Thursday, February 1, 2024

Robert Hunter Biden Motion to Dismiss Federal Gun Charges: The Briefs Are In.

The briefing is now complete on Hunter Biden's Motion to Dismiss Based on Immunity Conferred by his Diversion Agreement. This motion was filed in the District of Delaware where three felony gun counts are pending against Biden. Biden contends that the Diversion Agreement was a binding contract once signed by the parties to it, and that the only parties to it were Biden and the U.S. Attorney's Office. DOJ disagrees on both points. Biden also argues that U.S. Probation's approval was not necessary and that, even it was necessary, U.S. Probation in fact approved the Agreement.  A similar motion will no doubt be filed in the federal tax case now pending in the Central District of California, with respect to the aborted tax-related Plea Agreement, but Biden's chances of success are much better at getting the federal gun charges in Delaware dismissed, since Diversion agreements do not require approval by the district court. The Diversion Agreement was related to the overall Plea Agreement that blew up last July in Judge Maryellen Noreika's Delaware federal courtroom. Here are Biden's original brief, the Government's Response, and Biden's Reply. Attached also is the Declaration of Christopher Clark, who was Biden's attorney involved in the negotiations surrounding the Plea and Diversion Agreements.

U.S. v. Robert Hunter Biden-Defendant's Motion to Dismiss Indictment Based on Immunity Conferred by Diversion Agreement.

U.S. v. Robert Hunter Biden-Government's Response to Defendant's Motion to Dismiss Indictment Based on Immunity Conferred by Diversion Agreement.

U.S. v. Robert Hunter Biden-Reply in Support of Motion to Dismiss the Indictment Based on Immunity Conferred by Diversion Agreement.

U.S. v. Robert Hunter Biden--Declaration of Christopher J. Clark.

(wisenberg)

 

 

February 1, 2024 in Celebrities, Corruption, Current Affairs, Defense Counsel, Deferred Prosecution Agreements, Investigations, Judicial Opinions, Media, News, Privileges, Prosecutions, Prosecutors, Tax | Permalink | Comments (0)

Monday, December 11, 2023

Hunter Biden Tax Evasion Indictment

The Hunter Biden Indictment for tax evasion, filing false tax returns, and failure to pay and file taxes was handed down last Thursday in the Central District of California. There were nine counts--three felonies and six misdemeanors. The felonies were for willfully filing a false 2018 personal tax return, willfully filing a false 2018 corporate return, and willful evasion of the 2018 tax assessment.  Presumably, no major new investigative steps were taken after the original plea deal blew up in July of this year. Here is the Hunter Biden Central District of California Tax Evasion Indictment. Although this appears to be a well-crafted and aggressive speaking Indictment brought by Special Counsel David Weiss, Hunter has an outstanding criminal defense team, lead by Abbe Lowell, and potentially better defenses than the typical tax evasion defendant.

(wisenberg)

 

 

December 11, 2023 in Current Affairs, Investigations, Music, Prosecutions, Prosecutors, Tax | Permalink | Comments (0)

Tuesday, October 24, 2023

11th Circuit Applies U.S. v. Boyle's bright-line rule to E-Filed Tax Returns

From yesterday's opinion in Wayne Lee v. United States:

"The IRS penalizes taxpayers for filing late tax returns, unless the delay 'is due to reasonable cause and not . . . willful neglect.' 26 U.S.C. § 6651(a)(1). In United States v. Boyle, the Supreme Court established the bright line rule that 'reliance on an agent,' without more, does not amount to “reasonable cause” for failure to file a tax return on time. 469 U.S. 241, 248, 252 (1985). The question in this appeal is whether Boyle’s bright line rule applies to e-filed returns." Gues what? It does. Even though Plaintiff Wayne Lee's CPA failed to file Lee's tax returns for three straight years (2014-16), the IRS assessed penalties of over $70,000.00 and refused to let Lee apply his 2014 overpayment to the 2015 and 2016 tax years. Lee argued that his delay in filing was due to reasonable cause, rather than willful neglect, as he relied on his CPA to file the returns in a timely manner. The district court ruled against Lee, citing Boyle and the 11th Circuit affirmed. The opinion is here.

(wisenberg)

October 24, 2023 in Judicial Opinions, Tax | Permalink | Comments (0)

Saturday, July 8, 2023

How To Think About The Hunter Biden Whistleblowers’ Disclosures And The Hunter Biden Plea Agreement. Part I.

There are three key elements to the recent disclosures by IRS Criminal Investigation Division whistleblowers concerning the DOJ’s criminal investigation of Hunter Biden: 1) the false and/or conflicting statements by Delaware U.S. Attorney David Weiss and Attorney General Merrick Garland about the degree of authority and independence conferred upon Weiss by DOJ; 2) the alleged efforts of Delaware AUSAs and DOJ Tax Division prosecutors to slow-walk the case and block or delay avenues of investigation; and 3) the alleged underlying criminal conduct of Hunter Biden.

