Thursday, March 5, 2015

More on Light Sentencing for Offshore Account Tax Crimes (3/5/15)

I wrote yesterday on an offshore conviction (Another UBS Client Sentenced Lightly (Federal Tax Crimes 3/4/15), here).  I commented that offshore tax crimes get punished lighter than ordinary tax crimes.  Today, I was going through some cases I had shelved and found one recent case that offers a contrast.

In United States v. Jones, ___  F.3d ___, 2015 U.S. App. LEXIS 3263 (8th Cir. 2015), here. the defendant was an ordinary tax cheat convicted under Section 7201, here, of evasion of payment.  Owing tax, he took numerous acts to avoid the IRS learning of and seizing his assets to pay the tax liability.  He was indicted for tax evasion.  He pled guilty.  His base offense level was 20 which means that the tax loss was more than $400,000.  See SG §2T4.1. Tax Table, here.   He received the sophisticated means 2 level increase.  See SG §2T1.1.(b)(2), here.  He then received the 3 level reduction for acceptance of responsibility.  See SG §3E1.1, here.   His offense level for the range calculations in the SG 5, Part A, here, was 19, producing a sentencing range of 30-37 months.  The sentencing judge used his Booker variance discretion to vary downward to 24 months imprisonment.  That sentence is 80% of the bottom of the Guidelines range.

Yesterday, I blogged on the sentencing of Gregg A. Kaminsky, an offshore tax evader.  Another UBS Client Sentenced Lightly (Federal Tax Crimes 3/4/15), here.  Although, I have not reviewed the underlying sentencing documents, I can construct his Guidelines calculations from the press release. Prior to doing so, I note that he pled guilty to an FBAR crime but the FBAR crime related to tax evasion.  Hence, his Sentencing Guideline calculations were apparently determined under the tax Guidelines.  I am not sure that this is correct for FBAR violations, but that seems to be the mainstream way of calculating the Guidelines for FBAR violations.  According to the press release, the tax loss was approximately $125,000, thus making his base offense level 16 under §2T4.1, here.  He would be subject to the sophisticated means enhancement under SG §2T1.1.(b)(2), here,  thus making  his offense level 18.  He would then qualify for the acceptance of responsibility 3 level reduction.  See SG §3E1.1, here.  His offense level for the sentencing table was thus 15, making his Guidelines range 18-24 months.  See SG 5, Part A, here.  The sentencing judge sentenced Kaminsky to 4 months in prison.  That sentence is about 22% of the bottom of the Guidelines range.

I am not sure that the conduct each undertook to effect their objective of tax evasion is materially different to explain the differences in their sentences.  Both behaved very badly.  Yet, the offshore tax evader got a relatively lighter sentence compare to their respect Guidelines ranges.

Many offshore violators receive no incarceration.  One explanation for some of the light sentences could be demographics.  Persons who amass the type of wealth that is likely to draw prosecutorial discretion to prosecute are older and thus not ideal candidates for incarceration.  See also §5H1.1. Age (Policy Statement), here, providing that " may be relevant in determining whether a departure is warranted, if considerations based on age, individually or in combination with other offender characteristics, are present to an unusual degree and distinguish the case from the typical cases covered by the guidelines."  Since age is recognized for potential departure in the Guidelines, I am sure it is considered also in exercise Booker discretion.  But, of course, that does not explain Kaminsky's light sentence and its seeming discrepancy compared to Jones' relatively heavier sentence.

Finally, these two instances are anecdotal.  Standing alone, they are not the basis for conclusions as to the universe of tax crimes sentenced.  Nevertheless, there is sufficient data from which a fair inference can be drawn that offshore tax cheating  is the preferred tax cheating based on sentences imposed.  (See my spreadsheet here which is long overdue for an update.)  Lighter sentencing for offshore tax crimes is the fact.  I ask whether that is right.


