Tuesday, October 14, 2014

An Example of the Difference Between Pleading and Not Pleading (10/14/14)

Over 95% of federal criminal cases are resolved by plea agreement.  One of the reasons is that, in the Sentencing Guidelines calculations, defendants who plead will usually qualify by the plea for the acceptance of responsibility two or three level decrease in the Guidelines calculation.  Moreover, by pleading, the defendant may make himself or herself more attractive for a Booker downward variance from the reduced Guidelines range already reduced for acceptance of responsibility.  Conversely, by going to trial, a defendant generally forgoes any realistic hope of an acceptance of responsibility adjustment or any favorable Booker downward adjustment and may behave at trial in a way that will not endear the sentencing judge to the defendant.

These dynamics played out in United States v. Morgan, 2014 U.S. App. LEXIS 19025 (11th Cir. 2014), here.  There the appellant, Morgan, and three others -- one her husband -- were indicted for one count of conspiracy (18 USC § 371), seven counts of funds taken by fraud (18 USC § 2314), six counts of money laundering (18 USC § 1957), and three counts of tax perjury (26 USC § 7206(1)).  Two of the other defendants each pled guilty to two nontax counts (one conspiracy count and one other); one was sentenced to 51 months and the other -- her husband -- was sentenced to 121 months.  There is no explanation for the differences in these two sentencings.  The third of the other indicted defendants resides in Denmark, has not been extradited and presumably is a fugitive from justice.

Morgan did not plead.  There is no indication that she was offered a plea, but defendants are usually offered a plea of some sort.  Sometimes the central person in a large crime with several counts will not be offered a plea, except on onerous terms.  At any rate, she went to trial.  Moreover, when she went to trial, she waived her Fifth Amendment privilege and testified.  That's bad enough, for the resulting cross-examination can make the defendant look very bad.  But, not only did she open herself to cross, she lied in her testimony.  Not good.  She was convicted on all counts.  The maximum possible punishment for the counts of conviction (stacked) was 264 years imprisonment.  The advisory calculated Guidelines range exceeded that maximum, so the Guidelines range became that maximum.  The judge sentenced her to 420 months (35 years), thus making a major Booker downward variance.  The sentencing was reversed on appeal.

On remand for sentencing, the sentencing judge "subtracted two levels from Morgan's offense level for the erroneous abuse-of-trust enhancement and determined Morgan's correct Guidelines range was 324 to 405 months of imprisonment."  The judge then sentenced her to 405 months imprisonment, stating that "nothing had changed in the case other than the enhancement for abuse of a position of trust."  (The judge could therefore have left the sentencing at 420 months, but did give her a 15 month lesser sentence.)  The judge stated that Morgan had not accepted responsibility and that "a 405-month sentence was appropriate, regardless of Morgan's life expectancy."

On this second appeal, Morgan urged that her sentence was substantively unreasonable because of the sentencing disparity between her and the two defendants that had pled.  The 11th Circuit rejected the argument, reasoning:
Morgan's 405-month sentence is substantively reasonable under the totality of the circumstances and the § 3553(a) factors. Her numerous offenses involved more than 80 victims and a loss of over $17.5 million. Morgan never accepted responsibility for her actions and does not dispute that she lied on the stand during trial. Although she argues the district judge erroneously continued to view her as one who had abused a position of trust with the victims, the record shows otherwise. At the resentencing hearing, the judge acknowledged the abuse-of-trust enhancement no longer applied and focused on the amount of loss, the number of victims, and Morgan's complete lack of remorse. The judge also addressed the need to protect the public from future crimes by Morgan. 
Morgan went to trial, lied on the stand, and was convicted of all 22 offenses. John Morgan and Bowman, on the other hand, each pled guilty to only two offenses and cooperated with the government. Therefore, Morgan is not similarly situated to John Morgan and Bowman, and her substantially higher sentence is warranted. Docampo, 573 F.3d at 1101.
So, it appears that Morgan made two mistakes.  First, she failed to make a plea deal.  Her husband got the worst sentence for the two who pled.  He pled to two counts -- conspiracy (5 years) and 1957 money laundering (10 years).  The aggregate maximum sentence for those two counts was 15 years (180 months).   Presumably, with the conspiracy conviction, the relevant conduct that pushed his wife's Guidelines up above her maximum aggregate, would have pushed his Guidelines up as well. He was sentenced to 121 months, thus achieving what appears to be a substantial Booker downward variance.  Presumably, had she pled, Morgan might have achieved that or some similar result.  Second, Morgan took the stand and lied.  For a combination of those reasons, she was sentenced to 405 months.  Every case has special facts that explain such apparent anomalies, but I suspect that much of the difference is accounted for by the second factor.

