DOJ Tax Press Release Warning of Consequences of Not Reporting and Paying Tax (4/14/15)

DOJ Tax issued this press release yesterday.  Justice Department Reminds Taxpayers that No One Is Above the Law or Below the Radar (DOJ Tax 4/13/15), here.  In the press release, DOJ Tax warns taxpayers of the legal risks of not properly reporting and paying taxes and trots out examples of ordinary taxpayers being prosecuted and punished.  This press release is not directed specifically to the offshore account phenomenon, probably since DOJ Tax has proclaimed the offshore initiative often and the overwhelming majority of taxpayers facing the April 15 deadline do not have offshore accounts .  But, of course, the point is that tax evasion is the problem whether ordinary / onshore or through offshore accounts.

Lies, Dams Lies and Statistics - DOJ's Promo Stats (4/9/13)

DOJ has just released DOJ Tax's promo PR as it Raison d'être, here.  This is a promo piece for DOJ -- and DOJ Tax, specifically.  And the piece has statistics, a play on Moneyball.  As I note in my Tax Procedure Book, Benjamin Disreali (or someone else) once mused that “there are lies, damned lies, and statistics.” I have discuss and expressed skepticism before about the DOJ Tax's statistics as they are presented in promo pieces.  The question is whether the statistics are even valid, but more importantly whether, as presented, they convey truth.  (Truth is not the same as literal accuracy.)   [Here are the contents of my footnote for the Disreali quote:  "This quote is commonly attributed to Benjamin Disreali, but sometimes it is attributed to Mark Twain. See http://en.wikipedia.org/wiki/Lies%2C_damned_lies%2C_and_statistics.  Even the attribution to Disreali has its doubters.  See http://www.york.ac.uk/depts/maths/histstat/lies.htm.]  I have tried unsuccessfully to have DOJ explain its claims / statistics before, without success; I will try once again to see what is behind the claims; in the meantime, I can present here only the claims; I do offer, however, to DOJ Tax personnel reading this blog entry to publish a guest blog going beneath the statistics claimed; I hope DOJ Tax will take my invitation.]  Here are the some excerpts (bold facing added by JAT):

The Tax Division’s primary purpose is to enforce the nation’s tax laws fully, fairly, and consistently, through both criminal and civil litigation. Some of the division’s accomplishments from the past fiscal year (FY 2012) include  

· Favorable outcomes were achieved in over 95 percent of all civil and criminal cases litigated by the Tax Division. 

· The division authorized 938 grand jury investigations and 1,751 prosecutions of individual defendants. 

· Division prosecutors obtained 127 indictments and 137 convictions. Those figures do not include additional criminal tax prosecutions handled exclusively by U.S. Attorney’s Offices nationwide. 

· The division collected over $290 million through affirmative civil litigation and retained over $1.1 billion through defensive tax refund and other litigation. 

· Taking into account the tax dollars collected and refunds not paid as a result of our successful litigation efforts, over the past five fiscal years (FY 2008-2012), the division’s attorneys have returned to the Federal Treasury an average of $14 for each dollar invested. 

* * * *

Former Kirkland & Ellis Partner Pleads to Tax Crimes (3/6/13)

Theodore L. Freedman, a former senior partner in Kirkland & Ellis, pled guilty today to four counts of tax perjury (Section 7206(1)) of approximately $2,097,211.  See USAO SDNY press release here.

The press release provides the typical hype of such press releases in tax season to encourage others to report taxes properly:

Manhattan U.S. Attorney Preet Bharara stated: “Theodore Freedman was an attorney at a high-powered and prestigious law firm who lied about his multi-million dollar compensation in order to avoid paying taxes, breaking the law and violating his professional code of conduct. Two things are certain: Freedman will now have to pay his taxes and more; and Freedman is now an admitted felon who has sacrificed his reputation, career, and potentially his liberty, for a few dollars. Others should not make the same bad calculation.”

The press release provides more details.  The only comment I have is that the press release says the plea is to four counts of tax fraud, which commonly means tax evasion.  However, the press release further says that

FREEDMAN, 65, of Pine Plains, New York, faces a maximum sentence of three years in prison on each of the tax fraud counts, for a total maximum sentence of 12 years in prison.

