A Sad Event for the Country’s Criminal Tax Enforcement System (10/15/25)

I today write on what to me is a very sad story for our country. Roger Ver, a crypto mogul and tax evader (by his admission in the story I tell here), just bought his way out of charged tax crimes by the amounts (tax, penalties, and interest) he already owed the Government for the charged years. (There is no indication that he will pay anything for uncharged years for which the civil statute of limitations would be open if civil fraud was involved (which he did not admit under the plea agreement), nor is there any agreement that he will be required to cooperate in the determination and payment of tax liability for any other years). In other words, he bought his way out of a criminal indictment and prosecution by paying what he admitted he owed. Worse, there is more to the story as I tell below.

The key documents are

• The plea agreement, here.
• The DOJ Press Release, here, which says in part:

“We are pleased that Mr. Ver has taken responsibility for his past misconduct and satisfied his obligations to the American public. This resolution sends a clear message: whether you deal in dollars or digital assets, you must file accurate tax returns and pay what you owe,” said Associate Deputy Attorney General Ketan D. Bhirud. 

“Mr. Ver is accepting responsibility for his actions and has agreed to pay a substantial penalty,” said Acting United States Attorney Bill Essayli of the Central District of California. “Every person, whether you’re a millionaire or not, is required by law to pay taxes and we will not hesitate to hold anyone accountable.” 

“Today’s resolution demonstrates that there are consequences for those who intentionally conceal their assets and evade their tax obligations,” said Kareem Carter, Executive Special Agent in Charge. “No matter how sophisticated the technology or the asset, IRS-CI will continue to follow the money, ensure compliance, and protect the integrity of our tax system.”

• The NYT article here that offers some key background including the following key paragraphs:

The case is poised to become the latest example of how the Trump administration has systematically dismantled a yearslong government crackdown on the crypto industry, a sector rife with fraud, scams and theft. 

Like other beneficiaries of the rollback, Mr. Ver sought to curry favor with President Trump by linking his case to the president’s grievances about the weaponization of the justice system.

This year, Mr. Ver paid $600,000 to Roger Stone, a longtime associate of Mr. Trump, to try to abolish the tax provisions at the heart of the case. And the crypto investor hired David Schoen, a lawyer who represented Mr. Trump during his second impeachment trial. Lobbying filings show that Mr. Ver also hired Christopher M. Kise, a lawyer who defended Mr. Trump against various criminal and civil charges, as well as the lobbying firm run by Brian Ballard, a major Trump fund-raiser.

Matthews' Article on Damage to IRS CI through Budget Cuts (3/28/16)

Mark Matthews, here, a prominent player in the tax crimes area has written this article:  Mark E. Matthews,  IRS Criminal Investigation: A National Asset Being Damaged, 150 Tax Notes 1319 (MAR. 14, 2016), here.  I highly recommend the article by a thoughtful practitioner who has been involved in enforcement and defense.

Mark begins his piece with the critical role that IRS CI plays in the tax system:

CI is the only enforcement agency pursuing investigations of potential criminal violations of the IRC. There are two key aspects of its work from a tax enforcement perspective. First, unlike IRS civil audit activity, CI's cases are public. CI publicizes its cases to send a message far beyond the individual taxpayer being prosecuted -- to more than 300 million taxpayers. The message has two components: (1) the threat to those tempted to cheat that there is a great risk to tax evasion, and (2) the assurance to those paying their fair share that they are not chumps and that those not paying it are not getting a free pass, or are at least risking their liberty. Second, the prospect of incarceration is a principal motivator to those tempted to cheat. If the only sanction for tax violations were civil penalties, many more would play the audit lottery more aggressively, especially as congressional budgets drive the audit rate lower each year. Yet even the slight prospect of a loss of liberty in one of our federal correctional institutions causes many to focus when they sign the perjury jurat on their returns. 

