Compassionate Release from Incarceration Based on COVID-19 Pandemic (4/20/20; 5/7/20)

This blog entry was updated on 5/4/20 to add a short notice discussion of Paul Daugerdas' denial of compassionate release in paragraph 5 below; and on 5/7/20 to add a reference and link to Peter Reilly's blog on the Daugerdas matter.

The Procedurally Taxing Blog has an excellent posting today on the compassionate release of a notorious tax criminal, Morris Zukerman.  Leslie Book, Court Grants Compassionate Release to High Profile Tax Felon Morris Zukerman (Procedurally Taxing Blog 4/20/20), here.  The blog entry discusses the Court’s granting Zukerman release because of his physical characteristics (75 years old, diabetes, hypertension and obesity) and close physical incarceration with other inmates that might make him particularly susceptible to COVID-19 infection and serious consequences.

Since I have never before considered the compassionate release provision, 18 USC § 3582, and have not done any independent research, I refer readers to the PT Blog entry linked above, which also has a link to the decision granting Zukerman the release.

JAT Comments:

1.  I wonder whether this and related decisions granting compassionate release in the age of COVID-19 will open the floodgates of such requests for those who, sometimes with the aid of their attorneys, conjure up some special characteristics.  (See paragraph 4 below discussing the Valentino habeas corpus proceeding.)

2.  I wonder whether the Court’s reacted too hastily to the exhaustion requirement.  As often with seeking relief from Government agencies, the statute requires that the incarcerated person first seek relief from the agency.  Zukerman did seek that relief but, rather than waiting for an answer to his request or the passage of 30 days, he filed the court proceeding three days after the request.  Had that process been allowed, perhaps the Bureau of Prisons could have found some accommodation to meet at least some of the concerns claimed by Zukerman.  But, the court just blew past the exhaustion requirement based on his physical characteristics, the conditions of his incarceration and the COVID-19 pandemic.  In my posting earlier today, I said:  "(Presumably, the Bureau of Prisons had time in the court proceedings to offer the court its views as to why it believed Zukerman were not at disproportionate risk.)"  I have just reviewed Zukerman's letter response to the Government's opposition, CourtListener here, and quote from it on this issue (pp. 2-3):

U.S. Tax Attorney Denied Habeas Corpus in Extradition Proceeding Based on Netherlands Criminal Tax Conviction (2/10/20)

In Valentino v. United States Marshal (S.D. Tex. Civ. Action 4:20-CV-304 order dated 1/30/20), here, the court denied Valentino’s request for habeas corpus relief in an extradition proceeding.  Valentino is an attorney who practiced international tax law (see some bio information in JAT Comments below at #4).

The Court starts as follows:

I. Procedural Background 

This habeas case arises out of an extradition proceeding. Joseph Valentino was charged and convicted by the Kingdom of the Netherlands for participating in a criminal organization that intentionally filed false corporate tax returns. The Amsterdam district public prosecutor issued a summons for the criminal proceedings in the Netherlands on November 19, 2002. Trial was held in absentia and the judgment was rendered on February 24, 2004. After Valentino appealed his conviction and sentence to the Court of Appeals of Amsterdam, during which proceedings he was represented by counsel, the Court of Appeals rendered a new judgment finding Valentino guilty on two counts: Count One — "participation in an organization for the purpose of committing crimes" — and Count Two — "co-perpetration of intentionally incorrectly filing a tax return provided by tax law." He was sentenced to thirty-four months in prison. 

On February 2, 2018, the United States sought Valentino's extradition to the Kingdom of the Netherlands to execute a sentence on his conviction. Valentino was arrested around April 18, 2018. After holding a detention hearing, United States Magistrate Judge Stephen Wm. Smith ordered Valentino to be released on reasonable conditions pending his extradition hearing. United States v. Valentino, No. 18-mj-00146, 2018 WL 2187645, at *6 (S.D. Tex. May 11, 2018). Judge Smith found that Valentino did not pose a flight risk or a danger to the community and had a "reasonable likelihood" of prevailing on one or more issues at his extradition hearing. He found special circumstances supporting Valentino's release and ordered him released on bond pending the extradition hearing. He noted that "this is only a decision on whether to release Valentino pending the extradition hearing," which "placed [the court] in the difficult task of assessing Valentino's success on the merits" without "prejudging the claims or the evidence until both sides have had an opportunity to be fully heard. Further, the court may not have before it all of the evidence that will be presented in the extradition hearing." Id. at *5 (emphasis added). 

Valentino then moved to dismiss the extradition complaint. Magistrate Judge Peter Bray held a formal extradition proceeding on December 4, 2019, and on January 23, 2020, issued a thorough, 37-page opinion denying Valentino's Motion to Dismiss the United States' Extradition Complaint. Judge Bray certified Valentino as extraditable. 

The next day, Valentino filed a Petition for a Writ of Habeas Corpus under 28 U.S.C. section 2241, which currently is pending before this Court. Dkt. 1. Valentino asserts that the Court should grant the writ and hold that extradition must be denied because (1) all but two of the charges against Valentino were barred by the statute of limitations under United States law, (2) the fourteen-year delay between conviction and the extradition complaint violates Valentino's due process rights, and (3) the Netherlands failed to establish probable cause to believe that Valentino had the requisite knowledge to convict him of the charged offenses. These arguments were raised in the extradition proceedings and addressed in Judge Bray's opinion. Valentino asserts he has a high likelihood of success on these claims, and that he poses no flight risk or danger to the community. These factors, he argues, along with the Netherlands' fourteen-year delay between convicting him and seeking his extradition, establish "special circumstances" that warrant his release until determination of his habeas petition.

German Court Denies U.S. Request for Extradition of Wegelin Banker (12/9/16)

We covered in several blog entries the saga of Raoul Weil, a top UBS banker, who was arrested in Italy on an Interpol Red Notice and extradited to the U.S.    See entries on Weil, here.  Now, we have news that a German court has refused to extradite a Wegelin banker, Roger Keller.  Nate Raymond, Ex-Swiss banker goes home after U.S. loses extradition from Germany (Reuters 12/9/16), here.  All posts on Keller can be viewed here.  Key excerpts from the article on Keller are:

A former Swiss banker who was arrested last year in Germany on U.S. charges that he helped wealthy Americans evade taxes is back in Switzerland after the denial of a request to extradite him to the United States from Germany, his lawyer said on Friday. 

Roger Keller, a onetime client adviser in Zurich at Wegelin & Co, was one of three bankers at the now-defunct Swiss private bank charged in a 2012 indictment in New York federal court for helping U.S. taxpayers hide more than $1.2 billion in assets. 

He was arrested in Germany in February 2015 at the request of the U.S. government, which sought his extradition, and served seven months in jail before being granted bail, said Thomas Green, Keller's U.S. lawyer at the law firm Sidley Austin. 

By German court order, he was officially released on Friday after the U.S. request to extradite him was denied, Green said, though Keller had already been allowed to return to Switzerland a "few days ago."

Denial of extradition just wins that battle.  It does not resolve the U.S. criminal charge against Keller.

And, the statute of limitations is determined by the filing of the charges.  And, as to any other charges, the statute would be suspended by § 6531, here, which provides:  "The time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States or is a fugitive from justice within the meaning of section 3290 of Title 18 of the United States Code, shall not be taken as any part of the time limited by law for the commencement of such proceedings."

Tax Crimes Fugitive for Almost 20 Years Extradited to US (7/23/15)

DOJ Tax announced here the apprehension and extradition of a U.S. person, Gideon Misulovin, convicted in the 1990s for tax and related crimes involving motor fuel excise taxes.  He had been on the lam since conviction.  Here are excerpts from the press release.

A former New York businessman, who disappeared the same day a federal jury sitting in the U.S. District Court in Newark, New Jersey, began deliberating in his tax evasion and fraud trial, was caught while in Greece more than 18 years after his conviction, and appeared in federal court in the District of New Jersey on Friday, July 17. . . .  

Gideon Misulovin, 58, whose last known address was in New York City, was extradited from Greece to the United States to serve his 10-year prison sentence.  He has been incarcerated in the United States since his return on July 16. 

On March 7, 1996, a jury convicted Misulovin of conspiracy to impede and impair the Internal Revenue Service (IRS) in the ascertainment and collection of more than $6.5 million in federal motor fuel excise taxes, wire fraud and money laundering stemming from a scheme to conceal the unpaid diesel fuel excise taxes from state and federal tax authorities. 

During trial, Misulovin was free on $500,000 bail and attended each day of the trial.  He failed to appear in court March 4, 1996, for the parties’ closing arguments.  U.S. Senior District Judge Dickinson R. Debevoise of the District of New Jersey in Newark issued a warrant for his arrest.  On June 25, 1997, Judge Debevoise sentenced Misulovin in absentia to serve 10 years in prison and a three-year term of supervised release, and to pay a $150,000 fine.  The court also ordered Misulovin to pay restitution in the amount of $200,000 to the United States and $100,000 to the state of New Jersey. 

The evidence at trial established that from 1988 through Jan. 31, 1993, Misulovin and his co-conspirators sold untaxed diesel fuel in a series of paper transactions using wholesale companies.  Some of the companies were shams and called “burn” or “butterfly” companies.  As part of the scheme, the sham company would assume the federal and state tax liability and then vanish, allowing the conspirators to keep the excise taxes they collected from truck stops and service stations. 

The case, part of a then-nationwide motor fuel excise tax enforcement effort, was investigated jointly by the Motor Fuel Task Force and the U.S. Attorney’s Office of the District of New Jersey.  In an effort to infiltrate the bootleg gasoline industry, task force agents set up an undercover business called RLJ Management that competed directly with the defendants’ operation. 

At the conclusion of the undercover operation, in November 1992, federal agents seized Misulovin’s assets, including approximately $70,000 in cash from his residence and $277,000 from his business bank account.  

Misulovin’s co-defendant and co-conspirator, Arnold Zeidenfeld, of Brooklyn, New York, pleaded guilty prior to trial and testified for the government.  Gurmit Singh and Manbir Singh, of Matawan, New Jersey, who operated truck stops in southern New Jersey, also pleaded guilty for their roles in the scheme. 

In August 2014, based on an Interpol Red Notice, Misulovin was detained in a Greek airport using an alias and traveling with an Israeli passport.  He was subsequently arrested pursuant to a U.S. request for a provisional arrest, and after contested extradition proceedings, was found extraditable in 2015.  

Of course, he will likely face more charges for going on the lam.  So, it looks like he will be in prison much of the rest of his life, depending upon his longevity.

Article on Swiss Enabler Fugitives Avoiding U.S. Indictments (12/26/14)

Giles Broom and David Voreacos, Swiss Bankers in Limbo After U.S. Jury Clears Ex-UBS Manager (12/22/14), here.  Excerpts:

Twenty-five offshore bankers, lawyers and advisers have yet to answer U.S. Justice Department charges that they helped Americans evade taxes. Most live in Switzerland, where they remain off-limits to U.S. prosecutors because the country doesn’t extradite people for tax crimes. If they cross the border into another country, they risk arrest, and the U.S. charges have no expiration date. 

* * * * 

Weil’s compatriots were cheered by his court victory, with Geneva financial newspaper L’Agefi calling him a “national hero” of “remarkable courage.” His success may tempt others to take their chances with a jury or to plead guilty and help prosecutors in bids for leniency. 

They include former employees of Switzerland’s top three wealth managers -- UBS, Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER) Just 10 days after Weil’s acquittal, Martin Dunki, a 66-year-old retired client adviser at Zurich-based Rahn & Bodmer Banquiers, a private bank established in 1750, was indicted on a charge of conspiring to help Americans hide hundreds of millions of dollars in offshore accounts. 

* * * * 

Making Deals 

“Client advisers who committed egregious offenses are probably trying to cooperate and strike a deal with the Justice Department,” Patel said. “Bankers fear coming to the U.S. because the DOJ can detain them on arrival pending trial. Therefore, walking around freely in Switzerland may be a more appealing option, even if the charges remain unresolved.” 

Stefan Buck, who was Bank Frey & Co.’s head of private banking, was indicted last year in New York. His lawyer filed a motion seeking bail without Buck’s first having to appear in a New York courtroom. Buck ultimately “wishes to leave the ‘safe haven’ of Switzerland to appear in a U.S. court to clear his name,” the filing said. Prosecutors oppose his bail motion, which is pending. 

Josef Dorig, who founded a Swiss trust company after working 36 years at Credit Suisse, pleaded guilty in April, admitting he created phony structures to help clients cheat the IRS. Dorig, 72, cooperated with U.S. prosecutors and is slated for sentencing Jan. 16 in federal court in Alexandria, Virginia. 

Probation Sought

In a pre-sentencing memorandum filed with the court, his lawyers said he deserves probation because he accepted responsibility and was not extraditable from Switzerland.
“Mr. Dorig had absolutely no incentive to voluntarily enter the United States to answer the charges against him or cooperate with the government,” his lawyers wrote. “He easily could have stayed in Switzerland and lived the rest of his life peacefully and happily in his homeland. But he did not.” 

