Gary Stern Plea Agreement (9/15/16)

I have previously reported on the indictment of Gary Stern, a lawyer, for various tax counts.  See Gary Stern Indictment (Federal Tax Crimes Blog 10/15/14), here (with a link to the indictment).  I said in that posting that I  would add more on the indictment later, but never got back to it.  Today, I report on Stern's plea agreement, here.  (For a related posting, see Chicago Lawyer Enjoined From Promoting Fraudulent Tax Schemes (Federal Tax Crimes Blog 11/7/13), here.)

In the plea agreement, Stern agrees to plead to Counts Five and Seven, two counts of aiding and assisting, § 7206(2), here.  Aiding and assisting is a three-year maximum felony, so the maximum incarceration period permitted under the plea agreement is six-years.

I won't get into the details of how Stern committed the crime, but it appears that he and an associate in his firm took the key steps necessary to create a structure purporting to transfer energy tax credits otherwise unusuable by one corporation through a series of transactions to two trusts which claimed the credits on their tax return and allocated $5,337,103 in improper credits to persons investing in the scheme.  Through those actions, defendant aided and assisted in the preparation and presentation of the trust tax returns that resulting in the claiming of credits by perhaps 55 taxpayers.

As to the two specific counts involved in the plea, only two taxpayers' false returns are involved -- Taxpayer RL whose return reportedly falsely claimed $150,718 in credits and Tapxayer JK whose return falsely reported $154,534 in credits.  The aggregate falsely claimed credits for the two is thus $305,252.

As is often the case, the plea agreement addresses the Sentencing Guidelines calculations.  (See ¶¶ 8 ff, pp. 10 ff.)

i. The base offense level 1s 24 pursuant to Guidelines §§2T1.4(a)(1) and 2T4.1(J), because the intended tax loss, $5,337,103, was more than $3,500,000 and not more than $9,500,000.  

ii. Pursuant to Guideline §2T1.4(b)(2), the offense level is increased two levels because the offense involved sophisticated means.  

iii. Pursuant to Guideline §3Bl.l(c), the offense level is increased two levels because the defendant was a supervisor of a participant in the criminal activity.  

iv. Defendant has clearly demonstrated a recognition and affirmative acceptance of  personal responsibility for his criminal conduct. If the government does not receive additional evidence in conflict with this provision, and if defendant continues to accept responsibility for his actions within the meaning of Guideline §3El.1(a), including by furnishing the United States Attorney's Office and the Probation Office with all requested  financial information relevant to his ability to satisfy any fine that may be imposed in this case, a two-level reduction in the offense level is appropriate. 

v. In accord with Guideline §3El.1(b), defendant has timely notified the government of his intention to enter a plea of guilty, thereby permitting the government to avoid preparing for trial and permitting the Court to allocate its resources efficiently. Therefore, as provided by Guideline §3E1.1(b), if the Court determines the offense level to be 16 or greater prior to determining that defendant is entitled to a two-level reduction for acceptance of responsibility, the government will move for an additional one-level reduction in the offense level. 

c. Criminal History Category. With regard to determining defendant's criminal history points and criminal history category, based on the facts now known to the government, defendant's criminal history points equal zero and defendant's criminal history category is I.  

d. Anticipated Advisory Sentencing Guidelines Range. Therefore, based on the facts now known to the government, the anticipated offense level is 25, which, when combined with the anticipated criminal history category of I, results in an anticipated advisory sentencing guidelines range of 57 to 71 months' imprisonment, in addition to any supervised release and fine the Court may impose.

The high end of the range is 71 months, just under the maximum 72 months allowed for the two plea counts.  Since above Guidelines Booker variances are almost never given in tax cases, the prosecutors' agreements to accept a two count plea deal should draw the same sentence as would apply even if more counts had been included in the plea agreement.

The following is the restitution provision:

13. Regarding restitution, defendant agrees that pursuant to Title 18, United States Code, Section 3663(a)(3), the Court shall order defendant to make restitution to the IRS in an amount of$397,949 (the total amount of FNS tax credits illegally claimed on 2006, 2007, or 2008 income tax returns of grantors of Merrillville Trust that were not audited and thus were not recovered by the IRS), which amount shall reflect credit for any funds repaid by defendant prior to sentencing. 

There was another trust involved.  I did not follow to determine whether there might be some unrecovered taxes with respect to that trust.  I presume that there were not.

I don't see much else in the plea agreement to comment on.  The other terms of the plea agreement seem fairly standard.

I do note that, when Stern was indicted, his lawyer said "Gary Stern is a thoughtful lawyer who didn’t do anything wrong here, and we’re going to prove that in court."  See Martha Neil, Ex-partner of law firm indicted, accused of aiding unlawful use of energy tax credits by clients (ABA Journal 10/16/14), here. That too is fairly standard for lawyers representing clients (whether lawyers or not) after the indictment.