Fourth Circuit Rejects Defendant's Collateral Attacks on Tax Perjury and Obstruction Convictions (6/8/24)

In United States v. Sutherland, 103 F.4th 200 (4th Cir. 2024), CA4 here and GS here, the Court rejects the criminal defendant’s collateral attacks on convictions for filing false tax returns and obstructing an official proceeding. (The latter conviction was for delivering false documents to the government attorney assisting the grand jury in the tax crimes investigation.) The collateral attacks were mounted by a petition under 28 USC § 2255 and a petition for the writ of coram nobis. The principal claim for both methods of collateral attack was an alleged ineffective assistance of counsel (“IAC”) at the criminal trial where the defendant was convicted. The defendant appealed the convictions, and the Fourth Circuit affirmed. United States v. Sutherland, 921 F.3d 421 (4th Cir. 2019), GS here; see also Obstruction Conviction Affirmed for Presentation of False Documents to AUSA Serving as Attorney for Government for Grand Jury (Federal Tax Crimes Blog 4/26/19), here.

I post to this blog primarily to refer readers to the excellent discussion of the collateral attack remedies under § 2255 and coram nobis. Readers wanting the nuance should read the opinion (19 pages, but worth the read). Key summary points are:

1. The principal IAC claim was that defendant’s trial counsel in the criminal trial gave inadequate representation at trial and at sentencing because of failure to present expert tax testimony that would have shown he did not owe the amount of tax claimed by the Government. The Court of Appeals describes this testimony at sentencing as (Slip op. 4-5):

Seeking to mitigate the U.S. Sentencing Guidelines loss calculation in his presentence report, Sutherland presented testimony from Jayne Frazier, a certified public accountant. Frazier reviewed Sutherland’s tax returns for the years 2007 to 2010 and testified that Sutherland had underreported his income by hundreds of thousands of dollars in the relevant timeframe. Despite that fact, she testified that Sutherland’s total tax liability for that period was less than the Government alleged because Sutherland failed to claim various business-expense deductions in 2008, 2009, and 2010, which, if claimed, would have reduced his taxable income for those years. Notably, however, Frazier did not independently audit Sutherland’s tax returns, and her calculations were based largely on information provided by Sutherland, much of which could not be corroborated by itemized receipts or other documentation. See, e.g., J.A. 1230 (Frazier testifying that her calculations included hundreds of thousands of dollars of unclaimed business expenses that were “all cash”). She [*5] also stated that her income calculations for Sutherland excluded approximately half of the $2 million in transfers from STS to Sutherland’s companies because it was her “understanding” that those funds came from a line of credit in favor of STS and thus would be “treated as loan advances” and not “taxable income.” J.A. 1209.

          The district court overruled Sutherland’s objection to the presentence report’s loss calculation, finding that Sutherland’s “self-reported information” to Frazier “was not reliable.”

2. In February 2021, after completing the period of supervised relief on the tax convictions but before completing the period of supervised relief on the obstruction conviction (not sure why they would be different), the defendant filed (1) the “§ 2255 petition [which] targets the obstruction conviction” and (2) the coram nobis petition which “targets the tax fraud convictions.” (Actually, the convictions were for filing false tax returns, commonly called tax perjury, rather than “tax fraud” which is commonly called tax evasion.) The Court explains why defendant chose the two collateral attack procedures (Slip Op. 6 n. 1):

Court Rejects Ineffective Assistance of Counsel Claim Based On Counsel's Delay In Preparation and Filing of Amended Returns (1/29/22)

In Evdokimow v. United States, No. 19-14130 (NLH), 2022 U.S. Dist. LEXIS 13110 (D.N.J. Jan. 25, 2022), CL here and GS here, the court rejected Evdokimow ‘s request for relief “to vacate, correct, or set aside his federal sentence pursuant to 28 U.S.C. § 2255.”  Evdokimow raised several claims for relief, all related to ineffective assistance of counsel.  All of Evdokimow’s unsuccessful claims are interesting but I focus on the first one considered in the opinion, which the district court titles “Correction of Petitioner’s Returns” (Slip Op. 9-12.)

Evdokimow’s argument was that his lawyer, Kridel, after learning of the criminal investigation, failed to have Evdokimow’s amended returns filed promptly “had a crushing impact on Evdokimow’s defense at trial, as Evdokimow was, as set forth above, barred from introducing evidence that he had amended his returns based entirely upon the delay between the time Evdokimow learned of the government’s investigation and the time his amended returns were filed, which this Court held to be too long to be considered ‘prompt;’ the Third Circuit affirmed the conviction on that basis.”

There was a substantial delay in filing amended returns.  In the criminal trial, the defense wanted to submit proof of the filing of amended returns to permit the jury to infer his good faith and lack of criminal intent with respect to the original returns.  The Government opposed the proffer, and the court rejected the proffer on motion in limine and again at trial.  Evdokimow raised the issue on the appeal from the conviction, but the Court of Appeals rejected the argument.  United States v. Evdokimow, 726 Fed. Appx. 889, 2018 U.S. App. LEXIS 6564 (3rd Cir. 2018) CA3 here & GS here, which I discuss in Court of Appeals Affirms Exclusion of Amended Returns and Payments after Start of Criminal Investigation (Federal Tax Crimes Blog 3/20/18), here.

In this § 2255 proceeding, the district court held that the argument did not meet did not meet the requirements of Strickland v. Washington, 466 U.S. 668, 687 (1984) that the petitioner show “(1) defense counsel’s performance was deficient and (2) the deficiency actually prejudiced the petitioner.”  The Court reiterated its holding from trial held that (i) proof of subsequent filing of the amended returns, even if filed more promptly, would have had “slight probative value” on the issue of his intent when filing the original returns forming the basis for the tax evasion charge and (ii) that slight probative value was “substantially outweighed by the potential for prejudice and confusion to the jury.”

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).

Court of Appeals Finds No Harm Attorney's Failure to Assure Client Understood Relevant Conduct for Sentencing Loss Calculations (10/29/30)

In Jones v. United States, 2020 U.S. App. LEXIS 33857 (6th Cir. 2020), unpublished, here, the Court by Order denied Jones’ request for a certificate of appealability ("COA") from the district court’s denial of a motion under 28 USC § 2255 to vacate, set aside or correct his sentence.  The Order rejected Jones’ allegations of ineffective assistance of counsel, a common complaint in § 2255 motions.

The Court reasoned (cleaned up)

A COA may issue “only if the applicant has made a substantial showing of the denial of a constitutional right." 28 U.S.C. § 2253(c)(2). When the district court's denial is based on the merits, the petitioner must demonstrate that reasonable jurists would find the district court's assessment of the constitutional claims debatable or wrong.

Reasonable jurists would not debate the district court's determination that trial counsel did not render ineffective assistance. To establish ineffective assistance of counsel, a defendant must show deficient performance and resulting prejudice. Strickland v. Washington, 466 U.S. 668, 687 (1984). The performance inquiry requires the defendant to show that counsel's representation fell below an objective standard of reasonableness. In the context of a guilty plea, the prejudice inquiry requires the defendant to show that there is a reasonable probability that, but for counsel's errors, he would not have pleaded guilty and would have insisted on going to trial. The test is objective, not subjective; and thus, to obtain relief on this type of claim, a petitioner must convince the court that a decision to reject the plea bargain would have  been rational under the circumstances.  With respect to claims of ineffective assistance of counsel during sentencing, prejudice is established if the movant demonstrates that his sentence was increased by the deficient performance of his attorney.