The U.S. probe has benefited from voluntary disclosures by at least 45,000 taxpayers and more than 100 Swiss banks seeking to reduce penalties through non-prosecution agreements. Information passed to U.S. authorities contains thousands of employee names, according to Douglas Hornung, a Geneva-based lawyer who represents Swiss financial workers. 

“Weil’s acquittal was far from good news for bank employees lower down the food chain,” Hornung [Douglas Hornung, a Geneva-based attorney] said. “After losing face in court in November, U.S. prosecutors will redouble their efforts to pursue smaller fish.”

JAT Comments:

Senators Urge Extradition of Indicted Swiss Bank Enablers (3/18/14)

Senators Levin and McCain, key members of the Senate Permanent Subcommittee on Investigations which held a recent hearing on offshore bank tax evasion, has written DOJ to seek extradition from Switzerland of indicted enablers.  The letter is here.

The body of the letter is short, so I quote it in full:

We are writing to urge a change in the current policy of the Department of Justice (DOJ) which, for more than five years, has not sought extradition from Switzerland of a single Swiss national charged with criminal conduct related to aiding and abetting U.S. tax evasion. 

During the hearing held by the U.S. Senate Permanent Subcommittee on Investigations on February 26, 2014, you testified that DOJ has charged 35 bankers and 25 financial advisors with misconduct related to facilitating U.S. tax evasion.  Of those, 6 have been convicted or pled guilty, and the majority of the rest apparently live openly in Switzerland, having avoided trial on their alleged crimes for years.  Yet you also testified that DOJ has not asked Switzerland to extradite any of those defendants, because DOJ believes “the Swiss will not extradite its citizens.”  

The extradition treaty between the United States and Switzerland, however, does not bar the extradition of Swiss nationals who assisted U.S. nationals in the commission of criminal tax evasion, and it is time to test the Swiss government’s professed willingness to cooperate with international tax enforcement efforts and put an end to its nationals participating in criminal tax offenses.  While Article 3 of the U.S.-Swiss treaty provides some discretion to the Swiss government to deny U.S. extradition requests related to tax offenses, that discretion is limited.  The treaty states that it can “not be used to shield from extradition underlying criminal conduct, such as fraud …or falsification of public documents.”  At least some of the charges in the indictments filed against Swiss bankers and intermediaries appear to meet that standard.  Additionally, Article 8, which provides an exception to extradition requests that name a treaty partner’s nationals, is limited to circumstances where “[t]he Requested State [Switzerland] … has jurisdiction to prosecute that person for the acts for which extradition is sought.” Switzerland does not consider tax evasion a crime, and therefore cannot prosecute such cases, which means the Article 8 exception should not apply to U.S. extradition requests to Switzerland for cases related to tax evasion.  

Given that the current treaty does not foreclose the cooperation of the Swiss government in extradition requests for tax cases, we urge DOJ to at least attempt to use the authorities laid out in that treaty.  Even if a request is unsuccessful, it will inform both Switzerland and its citizens that the United States is ready to make full use of available legal tools to stop facilitation of U.S. tax evasion and hold alleged wrongdoers accountable. 

Thank you for your attention to this matter.

Raoul Weil Pleads Not Guilty: Thoughts and Speculations (1/8/14)

Raoul Weil, the top UBS banker, pled not guilty yesterday.  See Zachary Fagenson, UPDATE 2-Ex-UBS banker pleads not guilty in major tax fraud case (Reuters 1/7/14), here.  For prior blogs on Weil, see the list at the end of this blog.

The not guilty plea is a routine step in a criminal case.  So there really is nothing eventful in Weil's plea itself.  A plea deal is often agreed to or finalized after the initial not guilty plea, and the defendant will still qualify for hte sentencing benefits of accepting responsibility provided it is not immediately before trial after all the preparation work has been done.

The article, however, does report some speculations from Bradley Birkenfeld's lawyer on his whistleblower claim that the government may be "negotiating a 'sweetheart deal'" with Weil in order to keep him from implicating prominent former UBS account holders.  This claim is made on the lawyer's web site under an entry titled Federal Court Hearing Scheduled for UBS Tax Fraud Kingpin Raoul Weil (Whistleblowers Protection Blog 1/6/13), here.  The source of the lawyer's claim is obviously Birkenfeld, who worked for Weil at UBS.

