Charging and Plea Policies in Federal Tax Cases (9/1/12)

The White Collar Crime Blog has this offering:  Lawrence S. Goldman, Prosecutorial Overcharging is Not "Regular" (White Collar Crime Prof Blog 8/28/12), here.  Mr. Goldman offers a good succinct discussion of one aspect of charging decisions of federal prosecutors.  Mr. Goldman rebuts the notion, sometimes made and recently appearing in a New York Times editorial, that, in order to force a plea, "[p]rosecutors regularly overcharge defendants with a more serious crime than what actually occurred."  The notion is that, fearing conviction of the aggressive more serious crime, the defendant will plead to a lesser crime.  The notion is rebutted by a letter to the New York Times, here, from USAO for DNJ.

I recommend both the letter and Mr. Goldman's article.  I use them as introduction to my offering  some excerpts from the manuals for federal charging and plea policies and practices in federal criminal cases generally and then in federal criminal tax cases. Since the great majority of cases plead, there is a correlation between the plea policies and the charging policies.  In most cases, I eliminate case citations except where I feel them important and have eliminated footnotes; case citations and footnotes are in the original materials for which I provide links.

UNITED STATES ATTORNEY MANUAL FOR CHARGING DECISION GENERALLY:

USAM 9-27.300  Selecting Charges—Charging Most Serious Offenses [here]

Except as provided in USAM 9-27.330, (precharge plea agreements), once the decision to prosecute has been made, the attorney for the government should charge, or should recommend that the grand jury charge, the most serious offense that is consistent with the nature of the defendant's conduct, and that is likely to result in a sustainable conviction 

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At the outset, the attorney for the government should bear in mind that at trial he/she will have to produce admissible evidence sufficient to obtain and sustain a conviction or else the government will suffer a dismissal. For this reason, he/she should not include in an information or recommend in an indictment charges that he/she cannot reasonably expect to prove beyond a reasonable doubt by legally sufficient evidence at trial. 

* * * * 

As stated, a Federal prosecutor should initially charge the most serious, readily provable offense or offenses consistent with the defendant's conduct. Charges should not be filed simply to exert leverage to induce a plea, nor should charges be abandoned in an effort to arrive at a bargain that fails to reflect the seriousness of the defendant's conduct.

9-27.320 Additional Charges [here] 

Except as hereafter provided, the attorney for the government should also charge, or recommend that the grand jury charge, other offenses only when, in his/her judgement, additional charges: 

1. Are necessary to ensure that the information or indictment:
    a. Adequately reflects the nature and extent of the criminal conduct involved; and
    b. Provides the basis for an appropriate sentence under all the circumstances of the case; or
2. Will significantly enhance the strength of the government's case against the defendant or a codefendant.

9-27.430 Selecting Plea Agreement Charges [here]
A.  If a prosecution is to be concluded pursuant to a plea agreement, the defendant should be required to plead to a charge or charges:
   1. That is the most serious readily provable charge consistent with the nature and extent of his/her criminal conduct;
   2. That has an adequate factual basis;
   3. That makes likely the imposition of an appropriate sentence and order of restitution, if appropriate, under all the circumstances of the case; and
   4. That does not adversely affect the investigation or prosecution of others.

CRIMINAL TAX MANUAL

CTM 1.01[3] Selection of Charges [here]

The exercise of prosecutorial discretion in criminal tax cases should be guided by the standards applicable to all criminal prosecutions handled by the Department of Justice. See United States Attorneys’ Manual (USAM), § 9-27.000, et seq. The Tax Division therefore should authorize prosecution for the most serious readily provable offense. See USAM, § 9-27.300. The Tax Division should authorize additional charges if they are necessary to ensure that the information or indictment reflects the nature and extent of the defendant’s criminal conduct and to provide the basis for an appropriate sentence or if they will significantly enhance the strength of the government's case against the defendant or a codefendant. See id. § 9-27.320. Charging decisions should reflect strategic prosecutorial judgments about how best to ensure that the defendant will be convicted and held accountable for his entire course of criminal conduct, regardless of whether the appropriate charges are suggested by the investigating agency.

CTM 5.01 TAX DIVISION PLEA AGREEMENT POLICY [here] 

5.01[1] Offense of Conviction — The Major Count Policy [here] 

The Tax Division designates at least one count in each authorized tax case as the “major count.” The prosecutor may enter into a plea agreement that includes a plea of guilty to that count without further approval of the Tax Division. However, the Tax Division must approve separately any plea agreement that does not include the major count. See United States Attorneys’ Manual, § 6-4.310. The major count policy is consistent with policies applied by the Department of Justice in all criminal cases. See, e.g., United States Attorneys’ Manual, § 9-27.430. The “major count” policy is intended to promote deterrence, ensure that a defendant will be held accountable at sentencing for the most serious readily provable offense, and eliminate the defendant’s ability to contest the criminal conduct in any subsequent civil tax proceeding. 

