The 87-year-old retired automobile dealer - who founded the Pflueger dealerships – had been charged with filing false tax returns after the U.S. Justice Department said he hid nearly $15 million in a Swiss bank account without paying taxes on the $27.5 million sale of the Hacienda Corporate Plaza in California.
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The defense team, headed by Steven Toscher [here], a Beverly Hills attorney from Hochman Salkin Rettig Toscher & Perez PC, and Edward M. Robbins Jr [here]., called just three witnesses including the former IRS acting chief as a summary witnesses and a handwriting expert who claimed Pflueger’s signatures were forged. Pflueger did not testify in his own defense.
Although the judge said Leslie Osborne, chief of the Fraud and Financial Crimes division for the U.S. Attorney and Special IRS attorneys Timothy Stockwell and Dennis Kihm did not prove beyond a reasonable doubt that Pflueger knowingly conspired to defraud the United States of taxes he owed, the IRS will pursue a civil case against Pflueger to settle some $4.5 million in unpaid taxes from the sale of his California investment property, the Hacienda Corporate Plaza.
Addendum 3/25/13: The (1) Order on Defendant’s Motions for Judgment of Acquittal and (2) Verdict in Non-jury Trial, is here. My comments:
1. The Order denies the post-renewal of the Defense's Rule 29(a) motions at the close of the Government's case and then renewal at the close of both cases. The Court says summarily:\
First, with respect to the original motion made at the close of the Government's case, viewing the evidence in the light most favorable to the Government, the Court concludes that a rational trier of fact could find each element of each crime beyond a reasonable doubt. Second, with respect to the renewed motion made at the close of the entire case, viewing the evidence in the light most favorable to the Government, the Court also concludes that a rational trier of fact could find each element of each crime beyond a reasonable doubt. The Court HEREBY DENIES both the original Rule 29(a) motion and the renewed motion.In effect, the denial of the Rule 29(a) motion means essentially that the charges must be resolved by the fact-finder rather than by the court. This division is most clearly seen where a jury is involved as the ultimate fact-finder. In that case, the office of the Rule 29(a) is to determine whether there is enough evidence to submit the issue to the jury (sort of like a directed verdict in a civil case tried to a jury.)
2. The Court found that the proof did not establish beyond a reasonable doubt that Pflueger made a conspiratorial agreement or that he had the required intent for a conspiracy, citing Ingram v. United States, 360 U.S. 672, 678 (1959); United States v. Krasovich, 819 F.2d 253, 255 (9th Cir. 1987).
3. The Court found that the proof did not establish the willful intent required for the tax perjury counts.
4. The key holdings (##2 and 3) are stated in summary fashion, stating only the elements of the crime and the proof's failure to meet certain of the elements. In this sense, therefore it resembles a jury verdict, because the court does not detailed the facts and nuances from which it derived its conclusion of not guilty. (Just a reminder: a not guilty verdict simply means that the prosecution did not prove the crime(s) beyond a reasonable doubt; it does not mean that the defendant did not commit the charged but acquitted crimes.)
The following are excerpts from a Tax Notes Today article: Shamik Trivedi, Government Fails to Prove Willfulness as Hawaiian Auto Mogul is Acquitted of Conspiracy, 2013 TNT 56-2 (3/22/13)
Steven Toscher of Hochman, Salkin, Rettig, Toscher & Perez P.C. in Beverly Hills, Calif., said in a statement that while the government rarely loses tax prosecutions, it "must objectively and carefully select the cases that it prosecutes. . . . The mere presence of a foreign bank account and foreign trust does not mean there has been a tax crime."
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Presiding over a nine-day bench trial, Judge Leslie E. Kobayashi [Wikipedia here] of the U.S. District Court for the District of Hawaii wrote in her decision that the government had not met its burden of proving beyond a reasonable doubt that there was an agreement between Pflueger and his alleged co-conspirators to obstruct the IRS as in a Klein conspiracy. Nor did the government establish intent for Pflueger, she wrote. "The crime of conspiracy includes an intent element which requires the Government to show that each member of the conspiracy had knowledge of the object of the conspiracy and joined the conspiracy intending to achieve that object," Kobayashi wrote, adopting the defense's arguments.
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[Judge Kobayashi also held that the proscution] failed to establish a violation of section 7206(1) -- filing false tax returns for the 2004 and 2007 tax years. In particular, the government failed to establish willfulness, Kobayashi wrote. "A defendant who acts on a good faith misunderstanding as to the requirements of the law does not act willfully even if his understanding of the law is wrong or unreasonable," she wrote, citing section 9.42 of the Ninth Circuit Court of Appeals Model Criminal Jury Instruction.
Kobayashi cited Cheek v. U.S., 498 U.S. 192 (1991), which says that willfulness, as construed under criminal tax jurisprudence, requires the government to prove the law imposes a duty, and that the defendant knew of the duty but intentionally and voluntarily violated that duty.Prior Federal Tax Crimes Blog entries on the prosecutions in this matter: