Supreme Court Case on Double Jeopardy that Might Affect States' Ability to Prosecute Tax Crimes After Federal Jeopardy (12/3/18; 12/6/18)

I picked up this in yesterday's Washington Post:  Robert Barnes, Supreme Court to consider case that could affect potential Manafort prosecutions (WAPO 12/2/18), here.  The  opening is )bold face supplied by JAT):

The Supreme Court next week takes up the case of a small-time Alabama felon, Terance Gamble, who complains that his convictions by state and federal prosecutors for the same gun possession crime violate constitutional protections against double jeopardy.
But likely to be watching the proceedings closely will be those concerned about a big-time felon, Republican consultant and former Trump campaign chairman Paul Manafort, who was prosecuted by special counsel Robert S. Mueller III for tax fraud. 

With President Trump keeping alive prospects that he might pardon Manafort, Gamble v. United States might be redubbed Manafort v. Mueller, joked Thomas C. Goldstein, an attorney who regularly argues before the Supreme Court.

The outcome in the case could affect nascent plans by states to prosecute Manafort under their own tax evasion laws — New York, in particular, has expressed interest — should Trump pardon Manafort on his federal convictions. 

The double jeopardy clause of the Constitution’s Fifth Amendment prohibits more than one prosecution or punishment for the same offense. But the Supreme Court since the 1850s has made an exception, allowing successive prosecutions and punishments if one is brought by state prosecutors and the other by the federal government. (One early case from that time involved counterfeiting; another was prosecution of someone harboring a fugitive slave.) 

In Gamble, the court is reconsidering these precedents. Almost none of the briefs filed in the case speculate on how a presidential pardon of a federal conviction would affect prosecutors at the state level should the so-called separate sovereigns doctrine be renounced.

Sixth Circuit Rejects Double Jeopardy Claim in Tax Prosecution Following State Civil Litigation Between Private Parties (11/9/16)

In United States v. Rankin, 2016 U.S. App. LEXIS 19746 (6th Cir. 2016) (unpublished), here, the Court rejected a double jeopardy defense in a situation I would not have thought to even raise the defense.  (That is my limitation, because the defense was actually pretty creative in the facts even though not ultimately successful.)

The defendant a common shareholder in several corporations, some of which were losing money.  So he began transferring money from one corporation to others.  In the corporation with the money to spread around, he had at least one minority shareholder, a gentleman named Franks.  Franks sued the defendant in state court.  The state court issued a preliminary injunction to mitigate the losses in the interim.  The preliminary injunction required the defendant to continue serving the corporation from which money was transferred but enjoined him from receiving pay from that corporation.  On appeal of the preliminary injunction before he had done the service required, "The Ohio Court of Appeals held that requiring Rankin to serve as president without pay violated the Thirteenth Amendment's prohibition on involuntary servitude. Franks v. Rankin, Nos. 11AP-934, 11AP-962, 2012-Ohio-1920, 2012 WL 1531031, at *14-15 (Ohio Ct. App. May 1, 2012)."

Rankin was thereafter indicted for failure to withhold and pay over (§ 7202), tax perjury (§ 7206(1)) and tax obstruction (§ 7212(a)).  Rankin moved to dismiss, arguing that the preliminary injunction requiring unpaid service (which he never served) was punishment making his prosecution for tax crimes unconstitutional double jeopardy.  There are several obvious problems with that argument.  The district court rejected it.  Rankin appealed.

The majority handily affirmed in three short paragraphs:

Rankin argues that this federal tax prosecution violates the Double Jeopardy Clause because it involves the "same offense" as Franks, a state civil case; and, in Rankin's view, Franks already punished him criminally for that offense. The Double Jeopardy Clause prohibits the government from putting a person "in jeopardy of life or limb" twice for the "same offense." U.S. Const. amend. V. Offenses are not the same when, looking at their statutory elements, they each "require[] proof of a fact which the other does not." Jackson v. Smith, 745 F.3d 206, 211 (6th Cir. 2014) (quoting Blockburger v. United States, 284 U.S. 299, 304, 52 S. Ct. 180, 76 L. Ed. 306 (1932)); United States v. Evans, 951 F.2d 729, 732-33 (6th Cir. 1991). Although here we could affirm the district court on multiple grounds, the simplest is that the federal tax charges in this prosecution are not the "same" as the state fiduciary-duty claims in Franks. 