The designation of the major count is based on the following considerations:
a.   felony counts take priority over misdemeanor counts;
b.   tax evasion counts (26 U.S.C. § 7201) take priority over other substantive tax counts;
c.   the count charged in the indictment or information that carries the longest prison sentence is the major count;
d.   as between counts under the same statute, the count involving the greatest financial harm to the United States (i.e., the greatest additional tax due and owing) will be considered the major count; and
e.   when there is little difference in financial harm between counts under the same statute, the determining factor will be the severity of the conduct.

5.01[2] Relevant Conduct and Tax Loss [here]

A plea agreement must hold the defendant accountable for all relevant conduct, including all known and provable tax loss for all years. Prosecutors should be wary of defense attorneys who seek to “bargain” over the tax loss, because such efforts may undermine uniformity and weaken the deterrent value of tax prosecutions. If there is a credible basis for reducing the tax loss, the prosecutor obviously should consider it. A prosecutor should not stipulate to a reduced tax loss, however, without first securing the concurrence of the IRS and consulting with the Tax Division. Tax Division approval is required prior to stipulation to a tax loss figure that is lower than the readily provable tax loss in the case. 

When a defendant pleads guilty to the major count prior to being charged, the prosecutor must include in the factual basis for the plea the full extent of the defendant's tax violations on all of the counts in order to demonstrate the defendant's actual criminal intent. In most cases, all of the tax charges are related. Consequently, even if the defendant pleads to only a single count, the court should take into account the tax loss from all of the years when it determines the tax loss for the offense to which the defendant pleads. United States Attorneys’ Manual, § 6-4.310. 

If all of the tax charges are not part of the same course of conduct or common scheme or plan, the Tax Division may designate more than one major count -- one count from each unrelated group of counts -- or the Division may designate one count as the major count and direct the prosecutor to obtain a stipulation from the defendant establishing the commission of the offenses in the other group or groups. The Tax Division also may designate more than one major count when the computed guideline sentencing range exceeds the maximum sentence that can be imposed for a single count. See § 43.00, infra, for a full discussion of the Sentencing Guidelines in criminal tax prosecutions. 

5.01[3] Waiver of Appeal of Sentence in Plea Agreements [here] 

A defendant generally may appeal the sentence imposed by the court. 18 U.S.C. § 3742 (a). A defendant also can waive the statutory right to appeal a sentence. [Case citations omitted]

A plea agreement generally should contain language waiving the defendant’s appeal rights, particularly the right to appeal the sentence. A waiver-of-appeal provision is enforceable “so long as [the waiver] is ‘the result of a knowing and intelligent decision to forgo the right to appeal.’” [Case citations omitted]

In tax cases, prosecutors should draft waivers of appeal to be specific, unambiguous, and as broad as possible. Depending on the language of a particular agreement, a waiver of a defendant’s right to appeal his or her sentence may not preclude the defendant from appealing an order of restitution. [Case citations omitted].

Even in cases in which there is a valid waiver of appellate rights, the defendant can appeal his or her sentence if the district court considers an impermissible factor or if the sentence exceeds the statutory maximum. [Case citation omitted] A defendant also can challenge an illegal sentence under 28 U.S.C. § 2255. [Case citation omitted].

DOJ MODEL ANNOTATED PLEA AGREEMENT  [here]

JAT Comments:

1.  In some respects, the Sentencing Guidelines real offense sentencing, including relevant conduct, take some of the gamesmanship out of charging.  To use an example, I recently reported on the split verdict for Dr. Ahuja.  Prominent Neurosurgeon Convicted for Offshore Accounts (8/23/12), here.  Dr. Ahuja was convicted of two felony counts - tax evasion and FBAR -- which permit a maximum sentence of 8 years.  He was acquitted of five felony counts.  Depending upon what the court determines to be relevant (could be for the tax loss during the years for which he was acquitted), it would make no difference whether he were convicted for 7 felony counts or 2 or, perhaps, even one.  The defense attorneys declared the acquittal of five counts out of 7 to be a great victory.  It might be and it might not be depending upon the sentencing.  This phenomenon is why I caution my students to avoid bragging to the client about achieving a great result in plea negotiations in a multi-count tax indictment when the prosecutors drop all the charges except the major one under the major count policy.  As you can see from the policy as described by DOJ Tax, the prosecutors don't think such a plea is really giving up very much.

[When I have more time, I may add some materials from my book, but I am temporarily out of time now.]