Monday, October 16, 2017

Tax Attorney Sentenced to Two Years for Evasion and Obstruction (10/16/17)

USAO SDNY announced here the sentencing of a tax attorney, Harold Levine, to two years imprisonment for counts of tax evasion and tax obstruction to which he pled.  I previously wrote on denial of his earlier motion to dismiss.  Court Denies Motion to Dismiss Counts Against Tax Shelter Lawyer (Federal Tax Crimes Blog 4/14/17), here.  The following are the key excerpts from the USAO SDNY press release for the sentencing:
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that HAROLD LEVINE, a Manhattan tax attorney, was sentenced today by U.S. District Judge Jed S. Rakoff to 24 months in prison for tax evasion and obstruction of the Internal Revenue Service (“IRS”), stemming from his scheme to siphon millions of dollars of tax shelter fee income from the law firm at which he worked and failing to report the diverted fees as income.  LEVINE’s scheme also involved making false statements to IRS auditors, and urging a witness to provide false testimony to the same IRS auditors who were investigating LEVINE’s receipt of the fees.  
* * * * 
Between 2004 and 2012, LEVINE, a tax attorney and former head of the tax department at a major Manhattan Law Firm (the “Law Firm”), schemed with co-defendant Ronald Katz, a certified public accountant, to obstruct and impede the due administration of the Internal Revenue laws by evading income taxes on millions of dollars of fee income generated from tax shelter and related transactions that LEVINE worked on while a partner of the Law Firm.  Specifically, LEVINE failed to report approximately $3 million in income to the IRS on his personal tax returns during the period 2005-2011.  Most of the fee income LEVINE failed to report was routed by him through a limited liability company LEVINE controlled, which was nominally owned by a family member. 
 As part of the scheme, for example, LEVINE caused tax shelter fees paid by a Law Firm client to be routed from the Law Firm’s escrow account to a partnership entity he co-owned with Katz and thereafter used those fees – totaling approximately $500,000 – to purchase a home in Levittown, on Long Island.  LEVINE caused the home to be purchased as a residence for a Law Firm employee (the “Law Firm Employee”) with whom he then enjoyed a close personal relationship.  Although LEVINE allowed the Law Firm Employee to reside in the Levittown house for over five years without paying rent, LEVINE and Katz prepared tax returns for the entity through which the home was purchased that claimed false deductions as a rental property. 
 In February 2013, LEVINE was questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received by LEVINE from those transactions.  During that questioning, LEVINE falsely told the IRS that the Law Firm Employee paid him $1,000 per month in rent while living in the Levittown home.  In addition, when the Law Firm Employee was contacted by the IRS and summoned to appear for testimony, LEVINE urged the employee to falsely tell the IRS that she had paid $1,000 per month in rent to LEVINE.
I do not have the transcript of the sentencing hearing and will post it if and when I get it.  The USAO SDNY press release linked about quotes the sentencing judge as follows:  “There was no one in the world who knew better that he was committing a crime than Harold Levine.”

I do have the following documents that readers interested in the process from acceptance of the plea to the sentencing hearing:
  • Levine Plea Hearing Transcript, here.
  • Defendant's Sentencing Memo, here.
  • U.S. Sentencing Memo, here.
  • U.S. Sentencing Memo, Exhibit C, Sentencing Data Chart, here.
  • Defendant's Reply Sentencing Memo, here.
  • U.S. Letter Response to Defendant's Reply Sentencing Memo, here.
  • Docket Entries as of today, here.

I have just a few comments on the linked documents:

1.  The judge taking the plea and imposing the sentence is Jed S. Rakoff, a giant among district judges (in my opinion).

2.  Some points of the plea hearing (from the transcript):

a.  The AUSA made clear that the U.S. could prove the issue presented in the cert petition in Marinello -- i.e., whether tax obstruction requires that the defendant know of a pending IRS investigation that he intended to obstruct.  (Transcript pp. 9 & 10.)