Reasonable jurists could not debate the district court's ruling that Jones failed to establish prejudice from counsel's alleged failure to advise him that the loss amount would include loss from relevant conduct not charged in the counts to which he pleaded guilty. Jones claimed that he discovered only after reviewing the presentence report that, because of the relevant conduct he would receive a 16-point increase in his offense level under USSG § 2B1.1(b)(1)(I). Jones also notes that counsel acknowledged that a psychologist testified on his behalf during sentencing, and that the psychologist explained that Jones had difficulty understanding "how things worked and was often confused. . . about the positions that the government took, as well as some of the things that took place." Therefore, he contends that counsel “should have taken extra steps . . . to ensure that [he] understood [the plea agreement]" before signing it. He also argues that he made a substantial showing that he would not have accepted the plea offer had he been made aware that pleading guilty would increase the amount of restitution by 2 million dollars. Because Jones claims that he would have proceeded to trial had counsel accurately advised him of his sentence exposure, he was required to establish that a decision to reject the plea bargain would have been rational under the circumstances.

Reasonable jurists would agree with the district court's conclusion that, in light of the strong case against Jones and his failure to cite any evidence that he had a viable defense to the twenty-five counts brought against him, he failed to establish that it would have been rational for him to proceed to trial had he known of the potential increase in his offense level and restitution amount. A petitioner must produce contemporaneous evidence that suggests that, absent counsel's allegedly deficient performance, he would have elected to proceed to trial instead of accepting the plea agreement. Moreover, at the plea hearing, Jones admitted the accuracy of the statement of facts attached to his plea agreement, and he acknowledged that the applicable guidelines range was not a guarantee of his eventual sentence. In these circumstances, knowledge that his guidelines range might be higher than anticipated—a fact that would be true regardless of whether he pleaded guilty or was found guilty at trial—would not make it rational for a defendant to abandon his plea agreement and risk conviction on twenty-two additional counts. Reasonable jurists could not debate that Jones failed to establish prejudice.

JAT Comments:

Negotiating Misdemeanor Plea in Lieu of Felony in Tax Crimes Cases? (11/13/19)

In United States v. Christensen, 2019 U.S. Dist. LEXIS 193864 (D. AZ. 2019) (Magistrate Report and Recommendation), here, Gary Steven Christensen had been convicted of multiple tax crimes and brought a "Motion Under 28 U.S.C. § 2255 to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody."  This motion states a standard claim for convicted defendants that they had not received a fair trial and appeal because of ineffective counsel.  The Magistrate R&R linked here recommends that the motion be denied and that a certificate of appealability be denied.

The general claims of ineffective counsel made are interesting.  Those who might be interested in such claims will, I think, find these claims interesting and so I do recommend it for those particularly interested in this type of claims.

But, what caught my eye was the claim Christensen makes about his attorney's plea negotiations.  Christensen was charged with 13 felony counts (7 evasion and 5 tax perjury) and 2 misdemeanor counts (failure to file).  The opinion states that, prior to the trial, Christensen's "Counsel wrote that he was "close to securing a plea offer ... which would dismiss all felonies and allow plead[ing] to three misdemeanor offenses to entirely resolve this criminal prosecution."  (See Slip Op. 5-6.)

Bottom-line, I have not experienced any willingness on tax prosecutors to take pleas to misdemeanor charges in lieu of felony charges.

I point to the DOJ Tax Criminal Tax Manual (CTM) Chapter 5 on plea agreements, here.  I could not find any discussion of offering to exchange multiple felony counts for one or more misdemeanor counts.

I ask readers to offer their comments on this issue, either by comment to this blog or by email to me at jack@tjtaxlaw.com.

D.C. Circuit Rejects Defendant's Post Conviction Claims of Selective Prosecution, Actual Innocence and Attorney Conflict (1/23/19)

In United States v. Bertram, 2019 U.S. App. LEXIS 1899 (D.C. Cir. 2019), here, the Court entered Judgment with an opinion immediately below the judgment.  Bertram pled guilty to a crime for failure to pay over trust fund tax.  See Sentencing for Failure to Pay Over Trust Fund Taxes (Federal Tax Crimes Blog 5/6/15), here.  Bertram moved to vacate his conviction  under 28 USC 2255. The district court denied the motion.  The Court of Appeals affirmed the district court.

Some interesting points:

1.  The Court rejects Bertram's selective prosecution claim based upon allegations that he was prosecuted because (i) he worked for Republican candidates and conservative organizations, (ii) that similarly situated Democrats were not prosecuted, and (iii) IRS agent audited him because he was among the "President's enemies" (the President would be Obama).

2.  The Court rejects his actual innocence claim (that might not even be cognizable with a knowing and voluntary plea), finding that the record forecloses the claim.

3. The Court rejects his final argument that an attorney representing Bertram before the plea agreement was conflicted.  That attorney was Cono Namorato, here, who is a giant in the criminal tax defense bar.  I found this the most interesting in the case, so I quote it in full:

Finally, Bertram's argument that one of his attorneys-Cono Namorato-had a conflict of interest gets him nowhere. Bertram alleges that Namorato developed a conflict of interest when he was considered for a position as Assistant Attorney General of the Department of Justice's Tax Division-the very Department that was prosecuting Bertram-and failed to alert Bertram to the conflict. Because Namorato served as outside counsel rather than counsel of record, Bertram has to show that Namorato had an "actual conflict" that "adversely affected" Bertram's decision to plead guilty. See United States v. Wright, 745 F.3d 1231, 1233 (D.C. Cir. 2014) (finding no evidence to support defendant's allegation that conflicted counsel had coerced him into pleading guilty). 

Bertram has not plausibly alleged that his decision to enter the guilty plea was adversely affected by Namorato's alleged conflict. As Bertram has admitted, Namorato did not advise him about the plea he ultimately accepted. Attorneys from Jenner & Block, including his counsel of record Jessie Liu, alone counseled him about that plea agreement. And Bertram said on the record that he was satisfied with Liu's performance. App'x 22. 

Bertram argues instead that Namorato failed to investigate several "exculpatory" witnesses. But the "exculpatory" witnesses to whom Bertram points are the same lawyers and IRS agent whose anticipated testimony he invoked in support of his actual innocence claim. Bertram was aware of those witnesses at the time of his plea, and the district court specifically advised Bertram that he had a right to present witnesses in his defense if he went to trial. He chose not to do so. And then his sentencing memorandum, (presumably) written by counsel of record, admitted that Bertram's actions taken pursuant to those same witnesses' advice did not negate the willfulness of his actions, but merely provided "[c]ontext." S.A. 10.  n1
   n1 The district court's holding that non-appearing counsel cannot be constitutionally ineffective was disputable. Other courts of appeals have recognized that, in rare instances, the actions, omissions, or conflicts of a non-appearing or secondary member of a defendant's team can so "taint" the defendant's representation as to constitute ineffective assistance. See Rubin v. Gee, 292 F.3d 396, 405 (4th Cir. 2002) (representation of two conflicted attorneys "ultimately tainted and adversely affected" defendant's representation by three trial lawyers); Stoia v. United States, 22 F.3d 766, 769 (7th Cir. 1994) (counsel need not have appeared in court to give rise to ineffective assistance of counsel claim); United States v. Tatum, 943 F.2d 370, 379 (4th Cir. 1991) (representation "tainted" by conflict of one of defendant's counsel who was relied upon heavily). But that issue is of no moment because Bertram has made no showing of taint, and the ineffective assistance claim fails on the merits. 

Bertram also argues that Namorato failed to investigate a selective prosecution claim or to explain to him the mens rea element of the offense under 26 U.S.C. § 7202. Because those arguments were made for the first time on appeal even though the relevant facts were fully known to Bertram when he was before the district court, we will not entertain them. See Chichakli v.Tillerson, 882 F.3d 229, 234 (D.C. Cir. 2018); United States v. Rice, 727 F. App'x 697, 702 (D.C. Cir. 2018). Bertram's separate argument that his plea was involuntary because of asserted shortfalls in his Rule 11 colloquy will not be addressed either because it is raised for the first time on appeal and is outside the scope of the certificate of appealability. See 28 U.S.C. § 2253(c)(1); Waters v. Lockett, 896 F.3d 559, 571-572 (D.C. Cir. 2018).