Part I

Let’s start with the false and/or conflicting statements by Garland and Weiss. AG Garland has repeatedly made public statements, sometimes sworn, indicating that Trump-appointed Delaware U.S. Attorney Weiss had (and still has) complete independence and authority to bring charges against Hunter Biden in any federal district where venue might lie, free of political interference.  Note that there is a difference between being able to run your investigation free of political interference and having the authority to bring charges in a federal district outside of Delaware. You can give Weiss all of the freedom to investigate he wants and still deny him the ability to bring charges in the District of Columbia or the Central District of California. But Garland recently reiterated that Weiss had (and has), “complete authority to make all decisions on his own,” had, “more authority than a special counsel,” and was “authorized to bring a case anywhere he wants in his discretion.” Garland has also stressed that Weiss never came to him asking for special counsel authority.

But here is a key contradictory fact we now know, thanks to the transcribed interview of IRS-CID Supervisory Special Agent (“SSA”) Gary Shapley, a/k/a Whistleblower #1 and the documents Shapley provided. Delaware U.S. Attorney Weiss told a roomful of IRS and FBI special agents and DOJ attorneys, on October 7, 2022, "that he is not the deciding person on whether charges are filed." He then revealed that, months before, he had sought and been denied the authority to bring felony tax evasion charges against Hunter Biden in the District of Columbia by District of Columbia U.S. Attorney Matthew Graves. Weiss further told the agents at the same October 7, 2022, meeting that he had requested special counsel status from Main Justice in order to bring charges in the District of Columbia but had been rebuffed. (Weiss also told the agents and prosecutors in the October meeting that the case was then at the U.S. Attorney’s Office for the Central District of California awaiting its decision on whether to file. He stated that if CDCAL rejected his request he would go to Main Justice again to ask for special counsel status.)

Weiss’s October 7, 2022, statement to the roomful of agents and prosecutors is clearly at odds with Garland’s public comments that Weiss had all the authority he needed to bring charges in any federal district. Garland has not indicated how he conferred this authority on Weiss. Was it reflected in a written authorization giving Weiss special attorney status under 28 USC §515(a)? Was it orally conveyed? If orally conveyed, did Garland merely invite Weiss to ask in the future for any authority he needed? Is this all a shell game in which Weiss asked Deputy Attorney General (“DAG”) Lisa Monaco for special attorney or special counsel status which she rebuffed and never reported to Garland?

Weiss’s June 7, 2023, letter to Congressman Jim Jordan, purported, “to make clear that, as the Attorney General has stated, I have been granted ultimate authority over this matter, including responsibility for deciding where, when, and whether to file charges and for making decisions necessary to preserve the integrity of the prosecution, consistent with federal law, the Principles of Federal Prosecution, and Department regulations.” This statement had to be clarified once the Shapley transcript and supporting documentation were released to the public. So on June 30, 2023, Weiss wrote again to Jordan, setting out his geographically limited charging authority but noting his ability to request special attorney status under 28 U.S.C. § 515 in the event that a U.S. Attorney in another federal district does not want to partner with him on a case. Then the kicker: “Here, I have been assured that, if necessary after the above process, I would be granted § 515 Authority in the District of Columbia, the Central District of California, or any other district where charges could be brought in this matter.” Translation? I never asked Main Justice for special attorney status or authority. But if Weiss was being truthful in his June 30, 2023 letter to Jordan, he certainly lied to federal agents on October 7, 2022 when he told them that he had asked for special counsel authority to bring the Hunter Biden case in the District of Columbia and been denied.

Honest prosecutors running a legitimate criminal investigation do not need to lie to their case agents or prevaricate in their public pronouncements. And Garland surely realizes that his public statements to date, for whatever reason, have left a misleading impression. Yet he has done noting to get to the bottom of what happened. It’s time for him to lance the boil. More to come in Parts II and III.

(wisenberg)

 

July 8, 2023 in Corruption, Current Affairs, Fraud, Government Reports, Grand Jury, Investigations, Legal Ethics, Money Laundering, Privileges, Prosecutions, Prosecutors, Tax | Permalink | Comments (0)

Monday, January 17, 2022

Fifth Circuit Reverses Tax Counts

Last week in United States v. Pursley, the Fifth Circuit reversed and remanded all counts of conviction against appellant Jack Pursley. Appellant had been charged with a Klein conspiracy and three tax evasion counts.  The convictions were reversed because: 1) the trial court refused to give a requested instruction requiring the jury to find that the charged offenses were committed within the 6 year statute of limitations period; and 2) the trial court neglected to make a ruling as to how long the statute of limitations had been suspended pursuant to 18 U.S.C. Section 3292 (suspension of limitations to obtain foreign evidence). Under Section 3292 (b), "a period of suspension under this section shall begin on the date on which the official request is made and end on the date on which the foreign court or authority takes final action on the request." According to the Fifth Circuit, the trial court must make the factual determination as to the date on which the foreign court or authority took final action on the request for evidence, assuming that there is a dispute as to this issue, but failed to do so here. It is often not at all clear when such final actions by foreign authorities take place. Sometimes the foreign authority will state that it has taken final action, but continue to send documents after this date. Sometimes the foreign authority will not indicate whether  it is taking its final action. The case has a good discussion of statute of limitations issues in tax evasion cases.

