District Court Rejects Defendant's Creative Claim that Alleged Overpayments of Other Taxes Precludes Criminal Liability (5/28/20)

In United States v. Hamdan (E.D. La. Dkt. 19-60 Order Dated 5/22/20), here, the Court denied the defendants’ motion to dismiss most of the counts in their 74-count Superseding Indictment charging (i) the conspiracy by “evading paying federal income and employment taxes” (not clear whether an offense conspiracy or defraud/Klein conspiracy charge or both, but not important for this discussion) by underreporting wages, (ii) failure to account for and pay certain trust fund taxes (§ 7202), and aiding and assisting the preparation of false individual income tax returns for third parties (§ 7206(2)).  The defendants owned food marts through which the alleged crimes were committed.

In their motion, the defendants (principally Hamdan) argued (high level summary) that:  (i) Hamdan overpaid his personal income taxes in an amount exceeding the alleged employment and income taxes charged in the indictment which should have been offset against those taxes and that the alleged overpayment negated willfulness; (ii) Hamdan’s right to a credit for the alleged overpayment of tax should estop the Government from charging because the offset mechanism somehow assures taxpayers that overpayments of one tax liability will exonerate taxpayers from criminal liability related to other internal revenue tax; and (iii) that the Government has been unjustly enriched by the alleged overpayments.

The Court did not accept any of those claims, finding that the Superseding Indictment properly alleged the offenses charged.  The Court did not accept Hamdan’s key factual claim that he had overpaid his income taxes or that, even if he had, he had properly claimed the refund so that the refund would be available to offset.  Right now, I don’t see an easy path to providing a meaningful analysis of the Court’s rejection of the defendants’ diversions (creative and unusual as they were).  I just commend the opinion to readers who might find some such interesting.