Tuesday, October 27, 2009

DOJ SG 5K1 and § 3553(e) Departure Request for Rubinstein

You will recall that Mr. Rubinstein was the first of the UBS clients to plead (see my original Get-in-Line Brother blog here). Mr. Rubinstein pled to a § 7260(1) count with a maximum incarceration period of 3 years. Sentencing time is nigh. Apparently the Guideline range for Mr. Rubinstein is 18 to 24 months. The Government has filed it's SG 5K1 and § 3553(e) request which, in its entirety (exclusive of sealed submissions), is:
1. On April 1, 2009, defendant Steven Michael Rubinstein was charged with a complaint alleging that he filed a false tax return, in violation of Title 18, United States Code Section 7206(1). On June 26, 2009, the defendant waived indictment, and entered a plea of guilty to a one-count Information charging the same. The defendant admitted to failing to disclose of the existence of and the income associated with an undeclared Swiss bank account at UBS, AG.
2. Pursuant to an agreement with the United States, the defendant cooperated with the United States in its ongoing investigation into offshore tax evasion. Since entering into this agreement, the defendant has provided substantial assistance in the investigation of others who have committed offenses against the United States. This substantial assistance has been timely, significant, useful, truthful, complete, and reliable.
3. In February 2009, pursuant to a deferred prosecution agreement, UBS AG, Switzerland's largest bank, provided the United States Department of Justice the identities and account information for certain United States clients that were believed to have not disclosed the existence of or reported the income associated with offshore bank accounts at UBS in Switzerland.
4. Information provided by UBS pursuant to the deferred prosecution agreement has led to the investigation of more than 150 United States taxpayers. The defendant was the first such person to be prosecuted. To date, six additional former UBS customers have been prosecuted throughout the United States. Additionally, a federal grand jury in the Southern District of Florida returned a one-count conspiracy indictment against Swiss banker, Hansruedi Schumacher, and Swiss attorney, Matthias Rickenbach (Case No. 09-60210-CR-HURLEY).
5. On the heals of the deferred prosecution agreement, the Internal Revenue Service announced a six-month program to encourage Americans to voluntarily disclose the existence of offshore bank accounts. In exchange for coming forward, the IRS agreed to reduced penalties and to not recommend prosecution of the taxpayer. In an average year, less than 100 individuals take advantage of the Internal Revenue Service's voluntary disclosure program. The IRS recently announced that so far this year more than 7,500 taxpayers voluntarily disclosed the existence of their offshore assets.
6. The prosecution and guilty plea of this defendant has generated tremendous publicity. This publicity, without a doubt, contributed, in part, to the drastic increase of taxpayers who voluntarily disclosed their offshore accounts to the IRS.
7. The United States will provide, under seal, to this Court details of additional substantial assistance provided by the defendant.
8. The defendant's current advisory guideline range is 18 to 24 months. Pursuant to the plea agreement, the United States will ask this Court to sentence the defendant to the low-end of the advisory guideline range. Pursuant to Title 18, United States Code, Section 3553(e), and Section 5K1.1, United States Sentencing Guidelines, the United States asks this Court to reduce the defendant's sentence by one-third percent and to impose a sentence of 12 months.

Just a couple of points about this filing:

1. Paragraph 8 needs some clarification. Context makes clear that the Government did not intend to be stingy in its recommendation of a "one third percent" reduction which would be virtually nothing. The Government really meant a "one-third" reduction from 18 months which is the bottom of the advisory range. And, of course, even here, surely the Government does not really mean a 12 month sentence which would insure Mr. Rubinstein's incarceration for a longer period than if he receives a 12 month and 1 day sentence (the old good time credit thing).

2. The Government says that its voluntary disclosure program normally generates only about 100 disclosures by individuals a year. The Government cannot be including the quiet disclosures made by filings with the service center. I have only anecdotal experience from my own practice and talking with others having similar practices, but I think it fair to project from this experience that the quiet disclosures are in the thousands each year. Of course, there is no way for the Government to quantify that since no one that I know of embazons in red on the amended returns "Voluntary Disclosure - Quiet Type" (indeed, then it would not be quiet). Quiet voluntary disclosures are an important compliance measure to collect the back revenue (with interest) and get those now compliant taxpayers back into the system or back fully into the system.

3. DOJ Tax wants to give credit for the effect Rubinstein's plea had on encouraging others to join the voluntary disclosure program. Yet, since DOJ Tax usually seeks publicity to encourage others to do right, should that be an extra factor warranting a downward departure? Surely, now practitioners will argue that it does. Perhaps they can argue that the publicity of the convictions spread by the news media and even blogs such as this warrant departure, particularly if the Government makes a 5K1 departure request for other reasons.

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