax Returns

DOJ Press Release - Federal Court Bars Hialeah, Florida Woman From Preparing Tax Returns for Others

DOJ Press Release Fresno Man Barred From Promoting Tax Scheme

And in addition, there is a new initiative starting -

Press Releases, Nathan J. Hochman, Tax Division's Assistant Attorney General, Announces the Creation of the National Tax Defier Initiative

(esp)