Update on Wartime Suspension of Limitations Act ("WSLA"), 18 USC 3287, and Tax Crimes (4/1/23; 4/2/23)

Caveat: Although authored and published on 4/1/23, this blog is not an April Fool's Joke.

I have written before about the Wartime Suspension of Limitations Act ("WSLA"), 18 USC  § 3287, here, that suspends certain criminal statutes of limitations while "the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b))." The statutes of limitations are suspended in relevant part for crimes "(1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not." My blogs on this subject discussing the potential application of this WSLA suspension for tax crimes are collected by relevance here and reverse chronological order here. In those blogs, I have noted that the WSLA's literal application to certain tax crimes involving "fraud" would mean that the WSLA could have a pervasive effect permitting the charging of tax crimes far before the normal suspensions often encountered for tax crimes. See also, Michael Saltzman & Leslie Book, IRS Practice and Procedure, ¶ 12.05[9][a][iii] Suspension and tolling (discussing normal suspensions and discussing § 3287 at n. 933); and John A. Townsend, Federal Tax Procedure (2022 Practitioner Ed.) 317-387 (August 3, 2022). Available at SSRN: https://ssrn.com/abstract=4180710.

1. The blog supplements those discussions until the next revisions of those respective books (note that I am the principal author of the Saltzman and Book chapter). Since I have already brought the discussion up to date in the 2023 working draft for the Federal Tax Procedure Book (2023 Practitioner Ed.), I will just offer the following from the 2023 draft (which should be finalized by early August 2023). The last sentence in the carryover paragraph will be changed to and a footnote added as follows (note that I link the blog entries and key case entries in this blog but will not link them in the book):

This provision [WSLA] might apply to the Iraq and Afghanistan engagements, but its application to tax crimes with elements of fraud or attempted fraud is notable only because of the many cases in which it could have been applied but is rarely, very rarely, asserted where statute of limitations defenses are asserted. fn

Supreme Court Addresses the Wartime Suspension of Limitations Act (5/26/15)

In Kellogg Brown & Root Services, Inc. v. Carter, 575 US 650 (2015), here, a unanimous opinion handed down today, the Supreme Court held that the Wartime Suspension of Limitations Act (19 USC § 3287, "WSLA"), here, did not apply in a case arising under the civil False Claims Act (31 U. S. C. §3729), "FCA"), here.  Both Acts, in their own ways, dealt with fraud in war defense contracts and related frauds.  Although fraud in defense contracts and related frauds was the impetus for both Acts, as I have noted before the WSLA, is rather broad in its textual coverage and read literally includes any fraud crimes against the U.S.  I will devote this blog entry to the WSLA and what the Court said about it in Kellogg.

The WSLA provides in relevant part: that, "When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces" under the War Powers Resolution Act, "the running of any statute of limitations applicable to any offense . . . involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not."  I have previously discussed the possible application of WSLA to tax crimes.  See Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (Federal Tax Crimes Blog 11/20/09), here; and Wartime Suspension of Limitations Act and Tax Fraud (Federal Tax Crimes Blog 6/27/12), here.

In part relevant to the WSLA, the Court in the Kellogg opinion says (Slip Op. 5-6, footnote omitted):

III

The text, structure, and history of the WSLA show that the Act applies only to criminal offenses. 

A

The WSLA’s roots extend back to the time after the end of World War I. Concerned about war-related frauds, Congress in 1921 enacted a statute that extended the statute of limitations for such offenses. The new law provided as follows: “[I]n offenses involving the defrauding or attempts to defraud the United States or any agency thereof . . . and now indictable under any existing statutes, the period of limitations shall be six years.” Act of Nov. 17, 1921, ch. 124, 42 Stat. 220 (emphasis added). Since only crimes are “indictable,” this provision quite clearly was limited to the filing of criminal charges.  

In 1942, after the United States entered World War II, Congress enacted a similar suspension statute. This law, like its predecessor, applied to fraud “offenses . . . now indictable under any existing statutes,” but this time the law suspended “any” “existing statute of limitations” until the fixed date of June 30, 1945. Act of Aug. 24, 1942, ch. 555, 56 Stat. 747–748. 

