Opinion on Effect of Parallel Civil Proceedings, Statute of Limitations on Tax Crimes, and Kassouf (Again) (10/22/16)

In United States v. Ogbazion, 2016 U.S. Dist. LEXIS 143358 (SD OH 2016), here, the Court addressed several claims by the defendant for dismissal of counts in his criminal indictment.  The defendant was a principal in a national franchisor of tax preparation services.  The IRS first proceeded against the franchise operation with an IRS civil investigation and an ensuring civil case to enjoin the business operations.  The defendant apparently cooperated to some extent in that investigation and case, including giving a deposition.  In that case, the court entered a civil injunction and order of permanent injunction against the defendants in the case.  Approximately one and one-half years after the civil case was fully resolved, the indictment was filed.  The criminal indictment charged the defendant with

engaging in a corrupt endeavor to obstruct and impede the due administration of the Internal Revenue Code, in violation of 26 U.S.C. § 7212(a) (Count 1); conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count 2); [*2]  wire fraud, in violation of 18 U.S.C. § 1343 (Counts 3-7); money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(ii) (Counts 8-13); bank fraud, in violation of 18 U.S.C. § 1344 (Count 14); tax evasion, in violation of 26 U.S.C. § 7201 (Count 15); and failure to collect and pay over payroll tax, in violation of 26 U.S.C. § 7202 (Counts 16-23). (Doc. 6).

The defendant moved to dismiss the criminal indictment and certain counts therein.  Briefly, the motion sought the following relief:

1. Parallel Civil Proceeding; Dismissal of the indictment or certain counts or, in the alternative, suppression of evidence.  This gravemen of the claims here is that the civil case was improperly used to obtain evidence for the criminal case.  Basically, after detailed consideration of the facts,

the Court finds that the civil proceedings were not a ruse undertaken to obtain evidence for the criminal prosecution and, further, finds that the Government's representations and actions throughout the civil investigation did not constitute trickery or deceit. The Government's conduct throughout the course of the parallel proceedings did not amount to bad faith such that the use of evidence obtained through Defendant's voluntary cooperation would amount to a constitutional violation or a "departure from the proper administration of criminal justice." See Kordel, 397 U.S. at 11-13 [United States v. Kordel, 397 U.S. 1 (1970)]. Accordingly, neither the dismissal of the Indictment in its entirety, nor the suppression of evidence, is warranted.

For more on parallel proceedings, see Parallel Civil Proceedings and Criminal Proceedings - The Balancing Act (Federal Tax Crimes Blog 10/12/12), here; and Assertion of the Fifth Amendment by a Taxpayer in a Tax Court Deficiency Redetermination Proceeding (Federal Tax Crimes Blog 12/21/15), here.

Ninth Circuit Reverses Barry Bonds Obstruction Conviction (4/21/15; revised 4/24/15)

The Ninth Circuit, in an en banc decision, just reversed Barry Bonds [Wikiepedia entry here] conviction for obstruction under 18 USC § 1503's omnibus clause, here, for his grand jury testimony.  United States v. Bonds, 2015 U.S. App. LEXIS 6708 (9th Cir. 2015), here. This is an important decision for tax crimes both for the grand jury context for § 1503 obstruction but also because § 7212(a), here, tax obstruction, has the same omnibus clause.  The analysis may further affect other statutory interpretations in the areas of false statements under 18 USC 1001(a), here.

When I posted on the opinion shortly after its release three days ago, I did a substantial amount of cutting and pasting because I did not have time to offer a good summary and synthesis.  So, I am revising the blog entry to delete the substantial quotations and offer more limited quotations with some of my own analysis.

First, the context.  The grand jury was investigating the use of sales enhancing drugs in sports and whether the proceeds from sales of the drugs were being laundered.  The investigation was focused on the persons providing drugs to athletes.  Athletes were not the targets of the investigation, but some were expected to testify to further the investigation.  Hence, a judicial order of immunity -- conferring use and derivative use immunity -- was given Bonds.  The grant of immunity effectively shielded Bonds from being prosecuted except for his own criminal footfaults in giving the immunized testimony.  Pursuant to the order, Bonds testified for about 3 hours.  The Government secured an indictment for false statements and obstruction based upon the testimony.  In the criminal trial, the jury acquitted on the false statement charges and convicted only for the obstruction charge.

