Is It a Variance for the Indictment to Allege Use of Attorney Client Trust Fund for Evasion When the Proof Showed only Attorney Trust Fund? (10/18/22)

In United States v. Hunter (W.D. Ky No. 3:20-cr-86-BJB Order dated 10/20/22), TN here and CL here, the court rejected Hunter’s claim of variance from the indictment because the indictment alleged use of an attorney client trust account to effect the tax evasion, whereas, Hunter claimed, the evidence (his own testimony) was that the account was the firm’s trust account without proof that it was a client trust account.  The court rejected the argument for several reasons because, in any event, as to the essential allegation and proof, Hunter used the trust account, whether client or not, to effect his evasion.

The court’s discussion is good, so I direct readers to Slip Op. pp. 2-7.  I make some points from the discussion to focus readers’ attention:

1. The testifying Revenue Officer explained why the Government does not levy on client trust accounts to collect the attorney’s tax liability.  The assumption is that the funds in an attorney client trust account are client funds.  See Slip Op. 3.)

2. The evidence that Hunter used the trust account, whether client or otherwise, to store personal assets “was substantial.”  (Slip Op. 4.)

3. Hunter was nitpicking (earlier the court said “persnickety”), noting Slip Op. 4 n. 4):

   n4 Hunter’s reply focuses extensively on the nature of so-called “IOLTA” accounts that many members of the Kentucky Bar must use in a manner that bears interest. Reply at 6–8. But the government’s evidence did not turn on the existence or use of an IOLTA account, or whether Hunter had to use one or not. Given that Hunter maintains he used his attorney escrow account for personal rather than client funds, this distinction appears utterly immaterial to whether his escrow account (however labeled or regulated) was used to shield | money from the IRS in a tax-evasion scheme. Given that Hunter maintains he used his attorney escrow account for personal rather than client funds, this distinction appears utterly immaterial to whether his escrow account (however labeled or regulated) was used to shield | money from the IRS in a tax-evasion scheme.

4. Finally, the Court said Slip Op. 5: 

The Court is hard pressed to see any daylight between the an (sic) attorney escrow account and client escrow account. Who other than a client would a law firm or attorney hold money in escrow for? Hunter has identified no real-world, as opposed to semantic, difference in his discussion of the evidence. To the extent any gap exists between the proof and the indictment, moreover, it is far narrower than distinctions in convictions the Sixth Circuit has affirmed.  * * * * n5
   n5 Hunter’s only support for a finding of materiality is a jury note that asked about the difference between an “escrow account” and a “client escrow account.” Motion at 1–2. The Court responded with, and the defense agreed to, the following response: “I cannot define that wording for you. The words client escrow account come from the indictment. Whether the evidence shows the defendant committed one of the alleged affirmative acts is a factual question for the jury to decide.” Trial Tr., Volume 5 (DN 90) at 109–110:25–4; see also id. at 110:9 (“I’m okay with that language, Judge”) (counsel for Hunter). And the jury returned a guilty verdict soon thereafter. Id. at 112:13–17. Despite being pressed for any legal argument or authority that might demonstrate that the existence of a jury question establishes prejudice or materiality, Hunter has identified none.