Thursday, January 13, 2022

5th Circuit Reverses Conviction to Have Court Calculate the Foreign Evidence Request Final Action for Statute of Limitations Suspension and, Properly Instructed, Have Jury Determine Whether Criminal Act Occurred in Statute of Limitations as Suspended (1/13/22)

In United States v. Pursley, ___ F.4th ___, 2022 U.S. App. LEXIS ___ (5th Cir. 1/13/22), CA5 here and GS here [to come], the Court reversed Pursley’s judgment of conviction on conspiracy and tax evasion counts because

  • the district court had not calculated the statute of limitations suspension period for foreign evidence requests under 18 U.S.C. § 3292; and
  • the district had not instructed the jury that it must find an overt act/affirmative act within the applicable statute of limitations period as extended by § 3292.

The Court remanded to have the district court (i) calculate the suspension period under § 3292 and (ii) if after that calculation, there are acts that a jury could find were committed in the applicable statute of limitations (calculated with the suspension), to retry the case and submit the issue to the jury as to whether there were such acts.

For an introduction to § 3292, I offer the following from my 2013 Tax Crimes book which was the last time I considered it in detail (John A. Townsend, Federal Tax Crimes, 2013 pp. 463-466 ( 2013 SSRN: https://ssrn.com/abstract=2212771) (note I copy and paste the text without the footnotes, so those wanting the footnotes should download the pdf file; I think this remains a fair summary of the law even today):

b. Foreign Country Evidence.

             In a world where international commerce, often of the illegal sort and often assisting tax fraud, is increasing exponentially, key evidence may be overseas.  Because long delays may be encountered in gathering foreign evidence, 18 U.S.C. § 3292 in some cases permits the statute of limitations to be suspended during the period between the U.S. request for foreign evidence and the production of that evidence by the foreign authority.  The key elements for this tolling are:

Monday, January 10, 2022

3rd Circuit Rejects Argument to Extend Marinello Pending Proceeding Requirement for Tax Obstruction to the Defraud Klein Conspiracy (1/10/22)

In United States v. Desu, ___ Fed. 4th ___, 2022 U.S. App. LEXIS 465 (3rd Cir. 1/7/22), CA3 here and GS here, the Court affirmed a conviction of Desu for “tax fraud.”  The Court rejected several arguments but apparently wrote the precedential opinion to clarify the standard of review for an “an evidentiary hearing as provided in Franks v. Delaware, 438 U.S. 154 (1978).”  The Franks hearing is a general process in criminal cases rather than related to tax, so I don’t discuss it here.

The Court did address, rather perfunctorily, a tax crimes issue that has been discussed several times on this blog – whether the Supreme Court’s decision in Marinello v. United States, ___ U.S. ___, 138 S. Ct. 1101 (2018), holding that a pending administrative proceeding is required for tax obstruction can apply to and limit the tax defraud conspiracy (the Klein conspiracy) that arguably is sufficiently similar to tax obstruction as to warrant a pending administrative proceeding limitation.  The consensus of the holdings in other courts (district and circuit) has been that that aspect of Marinello does not apply to the defraud Klein conspiracy.

The Court rejected the argument.  The Court’s reasoning is short so I copy and paste pp. 7-9 (omitting a footnote):

III

     A

            Desu next argues that the two counts in the indictment alleging violations of 18 U.S.C. § 371 fail to state an offense. In those counts, the government alleges that Desu conspired “to defraud the IRS by impeding, impairing, obstructing, and defeating the lawful government functions of the IRS to ascertain, compute, assess, and collect income taxes,” a crime known as a Klein conspiracy. App. 94, 100. Desu claims that [*8] both counts fail to state an offense under Marinello v. United States, 138 S. Ct. 1101 (2018). In Marinello, the Supreme Court held that to convict someone of obstructing or impeding the administration of the Internal Revenue Code under 26 U.S.C. § 7212(a), the government must prove that a ‘“nexus’ [existed] between the defendant’s conduct and a particular administrative proceeding, such as an investigation, an audit, or other targeted administrative action.” Id. at 1109. Desu claims that both counts fail to state an offense because they do not allege that an investigation was pending when he committed the conspiracies as required by Marinello in the separate but similar statute.