U.S. Tax Attorney Denied Habeas Corpus in Extradition Proceeding Based on Netherlands Criminal Tax Conviction (2/10/20)

In Valentino v. United States Marshal (S.D. Tex. Civ. Action 4:20-CV-304 order dated 1/30/20), here, the court denied Valentino’s request for habeas corpus relief in an extradition proceeding.  Valentino is an attorney who practiced international tax law (see some bio information in JAT Comments below at #4).

The Court starts as follows:

I. Procedural Background 

This habeas case arises out of an extradition proceeding. Joseph Valentino was charged and convicted by the Kingdom of the Netherlands for participating in a criminal organization that intentionally filed false corporate tax returns. The Amsterdam district public prosecutor issued a summons for the criminal proceedings in the Netherlands on November 19, 2002. Trial was held in absentia and the judgment was rendered on February 24, 2004. After Valentino appealed his conviction and sentence to the Court of Appeals of Amsterdam, during which proceedings he was represented by counsel, the Court of Appeals rendered a new judgment finding Valentino guilty on two counts: Count One — "participation in an organization for the purpose of committing crimes" — and Count Two — "co-perpetration of intentionally incorrectly filing a tax return provided by tax law." He was sentenced to thirty-four months in prison. 

On February 2, 2018, the United States sought Valentino's extradition to the Kingdom of the Netherlands to execute a sentence on his conviction. Valentino was arrested around April 18, 2018. After holding a detention hearing, United States Magistrate Judge Stephen Wm. Smith ordered Valentino to be released on reasonable conditions pending his extradition hearing. United States v. Valentino, No. 18-mj-00146, 2018 WL 2187645, at *6 (S.D. Tex. May 11, 2018). Judge Smith found that Valentino did not pose a flight risk or a danger to the community and had a "reasonable likelihood" of prevailing on one or more issues at his extradition hearing. He found special circumstances supporting Valentino's release and ordered him released on bond pending the extradition hearing. He noted that "this is only a decision on whether to release Valentino pending the extradition hearing," which "placed [the court] in the difficult task of assessing Valentino's success on the merits" without "prejudging the claims or the evidence until both sides have had an opportunity to be fully heard. Further, the court may not have before it all of the evidence that will be presented in the extradition hearing." Id. at *5 (emphasis added). 

Valentino then moved to dismiss the extradition complaint. Magistrate Judge Peter Bray held a formal extradition proceeding on December 4, 2019, and on January 23, 2020, issued a thorough, 37-page opinion denying Valentino's Motion to Dismiss the United States' Extradition Complaint. Judge Bray certified Valentino as extraditable. 

The next day, Valentino filed a Petition for a Writ of Habeas Corpus under 28 U.S.C. section 2241, which currently is pending before this Court. Dkt. 1. Valentino asserts that the Court should grant the writ and hold that extradition must be denied because (1) all but two of the charges against Valentino were barred by the statute of limitations under United States law, (2) the fourteen-year delay between conviction and the extradition complaint violates Valentino's due process rights, and (3) the Netherlands failed to establish probable cause to believe that Valentino had the requisite knowledge to convict him of the charged offenses. These arguments were raised in the extradition proceedings and addressed in Judge Bray's opinion. Valentino asserts he has a high likelihood of success on these claims, and that he poses no flight risk or danger to the community. These factors, he argues, along with the Netherlands' fourteen-year delay between convicting him and seeking his extradition, establish "special circumstances" that warrant his release until determination of his habeas petition.

II. Standard of Review 

"Bail should be denied in extradition proceedings absent `special circumstances.'" In re Extradition of Russell, 805 F.2d 1215, 1216 (5th Cir. 1986) (citing Wright v. Henkel, 190 U.S. 40, 62-63 (1903)). "Unlike the situation for domestic crimes, there is no presumption favoring bail. The reverse is rather the case." Russell, 805 F.2d at 1216 (citing Beaulieu v. Hartigan, 554 F.2d 1, 2 (1st Cir. 1977)). This heightened standard for extradition cases reflects the national interest in complying with treaty obligations. See, e.g., United States v. Taitz, 130 F.R.D. 442, 444 (S.D. Cal. 1990) ("If the United States were to release a foreign fugitive pending extradition and the defendant absconded, the resulting diplomatic embarrassment would have an effect on foreign relations and the ability of the United States to obtain extradition of its fugitives.") 

