Appeals Arguments Over Whether Government Brought Evasion and Tax Conspiracy Charges Within Statute of Limitations With No Mention of WSLA (9/19/21)

In United States v. Pursley (on appeal to CA 5, Dkt. No. 20-20454), Pursley was convicted of 1 count of conspiracy related to tax and three counts of tax evasion, two for Pursley’s taxes and one for the taxes of another.  See the judgment here.  Pursley was a lawyer in Houston who enabled tax evasion by a client by moving untaxed monies from foreign accounts into the U.S. without accounting to the IRS for the unpaid tax.  Pursley’s client ultimately joined the OVDP, thus avoiding his own criminal exposure.  As required under the OVDP, the client had to disclose the enabler of the tax evasion scheme.

At the conclusion of trial after the guilty verdicts were returned, the judge sentenced Pursley to 24 months incarceration, ordered restitution of $2.5 million and imposed standard conditions.  I think the restitution was for Pursley’s taxes rather than the client’s taxes, because the client’s taxes had been paid in the OVDP.  So just from the restitution of Pursley’s taxes for two years, one can infer that he made a lot of money for his conduct.  But that need not detain us here.

On the appeal, Pursley raises only statute of limitations issues.  The parties’ briefs on appeal are:  Pursley’s opening brief, here; United States’ answering brief, here; and Pursley’s reply brief here. Pursley’s arguments are:

1.     As to all counts, the indictment was brought outside the statute  of limitations.

2.     As to the conspiracy count, the trial court erred by failing to give a requested instruction that it must find one overt act within the statute of limitations.

3.     As to the tax evasion counts, the trial court erred by failing to give a requested instruction that it must find one affirmative act within the statute of limitations.

The first argument, if successful, would require complete reversal and expungement of the conviction.  The second two would require retrial where, if there is enough evidence to get to the jury, the jury will almost certainly find at least one affirmative act within the statute of limitations.

Pursley makes no argument that the jury verdict of guilt should be overturned, except as required by the statute of limitations arguments.

The key statute of limitations argument (in # 1 above) is that the indictment was not brought within the applicable statute of limitations.  The judgment here provides in relevant part:  

Title & Section	Nature of the Offense	Offense Ended	Count
18 U.S.C. § 371	Conspiracy to defraud the U.S.	05/31/2013	1
26 U.S.C. § 7201	Tax evasion	09/20/2018	2
26 U.S.C. § 7201	Tax evasion	12/31/2012	3
26 U.S.C. § 7201	Tax evasion	10/31/2011	4

The indictment, here, was filed on September 20, 2018.  Just on the face of the judgment, it would appear that, without more, the six-year criminal statute of limitations would have expired on Count 4 on 10/31/2017, but the other counts would have been timely under the six-year statute.

CA9 Holds that Suspension of Limitations Act (“WSLA”) Applies to Fraud and Property Offense Crimes Without Nexus to War or Authorized Use of Armed Forces (5/13/21)

In United States v. Nishiie, 996 F.3d 1013 (9th Cir. 5/12/21), here, in a nontax criminal case, the Court held that the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, here, applies to suspend the criminal statute of limitations for fraud and property offense crimes “whether or not a nexus exists between these offenses and either war or ‘authorized use of the Armed Forces.’“ (Quote is from the Ninth Circuit’s Summary.)

 After reaching that conclusion, the Court said (Slip Op. 29-32, emphasis supplied):

            We recognize the WSLA “creates an exception to a longstanding congressional ‘policy of repose’ that is fundamental to our society and our criminal law.” Bridges, 346 U.S. at 215–16. The WSLA suspends already-running statutes of limitation when its conditions are met. As we detail, the WSLA unambiguously tolls the statute of limitations during any period of war or authorization of the use of the Armed Forces. We are acutely aware—and somewhat concerned—that this interpretation, while legally correct, may effectively toll the statute of limitations for offenses under the WSLA for 20, 30, even 40 plus years. In large part that results from the expansion of war powers far beyond what they were when the WSLA was codified in 1948. Any policy concern for subjecting defendants to [*30] decades-long liability is subordinated to the WSLA’s unambiguous language.