Problems with Restitution Based Assessment in Excess of Amount Due (2/3/18)

In Choi v. United States, 2018 U.S. Dist. LEXIS 14393 (D. Md. 2018), here, the Court rejected an attempt by a defendant convicted of tax evasion to reduce the amount of restitution based on a subsequent resolution of the underlying liability with IRS Appeals that, on its face to me at least, indicates that the restitution amount was grossly overstated.  There is a lot to unpack there.  At the outset, I offer the following additional documents that I pulled from Pacer:

• The defendant's memorandum in support of the 28 USC § 2255 motion, here, whereby the defendant sought to invoke the Court's authority to reduce the restitution award and the resulting tax assessment under § 6201(a)(4).
• The U.S. Response, here, and Exhibit 1, here, to the Response (a Memo from Appeals)
• The docket entries as of yesterday, here.  Note that there are many extensions for the U.S. response, as the views of IRS CI and IRS Appeals were sought (this is noted in the U.S. response linked above).

The basic problem is that, once the criminal judgment becomes final, there appears to be no way to reduce the restitution award even if it exceeds the subsequently determined real loss to the victim (here the IRS).  Bottom line, that is what the Choi court held, although in any event the procedural device Choi used - the 28 USC § 2255 motion was not the proper procedure in any event.

The basic facts as narrated by the Court are (I eliminate the record references for easier readability):

On March 30, 2012, Petitioner Choi pled guilty in this Court to one count of tax evasion in violation of 26 U.S.C. § 7201. In his plea agreement, he agreed that the corporate tax returns that he filed for his business, Frankford Garden Liquors, for the years 2006 through 2009 "each understate the amount of the corporation's taxable gross receipts by more than $300,000." Further, he acknowledged that he understated his corporation's income to evade paying taxes. The plea agreement, however, did not state an agreed amount of taxes due and owing as a result of Choi's undereporting. Rather, the plea agreement laid out the Internal Revenue Service's (IRS) calculation of the taxes due and owing for the years 2006 through 2009. By the time of Choi's sentencing, however, both parties told this Court that they agreed to the IRS's calculation of tax loss and the imposition of a restitution order in the amount of $739,253.98 representing the taxes he owed for the years 2006 through 2009. This Court subsequently sentenced Choi to eighteen months incarceration, six months home detention, and three years supervised release. Additionally, this Court ordered a payment of $100.00 in special assessment, a $20,000.00 fine, and $739,253.98 in resitution. 

After his sentencing, Choi challenged the amount of taxes owed by his company in a civil action with the IRS Office of Appeals. In December of 2013, Petitioner was released from prison after serving his eighteen month term. Around January of 2016, Choi negotiated a settlement through the IRS Office of Appeals for total amount of $132,991.00.1

Trial Court Rejects Ineffective Assistance Claims for Strategic Choices at Trial (11/24/16)

In Litwok v. United States, 2016 U.S. Dist. LEXIS 162715  (ED NY 2016), here, the Court denied the convicted defendants petition for relief under 28 USC 2255, here, a form of federal habeas corpus relief after conviction. Litwok had been convicted for tax evasion on retrial after her first convictions for wire fraud and tax evasion were reversed.  (I wrote on the first convictions which were reversed Second Circuit Reverses and Vacates Convictions for Wire Fraud and Tax Evasion (Federal Tax Crimes Blog 5/1/12), here.)  The conviction on retrial for one count of tax evasion was subsequently affirmed on appeal.  United States v. Litwok, 611 F. App'x 12 (2d Cir. 2015), here.  I did not write on the later affirmance but will mention  some aspects of the affirmance in this blog on the § 2255 proceeding.

In the earlier blog on the reversal of the first convictions, I dealt with the issue of charging a defendant for tax evasion -- evasion of assessment -- where the taxpayer failed to file a tax return.  It is black letter law that a failure to file alone cannot support a prosecution and conviction for tax evasion; there must be some affirmative act of evasion.  The initial prosecution charged three years of tax evasion in a context of failure to file.  The Second Circuit held in the first appeal that, for two of the three charged years, the Government had not established the required affirmative act of evasion for tax evasion.  The Court reversed the third conviction also because of the improper joinder of the wire fraud charge.  On remand and retrial, the Government charged only the tax evasion count.  The defendant was convicted.  On appeal of that conviction, the Second Circuit in a nonprecedential order held in part as follows:

1. Litwok had waived any statute of limitations defense by not raising the issue below.

2. "Based on the evidence presented, a jury could have fairly credited Testaverde's testimony and concluded that Litwok willfully committed an affirmative act with the intent to avoid paying her taxes."

3.  "Litwok's ineffective assistance claims (failure to raise statute of limitations, failure to investigate perjured testimony and object to prosecutorial misconduct, failure to call a forensic accountant, failure to present exculpatory evidence, and failure to inquire as to whistleblower status of witnesses)" are more properly raised in a § 2255 proceeding.

4.  The record did not support Litwok's claim that the accountants testimonies were false.

5.  The record did not establish Litwok's claims of prosecutorial misconduct in referring in opening and closing arguments to allegedly perjured testimony of Government witnesses.

So, after the conviction on the second trial and while the second appeal was pending, Litwok filed the instance § 2255 proceeding.  The trial court finally reached and resolved the § 2255 proceeding by denying the claims and rejecting the request for certificate of appealability.

I recommend to readers reviewing the entire opinion.  I mention here only briefly the claims addressed with some context for claims I find particularly interesting:

1.  Failure to assert the statute of limitations Defense.

Here, petitioner's trial counsel submitted a declaration attesting that a statute of limitations argument "was not a bona fide issue or defense and there was no good faith factual basis for making such a motion." (Decl. of Robert A. Chapnick, ECF No. 16-2 ("Chapnick Decl.") at ¶ 2.) Under the deferential standard outlined above, the court must presume that counsel acted within the "wide range of reasonable professional assistance," Strickland, 466 U.S. at 689, in making that determination, and the applicable precedent indicates that a limitations defense would have been fruitless. "The law is well established that the statute of limitations for tax evasion runs from the day of the last act of evasion[, which] encompasses any act of concealment . . . ." United States v. Mui, 214 F. App'x 40, 47 (2d Cir. 2007) (emphasis in original) (and citation omitted). Petitioner was charged with tax evasion by superseding indictment dated March 19, 2003, and at trial, the government introduced acts of concealment dating to at least mid-1997, which falls within the limitations period. Those incidents include the March 1, 1997 retention of another accounting firm to replace Testaverde, a relationship that lasted for approximately two months before that accountant quit (T. at 248-50); and petitioner's April 15, 1997 submission of an extension request for the filing of her tax return (T. at 193). Had petitioner's trial attorney sought dismissal on limitations grounds, the government would have argued that those events or other post-March 19, 1997 conduct constituted acts of concealment sufficient to toll the commencement of the statutory period. Given that evidence of concealment, any motion to dismiss would have lacked merit, and counsel was not ineffective for failing to raise that argument. 

Accordingly, this branch of petitioner's ineffective counsel claim fails because she has not shown that her trial attorney was deficient for declining to make a motion that had no merit.

Creative But Unsuccessful 2255 Proceeding with Interesting, but Unproven, Allegations (10/6/16)

I offer today an opinion in a Hail Mary habeas corpus-like proceeding under 28 USC 2255 after conviction and appeal.  United States v. Bertram, 2016 U.S. Dist. LEXIS 126906 (D DC 2016)  The opinion is here and the petition addressed in the opinion is here.  These proceedings are very common, particularly federal prisoners who have some time on their hands and can proceed pro se. Bertram proceeded pro se, but the petition reflects a lot of research and creativity.  The opinion offers no new law, but, although the petition was unsuccessful, the opinion does have some interesting aspects.  Readers should look for the following:

1. The petitioner argues that his conviction should be reversed because he was selectively prosecuted.  The claim was that

he was the victim of selective prosecution because his work during President Obama's administration was for the GOP.1 See, e.g., Def.'s Mem. at 8. In support of this claim, defendant provides the court with seven anecdotal examples of prominent Democratic figures who allegedly committed similar offenses but were not prosecuted. See Def.'s Mem. at 5-6. He also provides statistics in an effort to show that the felony charged in this case - 26 U.S.C. § 7202 - is "infrequently charged." See U.S. Sentencing Comm'n Guidelines Manual, Ex. 1 to Def.'s Mot. [Dkt. # 24-1]; see also Emp't Tax Evasion Statistical Data, Ex. 10 to Def.'s Mot. [Dkt. # 24-1] at 50 (providing statistics showing the relative infrequency of prosecution). Finally, he contends that the prosecution was permeated with "bad intent" because an IRS agent allegedly inquired as to the political motivations behind defendant's work. See Aff. of Kevin Duane Bertram, Ex. 14 to Def.'s Mot. [Dkt. # 24-2] ¶¶ 10-15.

