Saturday, May 8, 2021

Fifth Circuit Holds that the Defraud/Klein Conspiracy Does Not Have Pending Proceeding Element; Update on Cert Petition in Related Case (5/8/21)

In United States v. Herman, 2021 U.S. App. LEXIS 13557 (5th Cir. May 6, 2021), CA5 here & TN here, the Court affirmed the convictions of husband and wife, restaurant owners and operators for the defraud/Klein conspiracy and willfully filing false tax returns. 

The noteworthy holding in the opinion is that the Klein conspiracy in § 371 does not import the holding in Marinello v. United States, 584 U.S. ___, 138 S. Ct. 1101 (2018), that the tax obstruction crime (§ 7212(a)) requires a nexus to an administrative proceeding.  (See Slip Op. 25-29.) 

As the Fifth Circuit panel notes, its holding is consistent with the two other circuits’ holdings, the only circuit court cases addressing the issue.

One of the other circuit court cases was United States v. Flynn, 969 F.3d 873 (8th Cir. 2020), cert. docketed, 20-1129 (Feb. 17, 2021).  I previously wrote on the petition for cert in Flynn.  See Defendant Petitions for Cert on Relationship of Defraud Conspiracy and Marinello Interpretation of Tax Obstruction (2/22/21), here.  I thought readers might want an update on the status of the pending petition for cert in Flynn.

The Supreme Court docket entries in Flynn, here, indicate that the following key entries:

  • The petition was filed 2/11/12, 
  • The Government’s response is due 5/19/21 (after some extensions) 
  • An amicus brief in support of the petition was filed by the New York Council of Defense Lawyers on 5/2/21.  

I recommend to readers the petition, here, and the amicus brief, here.  As presented in the petition, the Questions Presented are:

I. Whether the due process clause of the United States Constitution, as discussed in McCarthy v. United States, 394 U.S. 459 (1969) and more recent decisions of this Court, requires discussion in open court of the elements of an 18 U.S.C. § 371 conspiracy to defraud the Internal Revenue Service (Klein Conspiracy) offense to advise the defendant of the nature of the charges against him before a guilty plea is accepted.

II. Whether the requirement for a nexus between a particular administrative proceeding and a taxpayer’s conduct is necessary to save the constitutionality of a conviction under an 18 U.S.C. § 371 conspiracy to defraud the Internal Revenue Service (Klein Conspiracy) after this Court’s decision in Marinello v. United States, 138 S. Ct. 1101 (2018).

III. Whether a criminal defendant is entitled to a jury trial to determine the amount of restitution under either the Sixth or Seventh Amendments to the United States Constitution.

The petition and the amicus brief are well-written and highly recommended for those interested in the scope of the Klein conspiracy.

I am surprised that it has taken the SG so long to file its response (3 months by the current due date).  Presumably, when filed, the SG's response (presumably a brief in opposition) will address the arguments in both the petition and the amicus brief.

I do hope that the Court takes cert in this case or some case soon to address the sweep of the defraud conspiracy as interpreted which raises the same overbreadth issues that cause the Court to limit the sweep of the tax obstruction statute (§ 7212(a)).  I have noised about my concerns since writing an article on the subject and providing a companion discussion of some potentially disturbing applications.  John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough?, 9 Hous. Bus. & Tax L.J. 260 (2009), on SSRN here and the companion online appendix, on SSRN here.

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