Burden of Proof on the Eighth Amendment Excessive Fines Issue (11/20/17)

I was reading again the unpublished opinion in United States v. Bussell, 2017 U.S. App. LEXIS 21189 (9th Cir. 2017), here, which I blogged earlier in Ninth Circuit Summarily Rejects Arguments Against FBAR Willful Penalty (10/27/17), here.  As I noted in the blog, the Court's bottom-line was that Bussell had "failed to carry her burden to establish that the penalty is grossly disproportional to her offense."

I want to say some more about the burden of proof issues.  The Court said earlier in the opinion:

Bussell bears the burden to prove that the fine against her violates the Constitution. See United States v. $132,245.00 in U.S. Currency, 764 F.3d 1055, 1058 (9th Cir. 2014) (explaining that the claimant has the burden of establishing that the forfeiture is grossly disproportional to the offense). Generally, "a punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense." United States v. Bajakajian, 524 U.S. 321, 334, 118 S. Ct. 2028, 141 L. Ed. 2d 314 (1998).

I think the Court is referring to the burden of persuasion which is a burden related to fact finding rather than legal conclusions.  Thus, I think the Court means that the person asserting a violation of the Eighth Amendment must establish the facts by a preponderance of the evidence that are necessary for a court to conclude that the Eighth Amendment applies.

I was trying to think about what this really meant in the two types of cases in which the Eighth Amendment issue might arise in the context of the FBAR willful penalty  -- the Government's FBAR suit to reduce the assessment to judgment and the refund suit by the person who did not file or filed an incomplete FBAR.  In both of those cases, the Government bears the burden of persuasion to establish that the person acted willfully in not filing or filing incompletely.  Basically, at least in the mainstream cases, the Government's threshold burden and any defense the person would require that the facts be fleshed out as to both issues.

I suppose that burden of proof could be teed up if the person asserting the Eighth Amendment admitted willfulness so that the Government did not have to prove willfulness to sustain the penalty.  That posture would leave the factual record bare except for such factual proof as the parties entered in the case as they sparred about the Eighth Amendment issue.  Then, the person might have a risk of nonpersuasion (burden of persuasion) as to any fact that would support application of the Eighth Amendment.

And, in any event, given the limited applicability of the burden of persuasion (it only applies in the rare case where the fact finder is in equipoise as to a fact), it would seem to me that making much ado about the burden is a bit of a diversion.

What concerns me is the Court's way of expressing its holding -- "Bussell has failed to carry her burden to establish that the penalty is grossly disproportional to her offense."  Read literally, that could mean either (i) that the Court was in equipoise on some the key fact or facts or (ii) that the court was able find all relevant facts and held that the Eighth Amendment just did not apply to the facts.  In either event, Bussell would not have established that the Eighth Amendment applied.  I think that the Court probably meant the latter; if that is what it meant, it did not state precisely its holding.  The more precise holding would have been something like: On the facts found, the Eighth Amendment does not apply.

Fifth Circuit Rejcts Nontraditional Contest of FBAR Willful Burden of Proof Contest (3/22/17)

I previously had several blogs on the attempt by Bernhard Gubser to contest the burden of proof issue for the FBAR willful penalty through nontraditional means.  The most recent is this:  Case on Appeal to Fifth Circuit on Standard of Proof for FBAR Willful Penalty (Federal Tax Crimes Blog 11/16/16), here.  Mr. Gubser complained that the Government's burden of persuasion on the FBAR willful penalty should be clear and convincing rather than preponderance.  He alleged that the Appeals Officer had represented that he would win if the burden of persuasion were clear and convincing rather than preponderance.

It appears that Mr. Gubser failed to persuade the Fifth Circuit of the merits of his argument -- at least on whether he made the argument via the right process.  On March 22, 2017, in a short per curiam nonprecedential opinion, the Fifth Circuit rejected Mr. Gubser's bid.  Gubser v. United States, 119 AFTR 2d ¶ 2017-532 (5th Cir. 2017), here.

Restitution Less than Tax Loss Based on Burden of Proof for Unclaimed Deductions; and Application of Section 3553(a) / Booker (1/19/14)

I previously blogged on an Eighth Circuit decision addressing the revisions to the Sentencing Guidelines regarding unclaimed deductions.  See Early Court Appellate Court Decision on New Sentencing Guideline Provision Regarding Unclaimed Deductions (Federal Tax Crimes Blog 11/19/13), here.  That blog entry discusses United Sates v. Fawaz, 2013 U.S. App. LEXIS 23135 (6th Cir. 2013), here, which discusses the amendment to the Guidelines Application Note § 2T1.1, par. 3, here, regarding unclaimed deductions in computing the tax loss.  The Eighth Circuit remanded the case for re-sentencing.

UNCLAIMED DEDUCTIONS FOR TAX LOSS AND RESTITUTION

On remand, the district court re-sentenced and wrote an opinion, United States v. Safiedine, 2013 U.S. Dist. LEXIS 179364 (ED MI 2013), here.  Safiedine was the co-defendant with Fawaz; this re-sentencing opinion is for both Safiedine and Fawaz.  Here are key excerpts from the opinion regard unclaimed deductions and the relationship to restitution:

The new Application Note in § 2T1.1 provides the following guidance to courts considering such unclaimed deductions "needed to ensure a reasonable estimate of the tax loss": (1) the deductions must be "related to the tax offense and could have been claimed at the time the tax offense was committed;" (2) the deductions must be "reasonably and practicably ascertainable;" and (3) "the defendant presents information to support the credit, deduction, or exemption sufficiently in advance of sentencing to provide an adequate opportunity to evaluate whether it has sufficient indicia of reliability to support its probable accuracy [.]" Id. Defendants bear the burden of establishing an entitlement to any deduction for purposes of calculating tax loss by a preponderance of the evidence. Id. 

* * * * 

The amendment to § 2T1.1 allows the Court to account for unclaimed deductions in calculating tax loss only if the unclaimed deduction is both reasonably and practicably ascertainable. In elucidating its reasons for the amendment, the Sentencing Commission explained that this requirement is designed to ensure that sentencing courts are not required "to make unnecessarily complex tax determinations[.]" U.S.S.G. Manual supp. to app. X, amend. 774 at 42. The Court finds support for Defendants' claim that JSC is entitled to deduct payments for improvements to properties owned by other Safiedine-related entities as the lessee of those properties (under a theory of leasehold improvement). (10/22/13 Restitution Hr'g Tr. 65-66, ECF No. 128 (Kempf agreeing that a lessee of property paying for improvements to the property has a right to amortize the payments on its tax returns)).6 Nevertheless, Defendants have failed  [*19] to discharge their burden of demonstrating that the unclaimed deductions were not already claimed by another Safiedine-related entity. Based on this Court's evaluation of the evidence, it finds that such a factual determination is not reasonably and practicably ascertainable. For this reason as well, the Court concludes that Defendants' previously unclaimed deductions should not be used in calculating the tax loss for the purpose of sentencing. 

[Omit discussion of other unclaimed deductions]