Saturday, February 20, 2021

More on the Wartime Suspension of Limitations Act (WSLA) (2/20/21)

The prior blog entry, Daugerdas Fails in Post-Conviction Hail Mary Motion (2/17/21; 12/19/21), here, had a brief discussion in paragraph 4 of Judge Pauley’s holding that the Wartime Suspension of Limitations Act (18 U.S.C. § 3287, here, (“WSLA”) applied to the nontax crimes fraud counts.  I said I would post a later blog with more on the WSLA.  I will now post some thoughts on the WSLA.  (In the prior blog, I did cut and paste my discussion from another text, but I expect this to offer more than in that cut and paste and make some corrections.)

First, here is the text of the statute (I bold-face the key provision):

18 U.S. Code § 3287 - Wartime suspension of limitations

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

 Definitions of terms in section 103 [1] of title 41 shall apply to similar terms used in this section. For purposes of applying such definitions in this section, the term “war” includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).

In this blog, I will focus only on the first of the three circumstances – “(1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not.”

 1.     The WSLA suspends the statute of limitations for any “offense” involving the specified categories (1)-(3).  Although some courts applied the WSLA to Government civil claims involving fraud (the False Claims Act in particular), the Supreme Court held that it only applied to criminal offenses.  Kellogg Brown & Root Services v. United States, ___ U.S. ___, 135 S.Ct. 1970, 1976-1978 (2015)

2. Must the offense for which the statute is suspended relate to the hostilities identified in the  congressional authorization? No.  Any fraud against the Government is covered.  See United States v. Wells Fargo Bank, N.A., 972 F. Supp. 2d 593, 613 (S.D.N.Y. 2013) (“applying the WSLA to all frauds against the United States, including those unrelated to the war, accords with the purpose of the Act. ")  Importantly, in this regard, the third disjunctive application specifically requires a relationship to the hostilities, so the absence of such a required relationship in the other two implies that such a relationship is not required for the other two, including specifically the fraud provision under subsection (1).

3.  Does the WSLA apply to tax crimes? The text of the WSLA does not exclude tax crimes.  On that basis alone and the inferences from the discussion in paragraph 2, I think the WSLA likely includes tax crimes otherwise meeting the fraud definition in WSLA, such as tax evasion.  I recognize that in the footnote from Saltzman and Book quoted in the earlier blog, I cited the only tax crime case citing the WSLA, United States v. Beard, 118 F. Supp. 297, 303–304 (D. Md. 1954) which held that the WSLA did not apply to tax crimes.  I am not sure that is good law.  The cases cited by the Beard court do not establish the proposition.  Perhaps based on Beard, as I also noted, the DOJ Criminal Tax Manual does not even mention the WSLA.  See CTM 7.00, here.  DOJ Tax’s forbearance in asserting the WSLA extension of the statute of limitations may be a prudent decision on its part, but I am not sure it is commanded by or even consistent with the statute. If DOJ Tax were to assert that WSLA applied to tax crimes with fraud relating to property as an essential element (such as tax evasion) that would mean that the statute of limitations for prosecuting those tax crimes was extended substantially because of the Afghanistan and Iraq hostilities.  As to the cessation of the hostilities, see United States v. Frediani, 790 F.3d 1196, 1197-98 (11th Cir. 2015) ("the plain language of the Act requires a Presidential proclamation or a concurrent resolution of Congress to end the tolling of the limitations period.").

4. What does “fraud” mean?  In Bridges v. United States, 346 U.S. 209, 216 & 221 (1953), the Court held that fraud has its typical statutory meaning:  offenses (1) of "a pecuniary nature or of a nature concerning property;," and (2) "in which defrauding or attempting to defraud the United States is an essential ingredient of the offense charged.”  Note that I emphasize “typical statutory meaning” because there is an important atypical meaning for the defraud conspiracy in 18 USC § 371.  In Hammerschmidt v. United States, 265 U.S. 182 (1924), the Court held that the defraud conspiracy contained an atypical meaning for defraud – an object to commit fraud with respect to property was not required.  In criminal lawyer lingo, despite the use of the word "defraud," fraudulent conduct with respect to property is not an essential element of the offense; any conduct to impair or impeded the agency can suffice.  (See my reference in ¶ 5 to a discussion of Hammerschmidt and its permutations.)  That is demonstrated in Bridges where Count I charged “a conspiracy to defraud the United States by impairing, obstructing and defeating the proper administration of its naturalization laws by having Bridges fraudulently petition for and obtain naturalization by falsely and fraudulently stating to the naturalization court that he had never belonged to the Communist Party in the United States, and that  such statement was known at all times by each of the petitioners to be false and fraudulent.” (Bridges, pp. 212-213.)  By its holding, the Bridges Court held that, while Count I did allege the defraud conspiracy offense that could be prosecuted, the WSLA did not apply because fraud involving property was not a necessary element of the offense.  The Daugerdas opinion, however, says that “the WLSA tolled the statute of limitations on the conspiracy to defraud the United States and mail fraud charges.”  (Slip Op. 13, bold-face supplied by JAT.)  It seems to me that, based on Bridges, the reference to conspiracy to defraud is erroneous because fraud with respect to property is not an essential element of the defraud conspiracy.  (Readers may have noted that, if the WSLA applied to tax crimes, Judge Pauley's discussion of the stipulation to extend the statute of limitations for the tax crimes that involve property would be irrelevant, but there were tax crimes such as the defraud conspiracy that do not involve property as an essential element.)

5.  For those interested in reading about the “atypical” definition of “defraud” in the defraud conspiracy, see John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255, 328 ff. (2009), SSRN here and direct link to the specific local page here.

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