Friday, March 18, 2011

Sentencing Simon (Preliminary and Final) (3/18/11)

Note to Readers:  This blog initially discussed only the opinion on Preliminary Sentencing Findings.  I have since obtained the subsequent sentencing opinion.  I accordingly ad a link to the sentencing opinion and a short discussion of it at the end of this blog.


Only 3 defendants have been tried recently amidst the Government's juggernaut against foreign bank accounts. All were convicted. I have previously discussed here, 2 of those defendants, father and son, who were convicted and sentenced to 40 months each. I want to talk today about the other whose prosecution, technically, did not arise from that juggernaut, but who was tried for foreign bank account violations during the ongoing juggernaut. He is James A. Simon whom I have discussed before here.

Mr. Simons' prosecution apparently arose from an investigated that predated the UBS brouhaha from whence the flurry of criminal charges arose. He had a number of criminal issues beyond just failing to report and pay tax on income stashed in foreign banks and filing the required FBAR. He did not plead and was convicted of multiple counts as will be noted.

Judge Robert L. Miller, Jr., has issued an opinion here dealing with a host of issues in advance of the actual sentencing hearing. I won't address all of the matters in that opinion, but to get a flavor for what is to follow, here are the opening paragraphs:

For several years, James Simon supported his family with money taken from a variety of entities in which he had an ownership interest. During those years, he executed no loan documents with those entities, repaid none of the entities, and didn't report the money as income on either his federal tax returns or applications for financial aid for his children's schooling. He also failed to disclose on his tax returns that he had an interest in foreign bank accounts. A jury found Mr. Simon guilty of four counts of filing false federal income tax returns, 26 U.S.C. § 7206(1), three counts of failing to report foreign financial interests, 31 U.S.C. § 5314, six counts of mail fraud, 18 U.S.C. § 1341, and four counts of federal financial aid fraud, 20 U.S.C. § 1097.

Mr. Simon and the government filed a breathtaking range of objections to the presentence report. The court addresses each as the issues arise.
I will selectively address the issues in the order addressed by the court.

1. Brady complaints. Simon raised a Brady complaint because he was first provided an appendix to the IRS Special Agent's Report that, Simon argued, called into question the agent's calculation in the SAR. The SAR includes these calculations to inform DOJ and to offer a starting point for the prosecutor to determine whether they are relevant to the charges finally made and, if so, how to present a final calculations of the numbers. Most importantly, such calculations are important for establishing the tax due and owing element of the crime of evasion. But, Simon was not charged with evasion and hence tax due and owing was not relevant to the trial and was not even introduced. Simon failed to demonstrate that there was even a Brady violation much less that was prejudicial.

2. Sentencing Findings.
a. The court determines the offense levels and grouping results. I will deal here only with comments on certain points in that exegesis.

b. The Court determined a tax loss of $886,901.69, requiring an offense level of 20. That determination seems to be unexceptional as presented by the Court.

c. The Court found that Mr. Simon was a leader of Mrs. Simon for purposes of the organizer and leader 2 level Role in the Offense enhancement in § 3B1.1(c). Among the acts where Mr. Simon led her was in the filing of false returns which she signed and mailed in. The court said:
In United States v. Herrera, 878 F.2d 997 (7th Cir. 1989), the defendant directed his wife's participation in drug distribution. The court of appeals rejected the argument Mr. Simon makes today: "It is also irrelevant that the criminal participants happen to be husband and wife. The guidelines contain no spousal exception; rather, 3B1.1(c) applies any time there is more than one participant, regardless if the participants happen to be husband and wife." Id. at 1002 (citation omitted). 
This has some logic to it, but it seemingly would require this enhancement in any situation where only one spouse is charged and convicted and the other might be shown by a preponderance of the evidence at sentencing to have some culpability. Mrs. Simon participated in various acts of concealment beyond just hiding the return, so perhaps this is not a signal that a mere knowing signing of a joint return will require this enhancement in other cases.

d. For the FBAR counts of conviction, the Court applied SG § 2S1.3(a) and (b), finding the offense level under (a) to be 30 but also finding the (b)(3) reduction to 6 to apply because, the court found, the conditions of (b)(1) and (b)(2) were absent. The court added a 2 level enhancement for leading Mrs. Simon (discussed below). However, the court did not consider § 2S1.3(c) which provides:
If the offense was committed for the purposes of violating the Internal Revenue laws, apply the most appropriate guideline from Chapter Two, Part T (Offenses Involving Taxation) if the resulting offense level is greater than that determined above.
The Court had previously found the tax offense level to be 26, so, it is unclear why the Court did not apply this provision to get to a level of 26 for the FBAR counts of conviction. In the final analysis, because of the way the court did the grouping, this did not make any difference -- "The group that is 18 levels less serious than the most serious group — counts 6-8 [the FBAR counts], at level 8 — is disregarded for purposes of calculating the post-grouping offense level. U.S.S.G. § 3D1.4(c)." Note in this regard, that the sentencings in the mainstream FBAR convictions where there is a conviction by plea to a single FBAR count have applied § 2S1.3(c) to have the sentencing under the tax guidelines. I would think that the application of this would mean that the FBAR counts of conviction should be grouped with the tax counts of conviction, but as noted, it did not seem to affect the bottom-line grouping determination.
These are only the preliminary findings.  The judge will have a sentencing hearing to determine a reasonable sentence.

CAVEAT:  There is at least one error in the opinion which I have highlighted on p. 22 of the download.


The sentencing opinion is here.  The key points of the sentencing opinion are (note that these are selective points that caught my interest and are not a balanced summary of the court's opinion):

1.  The sentence is 72 months which is just 2 months more than the bottom of the Guidelines range calculated in the preliminary sentencing opinion.

2.  The court notes that it is sentencing under 18 USC 3553 and Booker to achieve a reasonable sentence sufficient, but not greater than necessary to satisfy the purposes of this statute.

3.  The court made a pass at the character letters as follows:
Mr. Simon solicited character letters from his friends and family by way of an email that suggested something of a template for writers to follow. Many people wrote and most followed the suggested template, but all appear to be sincere in their attestations to Mr. Simon’s character. Many mention Mr. Simon’s children and Mr. Simon’s heightened importance in their lives following their mother’s death — as the template suggested.
Practitioners always wonder what effect of such character letters will have.  Obviously, it is better if they are not scripted.

4.  Although the court did not presume that the Guidelines calculations set the proper range, the court said:
The sentencing guidelines ordinarily are the best measurement of the need to reflect the crime’s seriousness, to provide just punishment for the crime, and to deter others from committing the same sort of crimes. The government notes that the tax loss falls just short of increasing Mr. Simon’s offense level by another two levels, which would have produced an advisory range of 87 to 108 months. The government also notes that deterrence is especially important in tax cases. U.S.S.G. § 2T, Introductory Commentary.
5.  The court noted the importance of the Guidelines for uniform sentencing practices:  " Reasonably uniform sentencing practices generally tend to promote respect for the law."

6.  Bottom-line:
Review of the factors specifically set forth in 18 U.S.C. § 3553(a) persuades the court that in light of the need for the sentence to reflect the seriousness of the offense and to provide just punishment and deter others, to promote respect for the law, and the range recommended by the guidelines, a sentence of six years, or 72 months, is sufficient but not greater than necessary to satisfy the purposes of 18 U.S.C. § 3553(a). For the same reason, a three-year supervised release term is reasonable.

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