Monday, November 5, 2018

Eleventh Circuit Affirms Klein Conspiracy and Tax Perjury Convictions Mostly on Harmless Error But Raising Interesting Tax Crimes Issues (11/5/18)

In United States v. Garcia, ___ F.3d ___, 2018 U.S. App. LEXIS 29554 (11th Cir. 2018), here, the indictment charged the defendant and her late husband (who died before trial) of (i) one count of conspiracy (both offense conspiracy and defraud / Klein conspiracy) and (ii) three counts of tax perjury (§ 7206(1).  Garcia was convicted on all counts.

The principal issue in the appeal was whether Garcia's and her counsel's absence from the trial for three to ten minutes in a trial lasting 49 hours violated her constitutional rights.  That is an interesting discussion but not relevant or only tangentially so to federal tax crimes.  The essence of the court's holding was that, although violating her rights, the error was not prejudicial to her.  One of the factors that the court discussed that made the error not prejudicial is, however, worth noting (cleaned up):
Finally, the jury got to consider the testimony of the defendant who vigorously denied knowingly defrauding the United States. A defendant's testimony is substantive evidence that a jury may -- and indeed in this case did consider and reject. A statement by a defendant, if disbelieved by the jury, may be considered as substantive evidence of the defendant's guilt. As the Supreme Court has explained, a defendant who chooses to take the stand runs "the risk that in so doing he will bolster the Government case enough for it to support a verdict of guilty." McGautha v. California, 402 U.S. 183, 215 (1971) [subsequent case history omitted]  An explanation or denial offered by a defendant at trial that the jury finds implausible or false may form a sufficient basis to allow the jury to find that the defendant had the requisite guilty knowledge. Garcia's decision to testify at trial thus, ironically, added further weight to the prosecution's case.
Focusing on the defraud / Klein conspiracy, often formulated in jury instructions as a conspiracy to impair, obstruct and defeat the lawful function of the IRS, the court instructed that the conspiracy was "attempting to impair, obstruct and defeat the lawful function of the IRS." (emphasis supplied.)  Garcia complained, and the court agreed, that the addition was error and the parties agreed that the addition was a constructive amendment of the indictment.  The court affirmed the conviction because she could not show plain error in the constructive amendment.  None of the trial focused on any attempt, with this being injected for the first time in the instructions.  Further, the conspiracy charge was for both offense conspiracy and defraud / Klein conspiracy.  She was convicted of the offenses that were the object of the offense conspiracy, and hence the error was harmless:  "It is, therefore, remote that the verdict rendered on Count One was somehow based on an attempt to defraud rather than on the actual commission of the substantive crimes. "  [JAT Note; that is a bit fuzzy, but the overall point is clear enough.]

Garcia made another claim about the defraud / Klein conspiracy -- she urged that the trial court did not instruct on it.  I am not sure from the opinion what this claim was, since, as noted in the preceding paragraph, a variation of the defraud / Klein conspiracy, albeit erroneous, was given.  But the Court held that her substantial rights were not affected, saying:
It is abundantly clear that the primary issue contested at trial was whether the defendant knowingly and willfully participated in the tax conspiracy. We repeat that the jury ultimately convicted Garcia on three substantive tax charges, which were included as objects of Count One.
I think what the court was saying was that the conviction on the offense conspiracy was sufficient to support the conviction even if the jury would have acquitted her on the defraud / Klein conspiracy.  Keep in mind that the offense conspiracy has the same mens rea standard as the offense that was the object of the conspiracy which in this case was that the defendant have acted willfully.  The court says that the issue at trial was whether she 'knowingly and willfully" participated in the conspiracy.  The defraud / Klein conspiracy does not have a textual willfully element because there is no substantive offense from which to infer that element.  But as with the tax obstruction offense in § 7212(a), most courts give instructions that parallel the willfully requirement.

Garcia also complained that the court did not "to give a multiple objects/unanimity instruction for the conspiracy charge."  The district court indicated a willingness to use a special verdict form for the jury to indicate unanimity as to each offense object of the conspiracy.   The defense objected.  The court warned that, if it did not use the special verdict form, he could not later complain.  The court held that the error, if any, was invited error.

Then, further confusing the issue, the court said:
Moreover, even if the invited error doctrine did not foreclose the claim -- and we believe that it does -- Garcia still would not prevail on this issue since the district court never instructed the jury that the government only had to prove one of the objects of the conspiracy as alleged. Rather the court's instructions required the jury to find the defendant guilty of conspiring to impede and impair the IRS in its tax assessing and collecting function and of committing substantive tax offenses against the United States.
Finally, the court rejected Garcia's complaint about the aiding and abetting instruction.  It appears that the indictment used aiding and abetting liability to leverage the chances that a conviction would be obtained.  I have written before about using derivative liabilities of aiding and abetting and Pinkerton to lard up jury instructions in the Government's favor when the defendant had direct substantive offense liability as she did in this case.  John A. Townsend, Theories of Criminal Liability for Tax Evasion (May 15, 2012), at SSRN: (the article deals with use of derivative liabilities--aiding and abetting and Pinkerton in cases where the defendant, although not the taxpayer, could be guilty of evading another person's taxes; that same phenomenon applies with tax perjury, but where the taxpayer is the person guilty of tax perjury, it makes no sense to instruct also on aiding and abetting and Pinkerton derivative liabilities).

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