Saturday, January 18, 2014

Restitution Not Allowed For Losses Beyond Count(s) of Conviction Except as Agreed or for Supervised Release (1/18/14)

In United States v. Campbell, 2014 U.S. App. LEXIS 821 (5th Cir. 2014), unpublished, here, the Fifth Circuit reversed a restitution award because the reward included amounts related to conduct other than the count of conviction and, the court held, the plea agreement did not permit the inclusion of those amounts.  Here is the relevant part of the decision:
C. The Restitution Award 
Restitution is generally available for losses stemming from the conduct of the offense of conviction. Hughey, 495 U.S. [411] at 420 [(1990)]  ("[T]he loss caused by the conduct underlying the offense of conviction establishes the outer limits of a restitution order."); see also United States v. St. Junius, 2013 U.S. App. LEXIS 25155, at *52-53 (5th Cir. Dec. 18, 2013) (substitute opinion on petition for rehearing) (holding, on plain-error review, that restitution is limited to losses stemming directly from the offense of conviction). 
Beyond that, the restitution statute, 18 U.S.C. § 3663, does not authorize restitution orders compelling payment to the IRS for a Title 26 offense. See United States v. Stout, 32 F.3d 901, 905 (5th Cir. 1994) (holding that § 3663 only permits separate restitution orders for offenses under Title 18 or 49 and vacating restitution award ordered for offense under Title 26). Section 3663 does, however, allow the sentencing court to "order restitution in any criminal case to the extent agreed to by the parties in a plea agreement." § 3663(a)(3); see also Stout, 32 F.3d at 905 n.5. 
A sentencing court may also require restitution to the IRS for a Title 26 offense as a condition of supervised release. 18 U.S.C. § 3583(d)(3) (authorizing a sentencing court to impose "any condition set forth as a discretionary condition of probation in section 3563(b) and any other condition it considers to be appropriate"); Miller, 406 F.3d at 329 ("[A]lthough . . . 18 U.S.C. § 3663 [ ] does not expressly cover tax offenses such as that under which Miller was convicted, § 3583(d) authorizes such restitution as a condition of Miller's supervised release."). Section 3583(d) allows the sentencing court to impose a condition of supervised release requiring restitution to the IRS without the defendant's agreement, but only if the restitution is "limited to losses from the crime of conviction." United States v. Nolen, 523 F.3d 331, 332-33 (5th Cir. 2008); see also Stout, 32 F.3d at 904 (vacating restitution order and remanding for resentencing where defendant never expressly agreed to pay restitution and noting that "[s]entencing courts are permitted to impose restitution as a condition of supervised release to the extent agreed to by the government and the defendant in a plea agreement." (citations omitted))
Campbell acknowledges that the plea agreement allowed the consideration of relevant conduct for the purposes of calculating her guideline range, but not for determining the amount of restitution. Campbell contends that the "general statement in the plea agreement that § 3663 would apply did nothing to extend her liability beyond Hughey," i.e., that restitution would be limited to the loss associated only with the offense of conviction. Because the count of conviction to which she pleaded guilty states a loss of only $7,500, Campbell contends that her restitution should be limited to that amount. 
The Government asserts that the plea agreement's reference to § 3663 gave the district court authority to order restitution in accordance with the terms of the plea agreement. According to the Government, the plea agreement provided that relevant  [*14] conduct set forth in the second superseding indictment and "any other applicable conduct" would be used in the calculation of Campbell's sentence, including the amount of restitution she owed. The Government further argues that Campbell acknowledged that relevant conduct would be considered in the calculation of her restitution in her factual basis, at rearraignment, and at sentencing. Alternatively, the Government contends that the restitution order was proper as a condition of Campbell's supervised release. 
We hold that Campbell did not agree to the imposition of restitution beyond the amount stemming from the offense of conviction. Contrary to the Government's assertion, Campbell did not acknowledge at rearraignment that relevant conduct would be included in the calculation of restitution. The transcript merely reflects that Campbell acknowledged that she "may additionally be required to reimburse any victim for the amount of loss under the victim's restitution law if that law is at all applicable to these proceedings." The factual basis, like the plea agreement, generally mentions relevant conduct when calculating Campbell's guideline calculation. However, there is no mention of relevant conduct in connection with restitution, thus distinguishing Campbell's case from those where this Court has held the district court properly considered relevant conduct beyond the offense of conviction in the restitution order. See United States v. Simmons, 420 F. App'x 414, 421 (5th Cir. 2011) (unpublished) (per curiam) (rejecting defendant's argument that restitution should be limited to offense of conviction because plea agreement provided that defendant would pay restitution and "'that restitution [was] not limited to the amounts charged in the Indictment'"); Miller, 406 F.3d at 329-30 (upholding restitution order that was not limited to the offense of conviction because defendant agreed in plea agreement that restitution would include "all relevant conduct, not limited to that arising from the offenses of conviction alone" (internal quotation marks omitted)). At oral argument, the Government conceded that Campbell's plea agreement did not expressly provide for the consideration of relevant conduct in calculating restitution. Ultimately, the restitution order was unlawful: 18 U.S.C. § 3663 does not authorize restitution orders compelling payment to the IRS for a Title 26 offense, and 18 U.S.C. § 3663(a)(3) only permits restitution to the extent agreed to in the plea agreement. Thus, the district court here was authorized to order "an award of restitution only for the loss caused by the specific conduct that is the basis of the offense of conviction." Hughey, 495 U.S. at 413.


