The original two count indictment (Doc. No. 1) contained charges of health care fraud and conspiracy to defraud the United States with regard to claims for payments for health care services under Medicare and Medicaid. The superseding indictment added a third charge of conspiracy to defraud the United States with respect to the assessment and collection of income and employment taxes (Doc. No. 64).The magistrate's report, adopted by the district court, rejects the Roylee's claim that the prosecutors failed to advise the grand jury of exculpatory evidence. The alleged exculpatory evidence was that DOJ Tax did not authorize a Title 26 charge. The discussion is interesting and short, so I include it in full:
B. Exculpatory Evidence.
Counsel for Defendant Roylee Belfrey asserts by way of affidavit (Doc. No. 82, Devore Aff.) that he participated in discussions with attorneys from the Department of Justice - Tax Division regarding a request by the Minnesota U.S. Attorney's Office to bring Title 26 tax charges n1 against Defendant Roylee Bailey. Counsel states his understanding that Title 26 charges would have been prosecuted by the Department of Justice ("DOJ"), and that the DOJ must have declined to prosecute a Title 26 fraud charge, thereby leaving the Minnesota U.S. Attorney's Office only the option of pursuing fraud conspiracy charges under 18 U.S.C. § 371, n2 as alleged in the superseding indictment. Id. Counsel contends that the DOJ's decision to decline prosecution of Title 26 charges is exculpatory evidence that should have been presented to the grand jury. In opposition, the government argues that the prosecutor had no obligation to present exculpatory evidence to the grand jury, and the failure to do so as alleged by the Defendants is of no consequence. Also, the government acknowledges that tax prosecutions must be approved by the Tax Division of the DOJ pursuant to 28 C.F.R. § 0.70, but states that such charges are typically prosecuted by the local U.S. Attorney's Office, not the DOJ, and that approval of a charge of conspiracy to defraud under 18 U.S.C. § 371 was in fact given in this case by the DOJ Tax Division. n3
n1 Title 26 of the United States Code is the Internal Revenue Code. Defendants do not indicate any specific provision of Title 26 that might have been under review by the DOJ - Tax Division. Counts 1 and 2 of the original indictment and the superseding indictment allege health care fraud in violation of Title 18 U.S. Code, §§ 286 and 1347.
n2 18 U.S.C. § 371 generally prohibits conspiracy to commit any offense against the United States, or to defraud the United States, or any agency of the United States. "A charge of conspiracy to defraud the United States by impeding the function of the Internal Revenue Service in the function of assessing and collecting taxes, commonly known as a 'Klein conspiracy,' is not brought under Title 26, but under 18 U.S.C. § 371." (Gov't Suppl. Br., n.2 (Doc. No. 87).
n3 At the hearing the government submitted a redacted letter from the U.S. DOJ - Tax Division to the Minnesota U.S. Attorney's Office expressly stating that the Tax Division had determined that the prosecution of Thurlee Belfrey and Roylee Belfrey pursuant to 18 U.S.C. § 371, conspiracy to defraud, is authorized. Defendants moved for production of the entire, unredacted letter (Doc. No. 86). This Court will address that motion in a separate order.
The Supreme Court has unequivocally held that the prosecutor is not required to present exculpatory evidence to the grand jury. United States v. Williams, 504 U.S. 36, 51-54 (1992) (discussing the historical role of the grand jury). In Williams, the Court reiterated its opinion in Costello v. United States, 350 U.S. at 364 that review of facially valid indictments on grounds that the prosecutor's presentation was incomplete or misleading "would run counter to the whole history of the grand jury institution[,] [and] [n]either justice nor the concept of a fair trial requires [it]." Williams at 54. Even the dissent in Williams agreed that the prosecutor is not required to place all exculpatory evidence before the grand jury, Id. at 69, but took the position that an indictment would be properly dismissed "if the withheld evidence would plainly preclude a finding of probable cause." Id. at 70. Even if the DOJ Tax Division declined to approve charging the Defendants with a Title 26 tax crime, such as income tax evasion, false statements in tax documents, or failure to pay over withheld employment taxes, the prosecution was not required to present this allegedly exculpatory evidence to the grand jury. Nor was the prosecution required to present to the grand jury any prior efforts by the Defendants to negotiate a tax payment plan with the IRS. Defendants' motions to dismiss the superseding indictment for failure by the prosecution to present exculpatory evidence to the grand jury should be denied.JAT Comments:
1. The discussion of the the defendant's claim suggests at least confusion in the defendant's attorney who apparently was not familiar with procedures for authorizing tax-related crimes, which the Klein conspiracy surely is, DOJ Tax must approve the charge. See e.g., USAM 6-4.122 - United States Attorney's Grand Jury Investigations and Prosecutions, subparagraph C, here; and DOJ Tax CTM 1.01[a] Authority of the Tax Division, here. Hence, as it turns out, as noted in footnote 3, DOJ Tax did approve the Klein conspiracy charge.
2. Most tax criminal conduct can be charged under more than one provision of title 26 or Title 18. Decisions as to which crimes to charge are in the prosecutorial of the prosecutors. DOJ Tax can thus authorize a tax related charge under either title depending upon a host of factors. For charges such as this where the gravamen of the conduct is health care fraud, DOJ Tax would authorize the tax-related charge or charges that most closely fit the prosecution needs for the gravamen of the conduct. I surmise that someone made the decision that a conspiracy is a better fit for the overall prosecution than the specific crimes in Title 26. For this reason, a decision not to charge the Title 26 crimes is most certainly not exculpatory evidence.
3. The discussion of the defendant's claim seems to suggest that the claim was that, had Title 26 charges been authorized, the prosecution would have been by DOJ Tax criminal attorneys rather than by an AUSA in the local USAO. That claim, if made that way, is simply contrary to the practice, as many tax charges, even stand alone tax charges unrelated to other principal charges, are prosecuted by AUSAs, depending upon how DOJ deploys its resources. Local AUSA prosecution would particularly occur when the gravamen of the conduct alleged in the indictment is a nontax crime, with one or more tax crimes also being charged incident to the larger misconduct.
4. As noted in footnote 3, the prosecutor did present a redacted copy of DOJ Tax's authorization of the Klein conspiracy charge. The defendant requested the entire, unredacted copy. The court deferred action on that request. I have not seen any action on that request. I would be surprised, however, if the court required the production of the entire, unredacted copy.
5. I suppose that one defense gambit this suggests is to always inquire into the authorization of the tax charges in an indictment and, specifically, request that the authorization be produced. There may be something to learn there. Maybe not, but you don't know until you look under that stone.