Source: https://www.justice.gov/tax/criminal-tax-manual-2200-false-fictitious-or-fraudulent-claims
Timestamp: 2019-04-21 11:02:03+00:00

Document:
22.02 GENERALLY         The United States Attorneys' Manual (USAM) contains a general explanation of section 287 of Title 18.  USAM, Sec. 9-42.160.  This section focuses on the use of the false claims statute and false claims conspiracy statute in the prosecution of false claims for tax refunds.          The purpose of 18 U.S.C. § 287 is to protect the government from false, fictitious, or fraudulent claims.  United States v. Montoya, 716 F.2d 1340, 1344 (10th Cir. 1983).  See also United States v. Computer Science Corp., 689 F.2d 1181, 1187 (4th Cir. 1982).  The majority of tax false claims cases are brought against individuals who, within the same year, file multiple, fictitious income tax returns claiming refunds of income tax.  The introduction of electronic filing (ELF) of income tax returns has led to a proliferation of multiple defendant, multiple return cases.  Many false claim for refund cases could also be charged as violations of 26 U.S.C. § 7206(1) or as violations of 18 U.S.C. § 1001.  Sections 286 and 287, however, are the preferred charges when one or more false claims for refund are made on false or fictitious income tax returns.
22.03 18 U.S.C. § 287 -- ELEMENTS         In order to establish a violation of 18 U.S.C. § 287, the following  elements must be proved beyond a reasonable doubt:        1.    The defendant made or presented a claim to a department or agency of             the United States for money or property;        2.    The claim was false, fictitious or fraudulent;        3.    The defendant knew at the time that the claim was false, fictitious             or fraudulent.  Johnson v. United States, 410 F.2d 38, 46 (8th Cir. 1969);  United States v. Computer Science Corp., 511 F. Supp. 1125, 1134 (E.D. Va. 1981), rev'd on other  grounds, 689 F.2d 1181 (4th Cir. 1982).  See also United States v. Drape, 668 F.2d 22, 26 (1st Cir.  1982);  United States v. Miller, 545 F.2d 1204, 1212 n.10 (9th Cir.  1976).   22.03 Claim Against the United States          To establish a violation of section 287, the government must prove that the defendant filed or caused to be filed a claim against the United States, or any department or agency of the United States, for money or property.  United States v. Neifert-White Co., 390 U.S. 228 (1968);  United States v. Mastros, 257 F.2d 808, 809 (3d Cir. 1958);  Johnson v. United States, 410 F.2d 38, 44 (8th Cir. 1969).  A tax return seeking a refund is a claim against the United States.  United States v. Drape, 668 F.2d 22, 26 (1st Cir. 1982).  Proof that a return was filed may include the IRS transcript of the account in which the refund claim was made.  See United States v. Bade, 668 F.2d 1004, 1005 (8th Cir. 1982).          A claim must be made or presented to fall within section 287.  For paper returns, the indictment may charge that the false claim was made by filing a return with the IRS.  Although an ELF return is not a complete return until both the electronic portion and the paper Form 8453 are filed with the IRS, a section 287 violation is complete when the electronic portion of an ELF return is received by the IRS.  Therefore, ELF indictments should charge the filing or causing to be filed with the IRS of a false claim for a refund of income taxes, without specifying that a "return" was filed. [FN2]        Although the language of the statute would appear to require that the government receive the claim, it does not require that the defendant present it directly to the government. See United States v. Blecker, 657 F.2d 629, 634 (4th Cir. 1981), holding that presentation of the claim to an intermediary authorized to accept the claim for presentation to the government satisfies the "presentation" requirement of section 287:        [T]here was substantial evidence that . . . [one of the defendants]       submitted  invoices for hourly rates based on falsified resumes with       knowledge that . . . [defendant's corporation] would seek reimbursement       for the payment of the invoices from the GSA.  This evidence amply       supported the  government's charge that . . . [defendants] violated       section 287 by submitting false claims to the government through an       intermediary, and we find that theory of prosecution to be consonant with       the language and meaning of the false claims statute.        