CI is the most dramatic example of the concept of general deterrence. Tax offenses are the one federal felony that every American confronts each year. We are not all tempted to sell drugs; we are not all in the securities industry or in a position to commit an environmental crime. But we all file returns. Therefore, the IRS must maintain a strong compliance message for the country's 300 million taxpayers, and it has -- in recent history, with as few as 1,500 criminal tax prosecutions each year. Even that low number, however, is dropping. That is far below the number of narcotics prosecutions brought by the federal government in attempting to deter a far smaller group of potential violators. Hence, CI needs publicity to achieve even a minimum enforcement presence. 

The CI chief, Richard Weber, recently made the same point in a conversation with the author: "Taxpayers voluntarily comply because they know it is the right thing to do, but they also want those who cheat the government to be held accountable. They want a level playing field. When they see that criminals get away with not paying their fair share, there is a direct impact on the voluntary compliance rate and the confidence in our entire system begins to erode. IRS-CI restores that confidence by ensuring that we all play by the same rules."

Mark then discusses the data on declining enforcement from declining resources.  I will let Mark's discussion speak for itself.  Highly recommended for readers of this blog.

I will close with my own brief thought.  The IRS is a critical agency, no less important to who we imagine ourselves to be as Americans than any other federal agency.  To the extent that there are problems in the IRS (or any other agency), the solution is to fix them which may even require additional budgeting to insure that the agency is functioning fairly and efficiently to meet the needs of the country.  Politicized budget cuts are going to make the IRS serve this country worse.

Role of Tax Evasion and Its Prosecution in a Civilized Society (4/7/14)

Professor James Maule has a good editorial piece on this blog.  The entry is titled
How Shocking is Tax Evasion? (Mauledagain Blog 4/7/14), here.

The issue is whether tax evasion has lost its place as a seriously considered offense in the United States.  Professor Maule has a good succinct insight.  I recommend it to readers.

I am reminded of the famous Oliver Wendell Holmes quote in Compania de Tabacos v. Collector, 275 U.S. 87, 100 (1904) (dissenting), here: "Taxes are what we pay for civilized society."

Sentencing Leniency for Offshore Tax Cheats (11/3/13)

In an earlier blog (Ty Warner, Beanie Babies Creator, Pleads Guilty (Federal Tax Crimes Blog 10/2/13; Updated 10/5/13), here, I noted:

Observers of the tax sentencing scene have noted for some time now that offshore account tax cheats fare better in sentencing than do ordinary tax cheats with similar sentencing characteristics.  See e.g., Lower Sentences For Offshore Tax Cheats - Role of 5K1 Departures (Federal Tax Crimes Blog 9/28/13), here.  (I am currently updating the master spreadsheet that will contain some nonoffshore sentencing data to compare to the offshore sentencing data.)  As noted in my blog, the apologists for this phenomenon assert that it is perhaps related to the 5K1 substantial assistance downward departure.  Note that there is no such down departure provided in the Warner plea agreement.  Hence, this case will test whether these offshore cheats really get treated better.  Warner is the poster child for the big fish that got caught.

On that theme is a recent article, David Voreacos, Beanie Baby Billionaire Sentence Comes Amid Tax Leniency (BloombergBusinessweek 11/1/13), here.  Key excerpts are:

The U.S. has prosecuted 103 people, securing 62 guilty pleas and five trial convictions. Of 49 sentenced, most received probation or home confinement, according to a Bloomberg analysis of the cases, which included criminal filings and transcripts of sentencings. 

Only 18 got prison time. Four of those were sentenced to a year and a day, and just two got longer terms. In almost every case examined, the defendants received sentences that were below the guideline range set at sentencing. 

JAT Comment:  I think this is consistent with the data I have compiled and analyzed in my spreadsheet.  I will check the numbers tomorrow and bring my spreadsheet up to date for posting, hopefully by tomorrow afternoon.   Then, from another part of the article is the following:

“The wide variety of sentences in offshore tax evasion cases -- ranging from probation to home confinement to substantial prison terms -- reflects the general difficulty of predicting how any one particular district judge might sentence a specific defendant in any case,” said Daniel W. Levy, who prosecuted federal tax cases before joining McKool Smith LLP.