As that date approached, Congress decided to adopt a suspension statute which would remain in force for the duration of the war. Congress amended the 1942 WSLA in three important ways. First, Congress deleted the phrase “now indictable under any statute,” so that the WSLA was made to apply simply to “any offense against the laws of the United States.” 58 Stat. 667. Second, although previous versions of the WSLA were of definite duration, Congress now suspended the limitations period for the open-ended timeframe of “three years after the termination of hostilities in the present war as proclaimed by the President or by a concurrent resolution of the two Houses of Congress.” Ibid. Third, Congress expanded the statute’s coverage beyond offenses “involving defrauding or attempts to defraud the United States” to include other offenses pertaining to Government contracts and the handling and disposal of Government property. Ibid., and §28, 58 Stat. 781. 

Congress made more changes in 1948. From then until 2008, the WSLA’s relevant language was as follows:  

“When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not . . . shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress.” Act of June 25, 1948, §3287, 62 Stat. 828.
In addition, Congress codified the WSLA in Title 18 of the United States Code, titled “Crimes and Criminal Procedure.” 

Finally, in 2008, Congress once again amended the WSLA, this time in two relevant ways. First, as noted, Congress changed the Act’s triggering event, providing that tolling is available not only “[w]hen the United States is at war,” but also when Congress has enacted a specific authorization for the use of military force. Second, Congress extended the suspension period from three to five years. §855, 122 Stat. 4545.

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)).

Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (11/20/09)

There are rumors that the government in a tax shelter case is seeking to suspend the criminal statute of limitations under the "wartime suspension act", 18 USC Section 3287. The text of the statute is:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

Definitions of terms in section 103 of Title 41 shall apply to similar terms used in this section. For purposes of applying such definitions in this section, the term "war" includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).

I have highlighted the portion upon which the Government is apparently relying.

I had not heard that the Government was doing that and have not researched the issue. The concern, of course, is that the statute of limitations is suspended on tax crimes as well as other crimes involving fraud or attempted fraud against the U.S. If any reader has any thoughts on this, I would appreciate hearing about it either as a comment to the blog or by separate email to jack@tjtaxlaw.com. I will post follow-through information as I learn it.

Update on 1/30/10:  See Erin M. Brown, Note: The Wartime Suspension of Limitations Act, the Wartime Enforcement of Fraud Act, and the War on Terror, 85 Notre Dame L. Rev. 313 (2009), here.  I think that the analysis and sources in the article will give ammunitiion to those who want to argue that plain vanilla tax crimes unrelated to the war effort should not be within the scope of 18 USC Section 3287.

More on the Wartime Suspension of Limitations Act (WSLA) (2/20/21)

The prior blog entry, Daugerdas Fails in Post-Conviction Hail Mary Motion (2/17/21; 12/19/21), here, had a brief discussion in paragraph 4 of Judge Pauley’s holding that the Wartime Suspension of Limitations Act (18 U.S.C. § 3287, here, (“WSLA”) applied to the nontax crimes fraud counts.  I said I would post a later blog with more on the WSLA.  I will now post some thoughts on the WSLA.  (In the prior blog, I did cut and paste my discussion from another text, but I expect this to offer more than in that cut and paste and make some corrections.)

First, here is the text of the statute (I bold-face the key provision):

18 U.S. Code § 3287 - Wartime suspension of limitations

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

 Definitions of terms in section 103 [1] of title 41 shall apply to similar terms used in this section. For purposes of applying such definitions in this section, the term “war” includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).

In this blog, I will focus only on the first of the three circumstances – “(1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not.”