For his statistical presentation, see the petition linked above.

2.   The petitioner made the standard 2255 claim of ineffective assistance of counsel.  His particular focus was upon Cono Namorato, here, a giant of the tax crimes bar, who had represented him during the criminal investigation but did not enter an appearance for him in the criminal case or represent him in the plea agreement and plea hearing.  The petitioner argued that nevertheless Namorato had failed in his due diligence, infected by a conflict of interest by his nomination to be AAG of the Tax Division while representing him.  The Court''s resolution of the conflict issue is:

B. Defendant has not shown that Mr. Namorato had a conflict of interest. 

Defendant complains that Mr. Namorato was nominated by President Obama to serve as Assistant Attorney General for the Tax Division of the Justice Department while he was still engaged as a member of the defense team. See Def.'s Mem. at 12-13. Defendant insists "that a lawyer attempting to become the head prosecutor of an agency would not want to risk his chance of that desired position by zealously representing his defendant-client who is at odds with the agency." Id. at 13. Whatever truth there might be to this statement as a general principle, the record does not indicate that the nomination posed an actual conflict in this case — in which, it bears repeating, another attorney was counsel of record — or that defendant was adversely affected in any way. n14
   n14 Defendant seems determined to deflect responsibility for his own wrongdoing onto Mr. Namorato, but the last time he invoked Mr. Namorato's name in these proceedings, he sought to benefit from the attorney's recent nomination and cloak himself in his lawyer's fame and reputation. In the sentencing memorandum filed on April 29, 2015, defendant informed the Court that at one time, defendant had retained Caplin & Drysdale to represent him in the criminal investigation. Def.'s Mem. in Aid of Sentencing [Dkt. # 12] at 11. After touting Mr. Namorato's qualifications and specifically mentioning his recent nomination to the Tax Division post, defendant stated that he "believed that his attorneys were working to resolve the outstanding tax liabilities and that he should delay filing all outstanding Form 941s and pay all tax liabilities as part of a comprehensive settlement." Id. at 11 & n.4. The next day, the defense filed a motion for leave to file a "corrected" memorandum that would "clarify" certain statements made in the memorandum, Mot. for Leave to File Corrected Def.'s Mem. in Aid of Sentencing [Dkt. # 14], and in the revised version, this reference to Mr. Namorato was completely excised. See Def.'s Mem. in Aid of Sentencing at 11. 

"Conflict of interest claims ...are a 'specific genre' of ineffective assistance of counsel claim." United States v. Wright, 745 F.3d 1231, 1233, 409 U.S. App. D.C. 63 (D.C. Cir. 2014), quoting United States v. Bruce, 89 F.3d 886, 893, 319 U.S. App. D.C. 245 (D.C. Cir. 1996). "[A] defendant who asserts a conflict of interest claim...in habeas proceedings generally must demonstrate only that an actual conflict of interest adversely affected his lawyer's performance." Id., citing Cuyler v. Sullivan, 446 U.S. 335, 348, 100 S. Ct. 1708, 64 L. Ed. 2d 333 (1980). "An actual conflict of interest exists where a lawyer is 'required to make a choice advancing his own . . . interests to the detriment of his client's interest.'" United States v. Thomas, 114 F.3d 228, 252, 324 U.S. App. D.C. 374 (D.C. Cir. 1997), quoting Bruce, 89 F.3d at 893. If a defendant can show an actual conflict that adversely affected his attorney's performance, he "typically need not demonstrate the second prong of the Strickland test — that the lawyer's deficient performance affected the outcome of the case." Wright, 745 F.3d at 1233, citing Cuyler, 446 U.S. at 349-50. 

First, the timeline does not support defendant's claim. Defendant retained Mr. Namorato and Caplin & Drysdale to deal with the tax matter on May 30, 2012. Aff. of Kevin Duane Bertram, Ex. 17 to Def's Mot. [Dkt. # 24-2] ¶ 1; see also Engagement Letter, Ex. 1 to Def.'s Reply [Dkt. # 27] at 1. Defendant avers that "sometime in 2013," he noticed a "marked decrease in Mr. Namorato's performance." Ex. 17 to Def.'s Mot. ¶ 6. According to defendant's own account, he "became so concerned about Mr. Namorato's decrease in representation, that [he] retained attorneys Thomas Perrelli and Jessie Liu of the firm Jenner & Block to assist [him]." Id. ¶ 13. Defendant retained Jenner & Block on February 10, 2014. Ex. 1 to Def.'s Suppl. The prosecutor sent the formal [*36]  plea offer letter to Ms. Liu on January 13, 2015, and she entered her appearance in the case at the arraignment and plea hearing on February 10, 2015. She was also the lone counsel for the sentencing on May 5, 2015. n15
   n15 Caplin & Drysdale formally concluded its representation of the defendant in a letter dated June 8, 2015. Ex. 2 to Def.'s Reply [Dkt. # 27].  

Court Rejects Attempt to Attack Guilty Plea Over Claim that Prosecutor Threatened to Prosecute Wife (9/13/16)

It is not uncommon in situations where two related parties are implicated in a common potential crime for the federal prosecutor to offer and accept a plea by one of the parties with the inducement that indictment or prosecution of another will not occur or will be more lenient.  This sometimes happens in the context of husband and wife who filed a joint return and are both potentially culpable for some crime with respect to the return, such as tax evasion or tax perjury.  If the husband is more culpable, the prosecutor may offer to accept a plea from the husband and not charge or drop the charges for the wife.

Obviously, the power to indict and prosecute both spouses creates powerful incentives/coercion on the spouse or related party being offered the guilty plea.  Is that coercion fair?  Would it allow a defendant accepting the plea to avoid the plea agreement, perhaps at a time when the Government will be unable to prosecute the other spouse?

In Peters v. United States, 2016 U.S. Dist. LEXIS 106962 (ED TX 2016), here, adopted by the district court, 2016 U.S. Dist. LEXIS 106654 (ED TX 2016), the husband defendant accepted a plea to one count of tax evasion and one count of bankruptcy fraud.  After the district court accepted the plea and sentenced the defendant, he was incarcerated.  He then brought a federal habeas corpus petition under 18 USC § 2255, here.  The petitioner made several claims for habeas relief, but the only one I address here is that he was subject to under coercion because of the prosecutor's threat to indict his wife.  I quote from the magistrate's opinion which was affirmed by the district court on the grounds stated in the magistrate's opinion:

b. Peters' claim that the plea was coerced by the threat of prosecution of his wife lacks merit 

The Fifth Circuit has explained: 

[G]uilty pleas made in consideration of lenient treatment as against third parties pose a greater danger of coercion than purely bilateral plea bargaining." United States v. Nuckols, 569 (5th Cir.1979). Even so, there is no "intrinsic constitutional infirmity" in promising leniency to a third party in exchange for a guilty plea. Id. A prosecutor has discretion to "inform an accused that an implicated third person will be brought to book if he does not plead guilty." Id. The prosecutor has a duty of good faith in making such a representation, which duty is satisfied where he has probable cause to believe the third person has committed a crime. Id.; United States v. Diaz, 733 F.2d 371, 375 (5th Cir. 1984). 

McElhaney, 469 F.3d at 385 [McElhaney v. United States, 469 F.3d 382 (5th Cir. 2006)]. Thus, so long as the Government has probable cause to bring charges against a defendant's relative, the "defendant's plea 'would not be involuntary by reason of a desire to extricate his relatives from such a possible good faith prosecution.'" Id. (quoting Diaz, 733 F.2d at 375). 

