Duplicity in Government Charging of Evasion of Assessment Counts

The Third Circuit issued an important opinion in United States v. Root, 585 F.3d 145 (3d Cir. 2009). The major issue in the opinion is the application of the criminal law concept of "duplicity." Duplicity is defined as "an indictment where the Government charges two or more distinct offenses in one count. In the latter situation, it cannot be determined if the jury's verdict was unanimous as to each distinct offense.)." 1A Charles Alan Wright et al., Federal Practice and Procedure § 142 (3d ed. 1999) (cited in fn. 7 of the concurring opinion in Root). The majority cites a longer list of concerns in duplicity:

The purposes of the prohibition against duplicity include: (1) avoiding the uncertainty of whether a general verdict of guilty conceals a finding of guilty as to one crime and a finding of not guilty as to another; (2) avoiding the risk that the jurors may not have been unanimous as to any one of the crimes charged; (3) assuring the defendant adequate notice; (4) providing the basis for appropriate sentencing; and (5) protecting against double jeopardy in a subsequent prosecution.

(Note that some of these concerns overlap the recent Rigas discussion here.

Mr. Root was charged with tax evasion but, as students of tax crimes know, there are two types of tax evasion. The more commonly charged crime of tax evasion is evasion of assessment (usually committed by filing a false tax return where the other Spies elements are present) and evasion of payment (usually committed by some affirmative act to avoid payment of an assessed tax liability). Generally, as discussed in Root, evasion of assessment is conceptualized as tied to the annual filing of a return, and thus evasion of assessment is charged as a single and separate count for each tax year. Generally, multiple years of evasion are required for conviction of evasion of assessment, as a single year can be viewed as an aberration and thus not proof of willfulness of the type that will move a jury to convict. However, evasion of payment can easily be viewed as involving the attempt to evade multi-year assessments and, hence, is often viewed as a single count when multi-year assessments are involved.

In Root, contrary to the conventional pattern, the Government charged evasion of assessment for three years in a single count. (The Government did attempt to confuse the matter by asserting that the charge was really evasion of payment even though the words charged evasion of as assessment; the court handily smacked down that, shall I say, duplicitious argument (see fn. 3).)

So, one might ask, why would the Government charge a single count for three years when it conventionally charges separate counts for each year? The majority and the concurring opinions suggest that the reason was to give its case an artificial boost. How's that, I hoped you asked? Well, the prosecutors thought that the amount of tax due -- another of the Spies elements of the crime of evasion -- involved in at least one of the years might not be considered "substantial," thus permitting the jury to acquit. Now, of course, the statute, § 7201, says nothing about a substantial tax being due and owing as an element of the offense of tax evasion. The substantial tax due requirement for a conviction -- and thus a charge to that effect to the jury -- is a judicial gloss. Some minority of courts don't buy the gloss. See United States v. Daniels, 387 F.3d 636 (7th Cir. 2004). But the Third Circuit and a majority do. See e.g., See United States v. Helmsley, 941 F.2d 71, 83-84 (1991), cert denied, 502 U.S. 1091 (1991) (“We have also required a showing that the deficiency was substantial.”) and other cases discussed in Daniels. So, the Government was trying to shore up its proof on the element that the jury would be charged was required.

Let's look at the numbers. In one of the years, the concurring judge reasons, the jury could have concluded that tax due was roughly $5,400. (The majority uses a higher number, but seems not to engage into as careful a calculation as the concurring judge on how a jury may have determined the amount.) The Government said ex cathedra that that amount was substantial. The concurring judge, however, was not so certain on that conclusion, and felt that in any event that was a conclusion for the jury to reach properly instructed. More importantly, if a jury or any single member of the jury could have concluded that the amount was not substantial, then, the concurring judge reasoned, the Government effectively pre-empted the jury's prerogative by including that year in a multi-year single count where it was hidden from view by the larger numbers in the other years. And, at least in theory, if one year fell, so might the rest. (Also, countering the majority's reference to other cases where the dollar quantum was found "substantial," the concurring judge makes inflation adjustments that shows that that dollar quantum may be misleading.)

So, the majority sustained the single count indictment, based on the notion that a multi-year pattern of conduct could be charged as evasion of payment in a single count and that the amounts were, as a matter of law, substantial as to any year, thus taking out the risk of prejudice to the defendant. The concurring judge seemed to disagree, but then finally decided he would concur rather than dissent, although on reasoning that I do not find wholly persuasive (some citations omitted for easier reading):

Nevertheless, this case does not warrant reversal because, as the majority correctly points out,"[t]he record demonstrates Root evaded the assessment of more than $ 50,000 of income in each of the years in question." Maj. Op. at 15. Although the indictment and the jury charge do not appropriately segregate Root's conduct by year, "Root's evasive conduct was consistent during the three-year time period." Id. Moreover, when Root first filed amended returns in June 2004, he reported only the commission payments made to New Perspectives; he did not report the other income. Accordingly, no reasonable jury could have voted to acquit Root of evasion of assessment of tax for any of the years with which he was charged in Count Two. Similarly, the record reflects sufficient activity in the Eastern District of Pennsylvania to establish venue in that district.

As I noted at the outset, and as the majority explains, the doctrine of duplicity is intended to "avoid[] the . . . risk that jurors may not have been unanimous as to any one of the crimes charged . . . ." As I have also explained, Shorter teaches that, absent appropriate jury instructions and/or special interrogatories that address the risk of conviction on less than a unanimous verdict as to each year in which evasion of assessment is charged, trial courts should not permit indictments (such as this one) that combine offense conduct across multiple tax years in a single count. Ignoring that risk permits indictments that rest only "on the narrow basis of tax evasion law" to escape the more crucial step of "measur[ing] that indictment against the purposes of prohibition against duplicity" to ensure fairness.

Thus, although the concurring judge had considerable discomfort with the majority's analysis, he concurs rather than dissents. Perhaps, it is a no-harm no foul notion. The jury clearly had found the defendant acted willfully and had committed a Spies affirmative act in the conduct that spanned all three years. And, since the amount was certainly substantial as to one of the years, the defendant would have been convicted on one year, so he has not been substantially prejudiced. That's my readaing between the lines.

So, in sum, the court sustained a single count indictment where the sum was greater than its component parts from a conviction perspective.

Some other miscellaneous points.

1. On the numbers involved, the Sentencing Guidelines would have produced a sentence below 5 years, which is the maximum sentence allowed on a single count. Hence, there was no compelling sentencing need for the Government to charge more than one count. But, in some cases, the defendant will be better off if the Government charges a single count.

2. The majority rejected the defendant's attempt to use the DOJ Criminal Tax Manual against the Government. The Court noted that the CTM was for the tax prosecutors' internal guidance and did not establish the law or substantial rights for defendants. This is basically the holding of United States v. Carceres, 440 U.S. 741 (1979) in the context of the Internal Revenue Manua.

3. I hope you noted that the majority and concurring make a gaffe in the following statement (said by the majority and quoted, apparently favorably, by the concurring judge): "The record demonstrates Root evaded the assessment of more than $50,000 of income in each of the years in question." What exactly is an assessment of more than $50,000 of income? Fortunately, although said prominently by each, the balance of the opinions suggest that they really did not believe it.