 1.     The WSLA suspends the statute of limitations for any “offense” involving the specified categories (1)-(3).  Although some courts applied the WSLA to Government civil claims involving fraud (the False Claims Act in particular), the Supreme Court held that it only applied to criminal offenses.  Kellogg Brown & Root Services v. United States, ___ U.S. ___, 135 S.Ct. 1970, 1976-1978 (2015)

2. Must the offense for which the statute is suspended relate to the hostilities identified in the  congressional authorization? No.  Any fraud against the Government is covered.  See United States v. Wells Fargo Bank, N.A., 972 F. Supp. 2d 593, 613 (S.D.N.Y. 2013) (“applying the WSLA to all frauds against the United States, including those unrelated to the war, accords with the purpose of the Act. ")  Importantly, in this regard, the third disjunctive application specifically requires a relationship to the hostilities, so the absence of such a required relationship in the other two implies that such a relationship is not required for the other two, including specifically the fraud provision under subsection (1).

Daugerdas Fails in Post-Conviction Hail Mary Motion (2/17/21; 2/19/21)

I write today on tax criminal, Paul Daugerdas, who has been the subject of many postings on this blog.  (See here.)  After exhausting all of his conviction and other post-conviction remedies, Daugerdas in 1918 tries one other “hail Mary” shot in the form of a motion “to vacate his conviction and sentence pursuant to 28 U.S.C. § 2255.”  Daugerdas v. United States (SDNY Dkt 18cv152, Entry No. 48), Memorandum and Order dated 2/16/21, TN here & CL here).  As with his other efforts to avoid or mitigate his convictions, this one fails. 

Daugerdas’ failed effort included the common use of the ineffective assistance of counsel allegation and other “blunderbuss” claims.  Basically, the Court rejected Daugerdas’ claims that his counsel, both trial and appellate, met the standards for effective assistance of counsel within the broad range of reasonable strategic decisions made in the course of trial and appeal.  The Court also rejected other claims, including a Marinello claim to his § 7212(a), tax obstruction, conviction.  See Marinello v. United States, 584 U.S. ___, 138 S. Ct. 1101 (2018).

This is a fairly standard disposition of such claims.  The following caught my eye.

1. Daugerdas claimed that his trial counsel failed in advising him to execute pre-indictment extensions of the criminal statute of limitations.  One of his arguments was that he received no consideration for the extension and therefore, as a contract, the extension was unenforceable as a matter of basic contract law.  The Court rejected that argument (see pp. 9-10).  The Court’s holding appears to be based on one holding and one notion:  (1) as recited in the extensions, Daugerdas did receive consideration in the DOJ’s forbearance to indict immediately without the extension and the extension gave him more opportunity to argue against indictment and marshal his case for trial when indicted; and (2) in any event, possibly, a waiver of the statute of limitations is a unilateral waiver rather than a contract, thus requiring no consideration under contract law (this second holding is, stated cautiously (“Under this view”), in a footnote, p, 10 n. 4).  My comments are:

• The second holding, a standard and routine one for extensions of the civil statute of limitations under § 6501(c)(4) is, I and my former partner have argued, wrong.  John A. Townsend & Lawrence R. Jones, Jr., Interpreting Consents to Extend the Statute of Limitations, 78 Tax Notes 459 (1998), here.  The problem is that there is too much water under the bridge on this spurious notion to ever correct it.  (Regardless, the Court,  usually meticulous, miscites the name of a key case, Stange v. United States, 282 U.S. 270 (1931)).
• As I said, § 6501(c)(4) applies only to civil statute extensions.  I am not sure that authority which was based on an early version of § 6501(c)(4) (since materially changed as we note in the article), could affect criminal statute extensions.  The cases cited by the Court in the footnote are civil cases which all go back to the notion cited above which now is mainstream even if erroneous. and I am not sure that authority would govern in criminal cases.
• In all events, I can't imagine that any defense counsel would advise a client to extend the statute of limitations unless there was something for the defendant in the extension.  So, I would imagine that a court considering such a contract consideration claim for a criminal statute extension would not be able to find consideration, at least in terms of considering an ineffective assistance of counsel claim.