(wisenberg)

 

January 17, 2022 in Judicial Opinions, Prosecutions, Tax | Permalink | Comments (0)

Tuesday, May 26, 2015

FIFA Officials Facing Corruption Charges

According to CNN, the U.S. Department of Justice is preparing to bring corruption charges against up to 14 senior officials at FIFA, the world's soccer governing body.  The reports from CNN come from "law enforcement officials."  According to the New York Times, several FIFA officials have already been arrested in Switzerland in a "extraordinary early-morning operation." 

FIFA has been under investigation for some time, including with regards to the bidding process for the 2018 and 2022 World Cups, which will occur in Russia and Qatar.  FIFA conducted an internal investigation of the selection process for each event.  The investigation was led by Michael Garcia of Kirkland & Ellis.  Garcia submitted his report to FIFA in September 2014.  FIFA then released a "summary" of the report's findings, which summary Garcia alleged was "erroneous."  Garcia resigned as independent chair of the FIFA Ethics Committee's Investigatory Chamber in December 2014.

One issue that will be interesting to watch in this case is the manner by which the U.S. alleges jurisdiction over the senior FIFA officials despite the fact that alleged corruption occurred overseas and FIFA is an association governed by Swiss law.  According to CNN, the U.S. will allege jurisdiction exists because of the breadth of U.S. tax and banking regulations.  Further, the government will reportedly rely in part on the fact that significant revenue is generated by the U.S. television market.  This is certainly a case we will be hearing a lot about in the coming months. 

(LED)

May 26, 2015 in Corruption, Current Affairs, International, Investigations, Sports, Tax, Television | Permalink | Comments (0) | TrackBack (0)

Thursday, May 29, 2014

Credit Suisse Conviction Does Not Demonstrate Substantial Change In Department Of Justice Enforcement

The Department of Justice (DOJ) and Attorney General Eric Holder were strutting last week over the criminal conviction by plea of guilty of Credit Suisse, a major financial institution.  "This case shows that no financial institution, no matter its size or global reach, is above the law," declared the Attorney General.  Recent prosecutions of major financial institutions had resulted in lesser results,  "deferred prosecutions," a somewhat deceptive term for "delayed dismissals," or a guilty plea by a minor affiliate.

The Credit Suisse guilty plea does not represent a sea change in the attitude of DOJ toward major financial institutions; rather, it appears to be a small ratcheting-up of the baseline penalty for serious criminal financial acts by such institutions.  Credit Suisse, despite paying a hefty $2.6 billion fine, will not suffer the severe collateral consequences that ordinary individual defendants do upon a criminal conviction.  (See here, NACDL's report "Collateral Damage:  America's Failure to Forgive or Forget in the War on Crime -- A Roadmap to Restore Rights and Status After Arrest or Conviction," released today, Thursday, May 29, 2014.)  It will still be able to act as an investment advisor, due to waivers agreed to by federal and New York State governmental agencies.  Thus, its conviction, according to its chief executive Brady Dougan, will not have "any material impact on our operational or business capabilities."  In other words, for Credit Suisse, it will be business as usual. 

I hold no sympathy for Credit Suisse.  Its crimes, continuous and notorious, have enabled American citizens and citizens of other countries to launder and evade tax payments on billions of dollars.  In effect, Credit Suisse (not alone among Swiss banks) (see here) was a criminal enterprise, for many years making huge profits from extraordinary fees for its knowing and willful provision of a presumably safe haven for untaxed income, ill-gotten or otherwise.  Mr. Dougan had stated to a Senate hearing in February that the tax evasion scheme was the work of a small group of private bankers that was hidden from senior management.  That hard-to-believe claim was challenged in a statement by Schweitzerisher Bankpersonalverband, the organization representing the bank's employees:  "It was common knowledge that tax evasion was the strategy, a business model pursued by many banks for a long time."  See here

To be sure, Credit Suisse's crimes did not cause the vast hardship to tens of millions of Americans that the wrongs -- criminal or not -- of other major financial institutions did in the last several years.  And, further, its acts -- while subject to the long-arm jurisdiction of American courts -- were apparently legal under Swiss law, and seemingly condoned by the Swiss government.

Some commentators have suggested that there is considerable unfairness in prosecuting corporations for acts of low- or mid-level employees without knowledge of corporate leaders (see here), a position with which I generally agree.  The demi-prosecution of Credit Suisse, however, does not appear to fit within that category, despite Mr. Dougan's claim.  I see no unfairness in the government's requiring Credit Suisse to plead guilty.

