Ninth Circuit Affirms Convictions for Klein conspiracy, Tax Evasion and Tax Perjury (9/26/18)

In United States v. Visconti, ______ (9th Cir. 2018) (nonpublished), here, the Ninth Circuit affirmed Visconti's conviction for "conspiracy to defraud the United States, attempted evasion of income tax, and making a false tax return."  Since the decision is nonpublished, the panel apparently felt it somewhat routine.  Nonetheless, I thought readers might find the following helpful:

1.  Corporate Distributions - the Boulware Issue

It is conventional wisdom that the Government bears the burden of proving beyond a reasonable doubt that the criminal defendant is guilty.  Where the criminal count is that the taxpayer failed to report a distribution from a corporation with respect to his stock, the distribution is only income if either (or some combination of both), the corporation has E&P and, to the extent there is no E&P, the distribution exceeds the defendant's basis in the stock with respect to which the distribution was made.  So, does the Government have to prove beyond a reasonable doubt E&P and/or insufficient basis in order to convict the defendant for willfully evadinig tax on the distribution (§ 7201) or willfully misstating the quantum of his income (§ 7206(1))?  The answer is no; the absence of the elements that would make the corporate distribution nontaxable is an affirmative defense that the criminal defendant must establish.  See Boulware v. United States, 552 U.S. 421 (2008); and United States v. Boulware, 558 F.3d 971 (9th Cir. 2009); see also Boulware Wins the Battle Only to Lose the War (Federal Tax Crimes Blog 3/9/09), here (discussing the 9th Circuit decision on remand from the Supreme Court); and for more on affirmative defenses in criminal cases, see Supreme Court Decision on Burden of Proof for Affirmative Defense of Withdrawal from Conspiracy (Federal Tax Crimes Blog 1/10/13), here.

In Visconti, the Court held that "Visconti failed to establish that his stock basis exceeded the value of the distributions."  The facts on that issue appear to me to be somewhat convoluted, but it does appear that Visconti failed to meet that burden.

What about the E&P issue?  The Court did not discuss it, but Visconti would clearly lose unless he established both lack of E&P and sufficient basis to cover the distribution.  By showing that he lacked that basis, the distribution would be taxable whether or not there was E&P.

Question, by holding that the defendant must prove the defense, one issue is what that level of proof is?  Beyond a reasonable doubt?  (Certainly not.)  By a preponderance of the evidence?  (Suspect to me)?  Or, just sufficient to show that the Government has not proved it case beyond a reasonable doubt? (I think this is right.)

2.  Admission of a Witness' Plea Agreement and the Vouching Issue.

It is standard law that the prosecutor should not vouch for the credibility of a witness.  See e.g., United States v. Warshak, 631 F.3d 266 (6th Cir. 2010), reh'g and reh'g en banc denied, 2011 U.S. App. LEXIS 5007 (6th Cir. 2011) (noting that improper prosecutorial vouching "typically occurs occurs when a prosecutor supports the credibility of a witness by indicating a personal belief in the witness's credibility, thereby placing the prestige of the office of the United States Attorney behind that witness." (Cleaned up)).  Visconti claimed that the admission of the witness' plea agreement requiring that he testify truthfully had the effect of the prosecutor vouching for the credibility of the witness.  The court rejected the argument as follows:

Visconti relies on dicta in United States v. Roberts, 618 F.2d 530, 536 (9th Cir. 1980), which raises concerns about admitting a plea agreement. But Roberts did not hold that a plea agreement containing a promise of truthfulness is per se inadmissible. References to a plea agreement “are only mild forms of vouching” and when “the credibility of [a witness] would almost certainly have been challenged during cross-examination, there [is] justification to bolster credibility.” United States v. Brooks, 508 F.3d 1205, 1211 (9th Cir. 2007). The prosecutor did not reference nor elicit testimony regarding the plea agreement’s truthfulness provision, nor did she bolster credibility by expressing personal belief in the witness’s credibility. Visconti challenged the witness’s credibility on crossexamination, and the district court instructed the jury to consider the witness’s testimony with “greater caution.” The district court did not plainly err by admitting the plea agreement. See United States v. Daas, 198 F.3d 1167, 1179 (9th Cir. 1999).

3.  Denial of Advice of Counsel Instruction
Visconti apparently requested an advice of counsel instruction and, presumably, had a factual basis for doing so.  The trial judge denied the request.  Visconti complained on appeal.  The Ninth Circuit panel rejected the complaint, saying that the standard good faith instruction covered the ground because if the jury believed he relied on counsel he would have had good faith.  I have written on variations of this issue before:

• Reliance on Counsel "Defense" and Jury Instructions (Federal Tax Crimes Blog 4/17/18), here, (where I quibble with whether the advice of counsel and good faith defenses are affirmative defenss that a criminal defendant must prove or whether, if there is a factual predicate in the record, the Government must disprove those defenses beyond a reasonable doubt).
• Opinion on Discovery in Tax Evasion Case of Reliance on Counsel Documents (Federal Tax Crimes Blog 1/26/18), here
• First Circuit Addresses Circuit Split Over Over Standard of Review Involving the Denial of an Advice-of-Counsel Jury Instruction (Federal Tax Crimes Blog 12/22/12), here.