In Ohio, a fiduciary-duty claim has three basic elements: the existence of a fiduciary duty, the breach of that duty, and harm to the plaintiff. Wells Fargo Bank, N.A. v. Sessley, 188 Ohio App. 3d 213, 2010 Ohio 2902, 935 N.E.2d 70, 83 (Ohio Ct. App. 2010). A minority shareholder in a closely held corporation, like the plaintiff in Franks, must show specifically that a controlling shareholder misused corporate power for personal benefit at the minority's expense. See Crosby v. Beam, 47 Ohio St. 3d 105, 548 N.E.2d 217, 220-21 (Ohio 1989). 

The charges in this prosecution are completely different. The grand jury charged Rankin with tax crimes under three provisions of the Internal Revenue Code, and the government must prove each beyond a reasonable doubt. First, on the charge of failing to withhold taxes, the government must prove that Rankin willfully failed "to collect or truthfully account for and pay over" taxes imposed by the Internal Revenue Code. 26 U.S.C. § 7202. Second, on the charge of falsifying tax returns, the government must prove that Rankin willfully made false and material statements on federal income tax returns that he signed under penalty of perjury. 26 U.S.C. § 7206(1). Third, on the charge of obstructing the IRS, the government must prove that Rankin intimidated or impeded the IRS "corruptly or by force or threats of force." 26 U.S.C. § 7212(a). The plaintiff in Franks did not need to prove any of these elements. And the government here does not need to prove that Rankin was a majority shareholder of a closely held corporation or that he violated his fiduciary duties. The "offenses" in Franks and this prosecution are not the "same" because each has elements the other does not. See Jackson, 745 F.3d at 211. Thus, this prosecution does not violate the Double Jeopardy Clause. The district court properly denied Rankin's motion to dismiss.

That's pretty short, so the concurring opinion found more to discuss, going beyond the majority opinion to reach issues that perhaps were not necessary (however interesting):

Inconsistent Verdicts While Tolerable Generally Must Not Be Invited (9/2/13)

Inconsistent verdicts are tolerated in the federal criminal system.  For example, if the defendant is charged with two crimes and guilt of the second crime requires or at least assumes guilt of the first, then acquittal of the first count will not require reversal of a guilty verdict on the second count.  But everyone recognizes that that tolerance for inconsistent verdicts needs to be narrowly prescribed, and in the context presented here, should not be encouraged.  In United States v. Moran-Toala, ___ F.3d ___, 2013 U.S. App. LEXIS 16605 (2d Cir. 2013), here, the Second Circuit held that, where the district court in its instructions to the jury in effect sanctioned inconsistent verdicts, the inconsistent guilty verdict must be reversed.

The situation in Moran-Toala may be summarized as follows:  The defendant was charged with narcotics conspiracy and with conspiracy to exceed authorized access to a government computer in furtherance of the narcotics conspiracy.  (Yes, the second is a crime, however oddly worded; for convenient reference I refer to this as the computer access conspiracy count)  The defendant was acquitted of the narcotics conspiracy count but found guilty of the computer access conspiracy count.  If that is all that occurred, there would be no reversible error because of the law, noted above, that consistency between and among verdicts is not required.

But, that is not all that occurred.  During its deliberations, the jury asked the judge whether consistency between the verdicts was required.  The judge answered that question no, although he struggled with the answer.  As you might suspect, the Government wanted a victory at all costs and thus wanted the no answer; the defendant wanted a win at all costs and, apparently suspecting that the question indicated the jury believed that the Government had overcharged the case, wanted a yes answer to the question.  At the Government's insistence, the Court answered the question no -- in essence telling the jury that it could render inconsistent verdicts.  That answer is, of course, the law.

On appeal, the defendant argued that the answer, while consistent with the law, invited the jury to render inconsistent verdicts and therefore should be reversed.  The Court agreed.  I will provide more on the Court's legal analysis below, but I think the predicate procedural posture is interesting. An inconsistent verdict of this nature might mean that, if the jury had known that it had to be consistent in its verdicts, it would have either convicted of both counts or acquitted of both counts.  If there is a reversal for retrial, the indicated solution might be to have another jury hear the evidence and render consistent verdicts (or at least, if it rendered inconsistent verdicts, the inconsistency would not be invited by the trial judge).  But, having been acquitted of the narcotics conspiracy count, the defendant could not be retried on that count by virtue of the Double Jeopardy guarantee.  Hence, if there is a retrial, it will be for the computer access conspiracy offense only.  (Of course, as sentencing afficionados will know, if the defendant on retrial is convicted of that offense, the acquitted offense can still be considered, but that is another discussion for another time.)