I do, however, wonder about the effectiveness of the insistence on a guilty plea if the collateral consequences are waived.  The conviction of a major financial institution with a considerable financial penalty but a waiver of regulatory bars is to me little different from a civil finding of wrongdoing with such a penalty.  Other than its current status as a convicted felon, Credit Suisse today is essentially in the same position it was two weeks ago.

Given the legitimate (but probably exaggerated) fear that a felony conviction of a major financial institution without regulatory waivers will have on its existence and thus on the economy and societal well-being, it may well be that guilty pleas (and trial convictions too) of such corporations should be accompanied by limited collateral consequences.  Such prosecutions, however, will then serve little more than a symbolic purpose (which I accept as a legitimate purpose).  Overall, DOJ's prosecution to conviction of Credit Suisse is a positive step, albeit a small one.

The resolution here suggests again that the criminal process is inadequate to prosecute large financial institutions.  Society looks to the criminal law to solve far more problems than the criminal law is capable of solving.  Meaningful reform of a flawed financial system will not come from criminal prosecutions of corporations, but, if at all, from strong, substantial regulatory rulemaking and non-criminal legislation.

 (goldman)

 

May 29, 2014 in Current Affairs, Deferred Prosecution Agreements, International, Money Laundering, News, Prosecutions, Prosecutors, Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 15, 2014

Lois Lerner Held in Contempt

Last week, as reported in the New York Times (see here), the House of Representatives Oversight and Government Reform Committee voted to hold in contempt Lois Lerner, the Internal Revenue Service official who after making a brief statement declaring her innocence invoked her Fifth Amendment privilege and refused to answer questions from the Committee members.  The Committee action will be referred to the entire House of Representatives for its consideration.  If the House votes to hold Ms. Lerner in contempt, it would refer the matter to the United States Attorney for the District of Columbia, Ronald C. Machen, Jr., a Democrat who in my view is unlikely to pursue this politically-charged case.

The Committee vote was based on party lines, with the Republican majority voting against Ms. Lerner.  A vote of the entire Congress, if it occurs, will most likely similarly be so based.  Indeed, Representatives on the Committee took exaggerated and hyperbolic positions.  Republican John J. Duncan claimed if Ms. Lerner's position were accepted, "every defendant . . . would testify and plead the Fifth so they couldn't be cross-examined . . . ."  Democrat Elijah Cummings said if he were to vote to hold Ms. Lerner in contempt, it would "place him on the same page of the history books as Senator Joseph McCarthy."

As I said before (see here), I believe that Ms. Lerner's general declaration of innocence, before she invoked the Fifth, does not constitute a waiver, but I do not believe the issue is crystal-clear.  Lawyers who represent witnesses before legislative committees (or in other matters) should be cautious about taking such positions.

(goldman)

April 15, 2014 in Contempt, Current Affairs, Investigations, News, Privileges, Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, December 14, 2013

Fourth Circuit Extends Required Records Exception to Foreign Bank Accounts

Yesterday, in U.S. v. Under Seal (4th Cir. 2013), the Fourth Circuit, joining several other federal circuits, extended the Fifth Amendment's Required Records Exception to records of foreign bank accounts required to be maintained pursuant to the Bank Secrecy Act ("BSA"). John and Jane Doe received a subpoena to turn over records of their Swiss bank accounts. They responded that complying with the subpoena compelled them to testify against themselves, as they were required to create and maintain such records pursuant to the BSA. They also argued that the long-standing, judicially-created, Required Records Exception did not apply in this case, because the BSA's record-keeping provisions are essentially criminal, rather than regulatory, in nature. The district court disagreed, the Does took civil contempt, and an appeal ensued. Unsurprisingly, the Fourth Circuit sided with the government, accepting its argument that the BSA's record-keeping provisions are essentially regulatory in nature. You are shocked? There's not exactly a strong constituency, public or judicial, for foreign bank account tax evasion. 

(wisenberg)

December 14, 2013 in Antitrust, International, Investigations, Judicial Opinions, Prosecutions, Prosecutors, Qui Tam, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, November 1, 2013

Field Acquitted, Daugerdas Re-Convicted, In Tax Fraud Case

Business Week has the story here. Former BDO Seidman CEO Denis Field, represented by Sharon McCarthy of Kostelanetz & Fink LLP, was acquitted on all seven counts he faced. Paul Daugerdas, former head of now-defunct Jenkens & Gilchrist's Chicago office, was convicted on seven of 16 counts. The original convictions against Daugerdas and Field were thrown out by SDNY Judge William Pauley after  a juror's misconduct was brought to light.

(wisenberg)

November 1, 2013 in Investigations, Prosecutions, Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 24, 2013

Beanie Babies - A New Issue?

Many years ago I authored an article titled, "Do We Need a 'Beanie Baby' Fraud Statute?"  The Article considered how specific a statute needs to be to provide proper due process to a criminal defendant.  It focused on the breadth of the mail fraud statute, while also recommending that criminal statutes cannot be created for every unique circumstance - like "Beanie Baby" fraud.  It was written at the height of the time when individuals were committing crimes of fraud with "Beanie Babies."  In some cases, the company producing this product was the victim of the fraud.

