Friday, October 21, 2016

Former Tax Court Judge Kroupa Enters Plea to Conspiracy Count (10/21/16; 10/25/16)

Note:  The following includes substantial revisions through 5:00pm on 10/25/16 after I received the plea agreement.

On October 21, 2016, former Tax Court Judge Diane Kroupa entered a guilty plea to Count 1 of the indictment.  The Plea Agreement is here; the transcript of the plea hearing is here (thanks to Keith Fogg, Former Tax Court Judge Kroupa Pleads Guilty to Conspiracy (Procedurally Taxing Blog 10/24/16), here).  (Just a reminder that most readers of this blog should also be following the Procedurally Taxing Blog.)

Kroupa pled to Count 1, the conspiracy count of the indictment, here.  That count is a defraud conspiracy (referred to in a tax context as a Klein conspiracy, named for the leading case, United States v. Klein, 247 F.2d 908 (2d Cir. 1957), cert. denied 355 U.S. 924 (1958)).  The conspiracy is charged under 18 USC § 371, here, which is a five-year felony.  The relevant language of the statute is:
If two or more persons conspire * * * to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.
Her husband, Robert E. Fackler, pled to tax obstruction, § 7212(a), here, which is a three year felony (and has even in earlier, simpler times been described as a one person conspiracy because the conduct punished, other than the conspiracy, is basically the same as the defraud / Klein conspiracy).  See Update on Judge Kroupa Prosecution - Her Husband Pleads Guilty (Federal Tax Crimes Blog 9/26/16; 9/27/16), here.  In his plea agreement, Fackler admitted participating in a conspiracy.  The other person in the conspiracy was his wife, Kroupa.

The single five-year conspiracy to which Kroupa pled should fully vindicate the tax imperatives involved.  Under the agreed Sentencing Guidelines calculation (discussed below) produces a sentencing range substantially below the maximum allowed by the five year count of conviction.  (As is often stated in the presentence investigative report (discussed below), based upon the sentencing guidelines calculations, convictions under the other counts dismissed under the plea agreement would not generate a higher guideline range.)

The following are key items of the plea agreement and the sentencing hearing transcript.

1.  The factual basis for the plea is in paragraph 2 of the plea agreement starting on p. 1 of the plea agreement.  The factual basis of the plea is also covered at sentencing hearings.  The presentation at the sentencing hearing begins on p. 27 of the transcript.  The factual basis includes the machinations to falsely report the components of tax liability on the return and the obstructions, including false representations in the 2012 audit.

2.  The agreed total tax loss is "approximately" $455,257 (federal) and $57,784 (state).  (See chart on plea agreement p. 10.)  The tax loss is the principal driver of the sentencing guidelines calculations.  The tax loss for guidelines purposes includes the state tax loss.  Hence, the total tax loss for guidelines purposes is $513,041.  She benefits from the recent guidelines amendments to the tax loss table which moved the the upper end bracket from $500,000 to $550,000 (otherwise, under the old guidelines, her base offense level would have been 2 levels higher and her resulting sentencing level would be two higher; generally the current guidelines apply unless the guidelines in effect at the time of the offense conduct are more favorable, which they are not here).

3. The calculations (beginning on p. 10 of the plea agreement; beginning on p. 20 of the transcript) are:
18 Base Offense Level (because tax loss is around $500,000).
+2 for abuse of public trust
+2 obstruction of justice
-3 acceptance of responsibility
Yields 19 Sentencing Level
The sentencing history is I.

The sentencing table range for 19:  30-37 months imprisonment

The Guidelines calculation is just advisory; the Court can "vary" upward or downward based on other sentencing considerations in 18 USC § 3553, here.  See United States v. Booker, 543 U.S. 220  (2005).  Upward variances in tax crimes cases are rare, so I would not expect an upward variance here.  I would expect for her attorneys to strive mightily for a significant downward variance.  I have no crystal ball on that downward variance, however.  But, if there is no downward variance, my hunch -- pure speculation -- that sentencing will be a the low end of the range.

3.  The sentencing will occur after the Probation Office provides a presentence investigative report (acronmyned or initialized to PIR or PSR) and the parties provide the comments or objections to the report, along with such other sentencing factors as appropriate.

4. The plea agreement (p. 13) provides for restitution for the total amount of the tax loss.  The restitution  requirement is covered in the transcript beginning on p. 21.  The restitution is the unpaid tax and  will be less than the tax loss noted above because she paid some tax after the criminal events (principally as a result of audits).  Presumably the restitution amount includes the state tax as well.  And, presumably, the restitution liability will be shared with Fackler.

5.  Plea hearings require inquiries into the voluntariness of the plea.  Included in the inquiries are questions about drugs.  Those questions start on p. 5 of the hearing transcript.  Kroupa says (Tr. 5-6) that she is being treated for "I'm being treated for anxiety, depression, and bipolar II."  She is taking certain medications as listed on p. 6.  I infer that whatever the conditions for which she is being treated did not prevent her from pleading guilty, but they may play out in the sentencing.  The Court was satisfied as to the voluntariness of the plea.

Key prior posts are (in reverse chronological order):
  • Update on Judge Kroupa Prosecution - Her Husband Pleads Guilty (Federal Tax Crimes Blog 9/26/16; 9/27/16), here.
  • Former Tax Court Judge Kroupa Indictment - Part I - Conspiracy (Federal Tax Crimes Blog 4/5/16; 4/6/16), here.
  • Former US Tax Court Judge Kroupa Indicted (Federal Tax Crimes Blog 4/4/16; 4/5/16), here.

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