Saturday, July 23, 2011

Acceptance of Responsibility, Relevant Conduct and the Fifth Amendment (7/23/11)

Tax crimes fans know the critical role that acceptance of responsibility plays in the tax enforcement system. A very high number of criminal tax indictments are resolved by plea agreement. The plea agreement has two salutary effects based on acceptance of responsibility. First, S.G. 3E1.1 gives a reduction for acceptance of responsibility. Second, acceptance of responsibility, when credible, puts the sentencing judge in the right frame for the exercise of Booker discretion.

Acceptance of responsibility requires that the defendant admit at least the criminal conduct related to the offense of conviction. This can be a delicate exercise if, in the course of providing a full admission of the offense of conviction, the defendant must disclose information that could potentially convict him or her of another as yet uncharged crime. Perhaps the most commonly encountered situation is with regards to relevant conduct which, as readers will recall, is uncharged criminal conduct related to the offense(s) of conviction. Relevant conduct, a key concept in the Guidelines, can be used to increase the Guidelines range but does not allow incarceration beyond that allowed by the offense(s) of conviction. For example, in tax cases, tax losses in years other than the year(s) of conviction can increase the base offense level and thus increase the Guidelines range. While the defendant must be forthcoming to the Probation Office and the Court about the conduct underlying the offense of conviction, what about the relevant conduct? Must the defendant be forthcoming and admit relevant conduct which, after all, is conduct for which he is not convicted?

I hope readers can see the Fifth Amendment concerns in the question of relevant conduct. The Guidelines address these concerns by treating relevant conduct differently than conduct involved in the offense(s) of conviction. The comments thus state that a key consideration for acceptance of responsibility is that the defendant either truthfully admit or, at least not falsely deny, any relevant conduct. S.G. 3E1.1 cmt n.1(A). The comment elaborates:
A defendant may remain silent in respect to relevant conduct beyond the offense of conviction without affecting his ability to obtain a reduction under this subsection. However, a defendant who falsely denies, or frivolously contests, relevant conduct that the court determines to be true has acted in a manner inconsistent with acceptance of responsibility.
This concept works as intended where the relevant conduct, as in other years’ tax losses are really not entwined with the offense(s) of conviction. For example, usually the facts the defendant must truthfully disclose as to the offense of conviction for tax evasion for year 03 will not necessarily alone mean he is guilty of tax evasion for years 01 and 02, even though the same pattern of conduct occurred in years 01 and 02. The tax losses for years 01 and 02 can be considered as relevant conduct and, under the principles noted above, the defendant does not have to admit them.

A more subtle issue arises where the relevant conduct is inextricably entwined with the conduct of the offense of conviction so that supplying the full facts with respect to the offense(s) of conviction would incriminate the defendant for the other offense(s). A recent decision, United States v. Saani, 650 F.3d 761 (DC Cir 2011), here, addressed this issue where a defendant pled guilty to five counts of tax perjury, § 7201(1), with respect to bribery income. The defendant’s dilemma was that cooperation as to the facts underlying the counts of conviction required admission of bribery. This is often not a concern because the plea agreement will foreclose such a prosecution for bribery.  But where such a prosecution is not foreclosed, the court said:
Saani, however, asserts that if he were forced to disclose the source of his funds, then he might face prosecution for a crime distinct from tax evasion, viz., bribery. Courts disagree whether the “compulsion” a defendant faces if he may be denied a reduction of his sentence unless he provides potentially incriminating information is sufficiently forceful to trigger the protection of the Fifth Amendment. Compare United States v. Frazier, 971 F.2d 1076, 1084, 1086 (4th Cir. 1992) (conditioning a reduction under § 3E1.1 "on the waiver of [a defendant's] Fifth Amendment right is [] analogous to (and constitutionally indistinguishable from) the choice confronting the defendants in [a] plea bargain case[] ... [it] may encourage defendants to provide information that could prove incriminatory, but it does not compel them to do so"); with United States v. Olivares, 905 F.2d 623, 628 (2d Cir. 1990) (requiring defendant “to accept responsibility for crimes other than those to which he has pled guilty ... in effect forces [him] to choose between incriminating [himself] ... or forfeiting [a] substantial reduction[]” in his sentence); United States v. Amico, 486 F.3d 764, 779 (2d Cir. 2007) (same in dictum); see also United States v. Cohen, 171 F.3d 796, 805 (3d Cir. 1999) (a majority of circuits “construe denied 3E1.1 reductions as ‘denied benefits’ rather than ‘penalties’”).
In the case, the Court was able to dodge the tensions by remanding the case for further consideration, but readers should be aware of these tensions and be prepared to deal with them.

Readers might also want to review the Court's discussion of holding the defendant to his counsel's strategic choices which were made without consultation with the defendant.


  1. Jack,

    Thank you for posting your commentary on this most important Fifth Amendment topic.

    I have carefully read the D.C. Circuit's decision and arrive at the following conclusions:

    1. It is "palpable," if not altogether "manifest," that Mr. Saani had a reasonable fear of self-incrimination with respect to other crimes including bribery.

    2. The Fifth Amendment may be asserted in any proceeding including presentence investigations conducted by Probation and sentencing hearings.

    3. Mr. Saani was well-advised by counsel to assert his Fifth Amendment right with respect to matters relating to "relevant conduct" beyond the scope of the elements of the 5 tax perjury counts.

    4. Mr. Saani "constitutionalized" his objections to the prosecution's sentencing position and to the trial court's decision.

    5. Had Mr. Saani not constitutionalized his objections, he would not have received appellate relief.

    6. Mr. Saani's counsel should feel re-invigorated by this appellate victory and vigorously defend Mr. Saani on remand.

    7. If Mr. Saani energetically stands his Fifth Amendment ground and is otherwise vigorously defended during "re-sentencing," he could receive a substantial reduction in his incarcerative sentence. Perhaps as much 36 months off.

    As always, I would welcome any feedback.

  2. To Anonymous on 7/23/11 @ 4:37 pm:

    Excellent analysis. Thank you so much.

    I will consider and give feedback if I can think of something to add (hopefully as good as your comments). In the meantime, I hope other users will comment as well.

    Jack Townsend

  3. Thanks for the compliment, Jack!

  4. Dear Professor Townsend,
    Thank you for running this blog. I have much respect for your knowledge and analysis of the laws.

    Though not a law professional myself I am a businessman and read about laws as much as I can.

    Much of this blog is about the transfer and the hiding of money out of the country, and how this is being prosecuted by the US Govt.

    But what about the other side, the countries where this money is being hidden. Most of them welcome it, with favorable laws and bank secrecy laws. Several Caribbean countries are funded by this kind of business. Switzerland I understand has 27 times the amount of money on deposit it should have, for a country of its size, and now the Swiss Franc is a refuge for currency problems in other countries, including the Euro.

    But my legal question is this. We are talking about money (of which we professional Americans have plenty). But what if the commodity being transferred and hidden abroad was people.

    You see, my parents left Communism in Eastern Europe to escape duress, persecution, and prosecution by a federal govt there. The US granted us political asylum then and I somewhat partial towards the US for that reason.

    But what if the times have changed and it is now "offshore" countries granting financial asylum and sometimes residence to persecuted Americans.

    And just like the US has benefited from educated and hard-working immigrants, these "offshore" countries are now benefiting as well.

    I am not sure how to compare the two legal systems: of the US(IRS) and the Communist dictatorships, but the flight of people/money I can understand.


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