Tuesday, September 18, 2012

IRS CI Statistics (9/18/12)

I just reviewed the IRS CI statistics web page, Like Share Print Enforcement Statistics - Criminal Investigation (CI) Enforcement Strategy, here, and revised my Federal Tax Crimes text to reflect those statistics.

Below is the revised excerpt of the text of my book.  I omit the table in the excerpt below but note that in the text I condense the columns to include only the years 2008-2011.  For those wanting a spreadsheet of the table, I provide it here in excel format with the derived percentages  The following text omits the footnotes:
B. Statistics 
Benjamin Disreali once mused that “there are lies, damned lies, and statistics.” Here are some statistics as presented on the IRS web page: 
The conviction rate is quite high.  The data is not presented for convictions, but it is for sentencing.  Since convictions result in sentencing, I derive over this 4 year period a conviction rate on Tax Investigations (not including Other Financial Crimes) of 89%.  However, DOJ Tax prosecutes more tax and tax related crimes than those referred by the IRS, and as recently as 2007, DOJ Tax claimed a conviction rate on the whole subset at 97%.  I am skeptical as to that percentage, but the conviction rate (whatever it is precisely) is high.
Assuming arguendo a conviction rate of 97% and the year for that statistic is representative, that appears to be – and certainly is – a whopping conviction rate.  But, we might extend those statistics working from the known to the unknown and make some interesting speculations.  Let’s say that tax crimes fit the general federal crimes pattern where 95% of the cases plead.  This means that only 5% of the tax indictments are tried.  Then, assuming a 97% conviction rate, it would appear the only 2 of 5 that go to trial end in conviction.  In other words, for those cases going to trial the defendant has an implied success rate of 60%.  And what that might further imply is that for at least some of the 95% pleading (say the 10% portion that are the weakest cases), the defendants might have been better off had they gone to trial.  But this is just speculation from a statistical data set that, I think, overstates the conviction rate.  With a lesser conviction rate, the implied success rate might increase marginally (my speculation). 
Better statistics (clearly apples to apples) from the above table (covering the years 2008-2011) would be derived percentages as follows:  (i) IRS criminal Tax Investigations that lead to recommendations to DOJ Tax CES compared to criminal Tax Investigations Initiated - 54% (meaning, on average, 46% of criminal investigations are not referred); and (ii) IRS CI Tax Investigations charged (Indictments / Informations) compared to those recommended - 86% (meaning, on average, 14% not guilty or dismissals).

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