Another side of "Beanie Babies" is mentioned this past week - and it relates to the CEO of  Ty Warner, who was the creator of "Beanie Babies."  A DOJ Press Release tells that H.Ty Warner was charged with tax evasion for allegedly hiding funds in a secret Swiss offshore account. The press release states, "[t]hrough his attorney, Warner authorized the government to disclose that he is cooperating with the Internal Revenue Service and will plead guilty to the charge." According to the DOJ Press Release, "Warner is the second taxpayer charged in Federal Court in Chicago in connection with an ongoing investigation of U.S. taxpayer clients of Union Bank of Switzerland (UBS) and other overseas banks that hid foreign accounts from the Internal Revenue Service."

(esp)

September 24, 2013 in Fraud, Prosecutions, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, August 29, 2013

DOJ Releases Statement on U.S.-Swiss Tax Evasion Investigations

The DOJ issued a press release today telling of "a program that will encourage Swiss banks to cooperate in the department's ongoing investigations of the use of foreign bank accounts to commit tax evasion."  The release also notes that "Switzerland will encourage its banks to participate in the program."  A joint statement was agreed upon by the DOJ and Swiss Federal Department of Finance." (see here). The program excludes those presently under investigation.  It offers others a non-prosecution agreement under a list of terms that include, "cooperat[ion] in treaty requests for account information," "agree to pay substantial penalties," and "make a complete disclsure of their cross-border activitites." The press release notes that

"banks seeking a non-prosecution agreement must agree to a penalty in an amount equal to 20 percent of the maximum aggregate dollar value of all non-disclosed U.S. accounts that were held by the bank on Aug.1, 2008.  The penalty amount will increase to 30 percent for secret accounts that were opened after that date but before the end of February 2009 and to 50 percent for secret accounts opened later than that."   

It will be interesting to see how many banks come forward to obtain a non-prosecution agreement. And if they do, will the disclosures result in tax prosecutions of individuals within the U.S.

(esp)

August 29, 2013 in International, Investigations, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, July 5, 2013

The Other Side to the Alleged IRS Targeting

Noted here were the initial reports of alleged IRS targeting.  The NYTimes tells the other side here. Perhaps this is a good time to appoint an independent non-political individual or entity to look into what really happened here, if anything. 

(esp)

July 5, 2013 in Tax | Permalink | Comments (2) | TrackBack (0)

Tuesday, May 14, 2013

Discretion At It's Worst - IRS Targeting

The Treasury Inspector General for Tax Administration Office of Audit report and its highlights tell the story of how "Early in Calendar Year 2010, the IRS began using inappropriate criteria to identify organizations applying for tax-exempt status to review for indications of significant political campaign intervention." This Report issued on May 14, 2013 has been the source of significant media attention and President Obama has stated that the Reports findings are "intolerable and inexcusable." (see CNN here).  The Report calls for several recommendations, including "develop training or workshops to be held before each election cycle including, but not limited to, the proper ways to identify applications that require review of political campaign intervention activities."

A couple of observations:  1)  It is good to see that this Audit produced this evidence and that it was not overlooked;  2) It is also good to see that the Attorney General is not taking this finding lightly; and 3) Most imoprtantly the President is not going to tolerate this activity.

Politics do not belong in the agencies of our government.  Whether it be the DOJ, SEC, or IRS - it is important that when politics gets infused in discretionary decisions, someone immediately puts a stop to this happening. Internal compliance programs are important in the corporate world, maybe we need more compliance programs and monitoring within the government world.

(esp)

May 14, 2013 in Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 4, 2012

Second Circuit Vacates Part of Tax Shelter Case

Guest Blogger - Peter D. Hardy (Post & Schell)

On November 29, a divided panel of the Second Circuit vacated two out of four convictions obtained at trial by the government in the massive Ernst & Young (E&Y) tax shelter case, due to insufficient evidence.  The opinion, United States v. Coplan et al, 10-583-cr(L), is available here.

In Coplan, four defendants were convicted after a 10-week trial on a variety of criminal tax charges arising out of their alleged involvement in the development and defense of five complicated tax shelters that were sold or implemented by E&Y to wealthy clients.  Two defendants, Nissenbaum and Shapiro, had been tax attorneys at E&Y who were each convicted of conspiracy to defraud the United States and to commit tax evasion (18 U.S.C. §371) and two substantive counts of tax evasion (26 U.S.C. §7201).  Nissenbaum also was convicted of one count of obstructing the IRS, in violation of 26 U.S.C. §7212(a), on the basis of allegedly causing false statements to be submitted to the IRS in response to an Information Document Request (IDR) submitted when the IRS was examining one of the tax shelters at issue.