            “We sit as judges, not as legislators . . .” California v. Ramos, 463 U.S. 992, 1014 (1983). “It is hardly this Court’s place to pick and choose among competing policy arguments . . . selecting whatever outcome seems to us most congenial, efficient, or fair. Our license to interpret statutes does not include the power to engage in . . . judicial policymaking.” Pereida v. Wilkinson, 141 S. Ct. 754, 766–67 (2021). Inducing perpetual limbo for potential criminal defendants under the WSLA is presumably not what Congress had contemplated. Nor did the 1940s era Congress likely anticipate the transformation of warfare. Our interpretation may seem like a gratuitous reading in light of modern criminal justice reform. “But our public policy is fixed by Congress, not the courts.” Bridges, 346 U.S. at 231 (Reed, J., dissenting). Readily apparent from the WSLA’s amendment history is that Congress is fully capable of changing course and cabining the reach of any statute of limitations if it decides public policy warrants such a change. See Ramos v. Wolf, 975 F.3d 872, 900 (9th Cir. 2020) (R. Nelson, J., concurring) (“Our sole responsibility as Article III judges is narrow—‘to say what the law is.’”) (quoting Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803)); id. (“By constitutional design, the branch that is qualified to establish . . . policy and check any excesses in the implementation of that policy is Congress.”) (citing City & Cnty. of San Francisco v. U.S. Citizenship & Immigr. Servs., 944 F.3d 773, 809 (9th Cir. 2019) (Bybee, J., concurring)).

U.S. Taxpayer Renouncing U.S. Citizenship Indicted And Extradition Started (5/11/20)

A reader just alerted me that I had overlooked a significant item of interest to readers of this blog. On March 5, 2020,, DOJ issued the following press release:  Founder of Russian Bank Charged with Tax Fraud: Allegedly Concealed $1 Billion in Assets and Income when Renouncing U.S. Citizenship, here.

Key excerpts from the release are:

According to the indictment, Oleg Tinkov was the indirect majority shareholder of a branchless online bank that provided its customers with financial and bank services.  The indictment alleges as a result of an initial public offering (IPO) on the London Stock Exchange in 2013, Tinkov beneficially owned more than $1 billion worth of the bank’s shares.  The indictment further alleges that three days after the IPO, Tinkov renounced his U.S. citizenship – a taxable event requiring Tinkov to report to the IRS the constructive sale of his worldwide assets, report the gain on the constructive sale of those assets to the IRS, and pay tax on such gain to the IRS.  Although Tinkov allegedly beneficially owned more than $1 billion of TCS shares at the time of his expatriation through a British Virgin Island structure, the indictment charges that Tinkov filed a false 2013 tax return with the IRS that reported income of less than $206,000, and a false 2013 Initial and Annual Expatriation Statement reporting that his net worth was $300,000.

If convicted, Tinkov faces a maximum sentence of three years in prison on each count.  He also faces a period of supervised release, restitution, and monetary penalties.

The indictment, here, charges two counts of tax perjury, § 7206(1), so the maximum incarceration period on the charges are six years.  The Government could always get a grand jury to issue a superseding indictment with more charges (e.g., FBAR counts or evasion counts, which are suggested by the discussion above).  It is reported that Tinkov has acute leukemia so (see e.g., Moscow Times article here), regardless of the number of accounts, I doubt that any period of incarceration would exceed 6 years.

Also, Tinkov apparently spent a lot of time outside the U.S., so during that period the statute of limitations was suspended (or not counted) toward the six-year statute otherwise allowed for the charges offenses.  § 6531(5) and flush language.

The CourtListener docket entries are here.

Court Denies Motion to Dismiss Counts Against Tax Shelter Lawyer (4/14/17)

In United States v. Levine, 2017 U.S. Dist. LEXIS 54071 (SD NY 2017), here, the court (Judge Rakoff) denied Howard Levine's motion to dismiss.  I had missed the indictment when it was announced last year, so I will first go over the announcement which fairly summarizes the indictment. See USAO SDNY announcement: Tax Attorney And CPA Indicted For Tax Evasion And Diversion Of Tax Shelter Fees From Major Manhattan Law Firm, here, with link to the indictment, here.  The key excerpts are:

HAROLD LEVINE, a tax attorney and former head of the tax department at a major Manhattan Law Firm (the “Law Firm”), schemed with RONALD KATZ, a certified public accountant, to divert from the Law Firm over $3 million in fee income from tax shelter and related transactions that LEVINE worked on while serving as a partner of the New York Law Firm.  In addition, LEVINE failed to report that fee income to the IRS on his personal tax returns during the period 2005-2011.  For his involvement in this scheme, KATZ received and failed to report to the IRS over $1.2 million in fee income.   

As part of the fee diversion scheme, for example, LEVINE caused tax shelter fees paid by a Law Firm client to be routed to a partnership entity he co-owned with KATZ and thereafter used those fees – totaling approximately $500,000 – to be used to purchase a home in Levittown, New York.  LEVINE caused the home to be purchased as a residence for a Law Firm employee (the “Law Firm Employee”) with whom he carried on a close personal relationship.  Although LEVINE allowed the Law Firm Employee to reside in the Levittown house for over five years without paying rent, LEVINE and KATZ prepared tax returns for the entity through which the home was purchased to claim false deductions as a rental property. 

