Friday, April 26, 2024

Oral Argument in Supreme Court Case on Trump Immunity Discussing the Defraud / Klein Conspiracy (4/26/24)

I have written many blogs over the years on the defraud conspiracy (aka Klein conspiracy) in 18 USC § 371, here. I collect at the end of this email some of the more noteworthy (in my imagination) of those blogs on the subject I discuss today. That subject is the potential breadth of the defraud conspiracy, particularly when the Supreme Court interpreted the word “defraud” in § 371 to not be limited to fraud in the usual federal law criminal sense to require some taking or intent to take property. In Hammerschmidt v. United States, 265 U.S. 182, 188 (1924), the Court held that the defraud conspiracy certainly means to cheat or attempt to cheat the Government out of property or money, but it also means to interfere with or obstruct lawful governmental functions “by deceit, craft or trickery, or at least by means that are dishonest” even if no fraud in its normal meaning is the object. As interpreted, that means defraud includes simply an object of the conspiracy to impair the lawful functions of Government. The Hammerschmidt interpretation of defraud was an outlier from the normal interpretation and was not based upon any objective indication that Congress meant the broader interpretation. But, as noted, Hammerschmidt is a long-ago case that is now entrenched in jurisprudence (perhaps even settled law, as some Justices used the term to get past confirmation hearings). (Note, however, that in the current Supreme Court settled law may not be settled after all.)

In yesterday’s oral argument in Trump v. United States, No. 23-939 (4/25/24) (Transcript here; and docket here), the defraud conspiracy came up at least briefly. That is perhaps not surprising because the indictment, CL here, alleged the defraud conspiracy as Count One. The oral argument focused on Presidential immunity for conduct alleged in various counts (including the defraud conspiracy and the two counts under 18 USC § §  1512 (Counts Two and Three). The focus was on presidential immunity rather than the contours of the statutes. 

I don’t propose to discuss the issue of presidential immunity here. My purpose is to relate the discussions of the potential scope of the defraud conspiracy, § 371, aka Klein conspiracy.

Justices Alito, Gorsuch, and Kavanaugh engaged at least glancingly with Michael R. Dreeben, Counselor to the Special Counsel, Jack Smith. I offer the excerpts (with some surrounding potentially relevant content; page numbers are indicated in brackets with asterisk (e.g. [*97]]):



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And making a mistake is not what lands you in a criminal prosecution. There's been some talk about the statutes that are at issue in this case. I think they are fairly described as malum in se statutes, engaging in conspiracies to defraud the United States with respect to one of the most important functions, namely, the certification of the next president.

JUSTICE ALITO: Well, I don't want to dispute the particular application of --of that, of 371, conspiracy to defraud the United States, to the particular facts here, but would you not agree that that is a peculiarly open-ended statutory prohibition? In that -that fraud under that provision, unlike under most other fraud provisions, does not have to do --doesn't require any impairment of a property interest.

Thursday, April 11, 2024

Good Article on Lesser Included Offense Strategy in Trump Criminal Trial in NY Court Next Week (4/11/24)

I have written on several occasions on the concept of lesser included offense, including the strategies involved for defense counsel in seeking a lesser included offense instruction. See e.g., Defense Request of Lesser Included Offense Instruction Precludes Questioning Sufficiency of Conviction (Federal Tax Crimes Blog 10/3/17), here; and Court Affirms Conviction, Rejecting Lesser Included Offense Instruction Request (Federal Tax Crimes Blog 7/17/19; 7/18/19), here; for the complete list sorted by relevance see here and sorted by date see here.

I thought readers might like the following Politico article:  Ankush Khardori, The Surprising Strategy Trump Could Use to Win His Manhattan Trial (Politico 4/11/24), here. The author, a former federal prosecutor, has a good discussion of Former President Trump’s potential use of the lesser included offense in his upcoming criminal trial in New York state court set to commence on April 15, 2024.

One key risk for the defendant is that a jury who thinks the crime(s) charged are too harsh for the conduct or might have some other reason to not convict where the binary choice is guilty or not guilty of the more serious offense charge might settle back (compromise) on a lesser included offense whereas, had the choice remained binary, the jury would acquit. 