Peters does not allege that the Government lacked probable cause to bring charges against his wife in the underlying criminal case or otherwise acted in bad faith during the plea bargaining process. Rather, he asserts that defense counsel threatened that his wife would be subject to indictment should Peters proceed to trial. See Brief in Support of Motion, Exhibit B. However, it is evident from the record that defense counsel reasonably concluded the Government had probable cause to bring an indictment against Peters' wife, since she was a signatory on the tax and bankruptcy filings at issue in the case. See Arrambide Affidavit at 1-6. Under the circumstances, the Court cannot find fault with counsel's advice regarding the potential exposure of his clients' spouse. Moreover, Peters' decision to enter a guilty plea in order to prevent such a good faith prosecution cannot be deemed involuntary.

This is a pretty fair statement of the law.  The issue of undue coercion is whether the prosecutor made an unreasonable threat to prosecute the third party to induce the plea.  Reasonableness is determined by whether the prosecutor had probable cause to assert the potential prosecution of the third party.  If so, then most courts would not entertain the attack on the plea.

In United States v. Marquez, 909 F.2d 738 (2d Cir. 1990), although an older case, the Second Circuit provides a good discussion of the then state of the law, which appears to be also the current state of the law.  In Marquez, the defendant sought to withdraw his guilty plea.  He claimed that the prosecutor had improperly threatened less leniency against his wife if he did not accept the offered plea.  (Or, I could have said that the prosecutor offered more leniency to the wife if he accepted the offered plea.)  He accepted the plea and sought to withdraw the plea.  The district court denied the request.  The defendant appealed on several grounds.  The Court of Appeals affirmed, reasoning

The Vanishing Federal Criminal Jury Trial (8/7/16)

This NYT article offers a good introduction, with quotes from noted federal judges in SDNY (Kaplan Rakoff, et al., about the vanishing criminal jury trial.  The myth is that juries delivery better community justice and service on juries makes better citizens.  See Benjamin Weiser, Jury Trials Vanish, and Justice Is Served Behind Closed Doors (NYT 8/7/16), here.  But, the system from overcriminalization and the resulting smorgasbord of choices given to prosecutors virtually compels a plea agreement in the overwhelming number of cases that are charged.  The NYT article is by no means a complete analysis of the issue, but it does introduce the issue in a straight-forward and understandable way.

This phenomenon is present generally in the federal criminal system and in the particular subset of federal criminal tax cases.  The prosecutor can lard up the charging document with any number of charges arising from a pattern of conduct which may be fairly characterized generally as tax evasion. Or he may charge down tax evasion to a lesser crime, such as tax perjury or a tax misdemeanor (although the misdemeanor is rarely charged). The Sentencing Guidelines will usually mitigate the effect of overcharging because the sentence will be primarily driven by the tax loss related to the overall pattern of conduct (including relevant conduct).  So, that is good.  But the perverse side is that the Sentencing Guidelines offer a better deal for acceptance of responsibility, most often achieved by plea agreement which means, in theory, that the Government's charge of criminal conduct may never get tested by trail (oh, sure the Government and the defendant must agree on the elements of the crime to which a plea is made, but that may not be critically tested).  And, of course, the prosecutor has virtually unfettered discretion as to what crimes to charge in the first instance..

I was reading through the recent cases this past Friday and found the following from a federal habeas corpus type proceeding under 28 USC § 2255.  United States v. Crowe, 2016 U.S. Dist. LEXIS 103706 (WD VA 2016).  In these proceedings, a common complaint by the person incarcerated after conviction is that his or her lawyer in the criminal proceeding rendered ineffective assistance of counsel.  One of Crowe's claims was that counsel failed to pursue the issue of selective criminal enforcement of the tax laws.  Here is the full, cryptic presentation and discussion of the issue in the opinion:

D. Selective Prosecution 

Next, Crowe argues that counsel failed to object to the fact that he was being prosecuted for tax fraud when only a fraction of those who commit such crimes are criminally charged. The Due Process Clause does not allow the government to prosecute a criminal case based on an "unjustifiable" factor, such as race, religion, or the exercise of a constitutional right. United States v. Armstrong, 571 U.S. 456, 464 (1996). However, absent a clear and substantial showing of such impermissible conduct, the government's decision to prosecute is presumed to be motivated by proper considerations. Id.; see also United States v. Hastings, 126 F.3d 310, 313 (4th Cir. 1997) (noting that "[a] criminal defendant bears a heavy burden in proving that he has been selected for prosecution in contravention of his constitutional rights"). "The Attorney General and the United States Attorneys retain broad discretion to enforce the Nation's criminal laws." Armstrong, 571 U.S. at 464 (internal quotation marks omitted). 

Crowe does not even make a bare allegation that he was prosecuted based on a discriminatory purpose. The government made clear that it was prosecuting him because he had been convicted of very similar conduct previously, and began the process of purchasing Southside less than 30 days after he was released from incarceration. (Ex. 13 § 2255 Mot. at 17-18, ECF No. 31-1.) Therefore, Crowe's selective prosecution argument lacks merit, and counsel was not deficient for failing to raise it. Strickland, 466 U.S. at 687.

It is just the nature of our system that many more taxpayers cheat than can be prosecuted and the Government knows of many more that cheat than can be prosecuted.  The prosecution bullet is usually retained for use against the worst offenders.  I say usually, because sometimes the Government goes after less egregious tax cheats in order to make a point to the public -- e.g., the prosecution of tax protestors or defiers.  It can't prosecute them all, but perhaps some prosecution -- perhaps it could be called selective prosecution -- will send a message to the larger group and will, at the same time, give the general public some idea that the Government is "on the beat."

Simon Redux - Ineffective Assistance of Counsel After All Else Fails (7/11/16)

A frequent venue for Monday morning quarterbacking in a criminal setting is the proceeding under 28 USC § 2255, here, which is a modern descendant of the common law writ of habeas corpus.  Setting aside procedural requirements, the § 2255 remedy is available

(a) A prisoner in custody under sentence of a court established by Act of Congress claiming the right to be released upon the ground that the sentence was imposed in violation of the Constitution or laws of the United States, or that the court was without jurisdiction to impose such sentence, or that the sentence was in excess of the maximum authorized by law, or is otherwise subject to collateral attack, may move the court which imposed the sentence to vacate, set aside or correct the sentence.

A common claim in a § 2255 proceeding is that the prisoner's attorney rendered ineffective assistance of counsel at the criminal trial leading to incarceration.

James A. Simon, a person about whom I have devoted several blog entries during his trial and appeal, used § 2255 for such Monday morning quarterbacking on the basis of claimed ineffective assistance of counsel.  Although mentioned in a number of blogs, prior to this blog, the last significant entry was Simon's Last Hurrah / Fizzle? (Federal Tax Crimes Blog 8/16/13), here.  This blog discusses his most recent case, a § 2255 proceeding.  United States v. Simon, 2016 U.S. Dist. LEXIS 86584 (ND IN 2016), here.

Prefatory to getting into the decision, I just state at the out set that I think it is a well-written and reasoned decision.  The author is Robert L. Miller (Wikipedia entry here), who handled the trial and thus was uniquely situated to observe the effectiveness of defense counsel and the effect of any counsel errors on the outcome of the case.  Plus, from my reading of the decisions he has written, particularly in the Simon trajectory through the end of the criminal trial, he seems to be a smart and good judge.

Now to dig into the details.  The opinion is long, 51 pages.  I cover only the highlights related to tax and FBAR in this blog entry.  He was also convicted of mail fraud charges and made § 2255 claims for those convictions, but I do not address them here.  He also made the claim about that the trial attorney erred in not having Simon testify at trial, a quintessential type of judgment call.  I do not address that claim here.  