Now, let's look at the court's reasoning for reversing despite the clear law that inconsistent verdicts are not per se reversible.  The pertinent part of the opinion is not very long, so I just quote it:

Aegis Convictions Affirmed Installment #4 - the Conspiracy Conviction (10/1/12)

The Aegis defendants were convicted of conspiracy which, as Judge Easterbrook has lamented, are “inevitable because prosecutors seem to have conspiracy on their word processors as Count I; rare is the case omitting such a charge.”   United States v. Reynolds, 919 F.2d 435, 439 (7th Cir. 1990).  At the end of this blog, I address the role of the conspiracy charge in white collar crime, of which tax crimes are a subset.  First, I want to deal with the Seventh Circuit's affirmance of conspiracy in the Aegis case, Vallone.

Sure enough, as Judge Easterbrook presciently noted, Count one of the indictment alleged conspiracy, specifically that the defendants violated 18 U.S.C. § 371 by conspiring to:

(a) defraud the United States by impeding, impairing, obstructing and defeating the lawful government functions of the IRS of the Department of the Treasury, an agency of the United States, in the ascertainment,  [*94] computation, assessment, and collection of revenues, namely income taxes; and (b) commit offenses against the United States, namely: to willfully aid and assist in, and procure, counsel, and advise the preparation and presentation, to the IRS, of returns and claims on behalf of others which were fraudulent and false as to various matters, in violation of Title 26, United States Code, Section 7206(2).

Tax and white collar crimes afficionados will recognize that, as framed, there is a single conspiracy with two objects.  The first object is what is called an offense conspiracy.  The second object is a defraud conspiracy, in a tax setting commonly referred to as a Klein conspiracy to impair or impeded the lawful functioning of the IRS.  (Note, the word defraud in the conspiracy statute is broader than the normal definition of defraud and reaches mere attempts to impair or impeded.)  A conspiracy can have a single object to violate one or more specific statutes (that is more technically an offense conspiracy) or to defraud (that is more technically a defraud conspiracy).  But the conspiracy can be to do both -- both to violate one or more statutes and to defraud.  The latter is the type involved in Vallone.

DOJ Tax Finally Decides to Fold 'Em with the Rigas's (1/27/12)

The Wall Street Journal Law Blog reports today that DOJ Tax has given up its prosecution of the John Rigas and Timothy Rigas, father and son ("the Rigas Defendants"), for alleged tax crimes.  Joe Palazzolo, The Daily Writing Sample: Paying Homage to Kenny Rogers (WSJ Law Blog 1/27/12), here.  Readers of this blog will be familiar with the Government's cases against the Rigas Defendants.   For blogs on the saga, see here.  In a nutshell, the Government prosecuted the Rigas Defendants for their alleged skullduggery with the failed Adelphia which they treated as a personal  piggybank (Adelphia being the bank and the Rigas Defendants being the piggies).

The major criminal trial was in New York City, in the Southern District of New York, where many large financial and securities crimes are prosecuted.  The SDNY indictment contained the ubiquitous conspiracy charge as Count One and various other substantive counts.  The conspiracy alleged was a conspiracy related to securities and bank fraud.  The defendants were convicted and sentenced to substantial terms (more on that later).

Following the SDNY convictions, the Government pursued charges against the Rigas Defendants in the Middle District of Pennsylvania for various alleged tax and related crimes related to their alleged looting of Adelphia.  (Note the venue rules for tax charges require or encourage prosecution closer to home.) Again, the ubiquitous conspiracy count appeared as Count One, alleging conspiracy to commit  tax offenses and a Klein (defraud the IRS) conspiracy, presumably both as objects of the single alleged conspiracy relating to tax matters.

In a prior interim appeal in this MDPA case, the Third Circuit held that the Rigas Defendants had made a substantial claim that this tax conspiracy charge was within the scope of the conspiracy alleged and tried in the original SDNY trial.  United States v. Rigas, 605 F.3d 194 (3d Cir. 2010) (en banc), here.  The consequence of that claim, if ultimately accepted, would be that the Rigas Defendants would be subject to double jeopardy in the second criminal case, requiring that the count be dismissed.  The Court remanded for the trial court to reconsider that issue.  For more detail on this holding, see my prior blog.  En Banc Rehearing in Rigas - Scope of Conspiracy, Totality, and Double Jeopardy (5/14/10), here.

