Friday, September 17, 2010

Another UBS Client Bites the Dust - One Year Sentence (9/17/10)

Another UBS client was sentenced today in New York. According to this blog posting by Janet Novack of Forbes' Taxing Matters, Frederico Hernandez was sentenced to a year in prison. After I get more details, I may do another posting if there is something material to add or correct. In the meantime, I recommend you to Ms. Novack's blog post which is quite good for such quick reporting.

I do make the following points:

1. The report is that Mr. Hernandez got a one-year sentence.  Mr. Hernandez would have been better off to get a sentence of 1 year and 1 day because the good time credit (about 15%, although the calculation can be tricky) is not available for sentences of less than one year and one day. 18 USC 3624(b). The good time credit for a sentence of one year and one day is 47 days, making the defendant with good time serve only 319 days. A defendant with a one year sentence must serve 365 days with no good time credit.  What a difference a day makes..  The Judge (Denny Chin) surely knew of this difference and, apparently was not quite willing to go there for this defendant.

2. Hernandez and the Government agreed in the plea that the tax loss was $84,423. However, the Government apparently asserted at sentencing that the real tax loss was in excess of $500,000. I have not seen the plea agreement, so there is a nuance somewhere that I am missing on this. In any event, the Probation Office and the Court are not locked into the tax loss that the Government and the defendant agree upon in the plea agreement (dare I say conspire to smoke past the court; the devil made me say that). The higher tax loss would, of course drive up the base offense level and, as a result, the Guidelines sentencing range after all adjustments.  And, of course, with a higher Guidelines sentencing range, a sentencing judge will have to vary more than if the sentencing range were lower.

3. According to the article, the plea was for tax perjury (Section 7206(1)) for the years 2004-2008, during which period he reported $503,682 of AGI, whereas during the period his real AGI was $1.9 million. And, as alleged by the government, he had the same pattern of conduct in the years 2001 through 2003. With the higher amounts, the Guidelines range would have been 30 to 37 months. Question for students: assuming that the pattern of the conduct was the same in all years, what would have been the effect had he pleaded to a single count?

4. Even the year is the longest UBS depositor sentence to date. Was this guy worse than the earlier ones or did he just get in line later than they did? What does that portend for later comers?

5. The Government urged the Court to sentence to 18 to 24 months to send a message. The court obviously wanted to send a different message -- first to the defendant before the court and, perhaps only derivatively, to the universe of tax cheats and wannabe tax cheats.

Ms. Novack also has a prior blog on how courts are lenient in tax crimes and certain other federal crimes relative to the typical federal crimes prosecuted in the courts. That blog is here.

Addendum:  9/17 @ 5:40pm:  Readers might want to take a look at this, at least tangentially related, WSJ Law Blog titled Planning A Prison Stay? The Options Can Be Overwhelming.

Addendum #2 9/18 @ 9:15am:  I have corrected the federal good time credit calculation which was in error in an earlier version of the blog.  There has been some confusion over the years about precisely how it is calculated.  But, the BOP controls the process and calculates it to allow 47 days GTC for a 1 year and 1 day sentence.  For a discussion, see here.

Addendum #3 9/20/10 @ 10:15am.  See Bloomberg article here and USAO SDNY release here.

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