In United States v. Garza (N.D. TX 3:22-CR-0390-8), Memo and Order dated 5/6/26, CL here, the Court dismissed certain counts in a long-standing indictment. (No speedy trial here.) In broad strokes, the indictment alleges that Garza, a Dallas attorney (at least at the time of the charged conduct) and the other co-defendants participated in promoting a “fraudulent tax shelter plan to clients.” (I have a somewhat fuzzy recall that it was Garza’s version of a BLIPS variant.) They were indicted for tax crimes (§ 7206(1)) and for wire fraud crimes, on some counts related to the charged tax crimes.
The Court describes the defendants’ motion as (Slip Op. 2):
Defendants move to dismiss the Wire Fraud Counts under Federal Rule of Criminal Procedure 12 on the grounds that: (1) the Wire Fraud Counts function as an end-run around the willfulness mens rea requirement for tax fraud in violation of the Fifth Amendment’s Due Process Clause; (2) 26 U.S.C. § 7206(2) (“Tax Fraud Statute”) preempts the application of 18 U.S.C. § 1343 (“Wire Fraud Statute”) “when both rest on the same alleged scheme”; and (3) the Wire Fraud Statute, interpreted according to its text and constitutional footing, does not extend to tax fraud against the Federal government and cannot be used to prosecute tax conduct.
The Court granted the motion as to the overlapping charges, dismissing the wire fraud counts related to the tax counts but leaving the false tax return counts. The gravamen of the holding is that by charging basically the same conduct (or at least intertwined conduct) as tax crimes with the high “willfully” standard of proof (the Cheek standard) and as wire fraud, the Government was trying to bootstrap a conviction for that conduct under the lesser burden of proof for wire fraud. The Court concluded somewhat conclusory that that phenomenon violated due process, almost as if she knew a due process violation when she saw it. (To paraphrase Potter Stewart’s famous comment on pornography.) She thus says (Slip Op. 3):
In this case, the Government’s prosecution of the same tax conduct under both the Tax Fraud Statute and Wire Fraud Statute violates the Due Process Clause by enabling the Government to avoid proving every fact necessary to constitute tax fraud.
The opinion is short and, since I
am leaving Charlottesville for D.C., the primary purpose of this blog (at least
as preliminarily offered) is notice. Readers can read the opinion and draw such conclusions as they wish. (I may add to this blog later, likely not until Monday.)
Quick questions:
