Tuesday, May 26, 2015

Supreme Court Addresses the Wartime Suspension of Limitations Act (5/26/15)

In Kellogg Brown & Root Services, Inc. v. Carter, 575 US 650 (2015), here, a unanimous opinion handed down today, the Supreme Court held that the Wartime Suspension of Limitations Act (19 USC § 3287, "WSLA"), here, did not apply in a case arising under the civil False Claims Act (31 U. S. C. §3729), "FCA"), here.  Both Acts, in their own ways, dealt with fraud in war defense contracts and related frauds.  Although fraud in defense contracts and related frauds was the impetus for both Acts, as I have noted before the WSLA, is rather broad in its textual coverage and read literally includes any fraud crimes against the U.S.  I will devote this blog entry to the WSLA and what the Court said about it in Kellogg.

The WSLA provides in relevant part: that, "When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces" under the War Powers Resolution Act, "the running of any statute of limitations applicable to any offense . . . involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not."  I have previously discussed the possible application of WSLA to tax crimes.  See Is the Criminal Statute of Limitations Suspended under the Wartime Suspension Act? (Federal Tax Crimes Blog 11/20/09), here; and Wartime Suspension of Limitations Act and Tax Fraud (Federal Tax Crimes Blog 6/27/12), here.

In part relevant to the WSLA, the Court in the Kellogg opinion says (Slip Op. 5-6, footnote omitted):

The text, structure, and history of the WSLA show that the Act applies only to criminal offenses. 
The WSLA’s roots extend back to the time after the end of World War I. Concerned about war-related frauds, Congress in 1921 enacted a statute that extended the statute of limitations for such offenses. The new law provided as follows: “[I]n offenses involving the defrauding or attempts to defraud the United States or any agency thereof . . . and now indictable under any existing statutes, the period of limitations shall be six years.” Act of Nov. 17, 1921, ch. 124, 42 Stat. 220 (emphasis added). Since only crimes are “indictable,” this provision quite clearly was limited to the filing of criminal charges.  
In 1942, after the United States entered World War II, Congress enacted a similar suspension statute. This law, like its predecessor, applied to fraud “offenses . . . now indictable under any existing statutes,” but this time the law suspended “any” “existing statute of limitations” until the fixed date of June 30, 1945. Act of Aug. 24, 1942, ch. 555, 56 Stat. 747–748. 
As that date approached, Congress decided to adopt a suspension statute which would remain in force for the duration of the war. Congress amended the 1942 WSLA in three important ways. First, Congress deleted the phrase “now indictable under any statute,” so that the WSLA was made to apply simply to “any offense against the laws of the United States.” 58 Stat. 667. Second, although previous versions of the WSLA were of definite duration, Congress now suspended the limitations period for the open-ended timeframe of “three years after the termination of hostilities in the present war as proclaimed by the President or by a concurrent resolution of the two Houses of Congress.” Ibid. Third, Congress expanded the statute’s coverage beyond offenses “involving defrauding or attempts to defraud the United States” to include other offenses pertaining to Government contracts and the handling and disposal of Government property. Ibid., and §28, 58 Stat. 781. 
Congress made more changes in 1948. From then until 2008, the WSLA’s relevant language was as follows:  
“When the United States is at war the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not . . . shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress.” Act of June 25, 1948, §3287, 62 Stat. 828.
In addition, Congress codified the WSLA in Title 18 of the United States Code, titled “Crimes and Criminal Procedure.” 
Finally, in 2008, Congress once again amended the WSLA, this time in two relevant ways. First, as noted, Congress changed the Act’s triggering event, providing that tolling is available not only “[w]hen the United States is at war,” but also when Congress has enacted a specific authorization for the use of military force. Second, Congress extended the suspension period from three to five years. §855, 122 Stat. 4545.
The Court then in subsection B concludes that the word offense means a crime, hence precluding application of the WSLA to civil FCA cases.  Interestingly, though, none of its discussion presumes application to fraud offenses against the U.S. only involving some relationship to the war or hostilities which, based on the history, was the reason for the suspension.