I start out first with an excerpt where Judge Miller summarizes background:

Mr. Simon was a certified accountant, professor of accounting, and entrepreneur with interests in several businesses and entities. One of those ventures was JAS Partners, a domestic limited partnership in which Mr. Simon and his wife each had a one percent partnership stake and the Cook Islands-based Simon Family Trust owned the other 98 percent. Another of Mr. Simon's ventures was Elekta Ltd., a corporation chiefly owned by Mr. Simon's retired sisters but entrusted wholly to Mr. Simon's management. Elekta owned nineteen percent of a third venture that Mr. Simon managed, JS Elekta. JS Elekta in turn owned 75 percent of a fourth business, Ichua Company, also managed by Mr. Simon. Of those four businesses over which Mr. Simon had signature authority, three — Elekta, JS Elekta, and Ichua — were foreign entities possessing foreign bank accounts. 

This case is about money that Mr. Simon paid to himself from those four entities and from another domestic venture, William R. Simon Farms. Between 2003 and 2006, Mr. Simon (or his immediate family members) received about $1.8 million combined from the businesses, which Mr. Simon spent on personal and family expenses and recorded as loans in his personal financial records. No promissory notes existed for these purported loans, and Mr. Simon paid no interest to the companies that made them. He repaid a small portion of the principal to JAS Partners after becoming aware of the government's investigation into his finances. He reported none of this money as income on his tax returns. In 2005 Mr. Simon paid less than $400 in taxes, and in each of the other three years between 2003 and 2006 he paid no taxes at all and claimed a refund. None of the tax returns disclosed that Mr. Simon had interests in or control over foreign bank accounts. Mr. Simon prepared and filed these tax returns himself. 

During these years, Mr. Simon filled out need-based financial aid applications for the private schools his children attended. On these applications, he reported that he had no or very little income, suffered large debts or losses, spent no money on clubs or vacations, had only a few thousand dollars of assets, was in a precarious financial situation due to business failures and litigation, and had enough money to keep him "afloat but barely." These representations were all false: Mr. Simon had the payments from his businesses, spent lavishly on several expensive club memberships, and could afford vacations to Europe and Disney World in addition to a comfortable lifestyle for himself and his family. Based solely on these applications and the tax forms Mr. Simon submitted, the schools gave the Simon family a total of $120,000 in need-based financial aid. Mr. Simon also filled out federal "FAFSA" financial aid applications for one of his daughters to attend college. As he did on his private financial aid applications, Mr. Simon reported minimal gross income and assets on the FAFSA application.
In November 2007, IRS agents searched Mr. Simon's house pursuant to a warrant. Mr. Simon hired attorneys soon after that and began preparing a defense to possible charges. His attorneys hired a team of investigators and conducted their own investigation into Mr. Simon's finances, including interviewing the people already interviewed by government agents. Mr. Simon's defense team also met with prosecutors to discuss the probable charges, to guide their planning of colorable defenses. 

In April 2010, Mr. Simon was charged in a 23-count indictment. Counts 1-4 alleged that Mr. Simon filed false tax returns for the years 2003-2006. The tax returns were allegedly false in that they underreported income, and in that they didn't check the "yes" box of Line 7a on Schedule B to IRS Form 1040. The question associated with Line 7a asked whether Mr. Simon had any interest in or authority over foreign accounts. Counts 5-8 charged Mr. Simon with failing to file forms called Reports of Foreign Bank and Financial Account, or "FBARs," for the years 2004-2007. FBARs concern foreign financial accounts, and a person is required to file them if he or she has an interest in or signature authority over foreign accounts worth more than $10,000. Counts 9-19 charged Mr. Simon with mail fraud related to the need-based financial aid applications he made to the private schools his children attended. Those counts alleged that Mr. Simon underreported his income on the forms, and that the tax returns he attached were fraudulent for the same reasons as alleged in counts 1-4. Counts 20-23 charged Mr. Simon with federal financial aid fraud based on the FAFSA forms he filled out on his daughter's behalf. The FAFSA application required Mr. Simon to include information from his tax returns; if the tax returns were false (as alleged in counts 1-4), the aid applications were fraudulent as well. 

Irwin Schiff's 2255 Denial Affirmed on Appeal (11/14/13)

Irwin Schiff is a notorious tax protestor / tax defier.  See Wikipedia entry here.  I have written before about the district court's rejection of his attempt via 28 USC 2255, here, to obtain relief from his convictions for tax related offense from his activities.  Schiff, a Tax Protestor, Loses 2255 Motion to Vacate Conviction (9/29/12), here.  He appealed.  The Court of Appeals for the Ninth Circuit affirmed.  United States v. Schiff, 2013 U.S. App. LEXIS 22636 (9th Cir. Nov. 7, 2013) (unpublished), here.  Nothing particularly surprising in the affirmance, except perhaps the Court of Appeals' dismissive treatment of his Cheek argument.  That treatment is (bold-face supplied by JAT):

1. Schiff's argument, that appellate counsel was ineffective for not appealing the district court's exclusion of evidence of his bipolar disorder, fails. Schiff's claim regarding the exclusion of mental health evidence is similar to one raised by co-defendant Cohen on direct appeal, and which formed the basis for this Court reversing Cohen's conviction and remanding for a new trial. United States v. Cohen, 510 F.3d 1114, 1123-27 (9th Cir. 2007). But Schiff and Cohen were situated very differently with respect to knowledge about the validity of their beliefs. Even assuming Schiff's appellate counsel was ineffective, Schiff cannot demonstrate that he was harmed by counsel's failure to raise this issue on appeal. 

In Cheek v. United States, 498 U.S. 192, 201, 111 S. Ct. 604, 112 L. Ed. 2d 617 (1991), the Court distinguished between "innocent mistakes caused by the complexity of the Internal Revenue Code," as opposed to positions that "reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable." Id. at 205. With regard to the second category, the Court held that "a defendant's views about the validity of the tax statutes are irrelevant to the issue of willfulness." Id. at 206. 

On direct appeal, this Court characterized the evidence against Schiff as "overwhelming, particularly the evidence that he intended to deceive the government through the use of zero returns." United States v. Cohen, 262 F. App'x 14, 16 (9th Cir. 2007). The overwhelming evidence at trial was that Schiff was aware his claimed beliefs lacked merit and that he simply disagreed with the law. Schiff had previously been punished for filing zero returns. He knew that numerous tax returns submitted by his clients had been returned as frivolous by the IRS and had resulted in penalties upheld by courts. He also knew his positions regarding tax law were rejected in every court to consider them. 

Trial testimony also showed that, knowing his beliefs and activities did not comport with tax law, Schiff counseled his clients to undertake affirmative acts of misrepresentation. Schiff engaged in evasive conduct too — after his bank account was levied upon by the IRS, he opened bank accounts under false taxpayer identification numbers and avoided IRS seizure of his vehicle by titling it in a friend's name. 

Given the extensive evidence that Schiff knew his views of the tax law were incorrect, he cannot establish that his Cheek good-faith defense was prejudiced by counsel's decision not to raise on direct appeal the district court's suppression of evidence of his bipolar disorder.

Court Rejects Ineffective Assistance of Counsel in Tax Preparer Case (8/20/13)

In United States v. Mobley, 2013 U.S. Dist. LEXIS 115392 (SD AL 2013), here, the defendant, a return preparer brought a 2255 proceeding to overturn her conviction by plea.  The defendant had been charged with a 99-count Second Superseding Indictment with preparing false and fraudulent returns.  The defendant pled to 4 counts:  (1) conspiracy count, (2) aiding and assisting, (3) wire fraud, and (4) aggravated identity theft.

The defendant was sentenced to 51 months, at the low-end of the guidelines sentencing range.  That calculation was made using a 21 base offense level, driven by a stipulated estimated tax loss between $400,000 and $1,000,000.  With other adjustments, the guidelines range was 51 to 63 months.