In or about 2013, LEVINE was questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received for those transactions.  During that questioning, LEVINE falsely represented that the Law Firm Employee paid him $1,000 per month in rent while living in the Levittown home.  In addition, when the Law Firm Employee was contacted by the IRS and summoned to appear for testimony, LEVINE urged the employee to represent falsely to the IRS that she had paid $1,000 per month in rent to LEVINE.

The charged counts were (the numbering is for the count numbers in the indictment):

1. Tax obstruction, § 7212(a), Levine & Katz, Count 1
2. Conspiracy, 18 USC 371, Levine & Katz, Count 2
3. Tax evasion, § 7201, 2008 Levine, Count 3
4. Tax evasion, § 7201, 2009 Katz, Count 4
5. Tax evasion, § 7201, 2010, Katz, Count 5
6. False statements, 18 USC § 1001 and 1, Levine, Count 6
7. False statements, 18 USC § 1001 and 2, Levine, Count 7
8. Wire Fraud, 18 USC § 1343 and 2, Count 8

The following are the motion documents:

• Motion to Dismiss (Dkt 20), here.
• US Response (Dkt 22), here.
• Reply (Dkt 24), here.
• Docket Entries (as of 4/14/17), here.

The following are the key points from Judge Rakoff's Opinion and Order:

Count One - § 7212(a)

Basically, on this issue, the Court held that the indictment was sufficient.  Levine's defense went well beyond the allegations of the indictment and thus were not properly considered on motion to dismiss.  Judge Rakoff has some good discussion of when and how facts beyond the indictment may be considered on motion to dismiss.  I refer you to the opinion for that discussion.  I will cut and paste Judge Rakoff's discussion about § 7212(a) which I think offers good review for tax crimes lawyers:

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."

Opinion on Effect of Parallel Civil Proceedings, Statute of Limitations on Tax Crimes, and Kassouf (Again) (10/22/16)

In United States v. Ogbazion, 2016 U.S. Dist. LEXIS 143358 (SD OH 2016), here, the Court addressed several claims by the defendant for dismissal of counts in his criminal indictment.  The defendant was a principal in a national franchisor of tax preparation services.  The IRS first proceeded against the franchise operation with an IRS civil investigation and an ensuring civil case to enjoin the business operations.  The defendant apparently cooperated to some extent in that investigation and case, including giving a deposition.  In that case, the court entered a civil injunction and order of permanent injunction against the defendants in the case.  Approximately one and one-half years after the civil case was fully resolved, the indictment was filed.  The criminal indictment charged the defendant with

engaging in a corrupt endeavor to obstruct and impede the due administration of the Internal Revenue Code, in violation of 26 U.S.C. § 7212(a) (Count 1); conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count 2); [*2]  wire fraud, in violation of 18 U.S.C. § 1343 (Counts 3-7); money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(ii) (Counts 8-13); bank fraud, in violation of 18 U.S.C. § 1344 (Count 14); tax evasion, in violation of 26 U.S.C. § 7201 (Count 15); and failure to collect and pay over payroll tax, in violation of 26 U.S.C. § 7202 (Counts 16-23). (Doc. 6).

The defendant moved to dismiss the criminal indictment and certain counts therein.  Briefly, the motion sought the following relief:

1. Parallel Civil Proceeding; Dismissal of the indictment or certain counts or, in the alternative, suppression of evidence.  This gravemen of the claims here is that the civil case was improperly used to obtain evidence for the criminal case.  Basically, after detailed consideration of the facts,

the Court finds that the civil proceedings were not a ruse undertaken to obtain evidence for the criminal prosecution and, further, finds that the Government's representations and actions throughout the civil investigation did not constitute trickery or deceit. The Government's conduct throughout the course of the parallel proceedings did not amount to bad faith such that the use of evidence obtained through Defendant's voluntary cooperation would amount to a constitutional violation or a "departure from the proper administration of criminal justice." See Kordel, 397 U.S. at 11-13 [United States v. Kordel, 397 U.S. 1 (1970)]. Accordingly, neither the dismissal of the Indictment in its entirety, nor the suppression of evidence, is warranted.

For more on parallel proceedings, see Parallel Civil Proceedings and Criminal Proceedings - The Balancing Act (Federal Tax Crimes Blog 10/12/12), here; and Assertion of the Fifth Amendment by a Taxpayer in a Tax Court Deficiency Redetermination Proceeding (Federal Tax Crimes Blog 12/21/15), here.