  1. Kristin, thanks again for your comments. I will just make a coiuple of points, not trying to address everything.

    1. When pleading in a tax crimes via offshore account case, the defendant often has a choice of taking a tax plea (usually 7206(1) tax perjury) or an FBAR plea. In all cases, thoough tax evasion is involved. The tax loss number used for sentencing is tax evaded. And, once the tax guidelines apply, the same sentence is achieved regardless of the specific plea. That is because the guidelines calculations are driven principally by the tax loss (the tax evaded). Hence, it makes no difference whether the taxpayer pled to FBAR or to a tax crimes charge (evasion or tax perjury). The sentencing factors are the same, all driven by the tax loss (the tax evaded). And, as to the difference in charge of tax perjury and evasion, the Government often charges tax perjury where it could have charged tax evasion. As noted, in most cases, it does not make a difference on the key factors -- i.e., the defendant is convicted of a felony (evasion is 5 years and tax perjury is 3 years, but that is not usually a material difference) and the actual sentence factors and, I suspect, the sentencing judge's sentence is the same whichever charge results in conviction.

    2. The tax loss was $125,000. The restitution was $91,000, as you say. But he may have paid the difference (although I note that orders of restitution sometimes include tax already paid). But, even assuming a $91,000 tax loss, the Government will prosecute for $91,000, particularly where there is obstructive conduct such as Kaminsky did (even if it had been in an ordinary onshore context).

    3. You are incorrect that the Government does not have to prove tax loss. It does, albeit by a preponderance of the evidence for purposes of sentencing. But, in most cases of a plea deal, the taxpayer and the Government agree as to the tax loss. I suspect that is what happened here. Having represented defendants and observed a lot of cases, I can assure you that both the defendants' lawyers and the Government's lawyers working with the assigned IRS agent(s) try to get the tax loss (tax evaded) properly calculated and will eliminated actual tax due if there is doubt as to whether the taxpayer intended to evade. In other words, by the time the matter is presented to the sentencing judge, the tax loss is the minimum tax loss (tax evaded).

    4. You are correct that the Government's burden to prove tax evasion is harder than to prove tax perjury or an FBAR crime. The key difference is that the Government has to prove tax due and owing (tax evaded) beyond a reasonable doubt. That often requires significant proof. Which is precisely why the Government often uses tax perjury when it could have used tax evasion. As noted above, it gets a felony conviction with less drain on the prosecutors' and the court's resources and gets the same sentence.

    Thanks again,

    Jack Townsend

  2. One other thing I would point out, I think your comparison regarding guideline sentences are way off. In your domestic example, your noted an offense level of 19 with a guideline range of 30-37 months that had a downward variance of 6 months to 24. In the Kaminsky case above, from what I've seen the actual offense level that the court stated was applicable was 12 with a guideline range of 10-16 months (so its possible for example that the sophisticated means enhancement didn't apply and perhaps some other things were going on to reduce it further). Applying a downward variance of 6 months, you get to the 4 month sentence. The point is that both cases had a 6 month downward variance. Sure, percentage wise you might make an argument that Kaminsky came out better with his 6 month variance, but given the applicable guideline range, I'm not sure it was the kind of blow out departure that you're talking about (i.e. it was 40% of the bottom, not 22%). Was it still a lighter sentence based on percentages? I suppose, but then we get into mitigating factors and other issues that I brought up in my previous comment that could have easily differentiated the 2 cases.

  3. Kristin, thanks again for your comments. My reconstruction of the guidelines range was based on the facts presented in the press release. As to the sophisticated means enhancement, the Commentary is quite clear that offshore accounts are included in the term. Here is the relevant part of the Commentary

    5. Application of Subsection (b)(2) (Sophisticated Means).—For purposes of subsection (b)(2), "sophisticated means" means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts ordinarily indicates sophisticated means.

    So, I think it is routine to include offshore accounts as sophisticated means in the Guidelines calculations, particularly where there is something other than a very simple single directly owned account where the account statements were mailed into the U.S. and no attempts to hide (by moving accounts, etc.). That is not Kaminsky's case. So, I would be surprised if the sophisticated means did not apply. Now, whether there was some other reduction, I don't know, but on the facts in the press release, I cannot see it. I suppose that if Kaminsky gave great assistance for other potential targets, he might get a 5K1 departure down to the level you mention, but again the facts I saw did not present that. If you are aware of how he got the reduction to 12, I would appreciate knowing.

    Thanks for your comments.

    Jack Townsend

  4. Don't forget, half of what is in the press releases are at best exaggerations and unproven allegations. If you want to know what's really going on with these cases, you have to do a little more research and investigation than simply reading and believing the government's propaganda. If you do that, you'll be in a much better position to properly analyze the result with far more accuracy :)


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.