I can't speak to whether the lawyer's claim is true.  I am skeptical.  If the Government wanted to keep things quiet , the Government would not have obtained his indictment and then pursued his extradition.  This smacks of a conspiracy theory with scant but speculations on thin threads.

I do note at least the possibility that Weil could be a whistleblower and claim some gargantuan award.  Of course, his central role in the tax underpayments involved would likely disqualify him from a whistleblower award.  See Section 7623(b)(3), here.

Tax Notes Today has an article offering skeptical comments on the lawyer's claim.  Stephanie Soong Johnston, Former UBS Banker Pleads Not Guilty to Tax Fraud Conspiracy Charges, 2014 TNT 5-2 (1/8/14).  Peter Hardy, a well-known criminal tax lawyer (bio here), expresses his doubts as well.  From the article:

 "He may or may not know embarrassing details, but generally speaking, the DOJ wants to prosecute, when appropriate, the elite, not to make sweetheart deals to protect them," Hardy told Tax Analysts. "The government is going to want him to enter into a guilty plea and cooperate."

According to Hardy, it is unusual that Weil faces only one count of conspiracy because economic crime cases, including tax fraud, usually include multiple counts. Because the general statute of limitations for tax crimes is six years and the last overt act the indictment references is in 2006, the government may not be able to add any additional charges, he said.

Weil, former UBS Exec and Former Fugitive, Set for Preliminary Hearing Today (12/16/13)

Raymond Weil, the former head of UBS's global wealth management business, who was a fugitive from justice until recently is expected cooperate with DOJ Tax incident to his extradition to the U.S.  See David Voreacos, Ex-UBS Banker Weil Seen Cooperating With Prosecutors (Bloomberg 12/16/13), here.  Key excerpts:

Weil, 54, is set to make an initial appearance today in federal court in Fort Lauderdale, Florida, where he was indicted in October 2008 and later declared a fugitive. His lawyer has said he is innocent. Weil hasn’t entered a plea in the case.

Weil is the highest-ranking banker among about 100 people charged since 2008 by the U.S. in a crackdown on offshore tax evasion. About three dozen foreign bankers, lawyers and advisers were charged. Most are at large. Tax lawyers not involved in the case said they expect Weil to plead guilty, cooperate with prosecutors, and seek leniency at sentencing. 

* * * * 

‘Less Useful’ 

“The window for his cooperation has shrunk and shrunk and shrunk as the U.S. government has gathered huge amounts of information from UBS and from taxpayers through the Offshore Voluntary Disclosure Program,” said Hochman of Bingham McCutchen LLP in Santa Monica, California. “What may have been useful five years ago is certainly a lot less useful today.” 

Still, Weil’s “only choice is to win at trial or turn over information that the U.S. government doesn’t have,” he said.

The Plot Thickens for Swiss Bankers Involved In U.S. Evasion (8/8/12; supplement 8/9/12)

A commenter alerted me to some developments regarding at-risk Swiss bankers and their travel plans.  I link to some of the articles below with some cuts and pastes:

US may target Swiss bankers travelling in Europe (Swissinfo.ch 8/6/12), here.

Swiss bankers whose names were delivered to the United States in April as part of the crackdown on US tax evaders face the risk of arrest while travelling in some European countries, not just on US soil. 

Extradition treaties between the US and countries including France, Germany, Italy, Austria and Britain make it possible for the US to take legal steps via Interpol against bankers suspected of helping US citizens evade taxes, Denise Chervet, central secretary of the Swiss Bank Employees Association told the Swiss News Agency. 

 “If the US issues an arrest warrant via Interpol, the employee targeted could be arrested in any country with which Washington has an extradition treaty, and where the alleged offences are also punishable,” Chervet said. 

 Around 10,000 employees of 11 banks under investigation by US authorities could be affected by potential travel restrictions. 

 Chervet said that employees visiting the US who had had direct contact with American clients “run the risk of being arrested for violating American tax laws for having assisted with tax evasion”. Other bank employees who may not have had direct contact with clients could be called as witnesses, she said. 

 Bankers’ families could also be implicated: a report in La Tribune de Genève newspaper this week said two teenagers who arrived in the US to visit their grandparents were interrogated by officials for six hours about the whereabouts and working habits of their father, a Geneva banker.