Wednesday, September 18, 2013

Relevant Conduct and Acceptance of Responsibility (9/18/13)

In some criminal tax cases, the Sentencing Guidelines calculations are simple.  The Base Offense Level is determined under the tax loss table.  S.G. § 2T1.1, here, and § 2T4.1, here.  If there are specific offense characteristics, under S.G. §2T1.1, they are applied (upward adjustments).  The only other adjustment is often the acceptance of responsibility adjustment in §  3E1.1, here, which is usually the incentive to plead rather than go to trial.  (Note that, because of the relevant conduct inclusion in the tax loss, it is often no incentive to get counts dropped via the plea agreement.)  Usually, in tax cases, the defendant will not be able to qualify for the § 5K1.1, here, downward adjustment for substantial assistance.  So, setting aside § 5K1.1, qualifying for the acceptance of responsibility adjustment is very important, otherwise the defendant might as well go to trial in which, even with low odds, he or she may still win.

In United States v. Workman, 2013 U.S. App. LEXIS 19053 (6th Cir. 2013), here, the defendant pled, securing in the plea agreement the prosecutors commitment to recommending acceptance of responsibility.and requesting a substantial assistance downward departure.  The Court granted the prosecutor's request for a 4 level downward departure, but denied the defendant the acceptance of responsibility downward departure.  The resulting Guideline offense level was 12 which, under the Sentencing Table, here, indicates a guidelines range of 10-16 months .  The Court then varied downward further (presumably under § 3553(a) / Booker) from the Guidelines range and sentenced the defendant to six months in prison.  The defendant objected to denial of acceptance of responsibility which, if he had achieved it, would seemingly have given him a pre-§ 5K1.1 downward departure offense level of 13 (3 level acceptance decrease), which in turn would have given him a post-assistance 4-level downward departure offense level of 9, with an indicated sentencing range of 4-10 months, but in Zone B rather than Zone C.  All of that is to say that the sentencing court gave this defendant a lot of breaks that probably substantially mitigated any effect of the denial of acceptance of responsibility, but still the acceptance of responsibility, if given, might have affected the sentence.

At any rate, focusing on the denial of acceptance of responsibility, what did the defendant do that screwed up that benefit of a plea?  Normally, the required statement of facts and plea allocution will assure that the defendant is accepting responsibility for the charged conduct to which he is pleading.  However, the problem that caused the judge to deny acceptance of responsibility, despite the recommendation of the prosecutor and the Probation Office, was the defendant's waffling on relevant conduct.  Relevant conduct is related criminal conduct outside the count(s) of conviction.  (Inclusion of relevant conduct in the tax loss why dropping counts often achieves no benefit in tax cases.)  The ground rules on the role of relevant conduct role in acceptance of responsibility were stated by the Court of Appeals as follows:
In determining whether a defendant has accepted responsibility, the district court may consider whether the defendant truthfully admits or does not falsely deny "any additional relevant conduct for which the defendant is accountable under § 1B1.3 (Relevant Conduct)." USSG § 3E1.1, comment. (n.1(A)). Although "a defendant is not required to volunteer, or affirmatively admit, relevant conduct beyond the offense of conviction in order to obtain a reduction . . . , a defendant who falsely denies, or frivolously contests, relevant conduct that the court determines to be true has acted in a manner inconsistent with acceptance of responsibility." Id. Because "[t]he sentencing judge is in a unique position to evaluate a defendant's acceptance of responsibility . . . , the determination of the sentencing judge is entitled to great deference on review." USSG § 3E1.1, comment. (n.5); see United States v. Webb, 335 F.3d 534, 538 (6th Cir. 2003).
With this background, what troubled the district court was the defendant's statement as follows:
During the year of 2006, I was one[-]third owner in 104 [I]nvestments. At that time my partners closed on a real estate deal in which was later deemed fraudulent (unknowing to my knowledge). Furthermore, the company issued over Six Hundred and Ninety Thousand Dollars to a particular individual from the above real estate deal mentioned. The monies issued were advised from our accountant to become a "write off" on that particular year[']s taxes and filed as such by the accounting firm for that year. From my understanding, since the monies were received were deemed fraudulent and written off as "tax break", I being one[-]third owner of the company did not take the full tax burden that I should have taken. Therefore, since the additional income was not accounted properly, I filed an illegal tax return for that particular year. 
(Presentence Report ¶ 15). Defense counsel conceded that "it was somewhat of a milk toast acceptance in the written form." (Sentencing Tr. 5). The district court compared Workman's written statement with the plea agreement's factual summary in which Workman admitted that, by the time he filed the false tax return, he knew that his partners had engaged in a fraudulent real estate transaction and that he had shared in the proceeds. Denying a reduction for acceptance of responsibility, the district court stated: 
And the issue for me is whether he has clearly admitted relevant conduct that's spelled out in the plea agreement. And the relevant conduct relates, which I think is important, not only as the guidelines, but as to the overall facts and circumstances in the defendant's involvement with Mr. Norman and Mr. Herceg, who are at the very top of this conspiracy, and, that is, again, his knowledge and notice of the fact that th[is] elderly couple was bilked out of $7 million and the fact that he even participated, Mr. Herceg and Mr. Norman, in the fruits of this crime, at least sharing in these proceeds such luxuries as watches and trips to Las Vegas, and et cetera. 
And candidly, in his writing and written statement here, I don't think that he's accepted or acknowledged the wrongfulness of that conduct. 
(Sentencing Tr. 22-23).
The Court of Appeals affirmed because "We can discern no clear error in the district court's denial of a reduction for acceptance of responsibility where the district court found that Workman had attempted to minimize his relevant conduct."

It is not clear whether the defendant was trying to exclude any relevant conduct from the sentencing equation in his "milk toast acceptance."  But defendants will often want to whitewash their conduct, perhaps in the hope that avoiding directly admitting the conduct somehow achieve a sentencing benefit.  It did not work for Workman, although of course the judge did give him some other breaks.

There are lessons to be learned here.  A defendant must really accept responsibility for all of his relevant conduct if it becomes an issue in the process.  As noted, the defendant is not required to address relevant conduct, but if he chooses to he should not deny or waffle.

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