Yet Another Offshore Account Conviction But With DOJ Agreement of No Sophisticated Means (5/29/17; 5/31/17)

DOJ Tax announced Friday here the guilty plea of Joyce Meads of College Station, TX.  Meads was charged in SD FL.  Meads pled to one count of the Klein / defraud conspiracy, a five-year felony.  I link the following document:  docket entries as of today here; the guilty plea here. and the Stipulated Facts here. Notice from the docket sheet that she was charged by information and that she waived indictment, which use indicate a plea agreement in the making.

The key items in the plea agreement are

1. Tax Loss:  Between $250,000 and $550,000.

2.  Sophisticated Means:  "[T]he defendant's efforts to defraud the United States did not involve sophisticated means' within the meaning of the Sentencing Guidelines."  (See my comment below.)

3.  No other factors that would increase the offense level.  Of course, she will get the acceptance of responsibility adjustment (2 or 3 level downward adjustment).

On the basis of the foregoing, my rough and ready calculation of the offense level is 15 with an indicated sentencing range of 18-24 months.  Based on the same calculation, if the sophisticated means adjustment were to apply, the offense level would be 15 with an indicated sentencing range of 24-30 months.

Key items in the stipulated facts, which are pretty much bare bones, are:

1. From 1997 to 2010, Meads "conspired with co-conspirators Marc Harris, Boyce Richard Griffin, and others to defraud the United States."  I will provide some additional information Harris and Griffin at the end of this blog.  One of the others is a person identified as "C.M." with Harris' entity, The Harris Organization in Panama City, Panama.

2. Meads sought to avoid tax on her income from U.S. oil royalties she had recently received from her parents as a gift and would receive as a gift.

3. Harris and the Harris Organization set up entities to implement the offshore structure.  The entities included a Delaware corporation and a Panama corporation.  Meads transferred her royalty interest to the Delaware corporation and he parents transferred to remaining interest to the Delaware corporation.  The royalty income apparently flowed through the Delaware corporation and then out to the Panama corporation.  In 1998, she caused the Panama corporation to distribute $25,000 to her disguised as a scholarship.

4.  In 1999, Meads shifted the operation from the Harris Organization to Griffin's Offshore Management Alliance Ltd., which, like the Harris Organization, assisted U.S. persons seeking to avoid U.S. tax.  Apparently, incident to that shift, Meads caused the royalty payor (Chesapeake Energy) to forward royalty checks to a private post box in Miami.  The royalty checks were forwarded by to Panama where Griffin deposited them in a Panamanian bank account for Meads' benefit.

5.  Meads failed to report the income on her 1997-2009 1040s and, as a result, filed false tax returns.

JAT Comments:

1.  This is pretty much garden variety type of offshore planning.

2.  I was surprised that the Government agreed in the plea agreement that the arrangement did not involve sophisticated means for Sentencing Guideline purposes.  The guidelines' application notes for §2T1.1. Tax Evasion; Willful Failure to File Return, Supply Information, or Pay Tax; Fraudulent or False Returns, Statements, or Other Documents, here, provides:

5.      Application of Subsection (b)(2) (Sophisticated Means).—For purposes of subsection (b)(2), "sophisticated means" means especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts ordinarily indicates sophisticated means.

SG §2T1.9., Conspiracy to Impede, Impair, Obstruct, or Defeat Tax, provides that the offense level for the conspiracy charge is the offense level determined under SG §2T1.1 or 10, whichever is more.  Application Note 3 provides that "imported" offense level includes both the base offense level and any applicable offense characteristics in SG in §2T1.1.  Hence, the offense level would include the sophisticated means adjustment if applicable.

The agreement as to lack of sophisticated means is not binding on the Probation Office or the court.  I would be surprised if they agreed.  But, then, I am surprised that the Government agreed that Meads' machinations did not involve sophisticated means.

3.  Note the other named co-conspirators -- Harris and Griffin.  In 2003, Harris was convicted of multiple counts of conspiracy, tax evasion and money laundering and sentenced to 204 months.  I link the following documents related to Harris' conviction:  docket entries here; last amended judgment here and jury verdict here.  There is no indication whether Harris cooperated in the investigation of Mead or other persons he served in avoiding U.S. tax.  In 2011, Griffin was convicted by plea agreement to one count of defraud / Klein conspiracy.  I link the following documents related to Griffin:  the docket entries here; the plea agreement here (which includes an agreement to cooperate); the judgment imposing sentence of 33 months here; a motion to stay indicating Griffin's cooperation here; and the Rule 35 order reducing the sentence to 12 months here.  I presume that Griffin either led the Government to Meads or contributed to the evidence for her conviction.

I had missed the Griffin conviction earlier.  I have now revised my spreadsheet to include it.  The Harris conviction was before the key time period of interest for my spreadsheet, but I have nevertheless included that conviction as well.  Those working with the spreadsheet can easily sort in or out charges and convictions by their dates.  I will try to post an updated spreadsheet in the next couple of weeks.

4. (Added 5/31/2017)  In taking another look at the Griffin judgment, I noted that the restitution was to be applied to a joint account with Larry Eugene Helms.  I did a Pacer search and found the conviction of Larry Eugene Helms who also had a restitution amount of $106,960.  The documents for Helms are:  docket entries here; plea agreement here; stipulation of facts here; and judgement here.  I note the following regarding Helms:

• Helms was sentenced to 3 years probation and restitution of $106,960.  This is the same amount and apparently is for the same tax loss for which restitution was imposed on Griffin.  (Note that the Griffin judgment provides for restitution payable into the joint account for Helms.)  Per the plea agreement and stipulation, the corporate loss was $54,633 and the individual loss was $54,633.
• Per the plea agreement, a 5K1.1 downward departure from the advisory sentence is contemplated.
• Per the plea agreement, the tax loss is $106,960 and, without details, a sentencing offense level of 13.  (My attempt to reconstruct the details suggest that the sophisticated means 2 level upward adjustment is not applied; however, the indication of a foreign account is opaque, but an FBAR penalty is not indicated.)
• Per the plea agreement, the Government has no objection to Helms traveling or relocating to Costa Rica.
• Scheme was to skim via false invoices with the money sent to Panama.  The money sent to Panama while under Harris' supervision prior to 2002 was lost due to fraud and mismanagement of Harris.  The same type of false invoice scheme was conducted under Griffin, but it is unclear what happened to that money.  Presumably it was not lost, but the journey it took from the U.S. to Panama is not clear.
• Per the judgment, Helms is permitted to relocate to Costa Rica after all monetary penalties paid.  (Not clear whether that includes restitution, which is not technically a penalty.)  But, Helms is permitted to travel to Costa Rica for emergency medical treatment and assist in the relocation of his family.