"Special circumstances include the raising of substantial claims upon which the appellant has a high probability of success, a serious deterioration of health while incarcerated, and unusual delay in the appeal process." Salerno v. United States, 878 F.2d 317, 317 (9th Cir. 1989). But no precise definition, exhaustive menu of situations, or checklist of factors controls the Court's determination whether "special circumstances" warrant release on bail. See, e.g., In re Extradition of Maniero, 950 F. Supp. 290, 294 (S.D. Cal. 1996). 

It is clear, however, that this standard of "special circumstances" for release on bail for persons involved in a foreign extradition proceeding "is a more demanding standard than that for ordinary accused criminals awaiting trial." Yau-Leung v. Soscia, 649 F.2d 914, 920 (2d Cir. 1981) (citations omitted), cert. denied, 454 U.S. 971 (1981). Special circumstances must be extraordinary and may not rely on factors that are applicable to all defendants facing extradition. In re Extradition of Smyth, 976 F.2d 1535, 1535-36 (9th Cir. 1992) (citations omitted). "Although most cases focus on a single special circumstance, courts are now recognizing that the cumulation of several factors may constitute special circumstances." In re Extradition of Nacif-Borge, 829 F. Supp. at 1216 (citing Taitz, 130 F.R.D. 442). 

The determination of what factors to consider and how much weight to give them is within the "sound discretion" of the Court. See, e.g., Wroclawski v. United States, 634 F. Supp. 2d 1003, 1006 (D. Ariz. 2009) (citing Beaulieu v. Hartigan, 554 F.2d 1 (1st Cir. 1977)).

The remainder of the opinion analyzes Valentino’s arguments for habeas and rejects the arguments.  Readers interested can read the opinion.

I thought readers might be interest in extradition Complaint, CL here, and docket entries here.  The linked complaint does not have the attachments and they do not appear to now be available on CL, so I link the complaint with attachments here.  I excerpt portions of the Complaint that I thought might give the background (at least in summary):

7. Valentino's convictions were based on the following facts: 

a. In September 1992, Russell became an attorney-in-fact for Oxbridge, which was an offshore company registered in the Bahamas. Between 1992 and 1996, Oxbridge purchased all of the shares of eight Dutch companies ("Dutch companies") and renamed them. These Dutch companies (after their renaming) included American Energy B.V., American Energy Resources B.V., and American Energy Mining B.V. Russell was the managing or sole director of all eight Dutch companies.

b. Shortly after the purchase of the Dutch companies by Oxbridge, the liquid funds of these companies were withdrawn by Oxbridge management. Additionally, the Dutch companies purchased certain "intangible assets" (e.g., oil leases, coal properties, zeolite mines) from Oxbridge, or another Oxbridge-affiliated company, for a significant purchase price and based on a relatively short-term contract of five-to-ten years. The Dutch companies usually continued to owe the purchase price of the assets to the seller via promissory notes.

c. Beginning on or about 1993, Valentino began acting as tax advisor for Oxbridge and gave extensive input about how the Dutch corporate income tax returns should be filed for the Dutch companies. These included:

i. A corporate income tax return for the company American Energy B.V. for the calendar years 1993 and 1994, which was signed by Russell on September 1, 1995, and received by Dutch tax authorities on September 15, 1995.

ii . A corporate income tax return for the company American Energy Resources B.V. for the calendar year 1994, which was signed by Russell on September 1, 1995, and received by Dutch tax authorities on September 15, 1995.

iii. A corporate income tax return for the company American Energy B.V. for the calendar year 1995, which was signed by Russell on July 1, 1997, and received by Dutch tax authorities on August 1, 1997.

iv. A corporate income tax return for the company American Energy Mining B.V. for the period July 1, 1994, to and including December 31, 1995, which was signed on July 1, 1997, by Russell and received by Dutch tax authorities on August 1, 1997.

d. These tax returns, like other corporate tax returns filed for the Dutch companies for the period 1992-95, asserted the value of the intangible assets purchased by the relevant Dutch company. The tax returns also declared significant depreciation write-offs associated with the intangible assets.