ELF returns can only be filed through an approved preparer or electronic return originator (ERO).  Preparers and electronic return originators should be considered intermediaries, and should not be characterized as "agents" of the IRS.  See United States v. Hebeka, 89 F.3d 279, 283-284 (6th Cir. 1996); Blecker, 657 F.2d at 634; United States v. Catena, 500 F.2d 1319, 1322 (3d Cir. 1974)..  The defendant need not be the person who actually filed the claim for refund.  See 18 U.S.C. § 2.  See also  Blecker, 657 F.2d at 633; Scolnick v. United States, 331 F.2d 598 (1st Cir.  1964); .  The offense is complete on the filing of the claim with the government.  The statute does not require that the government pay or honor the claim.  Thus, violations of section 287 are chargeable even if the government has not lost money due to the false or fictitious claim.  United States v. Coachman, 727 F.2d 1293, 1302 (D.C. Cir. 1984); United States v. Miller, 545 F.2d 1204, 1212 n.10 (9th Cir. 1976).   22.03 False, Fictitious, or Fraudulent Claim        22.03[a] False, Fictitious or Fraudulent        Section 287 is phrased in the disjunctive.  Thus, charges under the statute may be based on proof that a claim submitted to the government is either false, fictitious, or fraudulent.  United States v. Murph, 707 F.2d 895, 897 (6th Cir. 1983)  ("the government may prove and the trial judge may instruct in the disjunctive form used in the statute"); United States v. Blecker, 657 F.2d 629, 634 (4th Cir. 1981); United States v. Irwin, 654 F.2d 671, 683 (10th Cir. 1981); United States v.  Milton, 602 F.2d 231, 233 n.5 (9th Cir. 1979); United States v. Maher, 582 F.2d 842, 847 (4th Cir. 1978).  The conduct proscribed by section 287 has been defined as follows in Irwin, 654 F.2d at 683 n.15:        A claim is false or fictitious within the meaning of Section  287 "if       untrue when made, and then known to be untrue by the person making it or       causing it to be made." A claim is fraudulent "if known to be untrue, and       made or caused to be made with the intent to deceive the Government agency       to whom submitted." United States v. Milton, supra, 602 F.2d       at 233 & n.6 quoting 2 E. Devitt & Blackmar, Federal Jury Practice and       Instructions  §28.04 (3d ed. 1977).  See United States v. Haynie, 568 F.2d 1091 (5th Cir. 1978) (duplicate returns).  A return may be false or fictitious under the statute if the facts and figures used on the return are fictitious, even though the taxpayer might be entitled to a refund if a true return were filed.  For example, an individual who recruits others to file false returns based on fictitious reports of wages and withholding (Form W-2) could be charged under section 287 even if the recruited taxpayers are legally entitled to refunds.  See United States v. Gieger, 190 F.3d 661, 667 (5th Cir. 1999); United States v. Leahy, 82 F.3d 624, 634 n.11 (5th Cir. 1996) (contractor violated section 286 even though the false claims were irrelevant to the total amount paid by the government to the contractor).  The returns filed are false, and the taxpayers are not entitled to refunds on the facts represented on those returns.  Similarly, a return may be false under the statute if the defendant files a correct return in the name of another taxpayer in an attempt to obtain for himself the refund that is due to the other taxpayer.  See, e.g., Kercher v. United States, 409 F.2d 814, 818 (8th Cir. 1969), ("What Kercher was trying to do . .  . was to lay claim . . . to what were claims of the taxpayers against the government.  Therein lies the falsity . . . .").         22.03[b] Materiality        Section 287 does not specifically require that a claim be false as to a "material" matter.  Several circuits have expressly held that materiality is not an essential element of section 287 and need not be alleged in an indictment charging a violation of that statute.  United States v. Logan, 250 F.3d 350, 358 (6th Cir. 2001); United States v. Nash, 175 F.3d 429, 433-34 (6th Cir.), cert. denied, 528 U.S. 888 (1999); United States v. Upton, 91 F.3d 677, 684-685 (5th Cir. 1995); United States v. Taylor, 66 F.3d 254, 255 (9th Cir. 1995); United States v. Elkin, 731 F.2d 1005, 1009 (2d Cir.); United States v. Irwin, 654 F.2d 671, 682 (10th Cir. 1981).  