The opinion is lengthy and complex, and resists easy summarization.  It is well worth reading because it discusses in detail a kaleidoscope of issues relevant to any "white collar" criminal trial, from evidentiary rulings to jury instructions to sentencing.  This commentary is limited to the sufficiency of evidence claims, and some of their implications for lawyers as potential defendants.

The panel in Coplan displayed a remarkable willingness to comb through an extremely complicated trial record and test every nuanced inference that the government urged could be drawn from the evidence in support of the verdicts.  The bottom-line holding of the panel was that, after making all inferences in favor of the government, the convictions had to be vacated because the evidence of guilt was at best in equipose.

Although this general principle can be stated easily, its practical application in Coplan involved the panel conducting a particularized review of the evidence that appellate courts often forego.  For example, one important fact for Shapiro was that a tax opinion letter provided to shelter clients stated that, for the purposes of the "economic substance" test governing tax-related transactions, the clients had a "substantial nontax business purpose" (OK, per the Coplan panel), rather than stating, as it had before Shapiro’s revisions, that the clients had a "principle" investment purpose.  Likewise, although Shapiro had reviewed letters and attended phone conferences deemed incriminating by the government, his involvement in such conduct was not "habitual" or otherwise substantial.  As for Nissenbaum’s Section 7212(a) conviction, his response to the IDR that the government characterized as obstructive – a partial explanation of the clients’ subjective business reasons for participating in the tax shelters – could not sustain the conviction because the IDR drafted by the IRS had sought all reasons held by the clients, rather than their primary reason.  If this sounds somewhat murky and convoluted, it is.  The point is that multiple convictions for very significant offenses were vacated after much effort at extremely fine line-drawing.

The implicit theme running throughout the discussion of the evidence was that it was not sufficiently clear that these lawyers had crossed the line while attempting to assist their clients, to whom they owed a duty.  The competing tensions that lawyers can face was encapsulated in a jury instruction discussed later in the opinion.  Although the trial court instructed the jury as requested by the defense that "[i]t is not illegal simply to make the IRS’s job harder[,]" it declined to instruct the jury on the larger defense point that "[t]his is particularly true for the defendants, whose professional obligations as attorneys or certified public accountants required them to represent the interests of their clients vigorously in their dealings with adversaries, such as the IRS." 

The Coplan case echoes partially the case of Lauren Stevens, the former in-house counsel for GlaxoSmithKline who was indicted and tried in 2011 by the government for allegedly obstructing a U.S. Food and Drug Administration investigation of alleged off-label practices by the company.  The district court dismissed all charges against Ms. Stevens at the end of the government’s proofs for insufficient evidence.  The ruling was a tremendous defense victory and underscored, like the Coplan case, the difficulties that the government can face when it targets a lawyer on the basis of alleged conduct undertaken on behalf of a client.  Nonetheless, these cases still stand as cautionary tales to practitioners.  Although there are important differences between Coplan and Ms. Stevens' case, both cases remind us of the pitfalls that can await advocates who stumble into the cross-hairs of the government.  Ms. Stevens – like Shapiro and Nissenbaum – was fortunate enough to have an extremely conscientious court willing to parse through the nuances of the evidence, a great defense team, and the resources for extended litigation.  It is no slight to these clients or their lawyers to recognize that, in many ways, sheer luck played a role in their ultimate outcomes.  Although acquittals can provide vindication, such finales may provide limited comfort to the client after the excruciating process of being investigated, charged and tried.  That such a process might turn eventually on the precise phrasing of a document, or how a conference call might be handled, is sobering.

(Peter Hardy)

December 4, 2012 in Prosecutions, Prosecutors, Tax, Verdict | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 11, 2012

IRS Whistleblower Birkenfeld Hits The Jackpot

Reuters reports here on the astounding award. Yours truly and other luminaries are quoted.

(wisenberg)

September 11, 2012 in Investigations, Prosecutions, Qui Tam, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, July 12, 2012

Lying Juror Requires New Trial in Massive Tax Fraud Case

Last month, in a thorough 64-page opinion, Southern District of New York Judge William Pauley ordered a new trial for three of four defendants convicted in what he described as "the largest tax fraud prosecution in U.S. history" because a juror, Catherine M. Conrad, had lied her way into being accepted as a juror.  United States v. Daugerdas, et al., 09 Cr. 581.

There appears to be little question Ms. Conrad, a suspended lawyer, connived to make herself in her own word "marketable" so that she could have "an interesting trial experience" as a juror.  In voir dire, she lied about her education, claiming the highest level she had reached was a B.A. when in fact she had a law degree.  She concealed not only her membership in and suspension from the bar but her own criminal convictions -- for shoplifting, DWI, contempt and aggravated harassment -- as well as her husband's extensive criminal history, which included a seven-year prison stay.  She made, according to the court, a "calculated, criminal decision to get on the jury." 

