Wednesday, February 17, 2021

Daugerdas Fails in Post-Conviction Hail Mary Motion (2/17/21; 2/19/21)

I write today on tax criminal, Paul Daugerdas, who has been the subject of many postings on this blog.  (See here.)  After exhausting all of his conviction and other post-conviction remedies, Daugerdas in 1918 tries one other “hail Mary” shot in the form of a motion “to vacate his conviction and sentence pursuant to 28 U.S.C. § 2255.”  Daugerdas v. United States (SDNY Dkt 18cv152, Entry No. 48), Memorandum and Order dated 2/16/21, TN here & CL here).  As with his other efforts to avoid or mitigate his convictions, this one fails. 

Daugerdas’ failed effort included the common use of the ineffective assistance of counsel allegation and other “blunderbuss” claims.  Basically, the Court rejected Daugerdas’ claims that his counsel, both trial and appellate, met the standards for effective assistance of counsel within the broad range of reasonable strategic decisions made in the course of trial and appeal.  The Court also rejected other claims, including a Marinello claim to his § 7212(a), tax obstruction, conviction.  See Marinello v. United States, 584 U.S. ___, 138 S. Ct. 1101 (2018).

This is a fairly standard disposition of such claims.  The following caught my eye.

1. Daugerdas claimed that his trial counsel failed in advising him to execute pre-indictment extensions of the criminal statute of limitations.  One of his arguments was that he received no consideration for the extension and therefore, as a contract, the extension was unenforceable as a matter of basic contract law.  The Court rejected that argument (see pp. 9-10).  The Court’s holding appears to be based on one holding and one notion:  (1) as recited in the extensions, Daugerdas did receive consideration in the DOJ’s forbearance to indict immediately without the extension and the extension gave him more opportunity to argue against indictment and marshal his case for trial when indicted; and (2) in any event, possibly, a waiver of the statute of limitations is a unilateral waiver rather than a contract, thus requiring no consideration under contract law (this second holding is, stated cautiously (“Under this view”), in a footnote, p, 10 n. 4).  My comments are:

  • The second holding, a standard and routine one for extensions of the civil statute of limitations under § 6501(c)(4) is, I and my former partner have argued, wrong.  John A. Townsend & Lawrence R. Jones, Jr., Interpreting Consents to Extend the Statute of Limitations, 78 Tax Notes 459 (1998), here.  The problem is that there is too much water under the bridge on this spurious notion to ever correct it.  (Regardless, the Court,  usually meticulous, miscites the name of a key case, Stange v. United States, 282 U.S. 270 (1931)).
  • As I said, § 6501(c)(4) applies only to civil statute extensions.  I am not sure that authority which was based on an early version of § 6501(c)(4) (since materially changed as we note in the article), could affect criminal statute extensions.  The cases cited by the Court in the footnote are civil cases which all go back to the notion cited above which now is mainstream even if erroneous. and I am not sure that authority would govern in criminal cases.
  • In all events, I can't imagine that any defense counsel would advise a client to extend the statute of limitations unless there was something for the defendant in the extension.  So, I would imagine that a court considering such a contract consideration claim for a criminal statute extension would not be able to find consideration, at least in terms of considering an ineffective assistance of counsel claim.

2. Daugerdas also raised Marinello arguments.  The Court held (pp. 15-16) that the argument was procedurally defaulted because he could have raised the Marinello-based argument before on the direct appeal.  Even though Marinello had not been decided by the direct appeal, the underlying argument could have been made (just as Marinello’s lawyers and others before Marinello made them in courts of appeals).  Daugerdas also failed to show prejudice (see below in discussing the Government’s response).

