Wednesday, May 12, 2021

CA9 Holds that Suspension of Limitations Act (“WSLA”) Applies to Fraud and Property Offense Crimes Without Nexus to War or Authorized Use of Armed Forces (5/13/21)

In United States v. Nishiie,  2021 U.S. App. LEXIS 14017 (9th Cir. 5/12/21), here, in a nontax criminal case, the Court held that the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, here, applies to suspend the criminal statute of limitations for fraud and property offense crimes “whether or not a nexus exists between these offenses and either war or ‘authorized use of the Armed Forces.’“ (Quote is from the Ninth Circuit’s Summary.)

 After reaching that conclusion, the Court said (Slip Op. 29-32, emphasis supplied):

            We recognize the WSLA “creates an exception to a longstanding congressional ‘policy of repose’ that is fundamental to our society and our criminal law.” Bridges, 346 U.S. at 215–16. The WSLA suspends already-running statutes of limitation when its conditions are met. As we detail, the WSLA unambiguously tolls the statute of limitations during any period of war or authorization of the use of the Armed Forces. We are acutely aware—and somewhat concerned—that this interpretation, while legally correct, may effectively toll the statute of limitations for offenses under the WSLA for 20, 30, even 40 plus years. In large part that results from the expansion of war powers far beyond what they were when the WSLA was codified in 1948. Any policy concern for subjecting defendants to [*30] decades-long liability is subordinated to the WSLA’s unambiguous language.

            “We sit as judges, not as legislators . . .” California v. Ramos, 463 U.S. 992, 1014 (1983). “It is hardly this Court’s place to pick and choose among competing policy arguments . . . selecting whatever outcome seems to us most congenial, efficient, or fair. Our license to interpret statutes does not include the power to engage in . . . judicial policymaking.” Pereida v. Wilkinson, 141 S. Ct. 754, 766–67 (2021). Inducing perpetual limbo for potential criminal defendants under the WSLA is presumably not what Congress had contemplated. Nor did the 1940s era Congress likely anticipate the transformation of warfare. Our interpretation may seem like a gratuitous reading in light of modern criminal justice reform. “But our public policy is fixed by Congress, not the courts.” Bridges, 346 U.S. at 231 (Reed, J., dissenting). Readily apparent from the WSLA’s amendment history is that Congress is fully capable of changing course and cabining the reach of any statute of limitations if it decides public policy warrants such a change. See Ramos v. Wolf, 975 F.3d 872, 900 (9th Cir. 2020) (R. Nelson, J., concurring) (“Our sole responsibility as Article III judges is narrow—‘to say what the law is.’”) (quoting Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803)); id. (“By constitutional design, the branch that is qualified to establish . . . policy and check any excesses in the implementation of that policy is Congress.”) (citing City & Cnty. of San Francisco v. U.S. Citizenship & Immigr. Servs., 944 F.3d 773, 809 (9th Cir. 2019) (Bybee, J., concurring)).

            Indeed, Congress has seemingly blessed this lengthy tolling even given the modern expansion of the WSLA’s war powers. When Congress amended the WSLA in 2008,  [*31] Congress changed the WSLA’s triggering event, providing that suspension of the running of any applicable statute of limitations was available not only “[w]hen the United States is at war” but also when Congress has enacted a specific authorization for the “use of the Armed Forces.” Congress also extended the suspension period from three to five years. Pub. L. 110-417, § 855, 122 Stat. 4545 (2008). These patterns provide a concert of clarity sustaining our unambiguous interpretation of the WSLA. At the time of these 2008 amendments, Congress had twice authorized the use of the Armed Forces since 2000: Authorization for Use of Military Force, Pub. L. No. 107-40, 115 Stat. 224 (2001); Authorization for Use of Military Force Against Iraq Resolution of 2002, Pub. L. No. 107-243, 116 Stat. 1498 (2002). These triggering events under the WSLA effectively suspend the running of any statute of limitations applicable to the fraud and property offense categories until five years after the termination of hostilities is pronounced “by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.” See 18 U.S.C. § 3287. So, at the time of the 2008 amendments, Congress was already aware the WSLA’s statute of limitations was tolled for 13 years and likely would be tolled for longer. Since no termination of hostilities has been announced, the suspension of the running of applicable statute of limitations now approaches two decades or more. See United States v. Melendez-Gonzalez, 892 F.3d 9, 15 (1st Cir. 2018); United States v. Frediani, 790 F.3d 1196, 1200–01 (11th Cir. 2015); United States v. Pfluger, 685 F.3d 481, 485 (5th Cir. 2012). Congress was certainly aware of the impact of these Authorizations when it amended the WSLA in 2008 and made no changes to the tolling provision. Nor has it since.

 JAT Comments:

1. The question for readers of this blog is whether the WSLA applies to tax crimes.  The apparent answer is yes.  I wrote on this and other WSLA issues earlier this year.  More on the Wartime Suspension of Limitations Act (WSLA) (Federal Tax Crimes Blog 2/20/21), here.  I copy and paste below the discussion on application to tax crimes:

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.").

2. Maybe the WSLA could be invoked to prosecute Trump for his tax and even other crimes for which the statute of limitations might otherwise have lapsed. 

Added 5/13/21 10:15am:

3.  The WSLA would apply to any to covered offenses -- in pertinent part,  "(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."  I focus on the "fraud or attempted fraud" in the earlier blog and as before copy and paste the discussion:

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 emphasis “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.)

 4.  Does the WSLA offer an opportunity to now visit some justice on all those taxpayers and tax shelter promoters participated in the class of abusive tax shelters (I call bullshit tax shelters) who skated by on the normal criminal and even civil statutes of limitations?  The promoters of course knew better and acted willfully with respect to the shelters.  Those promoters could be subject to civil penalties, some of which do not have a statute of limitations apart from WSLA, but those promoters who thought they hhad outrun the criminal statute of limitations could now be prosecuted (or incentivized to reach a settlement of the type noted below).  The taxpayers also knew that they were behaving badly (hoping that the presence of the professionals (really co-conspirators) would insulate them from criminal and civil fraud penalties) but knew that they were willfully claiming tax benefits they were not entitled to, thus illegal tax benefits.  Courts have frequently said in the civil cases that the taxpayers knew the tax benefits were too good to be true.  The smoking gun--at least one smoking gun--that was common was for taxpayers to represent to the professionals that they had a nontax motive for the "investment"/financial manipulation when, in fact, they did not and knew that they did not and thus acted willfully in the sense of intending to violate a known legal duty (the Cheek standard).  These taxpayers knew that the professionals would not participate without this false taxpayer representation.  Of course, the professionals knew that as well but "accepted" the false representation thus conspiring with the taxpayers so that the taxpayers could claim illegal tax benefits and the promoters could claim a healthy share of those benefits as their "share" of the illegal tax benefits.  Keep in mind that the civil statute of limitations is open in the case of fraud (even in cases that have already been litigated as to some aspect of the shelter), so the IRS could offer taxpayers relief from criminal fraud consequences (clearly open back to the 1990s under WSLA) and even the civil fraud penalty plus interest.  I suspect that could flush out billions which would be collected from the right persons (those gaming the system).  Would and should any honest taxpayer feel any sympathy that these people are finally having to pay for their raids on the Treasury?

No comments:

Post a Comment

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.