Ninth Circuit Joins the Parade on 7206(1) as Deportable Crime

In Kawashima v. Holder, 615 F.3d 1043 (9th Cir. 2010), here, decided 1/27/10, the Court held that Section 7206(1), tax perjury, was a deportable crime and that, depending upon the circumstances, Section 7206(2), aiding and assisting, may be a deportable crime. [Note: Kawashima was affrirmed by the Supreme Court in Kawashima v. Holder, ___ U.S. ___, 132 S. Ct. 1166 (2012), which is discussed in a subsequent blog titled Supreme Court Rules Tax Perjury and Aiding & Assisting Are Deportable Aggravated Felonies (2/21/12), here.]

I have previously written here on a petition for certiorari that was filed on the tax perjury issue. That discussion gives more detail, so I will just be more summary on the general issue and develop a nuance that I find interesting.

The petitioners in Kawashima had pled guilty as follows: (1) the husband to tax perjury and (2) the wife to aiding and assisting. At sentencing, Mr. Kawashima stipulated that the "total actual tax loss" was $245,126.  Using this evidence, the Board of Immigration Appeals ordered deportation upon finding that the crimes were "aggravated felonies."  The petitioners appealed.

The Ninth Circuit crisply states the interpretational issue as follows (the words are the Ninth Circuit's but I divide the words into subparagraphs to highlight the issue):

We are faced with the task of determining whether Mr. Kawashima's conviction for willfully making and subscribing to a false statement on a tax return, in violation of § 7206(1), and Mrs. Kawashima's conviction for aiding and assisting in the preparation of a false tax return, in violation of § 7206(2), constitute aggravated felonies.

Section 1101(a)(43)(M) defines an "aggravated felony" to include "an offense that

(i) involves fraud or deceit in which the loss to the victim or victims exceeds $ 10,000; or

(ii) is described in section 7201 of Title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $ 10,000." 8 U.S.C. § 1101(a)(43)(M)(i)-(ii).

The petitioners argued that a fair -- and the preferred -- way of reading the statute was that tax evasion was the only tax crime that met the definition of an aggravated felony. A prior case had so held. Ki Se Lee v. Ashcroft, 368 F.3d 218 (3d Cir. 2004). The Ninth Circuit itself had held otherwise in an earlier iteration of the Kawashima case and the Fifth Circuit had also. So the crisp holding of the current opinion in Kawashima is that other tax felonies involving a loss to a victim (here the United States) in excess of $10,000 are aggravated felonies subject to deportation.

The reason the Court revisited the holding was the Supreme Court's intervening decision in Nijhawan v. Holder, ___ U.S. ___, 129 S. Ct. 2294 (2009), here. Nijhawan had been convicted of a "variety of federal fraud offenses" found at sentencing to involve total loss to victims in excess of $100 million. The crimes involved did not contain any element that the loss exceed $10,000. In the deportation proceeding, the Government relied upon the convictions and the sentencing stipulation.

This set up a nice definitional issue for the Supreme Court that permitted the Supreme Court to split syntactical hairs to arrive at a result to resolve the issue. Bottom line, the Supreme Court allowed the Board of Immigration Appeals to consider the facts underlying the fraud conviction to determine whether the Government had shown beyond a reasonable doubt that the loss exceeded $10,000. In the Syllabus's Supreme Court lingo, the Supreme Court held: "Subparagraph (M)(i)'s $ 10,000 threshold refers to the particular circumstances in which an offender committed a fraud or deceit crime on a particular occasion rather than to an element of the fraud or deceit crime."