En Banc Rehearing in Rigas - Scope of Conspiracy, Totality, and Double Jeopardy (5/14/10)

Eearlier this week, the Third Circuit decided the Rigas case en banc. United State v. Rigas, 605 F.3d 194 (3d Cr. 2010), here.  I have previously discussed the panel decision (United States v. Rigas, 584 F.3d 594 (3d Cir. 2009)) here. The Third Circuit took the case en banc

on the sole issue of whether the two clauses in 18 U.S.C. § 371 -- the "offense" clause and the "defraud" clause -- constitute separate offenses under the Double Jeopardy Clause of the United States Constitution.

You will recall that that statute defines a criminal conspiracy as a conspiracy to commit an offense and a conspiracy to defraud the United States -- "the 'offense' clause and the 'defraud' clause, as stated by the Court in granting the petition for rehearing en banc.

The en banc majority opinion was written by Judge Fuentes who wrote the panel majority opinion. The en banc minority opinion was written by Judge Rendell who wrote the panel minority opinion. Needless to say, the result does not change. And, I am not sure much new was added by the en banc opinions; the battle lines were staked out in the predicate panel opinions. I have not tried to compare the en banc and panel opinions to pick up sublte nuances, but will offer her the gist of the en banc opinions.

Judge Posner Addresses Double Jeopardy and Sentencing Financial Loss Calculations

In United States v. Peel, 595_F.3d 763 (7th Cir. 2010), Judge Posner addresses a variation of the double jeopardy issue in a nontax case. I address Peel in this blog because variations of the double jeopardy theme do arise in tax cases. I discuss my notions on the related themes -- lesser-included offense and merger -- in my text, but here devote the discussion to Judge Posner's decision in Peel.

The defendant was convicted of bankruptcy fraud and of obstruction of justice arising out of the same conduct. Unhappy with that result, the defendant argued on appeal that "to convict him of both violated the double jeopardy clause of the Fifth Amendment, because one offense is included in the other." Double jeopardy is most often encountered in successive trial situations, but, as Judge Posner noted, "with respect to cumulative sentences imposed in a single trial, the Double Jeopardy Clause prevents the sentencing court from prescribing greater punishment than the legislature intended." (Internal quotes and marks omitted.) Judge Posner reasoned that the dual charges here did violate the double jeopardy prohibition. His reasoning (stripped of quotes and case citations) is:

Tenth Circuit Summarizes Double Jeopardy in Rejecting the Argument (1/16/10)

In United States v. Farr, 591 F.3d 1322 (10th Cir. 2010), decided 1/11/10), the Tenth Circuit rejected a double jeopardy argument under the following facts:

Skoshi Thedford Farr was convicted by a jury of evading taxes in violation of 26 U.S.C. § 7201. We reversed her conviction on appeal because the proof presented at trial and the district court's jury instructions constructively amended the indictment. She was subsequently indicted for violating the same statute based on the same conduct. The district court denied her motion to dismiss on double jeopardy grounds. For the reasons that follow, we AFFIRM the district court's decision.

The Court's discussion of double jeopardy is short and sweet (p. 1325, case citations and quotation marks omitted for readability):

The [double jeopardy] clause only creates an impediment to subsequent prosecution when there was previously a judgment of acquittal on the charge.

The successful appeal of a judgment of conviction, on any ground other than the insufficiency of the evidence to support the verdict, poses no bar to further prosecution on the same charge, but a judgment of acquittal, whether based on a jury verdict of not guilty or on a ruling by the court that the evidence is insufficient to convict does bar future prosecution on the same charge. Whether a judgment or reversal constitutes an acquittal is not controlled by the form of the court's decision. Instead, `we must determine whether the ruling of the judge, whatever its label, actually represents a resolution, correct or not, of some or all of the factual elements of the offense charged.

Neither the district court nor this court made factual findings tantamount to a judgment of acquittal.

Issue Preclusion #2 - Conspiracy Theories and Getting to Perhaps (10/28/09)

Back on the preclusion theme I discussed yesterday here, I look at the case of United States v. Rigas, 584 F.3d 594 (3d Cir. 2009).

In Rigas, the defendants had been charged in New York (SDNY) on a broad federal conspiracy charge as follows:

Count One of the New York Indictment alleges a wide-ranging conspiracy (1) to create the false appearance that Adelphia's operating performance was strong and that Adelphia was reducing its debt burden, (2) to use Adelphia assets for the personal benefit of members of the Rigas family, and (3) to make false and misleading statements.

The Court focused its analysis on object (2), above, since it "most closely overlaps with the charges in the Pennsylvania Indictment."

The defendants were convicted of the conspiracy charge in the New York indictment. Then the Government (all right the grand jury) charged them in Pennsylvania on a federal tax conspiracy charge -- the ubiquitous defraud conspiracy charge.