The Q&A [referred to in the opinions as Statement C] and follow-through on which the conviction for obstruction was based (this is from Judge Kozinski's concurring opinion):

Q: Did Greg[, your trainer,] ever give you anything that required a syringe to inject yourself with?
A: I've only had one doctor touch me. And that's my only personal doctor. Greg, like I said, we don't get into each others' personal lives. We're friends, but I don't—we don't sit around and talk baseball, because he knows I don't want—don't come to my house talking baseball. If you want to come to my house and talk about fishing, some other stuff, we'll be good friends. You come around talking about baseball, you go on. I don't talk about his business. You know what I mean?
Q: Right.
A: That's what keeps our friendship. You know, I am sorry, but that—you know, that—I was a celebrity child, not just in baseball by my own instincts. I became a celebrity child with a famous father. I just don't get into other people's business because of my father's situation, you see.
Defendant was again asked about injectable steroids immediately following this exchange and a few other times during his testimony. He provided direct responses to the follow-up questions. For example, he was asked whether he ever "injected [him]self with anything that Greg . . . gave [him]." He responded [4]  "I'm not that talented, no." The government believed that those answers were false but, as noted, the jury failed to convict defendant on the false statement counts.

Bonds appealed.  The three Ninth Circuit judges originally hearing the appeal unanimously affirmed the conviction.  United States v. Bonds, 730 F.3d 890 (9th Cir. 2013), here.  The reasoning was that the testimony was evasive and misleading and thus within the scope of 18 USC 1503 even if true.

Bonds then requested en banc review.

The Ninth Circuit granted the en banc review and issued the following per curiam opinion (short enough to quote in full):

During a grand jury proceeding, defendant gave a rambling, non-responsive answer to a simple question. Because there is insufficient evidence that Statement C was material, defendant's conviction for obstruction of justice in violation of 18 U.S.C. § 1503 is not supported by the record. Whatever section 1503's scope may be in other circumstances, defendant's conviction here must be reversed. 

A reversal for insufficient evidence implicates defendant's right under the Double Jeopardy Clause. See United States v. Preston, 751 F.3d 1008, 1028 (9th Cir. 2014) (en banc) (citing Burks v. United States, 437 U.S. 1, 11, 98 S. Ct. 2141, 57 L. Ed. 2d 1 (1978)). His conviction and sentence must therefore be vacated, and he may not be tried again on that count. 

REVERSED.

Sixth Circuit Holds that § 7212(a)'s Omnibus Clause Requires Knowledge of a Pending Proceeding / Action and Intent to Obstruct (12/13/14)

Section 7212(a), here, was derived from Title 18’s obstruction provisions.  The key Title 18 obstruction provision is § 1503, here.  Both of the sections have an Omnibus Clause providing:

18 USC § 1503:

corruptly influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice.

26 USC 7212(a)

corruptly . . . obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title.

In United States v. Kassouf, 144 F.3d 952 (6th Cir. 1998), here,  the Sixth Circuit noted that the Omnibus Clause in § 7212(a) and the Omnibus Clause in § 1503 were virtually identical  and thus held that the Supreme Court's interpretation of § 1503 in United States v. Aguilar, 515 U.S. 593 (1995), here, to require that the defendant know of a pending investigation that he intended to obstruct applied to § 7212(a) as well.   Just as this interpretation restricts the application of the same words in the Omnibus Clause of § 1503,  so this interpretation of the same words restricts the application of the words in the Omnibus Clause of § 7212(a).  Subsequently in United States v. Bowman, 173 F.3d 595 (6th Cir. 1999),  here, the Sixth Circuit restricted Kassouf to its facts and applied § 7212(a)’s Omnibus Clause where the defendant, by filing information forms, attempted to trick the IRS into investigating his creditors.  Bowman could be read as a repudiation of Kassouf’s requirement for a pending investigation and thus giving a broader interpretation to § 7212(a)’s Omnibus Clause than to § 1503’s Omnibus Clause.  United States v. Floyd, 740 F.3d 22, 32 n4 (1st Cir. 2014); United States v. Kelly, 564 F. Supp. 2d, 843, 844-45 (N.D. Ill. 2008)}}; and United States v. Willner, 2007 U.S. Dist. LEXIS 75597 (S.D.N.Y. 2007) (finding support in the defraud conspiracy interpretation).

