Daugerdas Retrial Jury Instructions - Part 06 Conspiracy Instructions Part 1 (11/16/13)

I begin today the first of several blog entries on Judge Pauley's conspiracy instructions.  The complete set of the instructions is here.

Judge Pauly instructs the jury on the general concept of Conspiracy as follows:

Count 1: Conspiracy  

As mentioned earlier, Count 1 of the Indictment charges both Defendants, Paul Daugerdas and Denis Field, with a conspiracy that had three objectives: First, to defraud the United States and the Internal Revenue Service by obstructing the IRS’s ascertainment and collection of income taxes. Second, to attempt to evade income taxes allegedly owed by various tax shelter clients. And third, to defraud the IRS by committing wire and mail fraud.  

A conspiracy is a kind of criminal partnership—an agreement of two or more persons to join together to accomplish some unlawful purpose. It is an entirely separate and different offense from the substantive crime which may be the objective of the conspiracy. Indeed, you may find a defendant guilty of the crime of conspiracy, even if you find that the substantive crime which was the object of the conspiracy was never actually committed. Of course, if a defendant participates in a conspiracy and the crime or crimes which were the object of the conspiracy were committed, the defendant may be guilty of both the conspiracy and the substantive crime. The point simply is that the crime or crimes that were the objective of the conspiracy need not have been actually committed for a conspiracy to exist. 

JAT Comments:

1.  Prosecutors are much enamored of the conspiracy charge.  As I report in a footnote in the current working draft of my Federal Tax Crimes book (all footnotes omitted, except one):

Conspiracy charges are frequent “add-ons” in charging traditional tax crimes to permit the Government to increase its chances of obtaining a conviction.  Even beyond the considerable elasticity of the conspiracy concept from a substantive perspective, the conspiracy charge offers the Government great advantages.  The mere charge of “conspiracy” connotes something sinister, and the law treats a conspiracy as a serious criminal act independent of any offense which might be the object of the conspiracy.  Moreover, herding a gaggle of defendants into a single case with an overarching conspiracy charge may make it difficult for the jury to assess independently the guilt or innocence of each defendant and invite a finding of guilt by association.  Conspiracy cases tend to be more complex as the Government mounts extensive evidence to connect the dots – real or imagined – among the alleged conspirators, particularly in allegedly large conspiracies such as involved in Stein.  Furthermore, the Government gets vicarious Pinkerton liability for offenses committed by others in furtherance of the conspiracy, ability to admit statements that would otherwise be inadmissible hearsay, relaxed standard of proof and relevancy, tolling or refreshing of the statute of limitations by remote participants, and venue in remote judicial forums of the Government’s choosing.  With all of these benefits and more, Judge Learned Hand long ago noted, correctly, that conspiracy is “the darling of the modern prosecutor's nursery.” n347
   n347 Harrison v. United States, 7 F.2d 259, 263 (2d Cir. 1925).  see also Goldstein, Conspiracy, p. 409 (1959) (noting that conspiracy has been a prosecutor favorite for centuries).  One author has noted that conspiracy charges are included in “more than one-quarter of all federal criminal prosecutions.”  Katyal, supra.
In United States v . Reynolds, 919 F.2d 435, 439 (7th Cir. 1990), Judge Easterbrook lamented that the conspiracy add-ons are “inevitable because prosecutors seem to have conspiracy on their word processors as Count I; rare is the case omitting such a charge.”  See also Kathleen F. Brickey, In Enron's Wake: Corporate Executives on Trial, 96 J. Crim. L. & Criminology 397, 401 & 420-423 (2006) (empirical research that, in federal corporate crime cases during the period 2002 through 2006), over 2/3s of the cases had multiple defendants and all of those had at least one conspiracy count).  Judge Easterbrook proceeds to discount the value of piling on this charge, calling it “pointless” because of the way the Sentencing Guidelines work; although, “once a formidable weapon in the prosecutor's arsenal, has become a distraction, useful only to obtain an extra $50 special assessment and to generate complex issues for appeal.”  Over my many years of practice, I find that disagreeing with Judge Easterbrook carries considerable risk of error, but in this case I do disagree for the reasons noted in the text.  Prosecutors perceive the conspiracy charge as a conviction enhancer, even if not a sentencing enhancer; otherwise, if it were only a mere distraction, prosecutors would not encourage – perhaps a euphemism for direct – grand juries to add the charge to the indictment.  Moreover, I have observed that in complex, multi-defendant white collar (including tax) crime cases, the Government is not indifferent as to which counts a pleading defendant admits guilt; rather, Government wants the conspiracy plea for the benefits it will bring – psychological, publicity wise, and trial wise – in the trial of the remaining defendants.  That pleading defendant will mount the stand and admit that he is guilty of the loosey-goosey conspiracy charge the Government is attempting to prove beyond a reasonable doubt, thus giving that Government’s claim a credibility that it might not otherwise have.  With regard to defendants pleading to achieve a deal – a common phenomenon of our system so heavily dependent upon pleas, this ability to offer a deal to a co--conspirator is itself a powerful tool to incentivize access to information to ferret out and punish the bad guys.  See Katyal, supra, pp. 1328-1333.  Finally, by piling on this or some other obstruction count along with substantive counts, the prosecutor further increases the pressure for a plea for the risk averse facing a potential long sentence.  Julie O'Sullivan, The Changing Face of White-Collar Crime: The Federal Criminal “Code” is a Disgrace: Obstruction Statutes as a Case Study, 96 J. Crim. L. & Criminology 643, 673 (2006).

2.  Of course for larger conspiracies with large tax dollars at stake, the tax shelter conspiracies in the Daugerdas, Coplan and Larson/Pfaff cases were proper occasions for use of the charge.  In those cases, the conspiracy charge was indeed count 1 of the indictments.

3. In later blogs, I will offer further discussions of the conspiracies charged, but the instruction alerts the jury that the types of conspiracies are (1) the "defraud" / Klein conspiracy to impair and impede the IRS and (2) two types of "offense" conspiracies -- (i) tax evasion and (ii) wire and mail fraud.

4.  Judge Pauley is not enamored of the Pinkerton instruction.  See my blog on this facet of the prior trial,  Even More on Principals, Accomplices, Causers and Pinkerton Conspirators - the Daugerdas Case (Federal Tax Crimes Blog 5/10/11), here.  However, he does obliquely include the concept in the following sentence: "if a defendant participates in a conspiracy and the crime or crimes which were the object of the conspiracy were committed, the defendant may be guilty of both the conspiracy and the substantive crime."  He includes that sentence to illustrate his point that the conspiracy is a crime separate and independent of any underlying offense that was the object of the conspiracy.