At a post-trial hearing at which she was granted use immunity, Conrad stated that if the truth were known, "defense counsel would be wild to have me on the jury."  In fact, however, Conrad turned out to be extremely biased against the defendants.  In a congratulatory letter she sent to the prosecutors after the trial, she said she was "privileged to observe la creme de la creme -- KUDOS to you and your team."  In that letter, she mentioned that she had fought against but ultimately had "thrown[n] in the towel" on a not guilty verdict on one of the counts concerning defendant David Parse.  At the hearing, she testified that "most attorneys" are "career criminals."  Two of the four convicted defendants were practicing lawyers; Parse was a non-practicing lawyer.

Judge Pauley, clearly upset by the need to retry a case which took three months, strongly urged the government to prosecute Conrad.  Perhaps concerned that the government might feel that prosecuting her would be inconsistent with its opposition to a new trial, he added, "The prospect of preserving a tainted jury verdict should not temper the Government's resolve to call Conrad to account for her egregious conduct."  Any prosecution of Conrad, however, obviously would have Kastigar obstacles because of her immunity.

The judge, following the Supreme Court's decision in McDonough Power v. Greenwood, 464 U.S. 548 (1984), found that in order to obtain a new trial, the moving party must "first demonstrate that a juror failed to answer honestly a material question on voir dire and then further show that a correct response would have provided a valid basis for a challenge for cause" (emphasis added).  Apparently, even in a criminal case, the mere existence of a juror who deliberately lied her way onto the jury may not be sufficient to require a new trial.  See United States v. Martha Stewart, 433 F.3d 273 (2d Cir. 2006).  The McDonough test appears to be "If the juror hypothetically had answered truthfully, would her truthful answers have led to a challenge for cause?"  Thus, unknown facts that might have affected her fitness to serve as a juror which would not in any case have been revealed by accurate responses to voir dire questioning presumably should not be considered.

In a lengthy analysis, mingling those hypothetical answers to questions asked during jury selection with, somewhat questionably, facts learned and impressions formed at the post-verdict hearing -- including Conrad's discovered dishonesty, bias and her animus to lawyers -- the court found that the McDonough criteria had been amply met.  Accordingly, it ordered a new trial for all the convicted defendants -- except Parse, who the court ruled had "waived" his claim for a new trial since his attorneys knew or "with a modicum of diligence would have known" that Conrad's statements in jury selection were false and misleading and failed to disclose that knowledge to the court.

Judge Pauley felt that Parse's lawyers, the firm of Brune and Richard, knew or at least suspected (or alternatively should have known) that Conrad was an imposter certainly by the start of jury deliberations, but made a decision not to reveal their belief or suspicion to the court.  The court was apparently affected by what seems to be a carefully-crafted, literally true but arguably misleading, statement in the lawyers' new trial motion that they were "prompted" by disclosure of Conrad's post-verdict letter to investigate and conduct records searches "in the wake of Conrad's . . . post-verdict letter."  The court found that the motion contained "significant factual misstatements" and that its "clear implication" was to give the false impression that Parse's lawyers had no idea of Conrad's true identity until well after the verdict.  In fact, as demonstrated in a later letter from the firm, in the firm's e-mails during trial, which were ordered by the court to be produced, and in testimony by the lawyers at a hearing, the firm apparently had concerns about and suspicion of Conrad's deception, initially at voir dire and later, after further record search revelations, during the judge's charge to the jury.  A most graphic example was one lawyer's e-mail during the charge, "Jesus, I do think it's her."

The court believed that the attorneys' submission was designed to foreclose any government claim that their pre-verdict knowledge doomed their post-verdict motion on the grounds that they failed to act with "due diligence."  The court found unconvincing the attorneys' claim that notwithstanding the similarities between the juror and the suspended lawyer discovered by electronic research -- name, home town, father's occupation, approximate age -- and the juror's use of previously unmentioned legal terms (such as respondeat superior) in jury notes she authored, the attorneys did not believe until after her letter to the government was disclosed that juror Conrad and suspended lawyer Conrad were the same person.

The court thus found that Parse's attorneys had "actionable intelligence" that Conrad was an imposter and that they had been required, but failed, to undertake "swift action" to bring the matter to the court's attention.  The court apparently felt that the attorneys had attempted to "sandbag" it by remaining silent about the defect and only raising the issue when and if the trial did not conclude favorably, in effect providing them and their client with an "insurance policy against an unfavorable verdict."  By his attorneys' conduct, the court ruled, Parse waived any error.

It may well be that during the trial the attorneys chose not to report their suspicions because they felt that Conrad, who appeared from web research to be potentially anti-government, would be a favorable juror for the defense, and they did not want to lose her.  It may also be that, whatever the objective evidence that the juror and the suspended lawyer were one and the same might look like with hindsight, they actually thought that the juror and the suspended lawyer were different people since, as they claimed, they could not believe that the juror -- a lawyer -- would blatantly lie.  Under either alternative, the court found, they had an obligation to share their knowledge with the court.