2. Daugerdas also raised Marinello arguments.  The Court held (pp. 15-16) that the argument was procedurally defaulted because he could have raised the Marinello-based argument before on the direct appeal.  Even though Marinello had not been decided by the direct appeal, the underlying argument could have been made (just as Marinello’s lawyers and others before Marinello made them in courts of appeals).  Daugerdas also failed to show prejudice (see below in discussing the Government’s response).

ABA Tax Section Recommendation to IRS for Priority Guidance to Disavow Application of WSLA and Further Comments Re Same (7/23/21)

I have written several times on the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, here.  In part relevant to tax crimes, the WSLA suspends “the running of any statute of limitations applicable to any offense involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not.”  (Cleaned up.) The statute of limitations is suspended from the date of the “specific authorization for the use of the Armed Forces until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.”  (Cleaned up.)

Where the WSLA is applicable, there are several authorizations that might establish the starting point for the suspensions.  Authorizations that have never been revoked were passed in 2001 and 2002 related to the activity after the 9/11 event.  So, for purposes of this discussion, I assume that the WSLA authorizes tax crimes prosecutions with the general 6-year statute of limitations for conduct back to 1995 or 1996 and the statute continues until 5 years after the authorizations are terminated.

Caveat:  There could be even earlier starting dates under the WSLA for earlier authorizations not yet revoked:  (1) a 1991 authorization incident to the Gulf “War”; and (2) a 1957 authorization (although it might not meet the “specific authorization” required by the WSLA.  Matthew Waxman, Remembering Eisenhower’s Middle East Force Resolution (LawFare 3/9/19), here.  The House has recently passed resolutions to revoke these authorizations.  See Karoun Demirjian, House votes to repeal military authorizations dating to Gulf War, Cold War (WAPO 6/29/21), here.

I have stated my belief that tax evasion under § 7201 is within the literal language of the WSLA.  That would mean also that the offense conspiracy to commit tax evasion would likely be within the literal language of the WSLA.  (The defraud conspiracy, in my view, would not be within the WSLA because the defraud conspiracy for some strange reason does not require fraud per Hammerschmidt v. United States, 265 U.S. 182, 188 (1924); see John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255 (2009), here; I think (perhaps speculation) that if the crime’s elements do not include fraud in the traditional sense of the term (defraud conspiracy does not), the WSLA would not apply.)

However, for some reason as yet unnanounced, at least in recent memory, DOJ Tax has asserted only the traditional six-year tax crime statute of limitations.  The CTM’s discussion of statutes of limitations does not even mention the WSLA.  DOJ CTM 7.00 STATUTE OF LIMITATIONS, here.  So how long DOJ Tax will forebear asserting the WSLA is open.  Further, in cases where the defendant challenges the normal statute of limitations, a court might sua sponte invoke the WSLA to deny the challenges.

Wartime Suspension of Limitations Act and Tax Fraud (6/27/12)

I have previously written about 18 U.S.C. § 3287, the Wartime Suspension of Limitations Act ("WSLA"), here.  See Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (11/20/09), here.  The issue was whether the WSLA applied to any fraud against the U.S., particularly tax fraud, regardless of relationship to war or hostilities.

The statute currently provides in relevant part:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544 (b)), the running of any statute of limitations applicable to any offense
(1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or
(2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or
(3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

The question I asked earlier is whether the portion earlier version of the WSLA which contained subsection (1) applied to any fraud against the U.S., particularly tax fraud.  I did not have any answer to the question.

Preliminary Comments on the Trump Organization and CFO Indictment (7/2/21; 7/4/21)

The much-anticipated indictment of the Trump Corporation and components and its Chief Financial Officer (“CFO”), Allen Weisselberg, has been released.  The caption is The People of New York v. The Trump Corporation, et. al. (N.Y. Supreme Court - no number available).  The indictment is here.  (The pdf copies on the web were not adequately OCR’d; I had this copy OCR’d using Adobe Acrobat text recognition; the OCRing came out much better than the copies I found in my quick searches.)

