Sunday, November 3, 2013

Sentencing Leniency for Offshore Tax Cheats (11/3/13)

In an earlier blog (Ty Warner, Beanie Babies Creator, Pleads Guilty (Federal Tax Crimes Blog 10/2/13; Updated 10/5/13), here, I noted:
Observers of the tax sentencing scene have noted for some time now that offshore account tax cheats fare better in sentencing than do ordinary tax cheats with similar sentencing characteristics.  See e.g., Lower Sentences For Offshore Tax Cheats - Role of 5K1 Departures (Federal Tax Crimes Blog 9/28/13), here.  (I am currently updating the master spreadsheet that will contain some nonoffshore sentencing data to compare to the offshore sentencing data.)  As noted in my blog, the apologists for this phenomenon assert that it is perhaps related to the 5K1 substantial assistance downward departure.  Note that there is no such down departure provided in the Warner plea agreement.  Hence, this case will test whether these offshore cheats really get treated better.  Warner is the poster child for the big fish that got caught.
On that theme is a recent article, David Voreacos, Beanie Baby Billionaire Sentence Comes Amid Tax Leniency (BloombergBusinessweek 11/1/13), here.  Key excerpts are:
The U.S. has prosecuted 103 people, securing 62 guilty pleas and five trial convictions. Of 49 sentenced, most received probation or home confinement, according to a Bloomberg analysis of the cases, which included criminal filings and transcripts of sentencings. 
Only 18 got prison time. Four of those were sentenced to a year and a day, and just two got longer terms. In almost every case examined, the defendants received sentences that were below the guideline range set at sentencing. 
JAT Comment:  I think this is consistent with the data I have compiled and analyzed in my spreadsheet.  I will check the numbers tomorrow and bring my spreadsheet up to date for posting, hopefully by tomorrow afternoon.   Then, from another part of the article is the following:
“The wide variety of sentences in offshore tax evasion cases -- ranging from probation to home confinement to substantial prison terms -- reflects the general difficulty of predicting how any one particular district judge might sentence a specific defendant in any case,” said Daniel W. Levy, who prosecuted federal tax cases before joining McKool Smith LLP.
Daniel Levy (bio here) was one of the chief prosecutors of these cases in USAO SDNY, so he knows of what he speaks.  Nevertheless, it is important to note that the heaviest sentences were in cases that went to trial and some of those few, those very few, cases going to trial were atypical cases.  So, the proper universe to compare is the cases that pled rather than going to trial.  It is difficult to predict what a judge might do, particularly if he or a fellow judge in the district have not sentenced in this context before.

Jeff Neiman (bio here) gets to an issue that concerns me.  Jeff is quoted in the article as follows:
“Tax evasion is still viewed as one of those crimes that don’t seem as serious to judges who sentence gun and drug and sex offenders,” said former federal prosecutor Jeff Neiman. “When you bring in these wealthy, charitable defendants, they stick out like a sore thumb in the criminal justice system.”
It does concern me that these pick stick out -- don't know about the sore thumb metaphor -- but they do stick out.  And, they stick out because they are rich (at least relatively, and, in the case of Warner and a couple of others, in real numbers).  And they get better treatment that non-rich tax cheats who did their tax cheating in other words, perhaps because they did not have easy access to the offshore bank form of tax cheating because they are not wealthy.  I am not sure that is a good systemic message for the federal criminal tax enforcement system.

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