Based in Part on NYT Article, Senators Request Information from AG Garland about Possible Political Intervention in Caterpillar Tax Investigation(s) (3/20/24)

In the past, I offered two blog entries on a tax and other agency investigation of Caterpillar’s use of a Swiss company transfer pricing diversion of U.S. income from the U.S. tax base. In reverse chronological order, they are:

• Caterpillar Shareholder Suit For Fraudulent Disclosures from Tax Civil and Criminal Investigation Dismissed (Federal Tax Crimes Blog 9/28/18; 3/20/24), here;
• The Whistleblower Behind Caterpillar Tax Commotion (Federal Tax Crimes Blog 6/2/17), here.
• Search Warrant Executed Against Caterpillar HQ, Apparently Related to Tax (Federal Tax Crimes Blog 3/6/17; 3/20/24), here

There is current reporting that there may have been political influence that stopped the criminal investigation and ended in a quite favorable civil tax resolution. See Jesse Drucker, How Trump’s Justice Dept. Derailed an Investigation of a Major Company (NYT 3/9/24), here. Following that article, on March 13, Senators Wyden (D. Oregon) and Whitehouse (D. Rhode Island), who serve as Chairs of the Senate Finance Committee and the Senate Budget Committee, respectively, wrote a letter here to Attorney General Garland requesting information about the handling and conclusion of the investigation. The facts as alleged in Drucker’s article and in the Senators’ letter (as to which I cannot personally attest) raise issues that, at least facially, require investigation (or at least answers) regarding the handling of the Caterpillar investigation that seems to have been resolved very favorably to Caterpillar.

Note: The Senators' letter linked above as posted on the Senate website as of today asks for a return date for the requested answers of "no later than____." (Letter physical p. 6; the letter does not have pagination.) Perhaps, that means that the return date is to be negotiated.

Recent Tax Enforcement Volume of DOJ Journal of Federal Law and Practice (3/19/24)

I recently discovered the recent Tax Volume of DOJ Journal of Federal Law and Practice, Vol. 71, number 4 here dedicated to Tax Enforcement. The following articles are in the volume (with page numbers indicated).

Recent Tax Volume of DOJ Journal of Federal Law and Practice (3/19/24)

• Elissa Hart-Mahan, Restitution in Criminal Tax Cases: Common Pitfalls and Practical Strategies 5 
• Todd Ellinwood & Caryn Finley, Investigating Legal Source Income Tax Cases 23 
• Howard J. Zlotnick, Twelve Rules for Presenting Accomplices 71 43 
• Andrew H. Kahl, Follow That Lead! Obtaining and Using Tax Information in a Non-Tax Case, 47 
• David Zisserson, Tax Fraud Involving COIVD-Relief Provisions 63 
• Larry Wszalek & Stuart Wexler, Attorney-Client Privilege in the Context of Tax Preparation and Tax Planning 79 
• Gregory S. Knapp & Joseph B. Syverson, Prosecuting Tax Obstruction under 26 U.S.C. 7212(a) 97 (2023)
• Stanley J. Okula, Jr. & Matthew Hicks, Sentencing Advocacy in Criminal Tax Cases - Making the Government's Case for the Appropriate Sentence 109 
• Katie Bagley & Melissa Siskind, A Fool for a Client: Legal and Practical Considerations When Facing Pro Se Defendants 129 
• Sean Beaty & Wilson Stamm, A Taxing Dilemma: Navigating the Crime- Fraud Exception in Criminal Tax Cases 155 
• Sarah Kiewlicz & Thomas F. Koelbl, Prosecuting Fraudulent Tax Return Preparers 175 
• Kimberle E. Dodd & Nanette L. Davis, Gathering and Using Foreign Evidence in Tax Cases 199 
• Jason Bergmann & Richard J. Markel, Monetary Claims Against the Government: When Are They Tax Refund Cases? 223 
• Marie E. Wicks & Michael W. May, They Don't Make 'Em Like They Used to: Statutory Jurisdictional Requirements in the Age of the Clear-Statement Rule 241