In a recent draft of a chapter for publication, I reviewed my understanding of the state of the law related to the issue of WSLA's potential application to tax crimes:
So far as we are aware, the Government has only attempted to use this statute in a single tax case.  In United States v. Beard, 118 F. Supp. 297, 303-304 (D. Md. 1954)}}.  The analysis of the issue is cryptic, perhaps in part because the Government appeared timid in floating the issue: 
This contention appears in the government's brief filed in this matter but was not further urged in oral argument and may be disposed of without extending this opinion by needless prolixity. It is my opinion that this War Time Suspension Statute does not apply to this prosecution for income tax evasion brought under 26 U.S.C.A. § 145 (b), under the recent decisions of the Supreme Court.  United States v. Scharton, 285 U.S. 518, 522, 52 S.Ct. 416, 76 L.Ed. 917;  Bridges v. United States, 346 U.S. 209, 73 S.Ct. 1055, 97 L.Ed. 1557; United States v. Grainger, 346 U.S. 235, 73 S.Ct. 1069, 97 L.Ed. 1575. 
Beard’s conclusion is consistent with the general interpretation of the purpose of the statute to affect crimes related to the hostilities rather than garden variety tax evasion.  Perhaps for that reason, the CTM does not mention the statute in its discussion of statutes of limitation.  CTM 7.00 (2012 ed.).  But, one has to wonder how judges preferring literal readings of statutes (the poster child being Justice Scalia) might apply the statute.
The issue apparently came up recently in a tax crimes case in Florida.  Two opinions were recently reported.  See United States v. Crithfield, 2015 U.S. Dist. LEXIS 53993 (M.D. Fla. Feb. 11, 2015), no link available, and United States v. Crithfield, 2015 U.S. Dist. LEXIS 53995 (M.D. Fla. 2015), no link available.  The crimes apparently related to the marketing of an alleged abusive insurance scheme referred to as a "business protection plan."  Both opinions address certain pretrial motions.  The first opinion is a magistrate judge's report; the second is the district court's opinions.  The second opinion states cryptically:
In conjunction with the motion (Doc. 128) resolved in the preceding paragraph, the defendants move (Doc. 129) to dismiss based on the applicable limitation, move in limine with respect to certain taxpayers' returns, and move for a James hearing on the admissibility of co-conspirator statements. For the reasons stated by the United States, the motion (Doc. 129) is DENIED. However, regardless of the resolution of any other issue, the Wartime Suspension of Limitations Act will not toll or suspend any otherwise applicable limitation in this action.
Finally, in Bridges v. United States, 346 U.S. 209 (1953), here, the Court addressed the WSLA in the context of a defraud conspiracy charge in which the defendant testified falsely in an immigration hearing.  Since the defendant had not "defrauded" the Government, WSLA could not suspend the statute for any substantive offense related to the testimony, the Government charged them for the defraud conspiracy which, surprisingly, as interpreted, has no requirement of an intent to defraud even though there must be a defraud conspiracy. (This interpretation of the defraud conspiracy is a big, big issue in the law; I have addressed it several times, so here just cite to the following two prior blogs:  Coplan #1 - Panel Questions Validity of Klein Conspiracy (Federal Tax Crimes Blog 12/1/12), here; and Further on the Second Circuit Detour on the Interpretation of the Defraud / Klein Conspiracy (12/18/12), here.)  Perhaps inconsistently with its holding in Hammerschmidt, the Supreme Court in Bridges held that the word defraud in the WSLA means defraud and does not mean the special expansion notion in the defraud conspiracy statute.  See Bridges, p. 221, fn. 19 ("Haas v. Henkel, 216 U.S. 462, and Hammerschmidt v. United States, 265 U.S. 182, are not to the contrary. The statements there made refer to conspiracies to defraud the United States "in any manner or for any purpose" as used in the second clause of the general conspiracy section. See § 37 of the old Criminal Code, 35 Stat. 1096, now § 371 of the new Criminal Code, 18 U. S. C. (Supp. V). See also, United States v. Gilliland, 312 U.S. 86. They do not control the interpretation of the provisions in the Wartime Suspension of Limitations Act discussed in this opinion.")

JAT Comments:
  1. I suppose that, if the issue had been resolved the other way to apply to civil fraud related actions, the WSLA might have had some application to civil aspects of tax crimes, including perhaps the so-called Allen issue of whether fraud on the return invokes the unlimited statute of limitations in § 6501, here.  See e.g., More on the Allen Issue - Oral Argument in BASR (Federal Tax Crimes Blog 4/17/15).  The Court of Appeals for the Federal Circuit should  should decide BASR any day now.
  2. I found that the original enactment of the WSLA in the Civil War became known then as the Lincoln law.  See Covington & Burling, E-Alert: White Collar & Litigation (6/25/14), here.

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