On the Manafort Tax, FBAR and Bank Fraud Trial - Complex White Collar Crimes Are About the Lie (8/16/18)

In the Manafort prosecution, each side claims that lies from the other side entitles it to win.  During the closing arguments yesterday, WAPO had a running commentary of the oral arguments and the lie word (or some variant) came up early and often on both sides.  See Rachel Weiner, Matt Zapotosky, Lynh Bui and Tom Jackman, Paul Manafort trial Day 12: Case heading to jury, deliberations start Thursday (WAPO 8/15/18), here.

Of course, the defendant who rests without putting on evidence has few defenses he can credibly argue. As I noted earlier, the defendant's lawyer can argue that the Government's evidence does not prove guilt beyond a reasonable doubt.  The defendant can make that argument credible if he can convince the jury that key government witness(es) lied.  So, not surprisingly, Manafort's lawyer, Kevin Downing (formerly of tax prosecution repute, Wikipedia here) makes that claim.

From the prosecution perspective, these complex financial crimes cases are about lies, which is why the prosecution hammered that claim home.  Juries may not understand complex financial, accounting and tax rules, but they do understand lies.

I have had a number of posts about "The Lie."  Those posts are collected here but the key ones for purposes of this discussion with appropriate excerpts (in chronological order) are:

• DOJ Tax's Further Attempts to Drum Up Business / Revenue (Federal Tax Crimes Blog 12/26/09), here.

4. Another good snippet reputedly from Downing consistent with his man on a righteous mission persona is: "I want to go after the privileged people who've had the benefits of this country and are cheating their taxes, get them in front of local juries and convict them." Lee A. Sheppard, The UBS Endgame, 2009 TNT 186-1 (9/29/2009). Even the crusty Lee Sheppard is enthralled by Himself, following up with: "It is reasonable to assume that the blasé Swiss and the complacent rich American tax cheats never counted on meeting up with a guy like Kevin Downing, senior trial counsel in the Justice Department's Tax Division, who has been leading the prosecutions against Swiss bank UBS AG. Downing, a former Marine." 

5. Jeff Neiman, an AUSA for SD Florida who is prominently involved in these prosecutions, said that he wanted to "avoid technical tax issues." Sheppard paraphrased: "Whether the defendant is lying, cheating, and stealing is what the argument to the jury boils down to for Neiman." See my earlier blogs on The Lie. This statement echoes the theme of the Enron prosecutions: "This is a simple case. It is not about accounting. It is about lies and choices." John C. Hueston, Behind the Scenes of the Enron Trial: Creating Decisive Moments, 44 Am. Crim. L. Rev. 197, 207 (2007). See also Stuart P. Green, Lying, Cheating, and Stealing: A Moral Theory of White Collar Crime 246-48 (2006)

And, in case you did not already know, that is the same Kevin Downing who is the lead defense lawyer.

• Tax Crimes -- the Role of the Lie (Federal Tax Crimes Blog 6/20/09), here.

Thus, the lie is the key feature of the crime in each tax crimes case and is the centerpiece of the Government's case. As it has recently been reported, a chief Government prosecutor asserts that steering clear of "lying, cheating, and stealing" will avoid prosecution. In my analysis, cheating and stealing are the ends and lying is the means. Proving the lie shows conduct that might otherwise be equivocal in terms of intentional violation of a known legal duty to be cheating and stealing and thus a violation of a known legal duty.

• The Daugerdas Indictment - Part #4 - The Lie (Federal Tax Crimes Blog 6/16/09), here.

I have blogged before that tax shelter prosecutions are about the lie. Often, the claim is that the tax shelters lack economic substance, but in these prosecutions the real complaint is the lie that is designed to give an appearance of economic substance. The jury will not understand the complex, convoluted tax structure and byzantine legal analysis, but the jury will understand the lie. In this blog, I will look principally at the indictment's claims as to the big lie. I caution readers that I address here only my understanding of the Government's unilateral claims about the lie in the indictment. I make no attempt here to develop nuance or present defenses to those claims that the defendants may have.

• Tax Shelter Crimes Are About Lies (Federal Tax Crimes Blog 5/10/09), here.

The statement that the prosecutions are about the lies is a variation of the theme in the Enron prosecution where complex accounting issues were the backdrop, but the prosecutor distilled the criminal case to a simple theme “This is a simple case. It is not about accounting. It is about lies and choices.” John C. Hueston, Behind the Scenes of the Enron Trial: Creating Decisive Moments, 44 Am. Crim. L. Rev. 197, 207 (2007). The theme is also inherent in the larger white collar crime context. See e.g., Stuart P. Green, Lying, Cheating and Stealing: A Moral Theory of White Collar Crime (Oxford Univ. Press 2007). I discuss this subject in considerably more detail in my upcoming article for the Houston Business and Tax Law Journal, titled Tax Obstruction Crimes: Is Making the IRS’s Job Harder Enough? 

One comment on the alleged lies in the Manafort case.  Certainly as to the tax and bank fraud claims, there were lies in the tax returns and in the documents submitted the banks.  Manafort did not file FBARs.  The Government has to prove for conviction that the knew of the duty to file FBARs and that he choice to evade that duty.  The implicit lie by not filing is that he did not have the duty to file FBARs.  I suppose that is close enough to a lie for the purpose of the subject of this blog.