The case appears pretty much garden variety for criminal tax cases. I point out here only a few points I thought were interesting:
1. § 7206(1) (tax perjury) does not have as an element that there be any tax loss to the Government. This is a standard holding, and just barely worth commenting on except as a reminder to students.
2. In a variation of the holding, the court said: "it is not a defense to a charge of willfully and knowingly filing a fraudulent tax return that the amount fraudulently deducted could have been deducted for some other reason." citing United States v. Helmsley, 941 F.2d 71, 92-93 (2d Cir. 1991) among others.
3. The court reversed the district court's acquittals on the conspiracy charge, thus reinstating the jury's convictions. The court of appeals recounted more than ample evidence of actions by both defendants to impair or impede the IRS through deceitful means to support the jury's verdict. "That is, from the evidence before it, the jury could have concluded that Velasquez knew that at least one purpose of the agreement to make up the six subcontractors was to reduce PDC's tax liability on false pretenses." Merely that they co-conspirators may have had some other goal (deceiving others) did not detract from their goal to impair or impede the IRS through deceitful means. (For other blogs on the lie as the critical component of tax crimes, click here.)
4. The court of appeals reversed for resentencing because of its reversal noted in #3 and the affect it might have on sentencing enhancements.. In so doing, the court of appeals addressed the notion that attorneys fees might be a factor mitigating the sentence. As suggested in the quote below, it was not clear what weight, if any, the sentencing judge placed on the attorneys fees, but he did comment on them. The background is that the Government had brought earlier nontax charges against one of the defendants for ERISA and mail frud charges upon which he had been acquitted. He had incurred large attorneys fees in that proceeding, and then the Government indicted again in this tax case where he also incurred large attorneys fees. The court said, perhaps gratuitously:
To aid everyone during the resentencing, we also take note of the government's arguments that the district court took impermissible factors into account when it sentenced Presbitero to a below-guidelines sentence. For one, the district court commented on the amount of money Presbitero paid in attorney's fees, stating at the sentencing hearing that Presbitero had spent "probably a good part of his savings defending against charges brought by the Government. That's a long time to be fighting the government. Almost ten years. And a huge amount of stress that's involved with that, and expense." Presbitero maintains that the district court did not actually rely on the amount of attorney's fees incurred when it decided which sentence to impose. Instead, he says, the comments we quoted were just observations that did not factor into his sentence.Putting on my economic animal hat (as criminal lawyers certainly do in striking the fee arrangements), I find the idea intriguing that, but for the court's rejection of this notion, defense lawyers might have both a success clause for more attorneys fees for acquittal, and a failure clause for more attorneys fees for conviction; either way it would be win, win for the lawyer.
It is not clear to us from the record whether the comments regarding attorney's fees and the resulting stress were simply asides at the hearing or whether they factored into the imprisonment term decision. In an opinion issued after Presbitero's sentencing hearing, we explained that the fact "that a defendant spends heavily on lawyers is not a mitigating factor. It would not only encourage overspending; it would be double counting, since the pricier the lawyer that a defendant hires, the less likely he is to be convicted and given a long sentence." United States v. Sriram, 482 F.3d 956, 961 (7th Cir. 2007), vacated on other grounds, 128 S. Ct. 1134 (2008). So the district court on remand should not consider high attorney's fees as a mitigating factor. And while we certainly recognize the emotional and financial tolls of an investigation, indictment, and trial, the resulting stress is not in and of itself an appropriate reason to lower Presbitero's sentence. See Sriram, 482 F.3d at 961 (protracted prosecution not a reason to lower sentence).
For those wishing to pursue the issue, the Sriram decision, written by Judge Posner, is here.