Using Nijhawan, the Ninth Circuit found that the BIA's use and reliance, in the absence of contravening evidence, of the sentencing stipulation was fair and sustained the proceeding. The reasoning, crisply stated, was:

Moreover, the BIA followed fundamentally fair procedures in finding that the offense for which Mr. Kawashima was convicted resulted in a loss to the government of more than $ 10,000. Specifically, Mr. Kawashima stipulated in the plea agreement that the "total actual tax loss" was $ 245,126. Given that in Nijhawan, the Supreme Court relied on such a stipulation to conclude that a petitioner's prior crime was an "aggravated felony" under subsection (M)(i), we cannot conclude that the BIA's reliance on such a stipulation in this case was improper.

The Ninth Circuit remanded Mrs. Kawashima's case for a more particularized analysis of whether her aiding and assisting plea was an aggravated felony.

I want to address here the holding for Mr. Kawashima. I ask the reader to keep in mind core concepts:

1. The Government must prove deportability by clear and convincing evidence.

2. The Government must prove tax loss for sentencing by a preponderance of the evidence, a lesser standard than clear and convincing evidence.

Technically, Mr. Kawashima's stipulation of a $245,000 loss may not have been an admission that, in absolute fact the loss was in that amount, but just a recognition that the Government could meet its burden of proving the tax loss by a preponderance of the evidence. Specifically, there is nothing inherent in that stipulation that it is an admission that the Government can show that loss by clear and convincing evidence. And, I think it defies logic that it can then be used as an admission or even persuasive evidence alone that the Government has met the burden by clear and convincing evidence.

There are variations of this that illustrate the fundamental logic. A conviction of the crime of tax evasion -- with a burden of proof of guilt beyond a reasonable doubt -- is evidence of civil tax fraud -- with a burden of proof on the Government by clear and convincing evidence. Why? Because the latter is the lesser burden, and it is necessarily included in the greater criminal burden. But a finding in a civil case by a preponderance of the evidence is not the equivalent of or does not necessarily subsume the same finding by either clear and convincing evidence or beyond a reasonable doubt. Nobody would doubt the latter truth (a finding by a preponderance of the evidence cannot suffice along to prove beyond a reasonable doubt). It necessarily and inevitably follows that a finding by a preponderance of the evidence cannot suffice to prove the same fact by clear and convincing evidence (a concept as to a burden between preponderance and beyond a reasonable doubt).

I think the Supreme Court in Nijhawan recognized the potential problem of a preclusive effect for the sentencing findings by saying that the convicted defendant / immigration petitioner may contest the loss amount at both the sentencing heraing and the deportation hearing. In other words, it is not a preclusive effect. But, what if all the Government shows at the immigration hearing is the bare sentencing stipulation of the loss amount and nothing more. I would think that the Government would have to prove more.  But, apparently, the Supreme Court says that may not be the case and effectively shifts the burden -- the risk of loss -- to the petitioner opposing immigration.

If I were on the panel in the Ninth Circuit, I would have dissented. Why dissent? Because I am not sure that the other panel members would have found this analysis persuasive by a preponderance of the evidence. (I have argued elsewhere that judicial interpretations may be analyzed similarly to fact findings; perhaps beyond a reasonable doubt is the factual equivalent of "plain meaning" for legal interpretation and so forth; if so, then one issue is what to do in legal analysis with the state of equipoise (as to which, perhaps, Chevron permits agencies some leeway).)

Addition:  The Ninth Circuit issued a good opinion a day after Kawashima addressing the circumstances in which sentencing findings must be by clear and convincing evidence.  The opinion is U.S. v. Treadwell, 593 F.3d 990 (9th Cir. 2010), here.  Under Ninth Circuit practice after Booker and its tentacles, sentencing findings usually are by a preponderance of the evidence, but those findings have a disproportionate impact to increase the sentence may require findings by clear and convincing evidence.  The Ninth Circuit in Treadwell hold that the extent of the financial loss in the crime, there a conspiracy, requires only fact findings by a preponderance of the evidence, even if in the aggregate the losses have a significant impact on sentencing as the Guidelines intend when the financial loss is significant.  Hence, the tax loss which is the tax equivalent of the financial loss are by a preponderance of the evidence.