Here are my first general comments (which I may supplement or revise later):

1. The general thrust of the indictment had been reported before the indictment came out.  Basically, through various schemes, certain individuals (including, for purposes of this indictment, the CFO) caused the corporation to underreport and underpay tax liabilities.  Essentially, these individuals caused the corporation to pay compensation that did not appear on the books and filings as corporation subject to various tax obligations – including reporting income of the individuals benefiting from the payments, avoiding payroll tax to the payors and payees, etc.  

2.  This is a fairly common pattern in a closely held corporation except that the payments often go to the owner and the owner’s family rather than to an employee (here the CFO).  In this case, the owner is Trump and the owner’s family are the Trump children and spouses.  Nothing is said about Trump’s off-the-books use of corporate assets, but with the egregious conduct for Weisselberg, one has to wonder whether charges against Trump are waiting in the wings, with the prosecutor hoping Weisselberg will flip.  Given Trump's alleged use of oral instructions (or signals) to avoid putting his conduct in writing to the extent possible, somebody like the CFO would be an important (perhaps not a necessary) witness against Trump if he were indicted.

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.

Fifth Circuit Holds Criminal Statute of Limitations is Not Suspended for Equitable Tolling on Government's Alleged Excuses (8/20/24)

In United States v. Plezia, 115 F.4th 379 (5th Cir. 2024), CA5 here and GS here, the Court states the facts relevant to this blog as follows (Slip Op. 1-4, bold face supplied by JAT):

          Richard Plezia (“Plezia”) challenges his convictions of conspiracy to defraud the United States, making false statements, and falsification of records in a federal investigation following a fifteen-day jury trial. He challenges the sufficiency of the evidence for some of the convictions, the district court’s determination that the statute of limitations for one count of making false statements was equitably tolled, and the district court’s decision to allow two witnesses to testify with the aid of prior recorded recollections.

          Because we agree with Plezia that equitable tolling of the statute of limitations in 18 U.S.C. § 3282 is not available, we VACATE Plezia’s conviction under [*2] Count Five and remand with instructions to dismiss Count Five with prejudice. However, the panel’s agreement with Plezia ends there. With respect to every other assignment of error, we AFFIRM.

I. Factual Background

          Plezia was a Houston-based personal injury attorney charged with conspiracy to defraud the United States through falsified reporting on tax returns to the Internal Revenue Service (“IRS”). The alleged falsified gains arise from barratry, the impermissible practice of attorneys soliciting clients that have not invited any contact with prospective counsel. The Government averred that Plezia conspired with a group of personal-injury attorneys and non-attorney case runners (“case runners”) in Houston, Texas to unlawfully reduce the federal income taxes owed by Jeffrey Stern (“Stern”). The case runners were alleged to solicit clients for Stern—in violation of the Texas Penal Code and the Texas Disciplinary Rules of Professional Conduct (“TDRPC”). The charging instrument set out that Plezia worked with case runner Marcus Esquivel (“Esquivel”) to aid Stern in reducing the income taxes he owed from 2011 through 2013. It alleged that Stern “funneled” illegal payments for soliciting and “running” cases to Esquivel by writing checks to Plezia—who subsequently wrote corresponding checks out to Esquivel’s business entities. Stern would then deduct the amounts paid to Plezia as attorney “referral fees.”

A. The Indictments and Pretrial Proceedings

          In August 2019, Stern was arrested and charged with conspiracy to commit fraud against the United States, willfully filing a false tax return, and obstruction of justice. Stern pleaded guilty to the first two counts and agreed to pay over $4.35 million in restitution to the IRS and cooperate with the prosecution and investigation of other attorneys involved in the scheme. On August 6, 2019, the grand jury indicted Plezia on one count of conspiracy to [*3] defraud the United States in violation of 18 U.S.C. § 371 (“Count One”). On January 18, 2022, the grand jury returned a Third Superseding Indictment adding two counts of making false statements to IRS agents in violation of 18 U.S.C. § 1001(a)(2) (“Counts Five and Six”) and one count of falsifying records in violation of 18 U.S.C. § 1519 (“Count Seven”).