In the 2255 proceeding, the defendant sought to avoid the conviction based on the usual claim in such proceedings -- ineffective assistance of counsel.  The claims came in several flavors, all based upon her factual assertion that her counsel was conflicted because, among the false returns defendant allegedly prepared, were returns for her counsel's father and stepmother.  One of the variations was a claim that, "unconflicted counsel could have negotiated a better plea agreement."  The reason, counsel was reluctant to take the case to trial if., by doing so, he would or might have to cross-examine his own relations.  The Court rejected the claim, finding that counsel had not been negatively influenced.  The court then held (focus particularly on footnote 5):

Furthermore, there is no indication that any "better plea agreement" could have been obtained, irrespective of who was representing Mobley. n5 Petitioner offers no specifics as to what sort of deal she thinks conflict-free counsel might have procured. There is no evidence or reason to believe that a more favorable deal could have been available to her under any circumstances. More fundamentally, Mobley steadfastly admits to this day, "I do not seek to vacate my conviction because I am guilty of the crimes to which I pled guilty." (Id. at 1.) Even in her objections to the Report and Recommendation, petitioner reiterates that "Mobley has not challenged her guilty plea." (Doc. 173, at 2.) In light of these admissions, her apparent suggestion that Attorney McCord betrayed her by not negotiating a plea deal that would have excused her from pleading guilty to those crimes (of which she is admittedly guilty and which plea she does not now challenge) borders on the absurd. Simply put, petitioner has not shown that there was any viable alternative strategy Attorney McCord could have utilized with respect to plea negotiations, but that she failed to follow because of the purported conflict. n6 For all of these reasons, Mobley's objection that she suffered an "adverse effect" from Attorney McCord's conflict because conflict-free counsel could have negotiated a better plea agreement is overruled.
   n5 In her objections, defendant suggests that she was induced to plead guilty "without obvious benefits." (Doc. 173, at 3.) This statement is demonstrably incorrect. The benefits to Mobley for executing this plea agreement were numerous and tangible, to-wit: (i) the Government agreed to dismiss 95 counts against her and to refrain from bringing any additional related charges against her; (ii) the Government agreed to cap the monetary loss for sentencing purposes at $1 million, while preserving Mobley's opportunity to object to that amount; (iii) the Government agreed to recommend a low-end sentence; and (iv) by executing the plea agreement and timely changing her plea, Mobley availed herself of a full three-level reduction for acceptance of responsibility, which had the effect of lowering the bottom end of her guideline range from 70 months to 51 months (a 27% reduction). To the extent that Mobley persists in arguing that her sentence "would have been the same if the [other 95] counts had not been dismissed" (doc. 164), she is wrong. The Court was not bound to adhere to the low-end recommendation, and would have been less likely to do so had Mobley pled guilty to 99 counts rather than just four. More importantly, recall that the Indictment included 12 counts of aggravated identity theft, in violation of 18 U.S.C. § 1028A(a)(1). (See doc. 70, at Counts 88 - 99.) Eleven of those counts were dismissed pursuant to the plea agreement. Each of those counts carried the very real possibility of a two-year consecutive sentence pursuant to § 1028A(b)(2), although this Court would have had discretion under the statute to run them concurrently. Thus, the plea agreement removed the potential for Mobley to face an additional 22 years' worth of consecutive sentences on top of the low-end guideline sentence the Government had agreed to recommend. This is, indeed, an "obvious benefit" to the plea, even if Mobley does not appreciate it.
   n6 In another objection, Mobley maintains that the plausible alternative strategy to her guilty plea was going to trial. On that point, Mobley reasons that "[i]f unconflicted counsel had been able to challenge the Government's case as relates to the alleged victims (McCord's parents), it is plausible that other challenges could have been made to the Government's case in total" and "it could have cast doubt in the jury's mind as to whether other alleged victims were actually participants." (Doc. 173, at 3.) With this argument, petitioner endeavors to have her cake and eat it too. One the one hand, she has repeatedly averred that she is not challenging or seeking to overturn her guilty plea. On the other hand, she seeks to establish a Sixth Amendment violation because her conflicted counsel persuaded her to plead guilty instead of going to trial. A § 2255 petitioner does not get to have it both ways. Besides, petitioner's argument does not establish the "reasonable alternative strategy" under the Reynolds line of cases. For Mobley to proceed to trial and attack D.B. [father] and E.B.[step-mother] as not being "victims" would have been foolish because, as discussed infra, the Government never, ever suggested that they were victims. The Indictment identifies numerous individuals on whose behalf Mobley prepared false/fraudulent tax returns, some of whom were aware of and participated in the fraud and some of whom did not know she was preparing tax returns for them at all. By the clear wording of the Indictment, D.B. and E.B. fell within the first category, not the second. In other words, it would not have been a reasonable alternative strategy for Mobley to go to trial to try to persuade the jury that D.B. and E.B. were not really victims, and that the Government's entire case was therefore of dubious worth, for the simple and obvious reason that the Government never contended that D.B. and E.B. were victims. Whatever else can be said, such an irrational trial strategy was not a viable alternative to a guilty plea that resulted in dismissal of 95 of the 99 counts against Mobley, leaving only four charges to which she even now concedes guilt.

Must a Defendant Prove Innocence of Uncharged Crime to Reverse Wrongful Conviction? (7/26/13)

In United States v. Caso, ___ F.3d ___, 2013 U.S. App. LEXIS 14624 (D.C. Cir. 2013), here, the Court dramatically opens its opinion as follows:

Russell James Caso, Jr. is innocent of the crime for which he was charged and convicted. The government does not dispute the point. Nonetheless, Caso was denied an opportunity to collaterally attack his conviction and sentence because he could not demonstrate that he is also innocent of a separate and uncharged offense that has a lower sentencing range under the United States Sentencing Guidelines. Because Caso was not required to make such a showing, we reverse the order denying his motion to vacate his conviction and sentence.

Now, that got my attention and perhaps yours as well.  What is the concept that a defendant wrongfully convicted of one crime must prove -- "demonstrate" -- that he is innocent of another uncharged crime in order to secure reversal of the conviction of the crime for which he is innocent?

The defendant previously served on a Congressman's staff.  He was compromised by a nonprofit consulting firm's engagement of his wife to perform editing services.  She appeared to do de minimis work and was paid $19,000 which did not appear commensurate with the work performed.  The defendant did not include the payment on the disclosure form he was required to file as a congressional staff person.  The defendant was charged with "conspiracy to commit honest-services wire fraud, in violation of 18 U.S.C. §§ 371, 1343, and 1346."  The defendant pled to that charge.  The defendant was sentenced to three years probation and 170 days home confinement.  The defendant apparently did not appeal, perhaps because his plea agreement waived appeal.

Shortly after Caso was sentenced, the Supreme Court handed down Skilling v. United States, 130 S. Ct. 2896 (2010), a decision that substantially limited the permissible reach of 18 U.S.C. § 1346, the honest-services fraud statute. Prior to Skilling, the government had used that statute to prosecute public officials who failed to disclose conflicts of interest, on the theory that such nondisclosure constituted a "scheme or artifice to deprive another of the intangible right of honest services," 18 U.S.C. § 1346. See Skilling, 130 S. Ct. at 2932-33. In Skilling, however, the Court interpreted § 1346 more narrowly. In an effort to avoid a "vagueness shoal," id. at 2907, the Court held that § 1346 "proscribe[s] bribes and kickbacks -- and nothing more." Id. at 2932.

The Skilling opinion is here.

Trial Strategies - Win Some, Lose Some (4/3/13)

Most 28 U.S.C. § 2255, here, a form of federal habeas corpus, cases are ho-hum, desperate attempts to seize victory from the jaws of defeat.  But a recent one was interesting to illustrative that facially creative trial strategies that may not work.  By way of general background, criminal trials (as well as civil trials) involve many strategic decisions, large and small, that may affect the outcome of the case -- most of the time, positively, if well conceptualized and implemented.  Some don't work, which often means that other strategies that might have worked were not pursued into order to pursue the one that, hindsight tells, did not work.  So, I present the recent case of Cantrell v. United States, 2013 U.S. Dist. LEXIS 45107 (ND IN 2013), here.

