Tuesday, December 15, 2015

Status of the NPAs and DOJ/IRS Mining of the Fruits of the NPAs (12/15/15)

Tax Notes Today reported that, at the ABA Criminal Tax Fraud and Tax Controversy 2015 seminar held in Las Vegas last week, the Acting AAG Tax, Carline Ciraolo, "reiterated her previously stated goal of completing the Swiss bank category 2 NPAs by the end of this month." Nathan J. Richman, Tax Division to Complete Non-Prosecution Agreements by Year-End, 2015 TNT 238-3 (12/11/15).  She reported that, as of that date, 61 category 2 NPAs had been entered and 1 NPA patterned on the category 2 NPAs had been entered with a non-bank, Finacor SA.  So, as I derive it, if the previously stated expectation of around 80 completed NPAs still holds, meeting the goal would mean that about 18 need to be entered between now and year end.  Of course, I would presume that the negotiation and drafting of the remaining NPAs is pretty far along, so that hopefully the holiday season for the parties involved will not be too disrupted just to meet what may be an arbitrary deadline of year end 2015.

She also said that the IRS has collected over $600 million from the program.  This is consistent with the numbers I reported after the last disclousre on 12/10/15.

As to the NPAs, she also beat the drum that the IRS and DOJ was obtaining a lot of information that will permit them to chase after tax cheats and enablers criminally and for tax cheats civilly.  As to criminally, the TNT report says:  "Ciraolo said that Swiss bank NPA criminal leads referred to the IRS may have already been developed by the Tax Division and may be accompanied by a request for referral back to the DOJ."  The process, therefore, seems to require a referral from the IRS in order for DOJ to seek indictment.  (That may be reading too much into the cryptic statement as reported, and the reporter may not have gotten it exactly right.)  I think -- no authority -- that prosecution would require the referral from the IRS.  The interesting issue would be if DOJ referred to the IRS with a request that the IRS refer back to DOJ with a prosecution recommendation, but the IRS determined for reasons based on its own assessment of the case and its systemic priorities not to make a prosecution recommendation.  For example, say that the IRS believed that the taxpayer had substantially complied with its voluntary disclosure program but DOJ was requesting a prosecution recommendation anyway (since DOJ says it is not bound by the IRS's voluntary disclosure program).  Could DOJ then prosecute for tax crimes without an IRS referral and recommendation?  I have been interested in this issue for a long time but have never been able to get a clear answer.  I do know that, in the KPMG grand jury investigation, when we had the initial contact for a DOJ conference, the DOJ attorney insisted that the prosecution recommendation that was on the table for the DOJ conference came from the IRS and not from the grand jury prosecutors.  And I subsequently heard (hearsay) that an IRS official who had been assigned to assist the grand jury actually made the decision as to who among the targets or subjects of the grand jury investigation would actually be prosecuted (meaning, I suppose, who would be referred to DOJ for prosecution).  I would think that the IRS recommendation for prosecution would be required in all tax prosecutions, at least where the gravamen of the misconduct is principally tax crimes.  If anyone has any thoughts or learning on this issue, please let me know.

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