          Count One’s allegations against Plezia are limited to his participation in redirecting checks to Esquivel. Count Five sets out that Plezia falsely told an IRS agent in Houston in December 2016 that he had never paid Esquivel any referral fees for clients in violation of the Texas bar rules. Count Six avers that Plezia made another materially false statement to IRS agents in September 2018 when he averred that any payments between him, Esquivel, and Stern were provided solely for the purpose of financing his ongoing benzene exposure toxic tort litigation against BP. Lastly, in Count Seven, the Government alleged that Plezia created a false document supporting or tracking the false statement he made in Count Six with the intent to impede a federal investigation under the jurisdiction of the IRS.

          Plezia pleaded not guilty to all charges and proceeded to a jury trial on January 9, 2023. He moved to dismiss the entirety of the Third Superseding Indictment for constitutional violations. Plezia argued that the Government’s delay in prosecuting all charges violated his Fifth and Sixth Amendment rights. He also filed a separate motion to dismiss Count Five as barred by the five-year statute of limitations in 18 U.S.C. § 3282 because it was filed over five years after the alleged false statement was made. He asserted that Count Five was filed five years and forty-two days after the alleged false statement was made even though the Government had all relevant information to charge him with that offense for at least three years before the Third Superseding Indictment. The Government opposed both motions and argued that the statute of limitations had been tolled due to the delays arising from its compliance with the district court’s COVID orders [*4] and from delays in processing Justice Department approvals during the pandemic. It further argued that the discovery of evidence of Plezia’s involvement in Stern’s scheme was hindered by COVID delays related to several steps of the investigation which prompted the addition of Count Five. 

Trump Superseding Indictment: More on the Defraud / Klein Conspiracy (8/28/24)

The D.C. grand jury approved a superseding indictment against former President Trump (“Trump”). The superseding indictment is on CourtListener here. The principal purpose of the superseding indictment is to eliminate charges that might implicate the President’s immunity as stated in Trump v. United States, 603 U. S. ____, 144 S. Ct. 231 (2024).

The Introduction to the superseding indictment contains a good summary on the issue I discuss in this blog – the defraud conspiracy in 18 U.S.C. §371 (Superseding Indictment pp. 1-3, ¶¶ 1-5).

INTRODUCTION

          1. The Defendant, DONALD J. TRUMP, was a candidate for President of the United States in 2020. He lost the 2020 presidential election.

          2. Despite having lost, the Defendant-who was also the incumbent President-was determined to remain in power. So, for more than two months following election day on November 3, 2020, the Defendant spread lies that there had been outcome-determinative fraud in the election and that he had actually won. These claims were false, and the Defendant knew that they were false. But the Defendant used his Campaign to repeat and widely disseminate them anyway-to make his knowingly false claims appear legitimate, create an intense national atmosphere of mistrust and anger, and erode public faith in the administration of the election.

          3. As a candidate and a citizen, the Defendant had a right, like every American, to speak publicly about the election and even to claim, falsely, that there had been outcome determinative fraud during the election and that he had won. He was also entitled to formally challenge the results of the election through lawful and appropriate means, such as by seeking recounts or audits of the popular vote in states or filing lawsuits challenging ballots and procedures. Indeed, in many cases, the Defendant did pursue these methods of contesting the election results. His efforts to change the outcome in any state through recounts, audits, or legal challenges were uniformly unsuccessful.

          4. Shortly after election day, the Defendant also pursued unlawful means of discounting legitimate votes and subverting the election results. In so doing, the Defendant  perpetrated three criminal conspiracies:

                   a. A conspiracy to defraud the United States by using dishonesty, fraud, and deceit to impair, obstruct, and defeat the lawful federal government function by which the results of the presidential election are collected, counted, and certified by the federal government, in violation of 18 U.S.C. § 371;

                   b. A conspiracy to corruptly obstruct and impede the January 6 congressional proceeding at which the collected results of the presidential election are counted and certified ("the certification proceeding"), in violation of 18 U.S.C. § 1512(k); and

                   c. A conspiracy against the right to vote and to have one's vote counted, in violation of 18 U.S.C. § 241.

