Wednesday, April 1, 2009

Sentencing Chart for Major Tax Crimes Convictions

The United States Attorneys Office for the Southern District of New York (USAO SDNY) filed this spreadsheet of sentencing for major tax crimes in United States v. Larson (USDC SDNY No. S1 05 Cr. 888 (LAK)). Larson is the remnant of the infamous United States v. Stein, 541 F.3d 130 (2d Cir. 2008). These cases involved the KPMG-related shelters.

The four remaining defendants in Larson were convicted in a case where the tax loss was in the billions. The tax loss is the principal driver for calculating the Guidelines sentence. (The defendants have other Guidelines-enhancing attirbutes, but the tax loss is the biggie.) The defendants of course are urging the district court to exercise its post-Booker discretion to vary downward from the sentence otherwise indicated by the advisory Guidelines. Courts have exercised their discretion in tax cases in some cases and, in my view, the Court will likely do so in Larson because the indicated Guidelines sentence is so draconian (24 years). The battleground is likely how much the variance will be. The USAO SDNY submitted this spreadsheet of other sentences in tax cases involving less tax loss to assist the court. Interesting reading indeed.

The sentencing of Messrs Larson and Pfaff will be this afternoon. I will post information or comments on the sentencing later as it becomes available.


  1. Thanks, Jack. This is interesting reading. I am noticing that restitution is ordered after the trial on some of these.


  2. John / Anonymous

    You'd have to dig into the details as to why restitution was provided. At least as to the tax crimes of conviction, it would have to be required or allowed by either the plea agreement (in there was one) or by some benefit the sentencing judge gave to the defendant on the condition that he or she pay restitution.

    By the way, this chart was submitted by USAO SDNY for the sentencing in US v. Larson. The sentencing occurred yesterday afternoon. I should be able to post something on the sentencing later today.

    Jack Townsend


  3. I'm on page 260 of your book about how state tax losses can be considered in the tax loss calculation. It reminds me of the recent Snipes case where he wanted venue changed from Florida to NYC. Seems from a tax loss perspective he would want venue in Flordia where there are no state taxes. I find it deplorable that the federal gov't can use state tax losses as relevant conduct when the statute under which he is convicted has nothing to do with the state taxes. Let the state prosecute their own case.

  4. Response to Anonymous:

    The concept of relevant conduct includes state taxes regardless of whether the state taxes are due the state in which the trial occurs. Hence, if trying to skinny down the relevant conduct were the reason for Snipes to request change of venue, then it would not work.

    I should note that prosecutors do not always include state tax evaded as relevant conduct and, if the prosecutors do not serve it up for the Probation Office, it is often just ignored in calculating the Guidelines sentence. Developing the state tax evaded often takes significant additional work to develop the state tax loss. The CTM says that they pursue the state tax loss where, among other factors, "the loss is easily ascertainable." CTM (2001 ed.) 3.00 AAG Argrett Memo of 12/4/98.

    In determining whether to do the extra work, the prosecutors undoubtedly make a judgment call as to whether the gravity of the federal crime is adequately covered by the federal tax evaded that is included in the tax loss calculation under relevant conduct. If federal tax evaded will get an appropriate Guidelines sentence, then there is no incentive to do the extra work to include state tax evaded.

    Moreover, under the Booker regime under which the Guidelines are advisory only, the sentencing judge is likely to reach an overall judgment as to an appropriate sentence and is unlikely to be materially influenced by additional state taxes that might be due.

    Inherent in the foregoing is the proposition that state taxes will be included in the prosecutor's claim of tax loss (and likely the Probation Office and Sentencing Judge's calculations also) where the state tax evaded is significant and the amount relatively easily calculated. For example, federal fuel excise taxes are calculated on quantum of fuel, just as the very significant state fuel excise taxes are calculated. The state calculation is easy based on the federal calculation which is already required. Moreover, because fuels tax evasion is a systemic problem with very large tax dollars involved at both state and federal levels, it is likely that the prosecutors will see deterrence value in piling on the quantum of tax loss where the message must get out to the industry that this is serious business.

    Finally, there may be the intersection of other policies involved in including state taxes in the federal tax loss Guideline. It would appear to me to be inappropriate to do that where the state itself prosecutes first for the state tax evasion. And, where the state itself prosecutes first there may be even a Petite Policy issue (the general federal policy not to prosecute for the federal crime if the state prosecutes and convicts for overlapping state crime). In important areas such as fuels tax evasion, the federal prosecutors may not think the state prosecution and punishment is sufficient to fully vindicate federal imperatives. In such a case, however, in the federal sentencing, I would think it is not appropriate to include the state tax loss.


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