Sunday, September 19, 2021

Appeals Arguments Over Whether Government Brought Evasion and Tax Conspiracy Charges Within Statute of Limitations With No Mention of WSLA (9/19/21)

In United States v. Pursley (on appeal to CA 5, Dkt. No. 20-20454), Pursley was convicted of 1 count of conspiracy related to tax and three counts of tax evasion, two for Pursley’s taxes and one for the taxes of another.  See the judgment here.  Pursley was a lawyer in Houston who enabled tax evasion by a client by moving untaxed monies from foreign accounts into the U.S. without accounting to the IRS for the unpaid tax.  Pursley’s client ultimately joined the OVDP, thus avoiding his own criminal exposure.  As required under the OVDP, the client had to disclose the enabler of the tax evasion scheme.

At the conclusion of trial after the guilty verdicts were returned, the judge sentenced Pursley to 24 months incarceration, ordered restitution of $2.5 million and imposed standard conditions.  I think the restitution was for Pursley’s taxes rather than the client’s taxes, because the client’s taxes had been paid in the OVDP.  So just from the restitution of Pursley’s taxes for two years, one can infer that he made a lot of money for his conduct.  But that need not detain us here.

On the appeal, Pursley raises only statute of limitations issues.  The parties’ briefs on appeal are:  Pursley’s opening brief, here; United States’ answering brief, here; and Pursley’s reply brief here. Pursley’s arguments are:

1.     As to all counts, the indictment was brought outside the statute  of limitations.

2.     As to the conspiracy count, the trial court erred by failing to give a requested instruction that it must find one overt act within the statute of limitations.

3.     As to the tax evasion counts, the trial court erred by failing to give a requested instruction that it must find one affirmative act within the statute of limitations.

The first argument, if successful, would require complete reversal and expungement of the conviction.  The second two would require retrial where, if there is enough evidence to get to the jury, the jury will almost certainly find at least one affirmative act within the statute of limitations.

Pursley makes no argument that the jury verdict of guilt should be overturned, except as required by the statute of limitations arguments.

The key statute of limitations argument (in # 1 above) is that the indictment was not brought within the applicable statute of limitations.  The judgment here provides in relevant part:  

Title & Section

Nature of the Offense

Offense Ended

Count

18 U.S.C. § 371

Conspiracy to defraud the U.S.

05/31/2013

1

26 U.S.C. § 7201

Tax evasion

09/20/2018

2

26 U.S.C. § 7201

Tax evasion

12/31/2012

3

26 U.S.C. § 7201

Tax evasion

10/31/2011

4

The indictment, here, was filed on September 20, 2018.  Just on the face of the judgment, it would appear that, without more, the six-year criminal statute of limitations would have expired on Count 4 on 10/31/2017, but the other counts would have been timely under the six-year statute.

Tuesday, September 14, 2021

Ninth Circuit Adopts Primary Purpose Test for Attorney-Client Privilege (9/14/21)

In In re Grand Jury, Nos. 21-55085 & 21-55145 (9th Cir. 9/13/21), CA 9 here, the Court held that the “because of” test imported from the work-product context did not apply to the attorney-client privilege and instead applied a predominant purpose test for dual-purpose communications.  The opinion is short (14 pages) and the summary offered by the Court is good, so I just copy and paste the summary here.

Grand Jury Subpoenas

            The panel affirmed the district court’s orders holding appellants, a company and a law firm, in contempt for failure to comply with grand jury subpoenas related to a criminal investigation, in a case in which the district court ruled that certain dual-purpose communications were not privileged because the “primary purpose” of the documents was to obtain tax advice, not legal advice.

            Appellants argued that the district court erred in relying on the “primary purpose” test and should have instead relied on a broader “because of” test. Under the “primary purpose” test, courts look at whether the primary purpose of the communication is to give or receive legal advice, as opposed to business or tax advice. The “because of” test—which typically applies in the work-product context—considers the totality of the circumstances and affords protection when it  can fairly be said that the document was created because of anticipated litigation, and would not have been created in substantially similar form but for the prospect of that litigation. The panel rejected appellants’ invitation to extend the “because of” test to the attorney-client privilege context, and held that the “primary purpose” test applies to dual-purpose communications.

            The panel left open whether this court should adopt “a primary purpose” instead of “the primary purpose” as the [*3] test, as the D.C. Circuit did in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014). The panel wrote that Kellogg’s reasoning in the very specific context of corporate internal investigations does not apply with equal force in the tax context, and that the disputed communications in this case do not fall within the narrow universe where the Kellogg test would change the outcome of the privilege analysis.

            The panel addressed remaining issues in a concurrently filed, sealed memorandum disposition.

 JAT Comments:

Wednesday, September 8, 2021

Prosecution IRS Agent’s Contact with Defense Expert Without Defense Counsel (9/8/21)

In United States v. Shun, 2021 U.S. Dist. LEXIS 161023 (W.D.N.Y. Aug. 25, 2021), Cl here, in a tax crimes prosecution (conspiracy and tax perjury), one of the questions discussed in the opinion is whether an attempt by IRS CI agents assisting the prosecutor in the case to interview an expert designated by the defense was a violation of the defendant’s Sixth Amendment right to counsel.  The discussion is short but instructive, so I just cut and paste (Slip Op. pp. 4-7): 

Shun's Motion for Relief Based on Violations of her Sixth Amendment Rights

            On July 22, 2021, IRS Criminal Investigation Division Special Agent Scott Simmons, together with another IRS special agent, visited the offices of Freed Maxick CPAs, P.C. and attempted to interview Certified Public Accountant Richard Wright, who had previously been identified by Shun as a potential expert witness for the defense in this case. (Dkt. No. 186) Wright was not present at the Freed Maxick office when Simmons and the other agent arrived. (Id.) The agents spoke with another employee of the accounting firm and requested that the employee instruct Wright to call the agents when he returned. (Id.) Wright called later that same day and spoke with Simmons and the other agent briefly on speaker phone. (Id.) Agent Simmons asked Wright some questions and inquired about documents pertaining to the case. (Id.) Wright informed Simmons that he believed defense counsel should be present for their communications and terminated the call. (Id.)

            Defendant Shun contends that Agent Simmons' contact with Wright was a "willful and deliberate attempt to interfere with the effectiveness of her defense" in violation of her Sixth Amendment right to counsel. (Dkt. No. 186) Defendant requests various remedies because of this alleged violation, including that the Court: (1) order the Government to produce information about the nature and purpose of Agent Simmons' visit to Freed Maxick and telephone conversation with Wright; (2) deem the income tax principles to which Wright is anticipated to testify about at trial as "accepted" for purposes of the trial and prohibit the Government from offering contradictory testimony; and (3) grant additional sanctions in the form of fees and reimbursements to defendant. (Id.)