Daniel Levy (bio here) was one of the chief prosecutors of these cases in USAO SDNY, so he knows of what he speaks.  Nevertheless, it is important to note that the heaviest sentences were in cases that went to trial and some of those few, those very few, cases going to trial were atypical cases.  So, the proper universe to compare is the cases that pled rather than going to trial.  It is difficult to predict what a judge might do, particularly if he or a fellow judge in the district have not sentenced in this context before.

Tax Muckraker Offers Ideas on Tax Compliance (2/11/13)

This morning, I was reading Paul Krugman's column titled, The Ignorance Caucus (NYT 2/10/13),  here (which I recommend to readers).  His point is that some influencing how our Government works prefer ideology over evidence.  That is perhaps not a surprise to any observer of the game.  But the phenomenon plays out in tax enforcement.  Some just hate the idea of the IRS, so  underfunding is the priority.  This theme plays out today in an article in Tax Notes.  David Cay Johnston, Law and Order: Tax Squad, 138 Tax Notes 759 (Feb. 11, 2013), here (thanks to Tax Prof Blog, here).  Professor Johnston is a noted tax curmudgeon who likes to burst conventional wisdom and put the searchlight on hypocrisy.

Here is an excerpt for flavor (emphasis supplied by JAT):

My proposal is to significantly increase tax law enforcement. In looking over a pile of IRS data going back to 1992 to see how vigorously our tax laws are being enforced, either of two conclusions struck me as reasonable just based on the numbers. 

One conclusion would be that individuals and corporations are more law-abiding now than they were two decades ago. Criminal tax prosecutions in fiscal 2012 were down 44 percent from 1992, according to Justice Department data posted by the Transactional Records Access Clearinghouse. If you control for population growth, the drop in prosecutions is 54 percent. On the corporate side, additional taxes and penalties recommended after audit are down 11 percent in real terms over the same 21 years.

IRS Promotes the Success of OVDI and Related Items (9/16/11)

As suspected, the IRS is promoting the success of the most recent offshore initiative -- OVDI 2011.  I will use this blog to post items in that general category, but encourage readers to post as comments any additional items -- pro and con -- that they think will be useful to readers.

The IRS promo piece is IRS Shows Continued Progress on International Tax Evasion, IR-2011-94 (9/15/11), here.  In the piece, the Commissioner claims major progress in global tax enforcement and getting back into the system.

My Editorial:  On the point of getting people back into the system, the truth is that the one size fits all approach kept many people out of the system and made many taxpayers cynical that good guys were being treated the same as bad guys.  Hopefully those taxpayers will get right in the system on a go-forward basis without serious repercussions from the past.  The truth is that most of those taxpayers who let by-gones be by-gones probably will never be bothered by the IRS and that could make those conscientious / fearful taxpayers who got into the program look and feel like dupes.  I think the system would have been better off with a more nuanced program.  A more nuanced program would have required more systemic resources but the additional cost would, I think, have been justified by treating bad actors worse than good actors.  (That's a relative scale, a continuum if you will, but I think the system would be better off with more nuance than the programs allowed.)  Just my thought, and really not trying to open up comments about the horrors of the system.  There are plenty of other posts where those comments are developed.

Of Fear and Hostages: A Mid-Sight Editorial on The OVDI Program and Extortion (8/1/11)

I write tonight an editorial comment on the OVDI program (and the OVDP program as well). Hindsight, they say, is always better than foresight. When the IRS designed these programs, the IRS did not have the benefit of hindsight. Nor, of course, do I have the benefit of hindsight. I must address the program mid-sight, which is where we are.

My mid-sight view of the OVDI (and its predecessor OVDP) is that it has some very rough edges -- some basic unfairness issues that the IRS should move affirmatively to address and resolve. I doubt that the IRS will listen to me, but I offer my views anyway and hope that the IRS or Congress will listen -- not because this is my issue but because the concerns I address are the concerns of many people who are hurting because of the way the IRS is administering the program and because of fears as to the way the IRS will administer the program.