Each of these conspiracies-which built on the widespread mistrust the Defendant was creating through pervasive and destabilizing lies about election fraud-targeted a bedrock function of the United States federal government: the nation's process of collecting, counting, and certifying the results of the presidential election ("the federal government function").

Special Counsel Opposes Motion to Dismiss FBAR Count as Untimely Because of Secret 18 USC 3292 Order (5/15/18)

Paul Manafort filed a motion to dismiss the FBAR count, Count 11 of the superseding indictment, here, in the case in E.D. Virginia, United States v. Manafort (E.D. Va. No. 1:18-cr-83 (TSE)).  The argument was the the statute of limitations prevented that count.  As described in the superseding indictment:

COUNTS 11-14: 31 U.S.C. §§ 5314 and

5322(a); 18 U.S.C. §§ 2 and 3551 et seq.

Failure To File Reports Of Foreign Bank

And Financial Accounts

Count 11 was for failure to file the FBAR for 2011, due on June 29, 2012.  The statute of limitations is 5 years (18 USC 3282(a), here), which had lapsed on June 29, 2017.  The original indictment was brought on February 13, 2018, and the superseding indictment brought on February 22, 2018.  The indictment was clearly out of time unless some special rule applied.  And it did.  As the prosecutors explained in its response to the motion, here (and Exhibit A here):

Section 3292(a)(1) of Title 18 suspends the running of the statute of limitations where the government, before the return of an indictment, applies to a court in which a grand jury is investigating the offense to suspend the running of the statute of limitations because evidence of the offense being investigated is in a foreign country. In connection with that application, the government must show, by a preponderance of the evidence, that “an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.” 18 U.S.C. § 3292(a)(1). If the government is successful in making that showing, the running of the applicable statute of limitations is suspended from “the date on which the official request is made” until “the date on which the foreign court or authority takes final action,” id. § 3292(b), though the suspension may not exceed three years, id. § 3292(c).

Because the government secured a timely and valid order in this District to suspend the running of the applicable statute of limitations until at least the date on which the Superseding Indictment was returned, Manafort’s motion should be denied. On June 6, 2017, the government transmitted a request pursuant to a mutual legal assistance treaty (“MLAT”) to the Republic of Cyprus seeking, among other evidence, bank records, articles of incorporation, and witness interviews concerning certain of Manafort and Richard Gates’s bank accounts in Cyprus.  

On June 26, 2017, the government applied, ex parte, to this Court for an order pursuant to 18 U.S.C. § 3292 to suspend the applicable statute of limitations in light of the government’s MLAT request to Cyprus. This Court (Hilton, J.) granted the government’s request on June 27, 2017, thus suspending the applicable statute of limitations during the pendency of the government’s official request to Cyprus. See In Re Grand Jury Investigation, No. 14 GJ 1420 (E.D.V.A. June 27, 2017) (attached hereto as Exhibit A). As found by Judge Hilton, a grand jury impaneled in this District was conducting an investigation into, as relevant here, the flow of foreign money to Manafort, DMP International, Davis Manafort Partners, Smythson LLC, and Jesand Investment Corporation, and into subject offenses that included potential violations of 31 U.S.C. §§ 5314 and 5322(a) (Failure to File a Report of Foreign Bank Accounts). Judge Hilton further found, based on a preponderance of evidence, that evidence of such offenses was located in Cyprus and that the government had made an “official request” to Cyprus for that evidence under 18 U.S.C. § 3292(d) on June 6, 2017. Having found the requirements of Section 3292 satisfied, Judge Hilton ordered that the statute of limitations be suspended for the FBAR offenses, among others, for the period authorized by Section 3292(c). 