Excellent Article by Former Tax Crimes Prosecutor About How the Tax Crimes Prosecution Decisions Are Made in Politically Charged Cases (3/14/24)

This blog entry will alert Tax Crimes fans to an article about, well, tax crimes. Andrey Spektor, Opinion: What Hunter Biden and Donald Trump have in common (CNN 3/13/24), here. Spektor is identified in the article as “Having worked with the Department of Justice Tax Division and prosecuted tax offenses.” His law firm bio, here, mentions only AUSA experience for EDNY and does not mention DOJ Tax Division experience; I infer that, as a prosecutor on tax cases in USAO EDNY, he would have “worked” with the Tax Division which is common. So he has credibility to speak to the how criminal prosecution decisions are made (or not made) in politically charged cases such as Hunter Biden’s and Donald Trump’s.

The article is fairly short, engaging, well-written, and, based on my experience in the tax crimes area, very credible. As to Hunter Biden, Spektor claims (rightly, I think) that Hunter Biden would not have been prosecuted on the facts had he not been related to Joe Biden, the President, and decisions influenced by the press and politics.  I offer the conclusion in the hope that offering the conclusion will not discourage anyone from reading the article:

          Hunter Biden has been treated differently from almost any other person save for, perhaps, Trump – at least in New York, where the former president has been indicted on a novel and shaky legal theory reserved for it seems, Trump. That doesn’t mean that Trump or Hunter Biden are [sic - is] innocent; indeed, the former has more serious cases to contend with. But unequal treatment of our citizens, no matter how unethical or despicable they may be, is just as immoral.

Taxpayers Should Be Prosecuted Along with Enablers of Abusive Tax Shelters (3/8/24)

This blog entry is an opinion piece. Individual taxpayers should be prosecuted along with their enablers who promote and implement the abusive shelters (particularly enablers from the tax professions).

The following is from a report of Attorney General Garland's comments (Kerry K. Walsh Deborah A. Curtis Amy Jeffress, “Swift” Justice: Attorney General Garland Vows To Uphold DOJ Priorities in Fireside Chat (Arnold & Porter 3/6/24), here):

Additionally, AG Garland explained how DOJ’s three co-equal priorities — upholding the rule of law, keeping America safe, and protecting civil liberties — implicated corporate accountability. AG Garland stressed that the greatest deterrent of white collar crime is holding individual corporate executives to account. AG Garland also reiterated the importance of applying the rule of law equally, regardless of rank or position of power.

I supplied the bold-face to emphasize the point. There has been a perception that, by delivering up the corporation (or other entity) for criminal consequences, the people in the corporations (collectively, the executives) could escape accountability.

A similar perception and resulting phenomenon exists in the tax area where the promoters of abusive tax shelters (think, for example, the Son-of-Boss shelters in the late 1990s and early 2000s) were prosecuted, but the taxpayers generally were not. Yet all of those taxpayers or at least most of them knew that they were violating the law and participated in the fraud. For example, the abusive shelters wrapped in complex structures and voluminous more-likely-than-not opinions, required at the minimum that the taxpayers represent to the promoters that they had a nontax profit motive when, in fact, they did not. That was a lie that was essential to abusive tax shelter. Moreover, most of those wealthy taxpayers had independent counsel (other than the ones supplied or recommended by the promoters) before buying into the deal. Assuming that most of those independent counsel were competent, those taxpayers knew that the deals were bogus, but nevertheless sought to buy fraud insurance through the legal opinions rendered by the promoter’s supplied or recommended counsel (as opposed to their own independent counsel). That worked as insurance.

My argument has been that the way to discourage abusive tax shelters is to prosecute the taxpayers along with the promoters. This would discourage the tax professional penalty insurance industry and abusive tax shelters generally.

This blog entry is cross-posted on the Federal Tax Procedure Blog here.