The message here, though, that the systemic pressure to plead guilty in the federal system is major, hence the 95+% plea rate..

For more on the prevalence of plea bargains see:
  • Plea Bargains Generally and in Tax Cases; Moneyball (Federal Tax Crimes Blog 3/24/12), here, discussing 2012 Supreme Court cases on pleas in the federal system.


  1. You wrote "The third of the other indicted defendants resides in Denmark, has not been extradited and presumably is a fugitive from justice." That would be Danish lawyer Eli Heckscher who was, in fact, convicted of fraud in Denmark and sentenced to five years in prison. Danish vernacular press report: http://politiken.dk/indland/ECE2276236/advokat-idoemt-fem-aars-faengsel-for-svindel/ Sarasota (Fla.) Herald-Tribune: http://www.heraldtribune.com/article/20140430/ARTICLE/140439987 I understand that the European Convention on Human Rights, which does not have a dual-sovereign exception for ne bis in idem, would indeed prevent him from being extradited from Europe after serving his sentence. (I wonder whether one can literally be a "fugitive" without having absconded or whether there is a more correct term, such as "evader" from justice? I understand that in the USA once an indictment has issued the statute of limitation is tolled so perhaps it makes no difference. You would know better than I.)

  2. Jack, here is a link to another article on the issue from Baseler Zeitung (in German):

  3. Jack,

    Logically If not "Non-Willfulness" then must "Willfulness". So if an OVDI participant is being pushed back and decides to opt-out, would IRS go after "willfulness" penalty ?

  4. Article 5 of the Extradition Treaty:


    The United States shall not be bound to deliver up its own nationals and Denmark shall not be

    bound to deliver up nationals of Denmark, Finland, Iceland, Norway or Sweden, but the

    executive authority of the requested State shall, if not prevented by the laws of that State,

    extradite such nationals if, in its discretion, it be deemed proper to do so.

    If extradition is not granted pursuant to this Article, the requested State shall submit the case to

    its competent authorities for the purpose of prosecution.

    If the lawyer is a Danish citizen and been sentenced in Denmark for an equivalent crime, I cannot imagine he will be extradited by Denmark or pretty much any other Euro-zone country.

  5. I'm interested to know what kind of advice the lawyers on this forum would give a Swiss bank given the following facts:
    1) The bank only has branches in Switzerland.
    2) They never sent employees to the US to get clients or advise clients.
    3) They never told US clients that they could avoid declaring accounts to the US tax authorizes.
    4) They have a significant percentage of US clients who opened accounts. They assume this is because they are in an international city where lots of Americans have jobs with international companies. They never targeted American clients. The clients just walked in and opened an account just like anybody else.
    5) They have complied with Swiss law.
    6) They never reported any account/earnings data to the US because there was no requirement to do so since they are not a US institution.
    Would you advise this client to pay the fine and accept the NPA that the DOJ has proposed? If the bank was indicted, what are the chances of the DOJ getting a conviction based upon the facts above.?

  6. I see your point ij but don't completely agree. Just like in a criminal trial people are declared "not guilty" (which is not equivalent to innocent; "not guilty" simply means guilt has not been proven) likewise the IRS may just deny the certification by saying that the taxpayer did not prove that he was nonwillful. Yeah, I know the burden should not be on the taxpayer to prove a negative, but things don't always happen as they should.
    Bottom line, just cbecause certification is denied, doesn't necesarily mean that the iRS could prove wilfulness on opt out.

  7. There have been people who had pretty good facts but were scared of opting out o paid a 27.5% penalty. Had they been able to transition, they might have. Lawyers who handle a lot of OVDI cases know who these people are, and whether the amounts involved would justify the cost of litigation (perhaps as a class action suit, with several plaintiffs splitting costs.)
    I wish that some lawyers would do this.
    I have dealt with a lawyer who has handled many such cases, and will bring this up next time I talk to him.