On December 12, 2014, the Sixth Circuit in United States v. Miner, 774 F.3d 336 (6th Cir. 2014), here, held that Bowman did not change the requirement it announced in Kassouf that the conduct must be intended to obstruct an IRS investigation.  Significant to the Court’s decision was its Circuit authority that the first decision trumps a later decision that might be viewed as in conflict.   The Court made much of the point that the Government’s sweeping claims that the Omnibus Clause untethered to a pending proceeding were expressly considered and rejected in Aguilar and Kassouf, the precedential authority in the Sixth Circuit.  The Court concluded:

In summary, post-Kassouf and post-Bowman, a defendant may not be convicted under the omnibus clause unless he is "acting in response to some pending IRS action of which [he is] aware." McBride, 362 F.3d at 372 [United States v. McBride, 362 F.3d 360 (6th Cir. 2004), here] (internal quotation marks omitted). The extension of Bowman that is urged by the government in this case does not represent a path that was unconsidered by Kassouf; it represents the path that was not taken.

Ninth Circuit Affirms Barry Bonds Conviction for Obstruction (9/14/13)

The Ninth Circuit yesterday affirmed the conviction of Barry Bonds, the ball player (Wikipedia here).   United States v. Bonds, 730 F.3d 890 (9th Cir. 2013), here.  Bonds was convicted of obstruction of justice under the "omnibus clause" of 18 USC, Section 1503, here.  Section 1503's omnibus clause is the "source" for the tax obstruction omnibus clause in Section 7212(a), here.  See John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255, 268-280 (2009), here.  Hence, I write on the Bonds' affirmance because the interpretations of Section 1503 will apply to tax obstruction under Section 7212(a).

The Ninth Circuit panel offers this introduction (footnote omitted):

Barry Bonds was a celebrity child who grew up in baseball locker rooms as he watched his father Bobby Bonds and his godfather, the legendary Willie Mays, compete in the Major Leagues. Barry Bonds was a phenomenal baseball player in his own right. Early in his career he won MVP awards and played in multiple All-Star games. Toward the end of his career, playing for the San Francisco Giants, his appearance showed strong indications of the use of steroids, some of which could have been administered by his trainer, Greg Anderson. Bonds's weight and hat size increased, along with the batting power that transformed him into one of the most feared hitters ever to play the game. From the late-1990s through the early-2000s, steroid use in baseball fueled an unprecedented explosion in offense, leading some commentators to refer to the period as the "Steroid Era."1 In 2002, the federal government, through the Criminal Investigation Division of the Internal Revenue Service, began investigating the distribution of steroids and other performance enhancing drugs ("PEDs"). The government's purported objective was to investigate whether the distributors of PEDs laundered the proceeds gained by selling those drugs. 

The government's investigation focused on the distribution of steroids by the Bay Area Laboratory Co-operative ("BALCO"), which was located in the San Francisco Bay Area. The government raided BALCO and obtained evidence suggesting that Anderson distributed BALCO manufactured steroids to Bonds and other professional athletes. The government convened a grand jury in the fall of 2003 to further investigate the sale of these drugs in order to determine whether the proceeds of the sales were being laundered. Bonds and other professional athletes were called to testify. Bonds testified under a grant of immunity and denied knowingly using steroids or any other PEDs provided by BALCO or Anderson. The government later charged Bonds with obstructing the grand jury's investigation. After a jury trial, Bonds was convicted of one count of obstruction of justice in violation of 18 U.S.C. § 1503. He now appeals. We affirm the conviction. 

* * * * 

On December 4, 2003, Bonds testified before the grand jury under a grant of immunity pursuant to 18 U.S.C. § 6002. The immunity order stated that "the testimony and other information compelled from BARRY BONDS pursuant to this order . . . may not be used against him in any criminal case, except a case for perjury, false declaration, or otherwise failing to comply with this order." 

The grand jury thereafter charged Bonds with several crimes, including obstruction arising from his testimony before the grand jury.  The jury convicted, "finding on the verdict form that Statement C was misleading or evasive."

Materiality and Corruptly in Tax Obstruction under Section 7212(a) (9/10/11)

In United States v. Bonds, 2011 U.S. Dist. LEXIS 96051 (ND CA 2011), the jury had found Barry Bonds guilty of obstruction of justice in violation of the so-called Omnibus Clause of 18 U.S.C. section 1503. The court rejected Bonds' Rule 29 for acquittal and Rule 33 for new trial. The Court's discussion is interesting for tax crime afficionados because the tax obstruction statute, section 7212(a), has its roots in the general obstruction statutes in 18 U.S.C., including specifically section 1503(a)'s Omnibus Clause. See John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255, 277-314 (2009), here.

The key elements of 1503's Omnibus Clause for present purposes are: (i) the defendant must endeavor (ii) corruptly to (iii) obstruct or impede the due administration of justice. The Court has the obligatory discussion of the leading case, United States v. Aguilar, 515 U.S. 593, 598 (1995), which is fascinating but need not detain us here.