Saturday, September 29, 2012

Another Reason for a Defendant Not to Testify (9/29/12)

In some of the indirect methods of proving either tax evasion or tax perjury by omission of gross income, the Government must prove beyond a reasonable doubt that the defendants had taxable income materially beyond what they reported on their income tax returns.  In order to do that, the Government is required to show a likely source of the income being imputed to the defendant under the indirect method.  See e.g., United States v. Sorrentino, 726 F.2d 876, 879-80 (1st Cir. 1984).  The drill is to negate the possibility of nontaxable sources for the proved cash flow, so that the defendant can be convicted of the crime charged (evasion or tax perjury).

The Government will prove the likely source in  its case in chief.  But, then to really nail the point, if the defendant testifies in his own defense, the Government can ask the defendant about any other sources.  If the defendant can't come up with them, well ...

In United States v. Dorsey, 2012 U.S. App. LEXIS 19978 (3rd Cir. 2012), here, a nonprecedential decision, the defendants, husband and wife, were convicted of "conspiracy to defraud the IRS in violation of 18 U.S.C. § 371, filing false tax returns for tax years 2004 through 2006 in violation of 26 U.S.C. § 7206(1), and, as to Troy Dorsey only, structuring cash deposits to avoid tax reporting requirements in violation of 31 U.S.C. § 5324(a)(3) and (d)(2)."

The Third Circuit affirmed on appeal, noting in footnote 3:
Although it was not part of the government's affirmative case, we note that Troy Dorsey testified at trial. When asked, he could not identify the amount of cash he deposited over the three-year period in question, and he did not offer any alternative, non-taxable explanation of its source.
Perhaps another reason not to testify at trial in these types of cases.

Note also that the burden on the Government to disprove (at least to some extent) is the reason that, during a criminal investigation, defendant's counsel may throw out leads that the Government is required to track down in order to make the required proof at trial.  If the source is members overseas -- e.g., family members in Iran -- that may be a difficult burden to overcome.  But, the lead may also lead the Government to more serious money laundering or Bank Secrecy Act charges.

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