Thursday, January 16, 2020

Anesthesiologist Sentenced for Tax Perjury (1/16/20)

DOJ Tax announced today the sentencing of a Pennsylvania anesthesiologist, James G. Allen, Jr. To 30 months in prison.  See Pennsylvania Anesthesiologist Sentenced to Prison for Tax Fraud (1/16/20), here.

The key excerpts are:
A Pennsylvania anesthesiologist was sentenced to 30 months in prison today for filing a false income tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. 
From 2010 through 2018, James G. Allen Jr., 54, filed and caused the filing with the Internal Revenue Service (IRS) of sixteen false tax returns for himself and his wife.  On these tax returns, Allen did not report more than $3 million in income that the pair earned as anesthesiologists.  In addition to filing false tax returns, Allen took steps to conceal the couple’s assets and income from the IRS, including depositing money in an offshore bank account held in the Bailiwick of Jersey, wiring money to Columbia to purchase a house, purchasing cryptocurrency and gold, and registering a vehicle in the name of a purported church. In total, Allen caused a tax loss of more than $900,000 to the United States. 
In addition to the term of imprisonment, U.S. District Judge Arthur J. Schwab ordered Allen to serve a one year term of supervised release and pay restitution to the IRS in the amount of $ 1,084,658.52.  
JAT Comments:

1. The Pacer Docket entries as of today are here.  The CourtListener (CL) docket entries are here; (Note that until at least one CL user downloads an item from Pacer, the particular item on the docket entry will not be available; as of this blog posting, docket entry listing is current but none of the items appear to have been downloaded and posted to CL.

2. Allen was convicted pursuant to a plea agreement.  My review of the Pacer Docket entries indicates that the plea agreement or its terms are not now available.  Hence, I cannot do an definitive Sentencing Guideline calculation.  However, based on the information in the DOJ Tax Press Release, my quick and dirty calculation is as follows

Base Offense Level based on tax loss: 22
Sophisticated Means adjustment: +2
Acceptance of Responsibility: -3

What I don’t know is whether the obstruction 2 level adjustment in § 3C1.1.  But, without that adjustment, the Guidelines offense level for the Sentencing Table in Ch. 5 Part A is 30-37 months.  So, on this basis, Allen was sentenced at the bottom end of the sentencing range, but since many, perhaps most tax cases, at least involving professionals get a Booker downward adjustment, this is a significant sentence.

3.  I made the calculations in paragraph 2 under the tax Guidelines.  Allen had offshore accounts.  It is not clear whether the filed the required FBAR form(s).  If he did not file those forms (which under the facts would appear likely), those crimes could have been considered as relevant conduct but without any loss other than the tax loss, this probably would not have affected the sentencing range under the tax Guidelines.  (Note that, had he pled to an FBAR violation, at least under the DOJ Tax position, the tax guidelines under 2T1.1 and 2T1.4 do not aply and the 2S1.1 Guidelines which would usually produce a higher sentence do apply.) See Sentencing Guidelines Analysis for FBAR Convictions (Federal Tax Crimes Blog 10/31/17), here.

4.  Note that the “headline” on the DOJ Tax press release was that Allen was sentenced for tax fraud.  Actually, he was sentenced for tax perjury, § 7206(1).  Tax perjury does not require tax due and owing as an element of the crime, so it is not technically a “fraud” crime.  It is true that the title of § 7206 is “Fraud and false statements,” which at least suggests that false statement is not the same as fraud.  And, indeed, subsection (1), the one governing the tax perjury crime is titled “Declaration under penalties of perjury” and the text does not mention fraud.  For this reason, for example, a tax perjury conviction is not collateral estoppel (or issue preclusion) in a civil case involving the same year(s).  See e.g., Tax Court Case Shows That the IRS Burden to Prove Fraud by Clear and Convincing Evidence Is Formidable Indeed (Federal Tax Crimes Blog 12/17/18), here.  So, I question whether the tax perjury crime should be called fraud.

5.  Of course, in every tax perjury prosecution of which I am aware, there will be tax evaded, even thought tax evaded is not an element of the crime.  DOJ Tax will likely not prosecute a crime where there is no tax evaded, called the tax loss for sentencing, because a minimum or no sentence would result.  No message can be sent by such a prosecution and conviction, and indeed DOJ Tax would appear petty in its prosecutions.  Now, it is possible that DOJ Tax would prosecute a no tax evaded case if some larger nontax issue is going on.  If the taxpayer were a drug dealer and either no other charges could be brought or the tax charges would be nice icing on the prosecution cake.

6.  For those wanting to pursue the issue of what fraud means, I have discussed the issue in the context of the defraud conspiracy, 18 USC § 371, and noted that, as interpreted, the defraud conspiracy is a one-off departure from the requirement of fraud requiring a taking of something of value.  John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255, 322 ff. (2009), here.

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