Monday, May 27, 2019

11th Circuit Affirms Convictions for Wire Fraud, Tax Perjury and False Statement (5/27/19)

In United States v. Beverley, 2019 U.S. App. LEXIS 14617 (11th Cir. 2019) (unpublished), here, Beverly, a previously convicted felon, appealed his convictions and sentence for four counts of wire fraud, 18 U.S.C. § 1343; four counts of filing a false tax return, 26 U.S.C. § 7206(1); and five counts of making a false statement to the United States, 18 U.S.C. § 1001.

The conduct drawing the convictions is garden variety conduct and the claims made on appeal are garden variety as well.  Here is an outline of the opinion.

   A. Evidentiary Rulings
   B. Sufficiency of the Evidence
   C. Guidelines Calculations

The tax convictions were for tax perjury, § 7206(1).  Beverley failed to report income that he shunted through others.  Beverly also claimed he had an $8 million NOL carryover.  He was convicted of tax perjury -- some known falsehood that he willfully presented on his tax return.  The omission of the income was sufficient to convict on the tax perjury counts.  But Beverly insisted that this $8 million NOL carryover should negate the convictions.  The Court rejected the argument as follows:
Beverley also argues that, with respect to his tax returns, the government failed to prove that he knew he was not entitled to report as negative income the $8 million net operating loss. But that argument is a red herring. Beverley's failure to report as positive income the funds he diverted from his employer supplied, on its own, sufficient evidence to sustain the tax fraud convictions.
JAT comments:

1.  Note that the Court in the last sentence says that he was convicted of tax fraud.  There is no crime of tax fraud.  However, tax evasion (§ 7201) is often referred to as tax fraud.  Tax evasion requires tax due and owing and, if indeed, Beverley were entitled to the claimed NOL, that perhaps would have eliminated the tax due and owing. More importantly, since fraud normally connotes some obtaining of money falsely and illegally, fraud is not an element of tax perjury which requires only a material false statement on the return regardless of whether the taxpayer evaded (or avoided) any tax due and owing.  The irony is that, if the taxpayer really had been convicted of tax fraud (evasion), the claimed $8 million NOL (if it existed, see next paragraph, could have eliminated the tax due and owing or the willful element with respect to any tax during and owing.

2.  The taxpayer's claiming of the $8 million is probably worth some inquiry (although I don't have the time or energy to do so).  The opinion earlier says (fn 5):
   n7 Relevant to the false tax return charges, Beverley had accrued around $8 million in net operating loss from the involuntary bankruptcy of aviation companies he operated in Texas in the 1990s. Beverley filed personal bankruptcy in 2002. In 2008, that $8 million debt was discharged in the bankruptcy proceedings. Beverley nonetheless continued to report the $8 million net operating loss as negative income on the tax returns at issue here, reducing his tax liability to zero.
So, if the taxpayer knew he was not entitled to the $8 million NOL carryforward, then that would be an element of possible conviction for tax perjury.  The Court sidestepped that issue.  But, it raises the issue of whether Beverley was entitled to the claimed NOL (not sure how he could be since the cancellation was either income to Beverley or the tax attributes (NOL carryforward) are reduced when debt is cancelled).  But, perhaps he had a colorable claim on that point so that (i) the Government did not charge evasion and (ii) the omission of income was important to sustaining the tax perjury convictions.

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