Is It Too Much to Ask that the Defraud Conspiracy Crime Require Fraud? (8/3/24; 8/6/24)

In United States v. Lingat, (S.D. N.Y. No. 1:21-cr-00573 Dkt # 191 Opinion & Order 7/30/24), CL here & GS here [to come], the court rejected the defendants’ motions for acquittal after conviction. The defendants asserted as a principal basis for the motions United States v. Coplan, 703 F.3d 46 (2d Cir. 2012), here, cert. den. 571 U.S. 819 (2013) which questioned the Klein defraud conspiracy (the § 371 defraud conspiracy) for which the defendants were convicted. In affirming the Klein defraud conspiracy convictions, Coplan strongly questioned the validity of the Klein conspiracy but was compelled to follow Supreme Court opinions approving the broad interpretation of the defraud conspiracy. 

I believe that most readers of this blog are familiar with the Klein conspiracy and perhaps even the saga of Coplan. The Second Circuit in Coplan was concerned that, through an expansive reading of the text of § 371, the Supreme Court had judicially created the Klein conspiracy crime to include an object to impair or impede the function of Government without any fraud in its traditional meaning for criminal statutes to deprive another of money or property. In short, the defraud conspiracy does not require fraud, at least fraud as the word is used in other criminal statutes. For readers wanting a short summary, I link a section of my Federal Tax Procedure Book (Practitioner Ed. 2024), pp. 318-319, here. I have posted a number of blogs on the issue presented in Coplan, but here will just link to some of the more prominent blogs. Coplan #1 - Panel Questions Validity of Klein Conspiracy (Federal Tax Crimes Blog 12/1/12), here; Further on the Second Circuit Detour on the Interpretation of the Defraud / Klein Conspiracy (Federal Tax Crimes Blog 12/18/12), here; and Oral Argument in Supreme Court Case on Trump Immunity Discussing the Defraud / Klein Conspiracy (Federal Tax Crimes Blog 4/26/24), here.

The key troubling aspect of the Klein conspiracy is that the precedent going to Hammerschmidt v. United States, 265 U.S. 182 (1924) and even earlier is now certainly “settled law,” a refrain we have heard so much over the last few years as the Court’s current conservative super-majority court has “unsettled’ much “settled law.” I think the Court’s super-majority has been unsettling too much settled law. But, if the Court's super-majority really wants to fix something worth fixing, it could not find a more worthy issue than the proper interpretation of the defraud conspiracy. Since first wading into the issue in the late 1990s and early 2000s, I have been convinced that the Court went too far in Hammerschmidt and its ilk and now should fix the issue simply because the defraud conspiracy can sweep too broadly. For my ruminations on that concern, see John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255 (2009), here, and its online appendix with examples Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough? Online Appendix, 9 Hous. Bus. & Tax L.J. A-1 (2009), here.

At any rate, those faced with the ubiquitous defraud conspiracy counts in tax cases, should be careful to ensure that the issue is raised and preserved at each step of the litigation so that when and if the Supreme Court nibbles at the issue, they will be able to pursue the issue. (I don't recommend that the issue be preserved in the way the Lingat defendants did it.)

Added 8/6/24 12:45pm:

A reader suggested that readers wanting a more in-depth discussion of the issue discussed in this blog entry might review Coplan’s petition for certiorari and the Solicitor General’s Brief in Opposition. I accordingly  post links to them:

• Petition for certiorari, here.
• SG Brief in Opposition, here