Saturday, April 6, 2024

Report on IRS CI Use of BSA Filings in Financial Crime Investigations (4/6/24)

The IRS has posted this report on the use of the BSA filings.  IRS CI, Primary subject in nearly 88% of investigations opened by CI in FY23 had a BSA filing, here(1/17/24; last reviewed or updated 1/18/24 and viewed 4/6/24). The posting mentions specifically third-party reports such as suspicious activity reports and currency transaction reports. The report is short but I copy and paste a couple of key paragraphs:

The primary subject in nearly 88% of investigations opened by CI during fiscal year 2023 (FY23) had a BSA filing. From FY21 to FY23, BSA data was instrumental in securing average prison sentences of 39 months and seizing $7.4 billion in assets tied to criminal investigations. BSA data during this same timeframe also resulted in restitution orders totaling $434 million and forfeited assets totaling $629 million, nearly double and triple the amounts, respectively, from FY20 to FY22.

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Under the BSA, financial institutions must notify the federal government when they encounter instances of potential money laundering or tax evasion. Of the CI investigations that originated from BSA data in FY23, 77% used information from suspicious activity reports, and 63.6% used information from currency transaction reports. Additionally, 16.5% involved fraudulent Small Business Association loans tied to COVID relief programs, 7.1% involved skimming where the primary subject steals funds from a business or charity and 4.7.% involved employment tax fraud where taxes due were not paid.

The key information relates to “financial crime investigations” which is defined at the end to include “tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more.” (Bold-face supplied by JAT.) I wonder whether the data set from which the 88% figure derives includes garden-variety tax crimes. My question is whether garden-variety tax crimes would generate such a high number of third-party BSA reports. Or, maybe the 12% remainder accounts for most of the garden-variety tax crimes.

A similar report came out last year. BSA data serves key role in investigating financial crimes, here (1/18/23, last reviewed or updated 11/9/23, and viewed 4/6/24),. That report showed an 83% figure over the past 3 years. The FY23 report mentioned above was at 88% but only related to a single year.

Monday, April 1, 2024

Attorney General Jackson Famous 1940 Speech on the Role of the Federal Prosecutor (4/1/24; 4/3/24)

I have recently written an article featuring Justice Robert H. Jackson’s contributions to tax law and to administrative law, The Tax Contribution to Deference and APA § 706 (SSRN 4665227 January 17, 2024), here. I am a Justice Jackson fan, heavily influenced by his contributions to the discussion of deference in tax cases and other contributions to tax as IRS Chief Counsel, Assistant Attorney General for Tax, Solicitor General, Attorney General, and then as Supreme Court Justice authoring the famous unanimous opinion in Dobson v. Commissioner, 320 U.S. 489 (1943), here, reh. den. 321 U.S. 231 (1944), here. (Note: many citations to Dobson omit the opinion denying rehearing, but the opinion on denial of rehearing is important for understanding Dobson.; one interesting feature of the opinion on rehearing is that Justice Douglas dissented in the denial of rehearing without explaining his position (not uncommon for Douglas in tax cases) but Justice Douglas had not dissented from the original opinion. See * below)

Correction 4/3/24 4:40pm: I have corrected the bold-face to say Douglas rather than Jackson. I apologize for that error.

Justice Jackson did so much more than tax; indeed, his major contributions to the country were not tax contributions; those major contributions should not eclipse his tax contributions though.

Today, I received an email from a Jackson scholar, John Q. Barrett, professor of law at St. John’s University (bio here). The bio mentions that his emails for his “Jackson List” go to more than 100,000 readers.  In today’s email, Professor Barrett quotes in full Justice Jackson’s famous speech on April 1, 1940 as Attorney General titled “The Federal Prosecutor.” Readers of this blog may read the entire speech on the Jackson Center site, here (with a link to its original publication in  ); and on DOJ site here. Sprinkled through the speech are some real gems of wisdom about the prosecutor’s role. I will not “cherry-pick” the best or my favorite quotes because all are good and are really appreciated best in the full context of the speech. (I do alert that he does not mention the word “tax” in the speech; perhaps that alert may induce some to read the speech.)



* On Justice Douglas’ propensity to offer no opinion for his dissents in tax cases, see Bernard Wolfman, Jonathan L.F. Silver, & Marjorie A. Silver, The Behavior of Justice Douglas in Federal Tax Cases 122 U. Pa. L. Rev. 235 (1973), later turned into a book titled Dissent Without Opinion: The Behavior of Justice Douglas in Federal Tax Cases (1975).