  1. This deals with the finances of individuals who do not live in America. The DC court would not reject a bankers attack on FATCA regs if such required the reporting of the finances of US residents. Yet, with FATCA, the US is pushing other nations to report on local citizens in non-US jurisdictions, something that the US would never do to itself.

    Why does the US need to be bigoted and hypocritical and why do you never speak out to oppose such financial crimes? You should advocate fairness and justice instead of endlessly demanding for American crimes to forced upon other nations in an abusive manner.

  2. Could you ever design a program more negative for 'benign actor' compliance than this?

    But of course Congress is not reading this MSP, but instead focuses on the one that says the IRS needs more money, apparently to bludgeon more 'benign actors'.

    One could get bitter, if you let it, about the lack of concern or action after reading report after report from the National Tax Advocate.

    Have to hand it to Nina for staying persistent on the issue, but it hard to get the IRS attention, even when you work down the hall from the Commissioner!

  3. The stroke of a pen would turn American tax evaders into law abiding citizens. Hopefully the Senate Finance Committee will do a cost/benefit analysis of CBT, and scrap it. CBT in human cost alone is devastating for the country. In the meantime, why don't they try a real amnesty program like Canada's.

  4. The court hit the nail right on the head when it said that those evading foreign taxes would withdraw funds, and that is the bankers' concern. The US Treasury also doesn't report on foreigners' interest income.

  5. The footnotes in the report also have important information.
    Footnote 5 states "Compliance Data Warehouse (CDW) (Sept. 27, 2013) (TAS analysis of closed cases where an offshore penalty was assessed, as reflected on AIMs and ERIS)." It would be useful to have the information in this report as to what happens on optouts (although its usefulness is limitedsince the uncertainty of what happens on optout limits optouts to the most clearcut cases.)

    Footnote 11 hits the nail right in the head that the uncertainty as to whether the IRS would pursue the willful or nonwillful penalty discourages optouts.

    Footnote 20 mentions that 44% of the taxpayers in the bottom ten percent are
    unrepresented whereas only 16% of those in the top ten percent are
    unrepresented, which is not surprising.

    Some clarifications I would like about Table 1.22.2: What does "open
    suspense" in the bottom row mean? For the 2011 program,
    certifications took an average of 203 days but optouts only 128 days.
    Does the optout time start running after certification has been completed and
    the 906 has been presented, so that the two figures (203+128=331) should be
    added? Does the time for certification start running when the complete
    package has been submitted, or at some other time? Footnote 26 suggests that
    perhaps the clock starts running after preclearance when the taxpayer
    information is entered into the system. I also noticed that the number of
    participants went from (in round numbers) 11,000 in the 2009 program, 13,000 in
    the 2011 program, but only 4,000 so far in the 2012 program, which suggests
    diminishing returns.

    The paragraph at the top of page 233, and discussed in Footnote 28, mentions another
    successful optout, a US citizen residing in Switzerland, with accounts of “under
    $1 million” receiving a warning letter.

    Footnote 29 has some aggregate information on optouts, and states that ten agents handling optouts reviewed 2,800 cases. Average time spent by the agent per optout was 7 hours, resulting in average of 8,600 per return of additional tax, $2,100 in interest, 5,950 in tax related penalties and $1,439 in FBAR penalties. These are averages and in round numbers, and the averages are limited in their usefulness, especially in the case of FBAR penalties since in many cases there was probably no penalty.

    Footnote 39 states that only 77% of domestic taxpayers and 85% of those residing abroad have internet access at home. This figure presumably includes those whose access is from a wireless connection which is much much easier to hack than direct cable connection. This indicated the risk and burden of filing future FBARs.

    “The IRS has discontinued an FBAR Compliance Initiative Project to educate those with foreign bank accounts who are most likely to have FBAR violations (e.g., immigrants to the U.S. and U.S. citizens abroad.” (bottom of page 235 and footnote 44.)

  6. Thank you. Good information.

  7. I can answer one of your questions about time for opt out and time for certification based on my own OVDI experience.

    Time from start of opt out to case closing: approx. 120 days (with intervention of the Taxpayer Advocate to move the case along)

    Time from agent being assigned case for certification to opt out: approx 70 days
    Note: I did not wait for the certification to be finished. I was determined to opt out and informed the agent I was going to do this before the certification was completed. I never got a 906.