Hence, since tax evasion is a five year felony, I infer that the plea was to four counts of tax perjury rather than tax evasion.  Extrapolating from  other mainstream tax sentencings and the sentencing guidelines, as well as other white collar crime cases, he is unlikely to be sentence anywhere near 12 years.

Plea to Tax Obstruction in Evasion of Payment Case (1/31/13)

I cut and paste this IRS news release principally for the benefit of students just being introduced to federal tax crimes.  First, the press release illustrates that the criminal enforcement system seeks to undergird the federal tax system by publicizing compliance initiatives that will encourage other taxpayers to voluntarily comply.  The IRS thus issues press releases for criminal actions.  DOJ Tax and U.S. Attorneys Offices issue press releases as well.  I often refer to the DOJ Tax and USAO press releases and have links to the right of the blogs to DOJ Tax's press release sites.  Second, this particular plea illustrates a matter we covered last week in the Federal Tax Crimes class at UH Law School.  We were covering tax evasion.  Tax evasion under Section 7201, here, is usually evasion of assessment (principally by false return underreporting tax liability), but sometimes by evasion of payment.  The case described in the press release below seems to fit the pattern of an an evasion of payment case, although the charge was not tax evasion.  The pattern for evasion of payment that we discussed in class was for a taxpayer to have unpaid assessed tax liabilities (often reported by him or set up on audit) that he avoids paying and takes affirmative steps to avoid paying.  That appears to be what this defendant did.

We have also noted in class that a pattern of conduct can often fit within the elements of two or more crimes.  Here, the pattern of conduct could have been charged as evasion of payment but was charged as tax obstruction, Section 7212(a), here.  This was a plea deal and perhaps the "lesser" crime of tax obstruction is what the defendant required in order to plea.  Facially, it is a lesser crime than tax evasion.  Tax evasion is a five year maximum sentence, whereas tax obstruction is a three year maximum sentence.  Given the amount of the tax loss ($1.7 million), it is possible that the three year count of conviction could be less than at least the top of the sentencing guideline range.  I did a fairly clean calculation of the guidelines range (only factors were the tax loss and the 3-level reduction for acceptance) and determined an indicated guidelines range of 30-37 months, so the maximum period allowed by a Section 7212(a) plea will cap the sentence at 36 months.  And this is true not only as to the guidelines range, but also as to any possibility of an upward Booker variance.  Some of the foregoing will be unintelligible to students in the early part of the course, but will be easily understood once we complete the Guidelines chapter.

Has DOJ Tax Crossed the Line in its Press Releases? (5/25/12)

Press releases are an important component of the Government's war on tax crime.  The notion is that, for maximum general tax enforcement bang for the limited criminal enforcement buck, the public needs to hear that tax crimes are enforced and thereby encourage better tax behavior.  Hence, publicity of criminal tax charges, convictions and sentences, by the IRS and by DOJ Tax is standard, almost daily, fare.  For the IRS's publicity policy statement, see IRM 1.2.19.1.9  (Approved 05-23-1986), Policy Statement 1-183, here; for DOJ Tax's Policies, see AAG Memo of 9/8/2000, here; For DOJ Tax's 2012 press releases, see here.  U.S. Attorneys also issue press releases in selective tax cases.

DOJ Tax recently issued a press release that has drawn controversy.  The title of the press release is:  Georgia Tax Cheats Indicted for Conspiring to Defraud the United States (5/23/12), here,  The White Collar Crime Prof Blog questions the ethical propriety of the release.  See DOJ Press Release Treads on Presumption of Innocence (White Collar Crime Prof Blog 5/24/12), here.  Not only does the author of the blog call out DOJ Tax, but, via a comment to that blog (see the blog), so does Professor Monroe Freedman, a law professor and noted expert on ethics, see here.  The point is that by calling them tax cheats DOJ has pronounced their guilt in a way that impairs the presumption of innocence.  It would have been better to just say that the individuals were charged rather than calling the tax cheats or, alternatively, calling them alleged tax cheats.  But alleged tax cheats may not have the same punch as just tax cheats.

I would appreciate comment from this community on the issues raised as to press releases.

I am aware of no response yet from DOJ Tax.  I will post one if I hear of it.