The Eighth Circuit has held that although materiality is an element of the crime, it is an issue for the trial judge to handle as a question of law.  United States v.  Pruitt, 702 F.2d 152, 155 (8th Cir. 1983). [FN3]  The Eleventh Circuit, on the other hand, has held that the issue is for the trial judge to decide, even assuming it is an element of the offense.  United States v. White, 27 F.3d 1531, 1535 (11th Cir. 1994).  The Fourth Circuit has stated, in dictum, that materiality is an element of section 287.  United States v. Snider, 502 F.2d 645, 652 n.12 (4th Cir. 1974).          The materiality issue has been drawn in question by several recent Supreme Court decisions.  In United States v. Gaudin, 515 U.S. 506, 522-23 (1995), the Supreme Court, applying the rule that the Constitution gives a defendant the right to have a jury determine the defendant's guilt of every element of the crime with which he is charged, concluded that the element of materiality in a prosecution under 18 U.S.C. 1000 had to be submitted to and decided by the jury.  Thus, in those circuits which have held that materiality is an element of section 287, the issue must be submitted to the jury.         In United States v. Neder, 527 U.S. 1, 27 (1999), the Supreme Court held that materiality was an element of the mail fraud, wire fraud, and bank fraud statutes, despite the fact that the term "materiality" was not mentioned in any of them. [FN4]  The Court noted that the term "defraud" had a settled meaning at the common law that included the requirement of materiality and that the inference was that Congress meant to incorporate the established meaning of that term.  Thus, applying Neder, a court may read the term "fraudulent" in section 287 to require that the claim be material and that this question be submitted to the jury.  See United States v. Foster, 229 F.3d 1196 n.1 (5th Cir. 2000) (while expressly not deciding the issue, Fifth Circuit reads Neder to require a materiality instruction and states that "the better practice would be to give the instruction in a § 28 false claim offense"), cert. denied, 121 S.Ct. 1202 (2001). [FN5] But even assuming that Neder supports the conclusion that materiality is an element of a section 287 charge that the defendant made a fraudulent claim for refund (but see Neder, 527 U.S. at 27  n.7), the holding of Neder may be avoided by simply charging that the defendant filed a false claim for a refund, omitting any reference in the charge to "fraudulent."        For further discussion of materiality, see Section 12.08, supra.   22.03 Knowledge -- Intent -- Willfulness        Section 287 requires the government to prove that a false claim against the government was made, "knowing such claim to be false, fictitious or fraudulent . . . "  A section 287 indictment should allege such knowledge, and the proof that the defendant knew the return was false is part of the government's burden of proof.   United States v.  Holloway, 731 F.2d 378, 380-81 (6th Cir. 1984). [FN6]        It is not necessary to allege willfulness in the indictment.  The term "willfully" is not used in section 287 and is not "an essential element" of section 287.  United States v. Irwin, 654 F.2d 671, 682 (10th Cir. 1981).          The circuits vary, however, on the proof of intent necessary to convict for a violation of section 287.  In  United States v. Maher, 582 F.2d 842, 847 (4th Cir. 1978), the court approved a jury instruction stating that under section 287 criminal intent "could be proved by either a showing that the defendant was aware he was doing something wrong or that he acted with a specific intent to violate the law."  In United States v. Milton, 602 F.2d 231, 234 (9th Cir. 1979), the court held that no instruction on "intent to defraud" is necessary where a false claim is charged (because it is not an element of the offense), but left open whether an "intent to deceive" is an element of a charge of submitting "fraudulent" claims.  602 F.2d at 233 n. 7.  The Eighth Circuit, in Kercher v. United States, 409 F.2d 814, 817 (8th Cir. 1969), did not draw a distinction between false and fraudulent claims, but held without elaboration that section 287 requires proof of criminal intent.