3.   I was curious as to why this motion filed in 2018 was only being decided in 2021.  So, I took a look at the docket entries in CourtListener, here.  I didn’t see anything on quick review that answered that question, but did find the following:

  • Daugerdas early filed a motion for the court to supervise in a hearing his trial counsel’s testimony regarding his waiver of the attorney-client privilege with respect to the claim of ineffective assistance of counsel.  In a brief order here (worth reading), the Court denied that motion.  See Dkt. 13 here.  Readers will recall that an ineffective assistance claim waives the attorney-client privilege for communications relevant to the claim.
  • Daugerdas filed a reply to the Government’s answer to his initial motion.  See Dkt. 31,  here.  He engages on the Marinello issue at pp. 9-13.  Nothing particularly startling there, except he does charge the following:  “The Respondant [sic] gleens [sic], pleasurizes, takes the above language from the Marinello decision.”  I’m not sure exactly what message that conveys since the definitions I found did not seem to fit, but it is cute.
4.  Added 2/19/21 11:00 am:  The Court held that, as to the nontax fraud claims, the Wartime Suspensions of Limitations Act (18 U.S.C. § 3287, here, “WSLA”) “tolled the statute of limitations on the conspiracy to defraud the United States and mail fraud charges.”  (Slip op. 12-13).  The Court apparently did not think that the WSLA applied to the tax evasion counts because it felt it necessary to deal with the tax crimes statute of limitations issue earlier in rejecting Daugerdas’ claims regarding the stipulated extensions of statute of limitations “relating to criminal tax evasion counts that were the subject of a grand jury investigation.”  (Slip Op. 6-7.)  I am going to write a separate blog entry on this as I find time but, perhaps as a teaser, I cut and paste here my previous thoughts on the WSLA in Michael Saltzman and Leslie Book, IRS Practice and Procedure ¶ 12.05[9][a][iii] at fn 933 (Thomsen Reuters 2015, online) (for which I was the principal author):

The Wartime Suspension of Limitations Act (WSLA), 18 USC § 3287 which on the bare text of the statute might apply to tax crimes involving “fraud or attempted fraud against the United States or any agency thereof” apparently does not apply to tax crimes. fn933
   n933 The Act suspends the criminal statutes of limitation for any offense “involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not.” The suspension is while the United States “is at war or Congress has enacted a specific authorization for the use of the Armed Forces.” So far as we are aware, the government has only attempted to use this statute in a single tax case. United States v. Beard, 118 F. Supp. 297, 303–304 (D. Md. 1954) . The analysis of the issue is cryptic, perhaps in part because the government appeared timid in floating the issue:
This contention appears in the government's brief filed in this matter but was not further urged in oral argument and may be disposed of without extending this opinion by needless prolixity. It is my opinion that this War Time Suspension Statute does not apply to this prosecution for income tax evasion brought under 26 U.S.C.A. § 145 (b), under the recent decisions of the Supreme Court. United States v. Scharton, 285 U.S. 518, 522, 52 S.Ct. 416, 76 L.Ed. 917; Bridges v. United States, 346 U.S. 209, 73 S.Ct. 1055, 97 L.Ed. 1557; United States v. Grainger, 346 U.S. 235, 73 S.Ct. 1069, 97 L.Ed. 1575 .
Beard's conclusion is consistent with the general interpretation of the purpose of the statute to affect crimes related to the hostilities rather than garden variety tax evasion. Perhaps for that reason, the CTM does not mention the statute in its discussion of statutes of limitation. CTM 7.00 (2012 ed.). But, one has to wonder how judges preferring literal readings of statutes (the poster child being Justice Scalia) might apply the statute. The United States' engagements in Iraq and Afghanistan may invoke the statute where it applies. United States v. Pflueger, 685 F3d 481 (5th Cir. 2012) (these engagements are still open, thereby suspending the statutes); and United States v. Prosperi, 573 F. Supp. 2d 436 (D. Mass. 2008) (the engagements were effectively terminated earlier although not in the textually prescribed manner; Pflueger rejects Prosperi's reasoning).
I think that footnote is still mostly accurate, except that (i) there is authority that the fraudulent crime need not relate to the hostilities in order for the WSLA to apply under the WSLA and (ii) there is more authority as to whether the Iraq and Afghanistan engagements are still open.  I will update that research when I do the separate blog entry.  However, I do note that my research up to now (further will be done before the new blog entry) has not located cases where the Government asserts that the WSLA applies to tax crimes charges unrelated to the hostilities, but the Government does assert that the WSLA can apply to nontax crimes unrelated to the hostilities (as the Court held in Daugerdas).  Finally, relevant portion of the CTM 7.00, here, still does not address the issue of whether it can apply to tax crimes with the relevant fraud component (such as tax evasion).  For other posts on the WSLA, see here (caveat, I have not reviewed the posts prior to today to see if the discussions remain valid).

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