Tuesday, February 12, 2013

Ahuja Sentencing (2/12/13; Expanded 2/13/13)

On 2/13/13, I added some comments and key sentencing documents below.

Key features (combining info from prior blog, here, with the new information in red):

Taxpayer:  Dr. Arvind Ahuja, a "prominent neurosurgeon"
Age: ___
Conviction Date: 8/22/12
Sentence Date: 2/1/13
Banks: HSBC in India; also HSBC account  in the Bailiwick of Jersey, a British Crown dependency located in the Channel Islands off the coast of Normandy
Enabler:  HSBC India representative in New York
Entities: No.
Guilt: Jury Conviction
Count(s) of Conviction: Tax Perjury (Section 7206(1))-one count; FBAR-1 count
Maximum Possible Sentence:  8 years.
Omitted Income:  $2.7 million for years 2005 through 2009
Tax Loss:  Because some key sentencing documents are under seal, it is unclear what  tax loss number was determined by the Court.  In its Sentencing Memorandum, the Government requested a tax loss finding of $967,944.66 (including (i) the federal tax loss for the 2009 year of conviction and the acquittal years that can be included under the relevant conduct concept and (ii) the state tax loss).  In his Sentencing Memorandum, Ahuja requested a tax loss finding of $ -0-, arguing that the Government had not proved by the required preponderance of the evidence that there was any tax loss.  I provide links to the submissions below, so those with the interest and time should pull them down to read.  
Guidelines Indicated Sentencing Range:  Gov't calculation: 41-51 months; Ahuja calculation: -0- months incarceration. 
FBAR Penalty: ?  [This is a civil penalty not resolved in a criminal case except by agreement of the parties; this is usually handled by plea agreement, but there was no plea agreement here.
Actual Sentence:  Incarceration - 0 months; probation 3 years.
Home Detention: 3 months
Fine:  $350,000.
Court: ED WI
Judge: Charles N. Clevert, Jr. (Wikipedia entry here)

See David Voreacos, Doctor Spared Prison for Tax Violations Tied to HSBC Account (Bloomberg 2/1/13), here.

JAT Comments:

1. The Government's sentencing submissions were detailed and good, but fairly routine.

2.  Ahuja's sentencing submissions were excellent -- both in the Sentencing Guidelines analysis and in elaborating the Booker factors for the lowest possible sentences (seemed to have been achieved).  As noted above, the defense argued that the Government had not proved any tax loss.  Note that neither count of conviction requires a tax loss as the element of the crime.  This may have been the basis for the zero incarceration.

3.  Ahuja did make one argument relating to the tax loss that was very, very interesting, since it sought to treat the usual calculation of tax loss as irrelevant.  Here is the argument.

Second, this may be the only case in history where an individual was indicted by the federal government for underreporting interest income that resulted in underpayment of taxes by less than two percent of the individual’s total tax liability. Even if the government’s charges are accepted, Dr. Ahuja’s underpayment of taxes was an extremely small percentage of his total tax liability. The Sentencing Guidelines measure tax loss in dollar amounts. There is no explainable rationale for why dollar amounts are the basis for the offense levels computed under the tax table. If instead the tax table used percentages of unpaid taxes as compared to total tax liability, Dr. Ahuja likely would be at an offense level of 6. Indeed, considering tax loss as a percentage or tax liability  [*5]  instead of dollar amounts is a far more equitable way to determine an appropriate sentence.
4.  Ahuja made an argument made by defendants:
Third, Dr. Ahuja has already paid all of the tax he owed, plus late payment penalties and interest, dating back all the way to 2002. When Dr. Ahuja realized that a mistake was made on his tax returns, he did what an honest tax-payer would do and filed amended tax returns. He did this prior to being indicted in this case. 
5.  Ahuja emphasized that he had not endeavored to hide as some of the other defendants in these prosecutions have.  For example, he had no entities, which has been a key feature of most prosecutions, and funded the offshore accounts with wire transfers from his U.S. account which is hardly typical of someone trying to hide offshore accounts.

6.  Finally defense counsel did a marvelous job of developing the Booker / 3553(a) factors.  A very good read.  I strongly recommend it for students and fledgling practitioners.

7.  It will be interesting to see if the Government appeals.  If indeed the Court found no tax loss and the record supports that finding (i.e., the Government failed to make the proof), then the sentence is probably bullet-proof.

