Saturday, June 8, 2024

Fourth Circuit Rejects Defendant's Collateral Attacks on Tax Perjury and Obstruction Convictions (6/8/24)

In United States v. Sutherland, ___ F.4th ___, 2024 U.S. App. LEXIS 13117 (4th Cir. 2024), CA4 here and GS here, the Court rejects the criminal defendant’s collateral attacks on convictions for filing false tax returns and obstructing an official proceeding. (The latter conviction was for delivering false documents to the government attorney assisting the grand jury in the tax crimes investigation.) The collateral attacks were mounted by a petition under 28 USC § 2255 and a petition for the writ of coram nobis. The principal claim for both methods of collateral attack was an alleged ineffective assistance of counsel (“IAC”) at the criminal trial where the defendant was convicted. The defendant appealed the convictions, and the Fourth Circuit affirmed. United States v. Sutherland, 921 F.3d 421 (4th Cir. 2019), GS here; see also Obstruction Conviction Affirmed for Presentation of False Documents to AUSA Serving as Attorney for Government for Grand Jury (4/26/19), here.

I post to this blog primarily to refer readers to the excellent discussion of the collateral attack remedies under § 2255 and coram nobis. Readers wanting the nuance should read the opinion (19 pages, but worth the read). Key summary points are:

1. The principal IAC claim was that defendant’s trial counsel in the criminal trial gave inadequate representation at trial and at sentencing because of failure to present expert tax testimony that would have shown he did not owe the amount of tax claimed by the Government. The Court of Appeals describes this testimony at sentencing as (Slip op. 4-5):

Seeking to mitigate the U.S. Sentencing Guidelines loss calculation in his presentence report, Sutherland presented testimony from Jayne Frazier, a certified public accountant. Frazier reviewed Sutherland’s tax returns for the years 2007 to 2010 and testified that Sutherland had underreported his income by hundreds of thousands of dollars in the relevant timeframe. Despite that fact, she testified that Sutherland’s total tax liability for that period was less than the Government alleged because Sutherland failed to claim various business-expense deductions in 2008, 2009, and 2010, which, if claimed, would have reduced his taxable income for those years. Notably, however, Frazier did not independently audit Sutherland’s tax returns, and her calculations were based largely on information provided by Sutherland, much of which could not be corroborated by itemized receipts or other documentation. See, e.g., J.A. 1230 (Frazier testifying that her calculations included hundreds of thousands of dollars of unclaimed business expenses that were “all cash”). She [*5] also stated that her income calculations for Sutherland excluded approximately half of the $2 million in transfers from STS to Sutherland’s companies because it was her “understanding” that those funds came from a line of credit in favor of STS and thus would be “treated as loan advances” and not “taxable income.” J.A. 1209.

          The district court overruled Sutherland’s objection to the presentence report’s loss calculation, finding that Sutherland’s “self-reported information” to Frazier “was not reliable.”

2. In February 2021, after completing the period of supervised relief on the tax convictions but before completing the period of supervised relief on the obstruction conviction (not sure why they would be different), the defendant filed (1) the “§ 2255 petition [which] targets the obstruction conviction” and (2) the coram nobis petition which “targets the tax fraud convictions.” (Actually, the convictions were for filing false tax returns, commonly called tax perjury, rather than “tax fraud” which is commonly called tax evasion.) The Court explains why defendant chose the two collateral attack procedures (Slip Op. 6 n. 1):

   n1 The reason for the separate petitions stems from Sutherland’s “custody” status regarding the obstruction conviction, on the one hand, and the tax fraud convictions, on the other. When Sutherland filed both petitions in February 2021, he was still serving his term of supervised release on his obstruction conviction. And because “[a] prisoner on supervised release is considered to be ‘in custody’ for purposes of a § 2255 motion,” United States v. Pregent, 190 F.3d 279, 283 (4th Cir. 1999), § 2255 provided Sutherland with the appropriate means of collaterally attacking his obstruction conviction, see 28 U.S.C. § 2255(a). But since Sutherland had already completed his term of supervised release on the tax fraud convictions, he was no longer “in custody” with respect to those convictions and thus could no longer collaterally attack them under § 2255, leaving coram nobis as his sole recourse. See Wilson v. Flaherty, 689 F.3d 332, 339 (4th Cir. 2012) (stating that the writ of error coram nobis “affords a remedy to attack a conviction when the petitioner has served his sentence and is no longer in custody” (citation omitted)).

