Tuesday, June 26, 2018

Dealing with Other Counts of Conviction After Vacating Tax Obstruction Based on Marinello (6/26/18)

I previously reported on United States v. Westbrooks, 858 F.3d 317 (5th Cir. 2017), where the Fifth Circuit joined the majority of circuits holding that tax obstruction, § 7212(a), did not require the Government show that the defendant knew of an IRS investigation that it was foreseeable for the defendant to obstruct.  See Fifth Circuit Joins Majority Decisions that § 7212(a) Requires No Pending Investigation (Federal Tax Crimes Blog 5/28/17), here.  That position was rejected in the subsequent Supreme Court case of Marinello v. United States, ___ U.S. ___, 138 S. Ct. 1101 (2018); see my blog post Supreme Court Holds that Omnibus Clause of the Tax Obstruction Crime (§ 7212(a)) Requires Awareness of Pending Tax-Related Proceeding (Federal Tax Crimes Blog 3/21/18; 3/22/18), here.  In subsequent proceedings in Westbrooks on remand from certiorari, the Government conceded that the tax obstruction must be vacated but that the defendant's other convictions for tax perjury should stand.  The Fifth Circuit agreed, rejecting Westbrooks' argument that the tax obstruction conviction contaminated the tax perjury convictions, thus permitting those convictions to stand.  United States v. Westbrooks, 2018 U.S. App. LEXIS 16943 (5th Cir. 2018) (unpublished), here.  The Court reasoned:
The disagreement between the parties is about what the vacatur of the obstruction conviction means for the three "false return" convictions. Westbrook contends that the improper obstruction count contaminated the false return counts. This same argument about "spillover prejudice" was raised in Governor Edwin Edwards's appeal of his convictions because an intervening Supreme Court decision had invalidated the legal basis for some of the mail fraud counts. United States v. Edwards, 303 F.3d 606, 638-40 (5th Cir. 2002) (citing Cleveland v. United States, 531 U.S. 12, 121 S. Ct. 365, 148 L. Ed. 2d 221 (2000)). We noted that the concept came from cases challenging a failure to grant a pretrial severance, and we had never decided whether "spillover from invalid claims can be a basis for granting a new trial." Id. at 639. We did not resolve that question in Edwards because even assuming the theory applied in this "retroactive misjoinder" situation, the improper taint exists only if the counts the jury should not have heard allowed the introduction of evidence that would not have otherwise been admissible. Id. at 640. That was not the case in Edwards, id., and it is not the case here. Evidence concerning cash payments, shoddy or nonexistent bookkeeping, and prior false returns was admissible even without the obstruction count as either intrinsic to the false return counts or permissible Rule 404(b) evidence that showed Westbrooks' plan, fraudulent intent, and absence of mistake. United States v. Morgan, 117 F.3d 849, 861 (5th Cir. 1997); Fed. R. Evid. 404(b). The testimony about Westbrook's false testimony at the show cause hearing was, as we have already explained, a permissible basis for the obstruction count and, even if not, would have been admissible as probative of Westbrook's intent. Because the now-invalid obstruction count did not allow the jury to consider evidence that would not have been allowed at a trial focused on just the false return counts, the latter will not be vacated. Edwards, 303 F.3d at 640.
The Court then turned to the sentencing and held:
The final question relates to the sentences for those false return convictions we are upholding. The government agrees that we should vacate those sentences and remand for resentencing in light of the vacatur of the obstruction count. That new sentencing will include but not be limited to reconsideration of the restitution amount which the government concedes should be reduced as it included amounts based on returns filed only during the time period covered by the obstruction count.
Now, returning to Marinello, the same pattern was presented.  An erroneous tax obstruction conviction but convictions for other tax crimes (eight counts of willfully failing to file individual and corporate tax returns for 4 years each).  Those other convictions were not reversed.  As I noted in the Marinello blog linked above, the win on the tax obstruction issue may be meaningless if the other convictions stand.  See particularly point 4 which is rather long, but the gravamen is that that Guidelines calculations will likely produce the same sentencing range and, at best, Marinello might hope to get some Booker variance benefit (likely a slight one) from the win on the tax obstruction issue.  I suspect that Marinello will make arguments like made in Westbrooks that the other convictions should be vacated and, at a minimum, he get a new trial without the contamination caused by the erroneous tax obstruction charge.  I understand that there are subsequent proceedings in Marinello, but the docket entries, here, on Pacer (see dkt entries 170-172) do not yet indicate what the nature of Marinello's arguments on remand will be.  I will check from time to time to determine what is happening in Marinello on remand.

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