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.

The argument on appeal relates to what actions (overt acts and affirmative acts) occurred within the statute of limitations.  Pursley argues that the overt acts and affirmative acts proved charged and proved at trial were not within the statute.  The argument turns upon the application of 18 U.S.C. § 3292, here, which permits, upon court order, the suspension of the statute of limitations during the period of outstanding treaty requests to a foreign country for information.  The fight is over whether a response by the Isle of Man was the final response that would cause the suspension to cease or whether the final response occurred later when the Isle of Man office supplied more information.  I don’t propose to get into the merits of the arguments here.  I do note that it is odd that, as noted above, based on the judgment, three of the counts were clearly within the statute of limitations.  Pursley claims that the last acts were in fact earlier than noted in the judgment.

What interested me is what is not in the arguments that are made.  Rather it is in what is not said.  Neither side mentions the potential application of the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, here.  As I have noted before (see blog entries here), the WSLA appears to apply on its face to tax evasion and would clearly make the indictment timely here for the tax evasion counts. 

The conspiracy count is a little different.  As noted above, the Court treated the conspiracy count as a defraud conspiracy count.  I'm not so sure.  The indictment, here, could be read to include an offense conspiracy count.  Here are the pertinent paragraphs:

COUNT ONE 

(Conspiracy to Defraud the United States)

            45. The allegations set forth in Paragraphs 1 through 44 of this Indictment are re-alleged and expressly incorporated herein as if copied verbatim.

            46.      From in or around March 2007 through in or around May 2013, in the Southern District of Texas and elsewhere, the defendant,

JACK STEPHEN PURSLEY,

did knowingly and willfully conspire and agree with Co-Conspirator 1 and others, both known and unknown to the grand jury, to defraud the United States by impeding, impairing, obstructing, and defeating the lawful government functions of the Internal Revenue Service of the United States Department of Treasury in the ascertainment, compilation, assessment, and collection of the revenue, that is, federal income taxes of PURSLEY and Co-Conspirator 1.

OBJECT OF THE CONSPIRACY

            47.      It was the purpose and object of the conspiracy for PURSLEY and his co-conspirators, including Co-Conspirator 1, to unjustly enrich PURSLEY and Co-Conspirator 1 by evading the assessment and payment of federal income taxes to the IRS, namely, taxes due on more than $18 million in income from Southeastern Shipping, which was parked offshore in the Isle of Man.

Paragraph 46 is worded as a defraud conspiracy, but paragraph 47 is worded as an offense conspiracy to commit tax evasion—evasion of assessment.  What difference does that make?  Tax evasion is easily within the scope of the WSLA which requires fraud and an offense conspiracy to commit tax evasion would be within the scope of the WSLA.  The defraud conspiracy, however, does not require fraud in the normal meaning of the word defraud.  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 e.g., More on the Wartime Suspension of Limitations Act (WSLA) (Federal Tax Crimes Blog 2/20/21), here.  Notwithstanding all of that, if any of the counts of conviction were within the statute of limitations, the others would be included in the Sentencing Guidelines calculations as relevant conduct and just one sustained count of conviction would support the sentence Pursley received—24 months.

JAT Comments:

1. The big question, though, is why the Government did not argue the WSLA and did not even advise the court of the WSLA?  Further, why did Pursley not advise the Court of the WSLA and argue that it was not applicable?

2. Can the Government waive a statute of limitations basis for sustaining an indictment otherwise outside applicable statutes of limitations?

3. It is common-place that a defendant may waive a statute of limitations defense.  The following is from a recent case (United States v. Wooding, 2021 U.S. App. LEXIS 27546  (11th Cir. 9/14/21) (Unpublished), CA 11 here):

            Regardless of which limitations period applies, however, Wooding waived this issue by failing to raise it in the district court. In criminal cases, the statute of limitations is a nonjurisdictional affirmative defense that can be waived if not asserted by the defendant at trial. United States v. Najjar, 283 F.3d 1306, 1308–09 (11th Cir. 2002). Consequently, a limitations defense that was not raised at or before trial is essentially unreviewable on appeal, even for plain error. Musacchio v. United States, 577 U.S. 237, 248 (2016) (discussing the general five-year limitations period for noncapital offenses). This is because the government's burden of proving that it filed a timely indictment does not arise until the defendant raises the issue. Id. “When a defendant does not press the defense, then, there is no error for an appellate court to correct — and certainly no plain error.” Id. We therefore reject Wooding's statute-of-limitations challenge to his conviction.

The pertinent question is whether the Government can waive an otherwise applicable statute of limitations argument in its favor by not arguing it in its briefs?  I don’t know the answer to that question.  But I am surprised that neither party would advise the Court of the WSLA.  See ABA Tax Section Recommendation to IRS for Priority Guidance to Disavow Application of WSLA and Further Comments Re Same (Federal Tax Crimes Blog 7/23/21), here.