Because Cyprus had not taken “final action” on the government’s June 6, 2017 official request at the time the Superseding Indictment was returned, the statute of limitations remained suspended. Specifically, Cyprus produced documents in response to the government’s June 6 request on September 6, 2017; October 2, 2017; November 1, 2017; and April 30, 2018. Several of the items requested in the June 6, 2017 request remained outstanding at least until the time of the April 2018 production. For example, on December 8, 2017—before Cyprus’s most recent production—the government wrote to Cypriot authorities to renew its June 6, 2017 request (and a related request made two weeks later). The government’s December 8 letter stated that, after reviewing the records produced thus far, investigators had identified several items called for in the MLAT request that Cyprus had not produced. And Cyprus did not make a subsequent response to the government’s request until the April 30, 2018 production mentioned above. The bottom line, then, is that Cyprus had not fully satisfied the government’s official request when the original and Superseding Indictment of Manafort were returned on February 13 and 22, respectively. As a result, no “final action” had yet occurred as of the date of the operative indictments, and the applicable statute of limitations remained suspended. See United States v. Bischel, 61 F.3d 1429, 1433-34 (9th Cir. 1995) (construing “final action” to mean “a dispositive response by the foreign sovereign to both the request for records and for a certificate of authenticity of those records”); see also, e.g., United States v. Ratti, 365 F. Supp. 2d 649, 659-60 (D. Md. 2005) (following Bischel’s interpretation of Section 3292).

Oral Argument in Supreme Court Case on Trump Immunity Discussing the Defraud / Klein Conspiracy (4/26/24)

I have written many blogs over the years on the defraud conspiracy (aka Klein conspiracy) in 18 USC § 371, here. I collect at the end of this email some of the more noteworthy (in my imagination) of those blogs on the subject I discuss today. That subject is the potential breadth of the defraud conspiracy, particularly when the Supreme Court interpreted the word “defraud” in § 371 to not be limited to fraud in the usual federal law criminal sense to require some taking or intent to take property. In Hammerschmidt v. United States, 265 U.S. 182, 188 (1924), the Court held that the defraud conspiracy certainly means to cheat or attempt to cheat the Government out of property or money, but it also means to interfere with or obstruct lawful governmental functions “by deceit, craft or trickery, or at least by means that are dishonest” even if no fraud in its normal meaning is the object. As interpreted, that means defraud includes simply an object of the conspiracy to impair the lawful functions of Government. The Hammerschmidt interpretation of defraud was an outlier from the normal interpretation and was not based upon any objective indication that Congress meant the broader interpretation. But, as noted, Hammerschmidt is a long-ago case that is now entrenched in jurisprudence (perhaps even settled law, as some Justices used the term to get past confirmation hearings). (Note, however, that in the current Supreme Court settled law may not be settled after all.)

In yesterday’s oral argument in Trump v. United States, No. 23-939 (4/25/24) (Transcript here; and docket here), the defraud conspiracy came up at least briefly. That is perhaps not surprising because the indictment, CL here, alleged the defraud conspiracy as Count One. The oral argument focused on Presidential immunity for conduct alleged in various counts (including the defraud conspiracy and the two counts under 18 USC § §  1512 (Counts Two and Three). The focus was on presidential immunity rather than the contours of the statutes. 

I don’t propose to discuss the issue of presidential immunity here. My purpose is to relate the discussions of the potential scope of the defraud conspiracy, § 371, aka Klein conspiracy.

Justices Alito, Gorsuch, and Kavanaugh engaged at least glancingly with Michael R. Dreeben, Counselor to the Special Counsel, Jack Smith. I offer the excerpts (with some surrounding potentially relevant content; page numbers are indicated in brackets with asterisk (e.g. [*97]]):

[*97]

JUSTICE ALITO:

* * * *

MR. DREEBEN:

* * * *

[*98]

And making a mistake is not what lands you in a criminal prosecution. There's been some talk about the statutes that are at issue in this case. I think they are fairly described as malum in se statutes, engaging in conspiracies to defraud the United States with respect to one of the most important functions, namely, the certification of the next president.

JUSTICE ALITO: Well, I don't want to dispute the particular application of --of that, of 371, conspiracy to defraud the United States, to the particular facts here, but would you not agree that that is a peculiarly open-ended statutory prohibition? In that -that fraud under that provision, unlike under most other fraud provisions, does not have to do --doesn't require any impairment of a property interest.