    Time waiting to be assigned an agent for certification: 24.5 months
    For the last item, please note that I was assigned an agent that "quickly" only after the Taxpayer Advocate intervened. I was the one successful TAO (Taxpayer Assistance Order) related to OVDI in 2012 that the IRS accepted.

  8. I can also add to my previous comment that as I opted out, I received refunds of most of the taxes paid in OVDI and all penalties paid in OVDI. These refunds took another 5 months to receive and that was only with the intervention of both the agent after the case had been officially closed and the Taxpayer Advocate.

  9. To clarify my previous comment, as I opted out and received a warning letter, I was entitled to refunds of some taxes paid in OVDI, some of the interest paid and all penalties paid in OVDI. Actually, I got 7 FBAR warning letters, one for each year of OVDI in which I had not been FBAR compliant. I consider these as one warning letter as they came together in a package.

  10. When commenting on the footnotes I referred to an optout from Switzerland; actually it's Sweden.

    Additional comments:

    Footnote 29 refers to 2,828 returns examined. Since there was a total of 1,400 optout cases (open and closed) it seems that typically two years are audited (perhaps those for which the SOL is still open) and I would guess more would be audited if something smells fishy.

    I noticed that in the 2011 program a far higher percentage of people are opting out than in the 2009 program. The final results aren't in yet, but it seems logical that the figure will be at least 12.6% Here's how I get to that number. People can opt out as soon as the agent is assigned to do the certification, as anon5percent did, or conceivably even earlier, as soon as the complete package has been submitted, but it would seem better to wait until the 906 has been issued and one is forced to decide. The latter seems more likely, since in the 2012 program there are only two open optouts and 216 closed certifications.

    Back to the 2011 program. The percentage opting out would be (open plus closed optouts) divided by (closed certifications plus open optouts plus closed optouts) or (813+249)/(7391+813+249) which is 12.6%. Since more than half the cases have been closed, this is a good size sample, if cases have been picked randomly (or, more likely, haphazardly) for processing. But it's possible that cases thought to be less likely to opt out are processed first. I'm not sure what the criteria would be (perhaps those residing abroad are more likely to opt out) but if those less likely to opt out have been processed first, then the final optout figure can be expected to be higher than the 12.6% so far.

    What does this mean? The 2011 disclosures may have better facts. (For one thing, this group does not include the 3,000 UBS customers whose data was delivered to the IRS.) There may be more confidence in the optout process, and less fear. There is starting to be more evidence of what happens on optouts, which will help others in deciding whether to opt out.

    Between the 2009 and 2011 programs there are 1,090 closed optouts. I sure wish there was more data available, and am grateful to JustMe, Moby, ij, and anon5percent for sharing their experience.

    Page 233 of the TAS report says "Those who make a quiet disclosure or ignore the problem are unlikely to be detected or penalized." So I ask myself, why are benevolent actors being strong-armed into paying 27.5%?

  11. I think your conjecture that there is more awareness of better results with opt outs is correct. My CPA tells me that the talk these days amongst the tax professionals in his OVD community is mostly about opt out. We had a good laugh about how he freaked out two years ago when I told him that I had fired my lawyer and was determined to opt out. He went into a panic and asked me, "Aren't you afraid of high penalties and losing everything?" I resolutely told him, "No." Now he says that due to "trailblazers" like me, opt out is discussed with much less trepidation. He actually knows a client story that is more than just an anecdote. What he does not realize is that I was not a trailblazer. Thanks to Just Me, Moby, Sally and ij, who shared their experiences here, as well as comments from Jack and other tax professionals who posted on this blog, I knew that opt out could be a viable option. Statistics the Taxpayer Advocate published as well as the introduction of the Streamlined Program were also signs that began waking people up to opt out possibilities.

  12. I have been reading 31 USC 5321. In 5321e delegation of assessment authority regarding banking institutions is delegated to bank regulatory agencies. I found no statutory authority to delegate assessment authority regarding individuals to the IRS. I've read somewhere that there was a memorandum between IRS and Treasury a few years ago, but is this legal? Can Treasury delegate assessment authority to any of its constituent agencies such as Bureau of Alcohol Tobacco and Firearms, just to cite an example, or is statutory authority needed?

    Also, in 31 USC 5321 b (1) the SOL is defined as the "six year period beginning on the date of the transaction." This refers to a "transaction" which is quite different than reporting the existence of an account on an FBAR. (31 USC 5321 a 5 D makes this distinction.) So is it incorrect to assume that the FBAR SOL is 6 years and therefore the SOL would be whatever it normally is (maybe 5 years?)since 5321 makes no mention of SOL for reporting of account balance on FBAR?


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