Thursday, May 2, 2013

Petition for Certiorari Seizing the Gauntlet Laid Down by the Second Circuit Majority Panel to Question the Klein Conspiracy (5/2/13)

In United States v. Coplan, et al., 703 F.3d 46 (2d Cir. 11/29/12), here, the Second Circuit entered a remarkable decision on many fronts, but the one I found most fascinating was the majority panel's questioning of the scope of the so-called Klein / defraud conspiracy.  I previously blogged on the majority's Klein conspiracy analysis in this blog entry -- Coplan #1 - Panel Questions Validity of Klein Conspiracy (Federal Tax Crimes Blog 12/1/12), here.  (I wrote a number of blogs on other aspects of Coplan; a roadmap to those other blogs is in this blog entry:  Major CA2 Decision on E&Y Tax Shelter Convictions (Federal Tax Crimes Blog 11/29/12), here.

Mr. Coplan has petitioned for certiorari on the blockbuster Klein conspiracy issue.  The petition is here; the docket sheet is here.  Mr. Coplan has assembled a formidable team for this frontal assault, including Dennis P. Riordan of Riordan & Horgan, San Francisco, here, who wrote the Second Circuit brief that captured the Second Circuit majority's interest, and Paul Clement of Bancroft LLC, former Solictor General and a major player in Supreme Court practice, here.

For background on the expansive scope of the Klein conspiracy, see my prior blog Coplan #1 - Panel Questions Validity of Klein Conspiracy (Federal Tax Crimes Blog 12/1/12), here; see also my earlier article, John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255 (2009), here, and its companion online Appendix, here.

In a nutshell, the argument raised by the petition is that the key statutory word "defraud" has a settled meaning but that, over the years, that word in the conspiracy statute has expanded through judicial opinions to mean something much broader and sufficiently ill-defined to permit more mischief than the Constitution allows -- i.e., it is has become a common law rather than a statutory crime.

I excerpt certain key portions of the petition.
18 U.S.C. § 371 makes it a crime to participate in a conspiracy “to commit any offense against the United States, or to defraud the United States, or any agency thereof.” At common law, “to defraud” meant to deprive another of money or property by dishonest means. That common-law definition has been incorporated into most federal fraud statutes. Under the so-called “Klein conspiracy” doctrine, however, the fraud provision of § 371 has been interpreted much more broadly to cover any interference with a lawful government function by dishonest means. See United States v. Klein, 247 F.2d 908, 916 (2d Cir. 1957).  
The question presented is whether the Klein conspiracy doctrine is consistent with the text, history, and purpose of 18 U.S.C. § 371, and whether that doctrine remains viable in light of this Court’s decision in Skilling v. United States, 130 S. Ct. 2896 (2010). 
* * * * 
* * * * 
The Klein conspiracy doctrine is wholly unmoored from the text and history of § 371. The language of the statute is as plain as can be: it prohibits any conspiracy to “defraud” the United States. Because the word “defraud” is undefined, it is presumed to have its longstanding common-law meaning of taking the property of another through deceitful or dishonest means. But through a remarkable accumulation of dicta beginning in the late 1800s, this straightforward anti-fraud provision morphed into a sweeping criminal prohibition on any conspiracy to make the government’s job more difficult. The Klein conspiracy doctrine has now been recognized by every circuit, and is a powerful tool that prosecutors routinely deploy in criminal tax cases. 
In Skilling v. United States, 130 S. Ct. 2896, 2928 (2010), this Court found it necessary to “pare” the doctrine of honest services fraud “down to its core” in order to avoid serious constitutional concerns regarding vagueness and fair notice. The Court’s reasoning in Skilling applies with equal or greater force to the judicially created Klein doctrine, which provides little notice about the scope of the offense and reaches broad swaths of conduct that do not remotely constitute “fraud.” Indeed, the lower courts are currently split over several important questions about the scope of a Klein conspiracy; given that this judicially created doctrine has no basis in the text of § 371 or the common-law definition of fraud, it is unsurprising that courts have struggled over how to apply it. And this inherent uncertainty only reinforces the serious vagueness concerns with the Klein conspiracy doctrine and the urgent need for an answer from this Court about the ongoing validity of that doctrine.  
The Second Circuit concluded that it was compelled by stare decisis to affirm Mr. Coplan’s conviction for participating in a Klein conspiracy. At the same time, however, the court emphasized that the Klein doctrine is not based on anything “recognizable as statutory interpretation,” and is long overdue for review by a “higher authority.” 
This Court should grant certiorari to address whether the judicially created Klein conspiracy doctrine remains viable in light of modern principles of statutory interpretation and serious constitutional concerns about vague and expansive federal criminal statutes.
For what it is worth (not much), I think the Klein conspiracy in its modern iteration is the product of incrementalism and sloppy dicta.  In short, it is wrong, as most courts articulate it.  The question, though, is whether the Supreme Court will make a sea change in Klein conspiracy jurisprudence.  The Klein conspiracy is such a common feature of the tax crimes landscape that upsetting Klein jurisprudence it is likely to create havoc.  Those types of reversals have occurred before (e.g.,  United States v. Gaudin, 115 S.Ct. 2310 (1995) (holding that materiality for most crimes is a jury issue rather than a judge issue as previously commonly assumed and held), but it will be a major problem that may be reason alone for the Supreme Court to let sleeping dogs lie.

No comments:

Post a Comment

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.