Source: http://federaltaxcrimes.blogspot.com/2017/03/sixth-circuit-rejects-argument-that.html
Timestamp: 2017-09-19 11:42:23
Document Index: 42006877

Matched Legal Cases: ['§ 7203', '§ 7206', '§ 7201', '§ 7206', '§ 6081', '§ 7201', '§ 2', '§ 2', 'art 07', 'art 2', 'art 06', 'art 1']

Federal Tax Crimes: Sixth Circuit Rejects Argument that False Statement to CI Agent Should be Sentenced as Obstruction Rather than Tax Offense (3/9/17; 3/10/17)
In ruminating on this case, I recalled an earlier case, Edwards v. United States, 375 F.2d 862 (9th Cir. 1967), here. In Edwards, the defendant, a tax return preparer, was convicted of 25 tax crimes counts -- failure to file (§ 7203), tax perjury (§ 7206(2)) and tax evasion (§ 7201). I focus here on the tax evasion convictions (17 counts), which apparently related to his clients' tax returns rather than his own. The defendant had created a special trust account to receive client funds pending payment to the IRS of the taxes with respect to their returns. He began having some difficulties with the account (those difficulties are recited earlier in the opinion with respect to the § 7206(2) charges for claiming tax payments not made). Then in discussing the tax evasion counts, the Court said: "Appellant's troubles with his trust account led him to prepare tax returns, collect the amount of tax due and then fail to file the return or make the payment."
The Court of Appeals then considered his arguments. The Court first rejected his Spies argument as to the nature of tax evasion. I don't discuss that here since it is irrelevant to the subject of this blog, except to note the Spies element for tax evasion that an affirmative act of evasion is required.
The trouble in this case is in its lack of proof of willfulness in the sense of a specific intent to evade or defeat the tax or its payment. Evasion and defeat, as we understand their use in this section, contemplate an escape from tax and not merely a postponement of disclosure or payment. n6 A knowing and intentional omission to file could be the result of either purpose, and either purpose might support a prosecution for the state crime of embezzlement or other form of theft. Tax evasion, however, focuses on the accused's intent to deprive the Government of its tax moneys, and this requires more than just delay. n7
n6 Sansone v. United States, 380 U.S. 343, 85 S.Ct. 1004, 13 L.Ed.2d 882 (1965), is consistent with our understanding. There a return was falsified to exclude taxable income. It was asserted by the taxpayer that he intended to declare the income in the future, and that this vitiated the requisite willfulness to sustain the conviction. This was held to be no defense, since tax for the taxable period had been intentionally evaded; declaration in the future would bring the income into a different tax year. But here, by tardy filing of a proper return, the tax for the taxable period has not been evaded; its payment has merely been postponed. Cf., Wilson v. United States, 250 F.2d 312 (9th Cir. 1957); United States v. Jannuzzio, 184 F. Supp. 460 (D.Del. 1960).
n7 Cf., Leathers v. United States, 250 F.2d 159 (9th Cir. 1957), where an accountant understated his client's income on the tax return for the client's business and pocketed the tax thus saved, defrauding both the client and the Government. His conviction was sustained.
While a scheme of the sort appellant perpetrated could be carried out with intent to escape the tax, the facts on this record do not support such an inference. It appears that some shortages in his trust account were traceable to his practice of accommodating some of his clients with advances — embezzling from Peter to pay Paul's taxes. But hard times came to him, and he also drew on the account for personal uses, gradually falling behind in filing returns and remitting payments. On the other hand one of his techniques was to apply to the District Director for six month extensions of time for filing returns, as permitted by Int.Rev.Code of 1954 § 6081(a). 1Such extensions had been obtained for a number of the returns cited in the indictment. He thereby disclosed to the Government that as to those taxpayers a return was due.