  8. After someone requests transition from OVDP to streamline, does the agent/manager typically discuss the statement with the taxpayer to clarify things? I'm hoping to have the opportunity to do so if there are any questions.

  9. I would suggest that another reason that 95% plead is that the government picks its cases carefully so that thhe ones it takes to court have a high likelihood of conviction, i.e., it would rather have a 95% conviction rate on few cases than a 70% conviction rate on many cases.

  10. I am not a lawyer. As a client who has delat with more than one bank I can say that the above six points apply to EVERY bak I have delat with, as far as their dealings with me. (For example, they never had employees meet me in the US or even suggested doing so but of course I can't know whether or not they did this with other clients.)
    Given my experience with OVDI (the ones who honestky didn't know about reporting requirements but came forward being treated as the most willful, while the majority of account holders did NOT join OVDI) I would have told such banks to stay away from this "OVDI for banks."
    As to what lawyers might advise banks, I fear that many were only comfortable saying joint the program for a predictable penalty.

  11. Guest,

    Yes. Your observation is correct. And given the relatively small number that it can really prosecute each year, it easily has enough 95% cases that it does not have to take the 70% cases.

    Jack Toiwnsend

  12. I am not sure that a class action would work unless you could convince a court of some key common feature other than just a willful penalty assessment.

    Jack Townsend

  13. Jack/Others,

    Can someone please guide on the SDOP if we need to write separate checks for every year and Title 26 or just 1 check with the Total?


  14. Just one check with the total. All returns plust the SDOP Certification get sent in one package, so if you are paying by check you can just paperclip your check to the package. The instructions are actually helpful in this regard (emphasis added): "Submit payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts. Your taxpayer identification number must be included on your check. You may receive a balance due notice or a refund if the tax or interest is not calculated correctly."

  15. We sent separate payments; one for the 1040 tax and interest and the other for the Title 26 penalty. I think it makes it easier to track the payments. Additionally, it is listed on IRS.gov as two separate required items. Per IRS.gov - http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States

    4. Submit payment of all tax due as reflected on the tax returns and
    all applicable statutory interest with respect to each of the late
    payment amounts. Your taxpayer identification number must be included
    on your check. You may receive a balance due notice or a refund if the
    tax or interest is not calculated correctly.

    4. Submit payment of the Title 26 miscellaneous offshore penalty as defined above.

    Therefore, we submit two payments. You generally do not need to submit a separate check for each tax period. Just make sure that you include your name, address, SSN and designate the payment to apply to 1040 taxes and the tax years at issue. E.g. "1040 2008-2013".

  16. Credit Suisse posts good Q3 results with net after tax income of 1,025 billion CHF !


  17. Swiss Bank
    Accounts. Dec.. 2014.

    Is your monies safe
    in these accounts ---- definitely NOT.

    Would you get your
    money back if every body decided to withdraw all their accounts –
    NO WAY.

    Economic Experts
    say that there would only enough money to repay 50% of their clients.

    Are you going to be
    in the 50% --- that loose your money.-- Get it out NOW.

    2012 -- - June.
    -- Published in Anglo INFO .Geneva.--- USA Trust Fund Investors were
    sent false and fraudulent documents by Pictet Bank.Switzerland. in
    order to collect large fees. ( Like MADOFF) ---Even after the SEC in
    the USA uncovered the fraud Pictet continued to charge fees and drain
    whatever was left in these accounts. Estimated that $90,000,000
    million lost in this Pictet Ponzi scheme.

    2012 - - - July.
    -- De – Spiegel. -- states – Pictet Bank uses a letterbox
    company in

    and a tax loophole involving investments in London to gain

    millionaires as clients.

    - - - August ---- German Opposition Leader accuses Swiss Banks of
    "organised crime."

    the fines that crooked Swiss banks have incurred in the last few
    years exceeds £75.Billion.

    is also calculated that the secrecy " agreements" with
    regards to tax evation by their clients will cost the banks another
    £450 Billion.( paid out of your monies.)

    banks are panicking --- the are quickly restructuring their banks
    ---- from partnerships --

    " LIMITED COMPANIES." ----- this will probably mean that
    in the future --- they could

    you only 10% of your monies " if you are one of the lucky ones"
    ---- and it be legal.

    ---- The Crimes of ---- Pictet & Cie Bank.


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