Some may argue that an attorney, in her duty of zealous representation of a client, may remain silent if she learns during jury selection that a juror misrepresented herself.  Judge Pauley's contrary view is clear:  "An attorney's duty to inform the court about suggested juror misconduct trumps all other professional obligations, including those owed a client."  I agree.  See New York Rules of Professional Conduct 3.3(b).

Some may also question whether Parse, the client, should suffer from his lawyer's purported misconduct or lack of diligence (of which he had no apparent knowledge).  While generally a client is bound by a lawyer's strategic decision, and cannot cry foul if it backfires, Parse did suffer the same denial of a fair jury as the other defendants.  Nonetheless, the court held that his attorneys' failure to report waived any objection by Parse, but granted new trials to the other three convicted defendants (whose lawyers apparently had no knowledge of Conrad's deception).

There are several ironies in this case:  Parse, about whom, according to Conrad's letter to the prosecutors, the jurors "had qualms," is the only one whose conviction stands.  Further, his attorneys were the ones responsible for investigating and presenting the motions which succeeded in a new trial for the others (who joined the motion), but not for him.  And, lastly, if Conrad had told the truth at voir dire and revealed her suspension from the bar and her and her husband's criminal record, she undoubtedly would have been successfully challenged -- whether by cause or peremptory -- on the motion of the prosecution she so strongly favored, and not be the defense she despised.

 (goldman)

July 12, 2012 in Defense Counsel, Fraud, Judicial Opinions, Legal Ethics, Martha Stewart, Perjury, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, May 24, 2012

DOJ Press Release Treads on Presumption of Innocence

The Department of Justice yesterday announced the indictment of four Georgia residents for tax fraud.  The press release (see here) stated, as is required by the ABA Fair Trial and Free Press Standards, ". . . the defendants are presumed innocent until proven guilty beyond a reasonable doubt."  Nonetheless, the headline read "Georgia Tax Cheats Indicted for Conspiring to Defraud the United States," certainly not affording these defendants the presumption of innocence to which the DOJ release paid lip service.

The indictment was announced by the new Assistant Attorney General of the Tax Division, Kathryn Keneally, until recently my able and respected colleague in the New York City criminal defense bar.  My assumption is that AAG Keneally neither wrote nor reviewed the headline.

(goldman)

May 24, 2012 in Legal Ethics, Prosecutors, Tax | Permalink | Comments (1) | TrackBack (0)

Wednesday, February 22, 2012

Strauss-Kahn Involved Again in Sex Case

Dominique Strauss-Kahn is once again in trouble with the law in relation to an investigation involving sexual activity.  Strauss-Kahn was detained overnight in Lille, France, for questioning in a French investigation related to an alleged prostitution ring that purportedly supplied women for sex parties with Strauss-Kahn in Brussels, Paris and Washington.

Strauss-Kahn contends that he had no reason to believe that the women at these parties were prostitutes.  His French lawyer bared that defense to French radio in December, "People are not always clothed at these parties.  I challenge you to tell the difference between a nude prostitute and a classy lady in the nude."  Reuters article, see here.  This lack of scienter defense ironically appears to be the converse of what many believed would have been Strauss-Kahn's defense had the New York case in which he was accused of sexual assault gone to trial.  In that case, it was expected that his defense would have been that he did believe that the woman in question was a prostitute.

The investigation, in which eight people have been charged, involves alleged misuse of corporate funds to pay for the services of the prostitutes.  Engaging prostitutes is not illegal in France (although it is in Washington), but if the investigators determine that Strauss-Kahn had sex with prostitutes he knew had been paid for out of company funds, he might be charged as a beneficiary of that misuse of funds.  Most likely, it will be difficult to prove that Strauss-Kahn, even if he were found to have known the women involved were prostitutes, knew how they were paid.

High-profile cases in other jurisdictions often affect prosecutorial priorities.  One wonders whether this case will lead American prosecutors to scrutinize corporate books to determine whether corporate funds have been used to supply prostitutes to customers, political figures and others.  I suspect that such payments (and consequent tax deductions as business expenses) are not wholly uncommon, at least for non-public businesses.  Any resulting cases, involving both sex and corporate corruption, are sure to draw media attention.

(goldman)

February 22, 2012 in Celebrities, Corruption, International, Investigations, Media, News, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, January 26, 2012

Romney Non-Disclosure? Ho-Hum.

The L.A. Times reports here that Mitt Romney did not "explicitly disclose" certain foreign and offshore bank accounts on his required federal campaign disclosure forms. These same accounts were reported, however, to the IRS. Doesn't look like there's much to the story. There are different reporting requirements on campaign forms and IRS returns and some of the items revealed to the IRS were apparently listed at a higher level of generality on the campaign forms. Even assuming that there was some misreporting, one would be hard pressed to call it anything other than inadvertent.

(wisenberg)

January 26, 2012 in Celebrities, Current Affairs, Media, Tax | Permalink | Comments (1) | TrackBack (0)