In United States v. Jewell, 614 F.3d 911 (8th Cir. 2010), here, the Court discussed and distinguished Edwards. Jewell was a tax lawyer who cooked up a scheme to evade clients' taxes. He was charged with aiding and abetting tax evasion for causing the filing of a false tax return for the clients. (The charged statutes were 26 USC § 7201 (tax evasion) and 18 USC § 2(a) (aiding and abetting).) He was also charged with other counts unrelated to the tax evasion. The jury convicted him on the tax evasion count (aiding and abetting tax evasion) but acquitted on the unrelated counts. Citing Edwards, Jewell argued that he cannot be guilty of tax evasion. Here is the discussion:
Jewell also claims he cannot be guilty of tax evasion because the Evanses eventually paid their taxes. Jewell relies upon a case from the Ninth Circuit for the proposition a defendant must intend a permanent escape from paying a tax and not merely a postponement. See Edwards v. United States, 375 F.2d 862, 867 (9th Cir. 1967) ("[E]vasion and defeat . . . contemplate an escape from tax and not merely a postponement of disclosure or payment."). The Eighth Circuit has not adopted such a position, however, and the Ninth Circuit itself has limited Edwards to the unique facts involved in that case, where there was no evidence at all of an intent to avoid payment of taxes, but merely to delay. See United States v. Huebner, 48 F.3d 376, 380 (9th Cir. 1994) (indicating the escape not postponement "statement in Edwards must be read in the light of the facts of that case."). The fact that the Evanses eventually reconciled their tax deficiency with the IRS does not exonerate Jewell where a reasonable jury could determine he had the intent to assist the Evanses with evading taxes in the tax year 2000. n6
n6 Jewell also claims the evidence was insufficient because the admission of the Evanses' 2000 tax return violated Crawford v. Washington, 541 U.S. 36, 124 S.Ct. 1354, 158 L.Ed.2d 177 (2004). Jewell contends a tax return is "testimonial" because it is signed by taxpayers under penalty of perjury. 1The government offered the tax returns prior to trial as business records, and Jewell did not object to them except as to relevancy, so we review this claim for plain error only. We find no plain error. Because Carl Evans testified, Jewell had an opportunity to challenge the accuracy of the tax returns. In addition, in United States v. Garth, 540 F.3d 766 (8th Cir. 2008), abrogated on other grounds, United States v. Villareal-Amarillas, 562 F.3d 892 (8th Cir. 2009), we rejected the argument that admission of tax returns, even as to non-testifying witnesses, violated Crawford. Id. at 778 (noting Crawford did not consider business records to be testimonial, and that the defendant stipulated the tax returns were business records).
Note that the footnote is not relevant to the point in this blog, but I include it for defense counsel to tuck away for possible future use.
I will note that the charging of Jewell for tax evasion through the aiding and abetting statute (18 USC § 2(a)) is inappropriate because Jewell's conduct made him a principal of the crime of tax evasion (even though he was not the taxpayer). I won't get further into that issue here, but direct readers attention to the following:
John A. Townsend, Theories of Criminal Liability for Tax Evasion (SSRN May 15, 2012), here,
Daugerdas Retrial Jury Instructions - Part 07 Tax Evasion Instructions Part 2 Tax Evasion and Conspiracy to Commit Tax Evasion - Derivative Liabilities (Federal Tax Crimes Blog 11/25/13), here;
Daugerdas Retrial Jury Instructions - Part 06 Tax Evasion Instructions Part 1 Tax Evasion and Conspiracy to Commit Tax Evasion (Federal Tax Crimes Blog 11/25/13), here;
Even More on Principals, Accomplices, Causers and Pinkerton Conspirators - the Daugerdas Case (Federal Tax Crimes Blog 5/10/11), here;
As an aside, the multiple counts charged in this case seems a bit odd, but I am looking at it through a post-Sentencing Guidelines lens. This case was before the Sentencing Guidelines. One of the main purposes of the Guidelines was to take away the incentive to overcharge cases by making sure that the sentence is determined by the real offense (in tax cases principally by the aggregate tax loss involved rather that the discrete events contributing to the tax loss). So, now, the Government can assure the same sentence by charging fewer counts, thus making the prosecution easier and the court time less, but with all of the conduct considered at sentencing as relevant conduct.