22.05 VENUE          The general venue statute provides that prosecution can be brought in any district where an offense was begun, continued, or completed. 18 U.S.C. § 3237(a).  Venue has been found proper where the claim was made or prepared or in the district where the claim was presented to the government, United States v. Leahy, 82 F.3d 624, 633 (5th Cir. 1996); United States v. Massa, 686 F.2d 526, 528 (7th Cir. 1982); United States v. Blecker, 657 F.2d 629, 632 (4th Cir. 1981);  and where the claim was acted upon,  Fuller v. United States, 110 F.2d 815 (9th Cir. 1940).  In ELF cases, venue may be proper in the district in which the false return was submitted to a preparer or electronic originator, in addition to the districts in which it was prepared or filed with the Internal Revenue Service.        Venue may be proved either by direct or circumstantial evidence.  It need only be established by a preponderance of the evidence, not by proof beyond a reasonable doubt. Proof of venue, although an essential element of the government's proof, has been held to be more akin to jurisdiction than to a substantive element of the crime.  Therefore, where venue is not disputed, it may be ruled on by the court as a matter of law and need not be submitted to the jury with an instruction.  United States v. Massa, 686 F.2d at 530-531.  See Section 6.00, supra, for a general discussion of venue, and Section 23.11, infra, for a discussion of venue for conspiracy charges.
22.06 STATUTE OF LIMITATIONS         18 U.S.C. § 3282 provides a five-year statute of limitations for crimes for which a period of limitations is not otherwise specified.  Section 6531(1) of the Internal Revenue Code, however, provides a six-year statute of limitations "for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner."  That section provides the statute of limitations for conspiracies to defraud the United States brought under 18 U.S.C. § 371.  See Section 23.12, infra.  That six-year limitations period may well apply to section 286 and 287 cases, but there is no case law on that point.  The safer course is to bring false claims cases within five years of the commission of the offense.  The plain language of the statute, however, provides an argument for a six-year limitations period in cases which have not been or cannot be indicted within the five-year period.
22.09 SENTENCING GUIDELINES CONSIDERATIONS        The Sentencing Guidelines generally require that a criminal sentence be based on the total harm caused by the defendant's conduct.  USSG, §1B1.3(a)(2) provides that the enhancement for monetary loss from theft or a scheme to defraud includes the aggregate of losses intended or caused by "all such acts and omissions that were part of the same course of conduct or common scheme or plan as the offense of conviction."  USSG §1B1.3(a)(2).  In false claims cases, the defendant should be held accountable for the total amount of false or fictitious refunds claimed by the defendant and/or co-conspirators that can be determined prior to sentencing.          Determining the total harm to the government may not be an easy task in some cases.  The total number of false paper returns may not be determinable by the Internal Revenue Service in any given scheme.  Therefore, additional investigation may be necessary to determine the scope of the scheme and the amount of the government's losses.  Many ELF cases are referred for grand jury investigation before the full extent of a scheme is known.  Even though there may be sufficient evidence to indict and convict one or more individuals at the time of the referral, it is important, when possible, to develop the case as fully as circumstances permit.  Preferably, an indictment should not be sought until the scope of the scheme has been sufficiently developed so that at the time of sentencing there will be enough information to demonstrate to the court the severity of the defendant's conduct.  In certain circumstances, however, an arrest or indictment may be necessary before the case can be fully developed.  In those cases, the prosecutor and agents should continue to develop evidence regarding any additional false returns and participants.