b.  Often in plea hearings, the AUSA or DOJ Tax attorney will summarize the key facts and legal basis for the plea and the defendant will indicate his knowing agreement that that facts stated are true and the his is guilty of the counts to which he pled.  In this case, the AUSA submitted a statement that apparently spelled out the elements of the offense.  Then the court had the following discussion (Transcript pp. 15-18):
THE COURT: Does the government affirm that if this case were to go to trial, it could through competent evidence prove every essential element of each of these two counts beyond a reasonable doubt?
MR. OKULA: We could indeed, your Honor.
THE COURT: Now, sometimes the government wants to give a little summary of its evidence. I don't require that, but if you want to, you're free to.
MR. OKULA: I don't think it's necessary, your Honor.
If the Court wants it, I'm happy to do it, but otherwise --
THE COURT: No, I don't require it. What I do require and I'm anxious to hear is from Mr. Levine. Please tell me in your own words what it is you did that makes you guilty of these counts.
THE DEFENDANT: In 2005 through 2008, 2010, and 2011, I filed false tax returns that did not include substantial income. I signed these returns and submitted them to the IRS. I knew it was my legal obligation to report all of my income to the IRS, and I did not do that. As a result, I failed to pay
substantial taxes that were due and owing. I am pleading guilty because I am responsible.
THE COURT: Just on that, you knew that you were thereby evading payment of taxes that were otherwise due, yes?
THE COURT: Very good. Go ahead.
THE DEFENDANT: I also submitted a false response to an information document request issued by the IRS, and I made statements to the IRS that were not true. In advance of someone else testifying before the IRS, I told that person what I had said, and I did so with the expectation that they would
make the same untrue statements.
THE COURT: Just picking up on the prosecutor's point, so you knew that this was part of an ongoing IRS investigation?
* * * *
THE COURT: Mr. Levine, in light of everything that we've now discussed, how then do you now plead, first, to Count One, the obstruction count, guilty or not guilty?
THE DEFENDANT: Guilty, sir.
THE COURT: How do you plead to Count Three, the evasion count, guilty or not guilty?
THE DEFENDANT: Guilty, sir.
THE COURT: Because the defendant has acknowledged his guilt as charged, because he has shown that he understands his rights, and because his plea is entered knowingly and voluntarily and was supported by an independent basis in fact containing each of the essential elements of each of the two offenses, I accept his plea and adjudge him guilty of Counts One and Three of indictment 16 Cr. 715.
c.  The Court makes clear that its primary consideration in sentencing are the 18 USC 1553(a) factors.  (Transcript p. 14.)  Of course, Judge Rakoff knows full well that he has to go through the drill of making the Guidelines calculations and taking them into consideration for what they are worth.

2.  Defendant's Sentencing Memo.  The defendant makes some arguments to reduce the guidelines calculations offered by the PO, but principally focuses on the § 1553(a) factors.  Not surprisingly, the defense asks the Court to exercise his Booker discretion to impose no sentence.  Since the defendant's lawyers are excellent, students and young lawyers might want to review the memo.

3.  The U.S. Sentencing Memo.  The Government asked for a sentence within  the advisory Guideline range of 37 to 47 months.  The Government makes the expected arguments for a significant sentence.  Among the arguments is that a low or no sentence would create significant sentencing disparities, see the Government Memo (pp. 16-18) and the Exhibit C Sentencing Data chart linked above.

4.  Defendants' Sentencing Reply.  The defendant's arguments on reply relate to the Guidelines calculations which, as noted above, Judge Rakoff said was not that important in exercising his sentencing discretion.

5.  The U.S. Letter Response to Defendant's Reply.  I offer this excerpt:
Second, Levine boldly claims that he “is not a ‘taker.’” (Mem. 16). But that is exactly what he is. Levine cheated his law partners at Herrick Feinstein and then stole from the United States Government—the exact conduct that now brings him before this Court for sentencing. Levine suggests that his long career representing clients as an associate and later a partner at major New York law firms should somehow mitigate his criminal conduct and warrant a lesser sentence. (See Mem. 16-18). This is ludicrous. The fact that Levine was an accomplished lawyer—and a tax lawyer at that—makes his crimes all the more deserving of substantial punishment. Not only was Levine obviously highly compensated for his legal work, but, to put it simply, he should have known better. If anyone is deserving of a lengthy prison sentence for committing tax fraud, lying to the IRS, and urging a witness to provide false testimony under oath, it is an experienced and successful tax lawyer like Levine. Levine also points to the high regard in which he is evidently held by former colleagues and friends who have written letters on his behalf. While the Court can and undoubtedly will consider such letters, they do not distinguish Levine from other white-collar criminals in any manner that would merit a downward departure. See, e.g., United States v. McClatchey, 316 F.3d 1122, 1135 (10th Cir. 2003) (“[E]xcellent character references are not out of the ordinary for an executive who commits white-collar crime.”).

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