The Court gives a short summary of the background facts to set the stage:

The substantive facts and procedural posture underlying this case are familiar to all parties, as well as the Court. Defendant, Robert J. Cantrell, was charged in an eleven count indictment. Counts One through Four alleged mail fraud and wire fraud, in violation of Title 18 U.S.C. sections 1341 and 1346. Counts Five through Seven charged Defendant with insurance fraud, in violation of Title 18 U.S.C. section 1341, by fraudulently representing that his adult children were employees of Addiction and Family Care, Inc. ("AFC") in order to procure health insurance for them under AFC's group insurance plan. Counts Eight through Eleven alleged Defendant filed false income tax returns for the years 2001 through 2004, in violation of Title 26 U.S.C. section 7206(1). 

On May 27, 2008, a jury trial commenced in this case. The Government introduced evidence for five days and, on June 5, the Government concluded its presentation of testimony and evidence. After the Government rested its case, the Defendant orally moved for a judgment of acquittal under Rule 29 of the Federal Rules of Criminal Procedure. The Defendant raised a host of arguments as to why he was entitled to judgment as a matter of law. Among those, Defendant argued that "no one ever identified Mr. Cantrell in court as the Defendant." (Gov. Ex. 0, p. 3). The Court denied the Rule 29 motion in all respects, except as to the issue of whether the Government properly identified the Defendant. (DE# 62). This issue was taken under advisement and the trial continued. At the conclusion of trial, the jury returned guilty  verdicts on all eleven counts. Following the jury verdict, the Court denied Cantrell's motion for judgment of acquittal and motion for new trial.

Court Rejects Claim of Ineffective Assistance of Counsel for Failure to Assert Sex Addition to Mitigate Sentence (2/23/13)

The old adage that sex sells seems not to account for the wild popularity of the tax law.  Tax law just has no sex in it.  But every now and then, sex rises up in tax cases.  And, so it did in Carroll v. United States, 2013 U.S. Dist. LEXIS 23769 (ND OH 2013).

In a six-count information, Carroll was charged with "with participating in three separate bribery schemes, making false statements to law enforcement officers, and falsifying his federal income tax returns."  He pled guilty and was sentenced "to 108 months imprisonment, followed by two years of supervised release, a $600 special assessment and ordered Petitioner to pay $728,000 in restitution."  He did not take a direct appeal, but thereafter filed a "§ 2255 motion, asserting he received ineffective assistance of counsel at sentencing."  The claims of ineffective assistance, apparently focused most on his bribery conduct, were (record citations omitted):

First, Petitioner claims that trial counsel was ineffective for failing to seek a downward departure pursuant to U.S.S.G. §5K2.13 for diminished capacity in light of his "addiction to sex." Second, Petitioner asserts that trial counsel was ineffective for failing to argue for a departure pursuant to U.S.S.G. §5K2.20 for aberrant behavior because the "bribery conspiracy was driven by sexual addiction and not avarice . . . ." 

The Court later summarizes the basis for his claim as follows (record citations omitted):

Petitioner claims that trial counsel was ineffective for failing to request downward departures for diminished capacity pursuant to U.S.S.G. §5K2.13 and for aberrant behavior pursuant to U.S.S.G. §5K2.20. In support of his argument, petitioner maintains that he developed a "raging addiction to sex" after meeting coconspirator Nilesh Patel ("Patel"), that "the entire bribery scheme between [Patel] and [himself] was driven by the insatiable desire for sex[,]" and that he and Patel "conspired to defraud the hospital so [they] could travel for sex." Petitioner further asserts that "there is no question my mental state was compromised by this addiction[,]" that he sought treatment in April or May 2010 for his sex addiction, but that his trial counsel "asked prosecutors to let it rest for fear of embarrassing [him]." Additionally, he contends that the only reason the government did not find "hidden accounts or cash in his home" was that the bribery conspiracy in this case "was driven by a sexual addiction and not avarice . . . ." According to Petitioner, his attorney "missed the entire defense of diminished capacity," and "should have argued for a sentence reduction based on the guidelines for Aberrant Behavior."

Schiff, a Tax Protestor, Loses 2255 Motion to Vacate Conviction (9/29/12)

Irwin Schiff, a tax protestor of some notoriety (see Wikipedia entry here) is back in the tax news.  He was previously convicted of various counts of conspiracy, tax evasion, tax perjury and aiding and assisting and sentenced to 151 months in prison.  He appealed his convictions.  He lost his appeal.  Then, as not uncommon, he filed a 2255 motion to overturn his conviction for ineffective assistance of appellate counsel.  (He could not do that for trial counsel, since represented himself.)  The Court denied the motion.  United States v. Schiff, 2012 U.S. Dist. LEXIS 135934 (D. NV 2012)

He raised more or less standard 2255 arguments, some more or less grounded in fact (that is not to say that those that were ground in fact had merit).  The Court dismissed them all handily.  Here is one related to some argument he had about foreign banks honoring levies (since foreign banks are a frequent topic of this blog):

5. Testimony Regarding Offshore Bank Accounts 

Defendant argues that his appellate counsel was ineffective for failing to appeal the Court's exclusion of the testimony of two Freedom Book customers, Robert Eiler and Robert Schulz. The Court permitted Defendant to testify about why he used offshore accounts as part of his extensive testimony about his beliefs. However, the Court properly prevented Defendant from introducing the testimony of Eiler and Schulz about their experience with offshore banks' treatment of IRS levies "as proof that they don't" honor them. (16Tr. 4350-51.) The Court determined that Defendant was attempting to improperly introduce evidence that his beliefs were correct, rather than his basis for forming his beliefs. Accordingly, Defendant's appellate counsel was not unreasonable for failing to challenge the Court's determination. Even if appellate counsel had raised the issue, there is no indication that the results of Defendant's appeal would have been different.

Daugerdas Defendant Whose Conviction Was Not Dismissed Claims Ineffective Assistance of Counsel (8/7/12)

The Wall Street Journal Law Blog today reports that David K. Parse, the sole defendant in the Daugerdas case who was not dismissed for juror misconduct, has filed a 2255 proceeding alleging that his attorneys rendered ineffecitve assistance of counsel in the actions or inactions that cause Judge Pauley to not dismiss his conviction.  See Chad Bray, Tax-Shelter Fraud Defendant Seeks New Trial Over Ineffective Counsel (WSJ Law Blog 8/7/12), here.  For my prior blog on the dismissals and refusal to dismiss Parse, see Daugerdas and Others, But Not All, Get New Trial (6/4/12; revised 6/22/12), here.

In response to my initial blog, one commenter, Joe diRuzzo, presciently said:  "Jack, I see a 2255 petition in the near future for Parse."  2255 is the shorthand for 28 USC Section 2255, here.

Normally, a 2255 proceeding is the procedure to argue:  (1) that the sentence was imposed in violation of the Constitution or laws of the United States; (2) that the court was without jurisdiction to impose such sentence; (3) that the sentence was in excess of the maximum authorized by law, and (4) that the sentence is otherwise subject to collateral attack.   Ineffective assistance of counsel the grounds most frequently asserted.  A Section 2255 occurs after normal appeals have occurred.  According to the WSJ Law Blog, Parse has filed some type of proceeding but it is not called a 2255 proceeding in the article, but as described it seems to cover ground often covered in 2255 proceedings.  And some courts say that the ineffective assistance of counsel issue may be raised in a motion for new trial.  Presumably that is the procedural posture for this motion.

Here is what the WSJ Law Blog says:

In a court filing late Tuesday, Paul Shechtman, Mr. Parse’s new lawyer, said the failure of his prior counsel to alert the court “constituted ineffective assistance” and he should be granted a new trial. 

“There should be little doubt that trial counsel’s performance was deficient,” Mr. Shechtman said. “As the court found, a reasonably competent lawyer on learning that Juror No. 1 might be a suspended lawyer with a history of alcoholism would have taken some action to resolve the issue. She would have conducted additional research, consulted with the government, or, most obviously, alerted the court so that it could inquire further.”