e. According to the findings of the Amsterdam Court of Appeals:

i. Oxbridge management listed on the Dutch tax returns the values of the intangible assets that had been purchased by the Dutch companies at an amount that was "fictitious," in that the values were intentionally inflated to be much higher than the actual market price.

ii. Oxbridge management listed on these Dutch tax returns depreciation write-offs, associated with the values of the intangible assets, which were also fictitious, in that they were intentionally inflated to be much higher than the actual depreciation value.

iii. Oxbridge management had no intent to exploit the intangible assets or any financial ability to do so.

iv. Oxbridge management had purchased these intangible assets for the express purpose of eliminating the profits that the Dutch companies had generated in the Netherlands before their takeover by Oxbridge by listing fictitious depreciation values on the Dutch tax returns.

v. The goal of Oxbridge management, using the Oxbridge shell company, was to transfer the Dutch companies' funds into foreign bank accounts, and to disperse those funds among the individual members of Oxbridge's management, while avoiding Dutch taxes by filing fictitious asset and depreciation values on Dutch tax returns.

vi. Valentino participated with other members of Oxbridge management in this criminal scheme, which included the intentional filing of false declarations on Dutch corporate tax returns. These tax returns specifically included the corporate tax return for American Energy B.V. for the calendar years 1993, 1994, and 1995; for American Energy Resources B.V. for the calendar year 1994; and for American Energy Mining B.V. for the period July 1, 1994, to and including December 31, 1995.

f. The Amsterdam Court of Appeals further found:

i. That between January 1, 1992, and April 11, 2000, Valentino participated with several co-conspirators in a criminal organization that used the companies Oxbridge Investments Limited and American Energy B.V. for the purpose of committing criminal activity, including committing tax offenses by filing false corporate income tax returns.

ii. That on September 15, 1995, Valentino, acting with co-conspirators, intentionally filed a false tax return on behalf of the company American Energy B.V. for the calendar years 1993 and 1994, and intentionally filed a false tax return on behalf of the company American Energy Resources N.V. for the calendar year 1994.

iii. That on August 1, 1997, Valentino, acting with co-conspirators, intentionally filed a false tax return on behalf of the companies American Energy B.V. for the calendar year 1995, and he intentionally filed a false tax return on behalf of the company American Energy Mining B.V. for the period July 1, 1994, to and including December 31, 1995.

JAT Comments:

1.  More detail is available in the attachments to the complaint (which may be viewed and downloaded with the complaint here).  Also the CourtListener docket entries are here which may provide free access to documents that a CL member has once viewed once on Pacer; otherwise have to go to Pacer has fees to view and download.

2. I am not an international tax lawyer, so I don’t know how the arrangements and actions alleged offended the Netherlands other than inferences from the foregoing.

3.  I have also not tried to sort through how, in the process of violating Netherlands law (if he did that), the conduct might have also potentially violated U.S. law.  But, based on the facts alleged, the statute of limitations on any U.S. violation likely would bar prosecution at this stage, although there are possible suspensions to the U.S. statute of limitations.

4.  I did find this listing of Valentino with a firm called Property Sales and Management LLC, here, which, as I viewed the URL today, identifies him as follows:

Chief Financial Officer (CFO) Joseph R. Valentino
Attorney P.C. – BAR license #20432300
CPA #CA010119L Joseph R. Valentino is one of the top tax attorneys in U.S. and is also a certified public accountant (CPA). He has a MBA degree in finance and accounting, and a JD law degree. He was a partner of Chamberlain, Hrdlicka, White, Williams & Martin, a nationally recognized law firm based in Houston, Texas for over 30 years. Formerly, Mr. Valentino was a tax specialist for Peat Marwick & Mitchell Accountants. Currently, he is a partner of the law firm Duncan, Valentino & Welnity, PLLC. Mr. Valentino is specialized in providing financial and U.S. tax consulting services to our foreign investors, and he is in charge of our Europe, South and Central America regions.

 I could not find a web link to the firm Duncan, Valentino & Welnity, PLLC.  Also, the last I heard was that Chamberlain firm was named Chamberlain, Hrdlicka, White, Williams & Aughtry, P.C. (I show that on some recent emails from members of the firm) and, to my recollection, was so named while Valentino was a partner toward the end of his affiliation.  A prior name was as listed in the blurb above.  And, its web site here shows the firm as Chamberlain Hrdlicka, which is historically how it was identified at least colloquially.