FN 1. For the felony offenses set forth in sections 286 and 287, the maximum permissible fine is at least $250,000 for individuals and $500,000 for corporations.  Alternatively, if the offense has resulted in pecuniary gain to the defendant or pecuniary loss to another person, the defendant may be fined not more than the greater of twice the gross gain or twice the gross loss.  18 U.S.C. section 3571.  FN 2. On January 6, 1993, the Tax Division mailed to each United States Attorney an information package on ELF returns, entitled Prosecuting Electronic Filing Fraud, which explains the ELF program and ELF fraud in detail and contains sample indictments and plea agreements.  Additional copies of that information package may be obtained from the Tax Division.  FN 3. In Pruitt, the court defined "materiality" for purposes of section 287 as: "A statement is material if it has a tendency to induce the government to act by placing the claimant in a position to receive government benefits." 702 F.2d at 155.  FN 4. In United States v. Wells, 519 U.S. 482 (1996), the Supreme Court laid out the approach a court should follow in determining whether a statute requires proof of a particular item as an element of the offense.  FN 5. In addressing "materiality" in the criminal tax context, the Supreme Court in Neder stated that "a false statement is material if it has a 'natural tendency to influence, or [is] capable of influencing, the decision of the decisionmaking body to which it was addressed,'" and noted that several courts had determined that "any failure to report income is material." Neder, 527 U.S. 16.  The Court concluded that, under either formulation, no jury could reasonably find that defendant's failure to report substantial amounts of income on his tax returns was not a material matter.  Id.  Applying Neder to a 287 filing false claim for tax refund prosecution involving so-called "black tax returns," the Fifth Circuit concluded, similarly to Neder,  that defendant's false statements (seeking a refund of "black taxes in the amount of $43,209) were material to the tax refund claims. United States v. Foster, 229 F.3d 1196, 1197 (5th Cir. 2000), cert. denied, 121 S.Ct. 1202 (2001).  The court  stated that: "[T]here is no doubt that the amounts claimed in the "black tax returns" that [defendant] assisted with were as material as they were unjustified.  The huge scope of IRS's processing and review activities makes it inevitable that a sensible threshhold of materiality must be applied to irregularities planted in tax returns. Were it not so, taxpayers would be encouraged to take advantage of IRS's practical inability to review each return individually.     FN 6. Although the element of knowledge can sometimes be established through proof of "willful blindness," extreme care should be exercised in seeking and framing appropriate jury instructions.  See Section 8.06, supra.  FN 7. See discussion of United States v. Neder, 527 U.S. 1 (1999), supra, p. 22-6.  FN 8. There is a sample section 286 indictment attached to the Electronic Filing Fraud Package mentioned in note 1, supra, and also included in the forms in this Manual.  FN 9. It appears that 18 U.S.C. § 287 cannot be used in ELF cases in which the electronic return preparer, or ERO, has not transmitted the return to the IRS.  Section 287 punishes those false claims that an individual "makes or presents" to the government, but does not punish attempts.  Where the preparer or return originator has notified the IRS of a suspicious return and has not transmitted that return, the individual(s) who attempted to file the return should be charged with making a false statement in a matter within the jurisdiction of the IRS, in violation of 18 U.S.C. § 1001.  A false statement punishable under section 1001 need not be submitted directly to the government.  See, e.g., United States v. Suggs, 755 F.2d 1538, 1542 (11th Cir. 1985); United States v. Blecker, 657 F.2d 629, 634 (4th Cir. 1981).   FN 10. Cases involving schemes that recruit real individuals to file returns in their own names, under their correct social security numbers, do not fall within the terms of the delegation of authority and must be referred to the Tax Division for authorization of the grand jury investigation.  FN 11. Tax Division authorization is also required before charging false claims for refunds as any other violation of Title 18 (such as the mail, wire or bank fraud statutes or as a money laundering violation).  See Tax Division Directive No. 99, Section 3.00, supra.

References: § 287
 v. 
 v. 
 § 7206
 § 1001
 § 287
 § 287
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 2
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 §28
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 § 28
 v. 
 v. 
 v. 
 v. 
 v. 
 § 3237
 v. 
 v. 
 v. 
 v. 
 v. 
 § 3282
 § 371
 §1
 §1
 v. 
 v. 
 v. 
 § 287
 § 1001
 v. 
 v.