3. The Court offers good discussions of the scope of IAC review under Strickland v. Washington, 466 U.S. 668 (1984), which the Court summarizes (Slip Op. 7 n. 2):

   n2 Under Strickland, to succeed on an ineffective assistance of counsel claim, a petitioner “must show that (1) counsel’s performance fell below an objective standard of reasonableness (the performance prong); and (2) the deficient representation prejudiced the defendant (the prejudice prong).” United States v. Cannady, 63 F.4th 259, 265 (4th Cir. 2023) (citing Strickland, 466 U.S. at 687–88).

4 The appeal of a § 2255 petition requires a certificate of appealability, which the Fourth Circuit granted on the following issues (Slip Op. 8):

(1) Whether Sutherland was denied his right to effective assistance of counsel; and
(2) Whether the district court erred when it granted the Government’s motion to dismiss the § 2255 motion without first conducting an evidentiary hearing.

5. The appeal of the denial of the writ of coram nobis is an appeal of right. (Slip Op. 8 n. 3.)

6. The Court of Appeals held Slip Op. 11-14)  that

The problem for Sutherland is that none of this alleged testimony [about tax liability] bears any relevance to the only conviction at issue in the § 2255 petition—the obstruction conviction. The evidence necessary to convict Sutherland of that charge depended not on the proper classification of the STS funds (i.e., nontaxable loans versus taxable income) or the extent [*12] of his tax liability, but on his submitting, through his attorney, fabricated loan documents to the U.S. Attorney’s Office in response to grand jury subpoenas.

* * * * 

          The testimony that Sutherland claims Phillip and a tax expert would have given at trial in no way bears on Sutherland’s culpability as to the obstruction charge, let alone calls any of the salient record evidence into question. Indeed, (admissible) testimony from these two witnesses that (1) the STS wire transfers were really nontaxable loans as opposed to taxable income and (2) Sutherland owed less in total taxes than the Government alleged for the tax years at issue may have been relevant to the tax fraud counts, which were predicated on Sutherland’s underreporting his income by mischaracterizing the STS wire transfers. But such testimony would not have implicated the free-standing obstruction charge, because that charge never hinged on whether Sutherland filed false tax returns. Instead, as we have made clear, it was premised on Sutherland’s providing sham loan documents to the U.S. Attorney’s Office in response to grand jury subpoenas—entirely separate, and independently unlawful, conduct. And as to that distinct conduct, the [*14] testimony Sutherland proffers in his § 2255 petition is silent. He makes no claim that either potential witness had any personal knowledge regarding the loan documents, their authenticity, or their provision to the U.S. Attorney’s Office. Thus, trial counsel’s failure to call those two witnesses had no prejudicial effect on Sutherland’s defense with respect to the obstruction conviction.

6, The Court noted (Slip Op. 15) that the writ of coram nobis is an “ancient and rare writ afford[ing] a district court the authority to vacate a criminal conviction after a defendant’s sentence has been completely served.” The elements for the writ are (Id.):

(1) a more usual remedy is not available; (2) valid reasons exist for not attacking the conviction earlier; (3) adverse consequences exist from the conviction sufficient to satisfy the case or controversy requirement of Article III [of the U.S. Constitution]; and (4) the error is of the most fundamental character.

7. The Court held that the defendant could have attacked his tax fraud convictions earlier via a § 2255 petition. (Slip Op. 15-19).

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