Ahuja Sentencing Documents:


Ahuja's Response to Government Sentencing Memo (1/23/13), here
Government Sentencing Memo (1/22/13), here.
Brief for Ahuja (1/22/13), here.
Judgment (Imposition of Sentence) (2/1/13), here.
Docket Entries as of 2/13/12, here. [Note some key sentencing documents are sealed]

7 comments:

  1. what does "prominent neurosurgeon" mean ? he may have cheated on tax but that does not take away his stand in his profession

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  2. Jack

    It seems Dr. Ahuja did not get off worse (at least from a sentencing perspective) than many defendants who pled. His sentence seems actually *lower* than that of several others in your sheet.

    Admittedly, he had a more defensible case than other defendants (no entities, post tax money), and the fact that the jury found him not guilty of FBAR violations for all but one year indicates that they either believed him or that they thought multiple years would amount to too severe a punishment. [Indeed, if it had not been for the offshore credit card, he might not have been charged criminally at all. ]

    I wonder if this might stiffen the spine of a few offshore account holders who have slightly better cases to actually fight in court rather than plead guilty. There would be additional expenses of a trial, and the possibility of FBAR convictions for each year (rather than one plea for a single year), so any such person would need a strong stomach.

    1) Would Dr. Ahuja have got the 'acceptance of responsibility' download departure ? Maybe not, since he was appealing the verdict. In that case, the sentence seems even lighter. Or did he finally strike a deal, post verdict, but pre sentencing ?

    2) If no deal was struck, the DOJ can still bring civil cases for open years in which Dr. Ahuja was found not guilty. They can already get 50% from the one year he was found not guilty, the question is whether they would try and get more from the other open years .. even beyond 100% (and possibly open themselves to an Eighth Amendment challenge).

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  3. A felony conviction might cost him his medical license -- indeed that might be one reason he chose to roll the die in court. It all depends on Wisconsin law and the state physician ethics body. I do think it would be a waste to deprive a skilled surgeon of his license for crimes that are unrelated to medicine -- indeed, perhaps the sentencing should have included free surgery as community service (only half joking).

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  4. 2 more thoughts.



    1) 2 other HSBC defendants (Dahake and Bhasin), pled nearly years ago, but there has been no news about their sentences. It might be the case that they too got very light sentences, with no actual jail time, so the DOJ did not issue press releases.


    2) On another topic -- the oft debated question of whether the FBAR civil penalty is on a per form basis or a per form, per year basis. The statute refers to violations, then specifies civil and criminal penalties. So if one were to take the IRS's position that the penalty is on a per-year/per-account basis, then the same penalty should also apply for criminal cases, and a person with 5 accounts over 5 years would be subject to 5 * 5 = 25 counts of criminal violation, something that would stretch into centuries. This by itself should point out the absurdity of the IRS/DOJ argument that the FBAR civil penalty should be on a per year, per account basis. And the DOJ did not try and convict Ahuja of multiple counts (per account) each year -- apparently they are not willing to make the argument in criminal cases, so why should the same argument be valid in civil cases ? After all the statute doesn't specify that 'violation' means something different in the criminal and civil context.

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  5. I meant to say 'They can already get 50% from the one year he was found guilty,'

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  6. Actually, at least in theory, they can get 50% for all years, but there would likely be an Eighth Amendment excessive fine problem. So, when the FBAR assessment is made, the IRS can either stick with the year of conviction (res judicata on liability) or try to get the highest year (if other than the year of conviction) which would require that the IRS prove civil willfulness which is not precluded by acquittals.

    Jack Townsend

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  7. The sentencing documents are very interesting.

    1) The government claims interest income of 2.75 million over 5 years. Dr. Ahuja claims this represents less than 2% of his tax liability (lets stick with Federal for simplicity). Assuming a marginal rate of 35%, that means an income of approximately 2.75 * 50 over 5 years = approximately 27.5 million per year. Even for a very skilled surgeon, that is extraordinarily high. I surmise that Dr. Ahuja's income may include substantial income from medical business related to the surgery.

    2) Reading the government's sentencing memo (with the obvious caveat that presents the government's view), I think they have a strong case that Dr. Ahuja did indeed evade taxes willfully for all the years in question. However, I think there is a good argument to be made that Dr. Ahuja did not actually know of the FBAR filing requirement for years prior to 2009 (actually, I think he likely did know by the due date for filing the 2008 FBAR too, but its not completely clear). In that sense, the jury made a very good judgement in only finding him guilty for 2009.

    3) The government's memo describes various attempts to transfer funds around, transfer money to his wife etc. in 2009 all of which is consistent with the idea that Dr. Ahuja begn to take active evasive action in mid 2009, likely having become aware of the UBS crackdown.

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