Fifth Circuit Holds Criminal Statute of Limitations is Not Suspended for Equitable Tolling on Government's Alleged Excuses (8/20/24)

In United States v. Plezia, ___ F.4th ___, 2024 U.S. App. LEXIS 21293 (5th Cir. 2024), CA5 here and GS here, the Court states the facts relevant to this blog as follows (Slip Op. 1-4, bold face supplied by JAT):

          Richard Plezia (“Plezia”) challenges his convictions of conspiracy to defraud the United States, making false statements, and falsification of records in a federal investigation following a fifteen-day jury trial. He challenges the sufficiency of the evidence for some of the convictions, the district court’s determination that the statute of limitations for one count of making false statements was equitably tolled, and the district court’s decision to allow two witnesses to testify with the aid of prior recorded recollections.

          Because we agree with Plezia that equitable tolling of the statute of limitations in 18 U.S.C. § 3282 is not available, we VACATE Plezia’s conviction under [*2] Count Five and remand with instructions to dismiss Count Five with prejudice. However, the panel’s agreement with Plezia ends there. With respect to every other assignment of error, we AFFIRM.

I. Factual Background

          Plezia was a Houston-based personal injury attorney charged with conspiracy to defraud the United States through falsified reporting on tax returns to the Internal Revenue Service (“IRS”). The alleged falsified gains arise from barratry, the impermissible practice of attorneys soliciting clients that have not invited any contact with prospective counsel. The Government averred that Plezia conspired with a group of personal-injury attorneys and non-attorney case runners (“case runners”) in Houston, Texas to unlawfully reduce the federal income taxes owed by Jeffrey Stern (“Stern”). The case runners were alleged to solicit clients for Stern—in violation of the Texas Penal Code and the Texas Disciplinary Rules of Professional Conduct (“TDRPC”). The charging instrument set out that Plezia worked with case runner Marcus Esquivel (“Esquivel”) to aid Stern in reducing the income taxes he owed from 2011 through 2013. It alleged that Stern “funneled” illegal payments for soliciting and “running” cases to Esquivel by writing checks to Plezia—who subsequently wrote corresponding checks out to Esquivel’s business entities. Stern would then deduct the amounts paid to Plezia as attorney “referral fees.”

A. The Indictments and Pretrial Proceedings

          In August 2019, Stern was arrested and charged with conspiracy to commit fraud against the United States, willfully filing a false tax return, and obstruction of justice. Stern pleaded guilty to the first two counts and agreed to pay over $4.35 million in restitution to the IRS and cooperate with the prosecution and investigation of other attorneys involved in the scheme. On August 6, 2019, the grand jury indicted Plezia on one count of conspiracy to [*3] defraud the United States in violation of 18 U.S.C. § 371 (“Count One”). On January 18, 2022, the grand jury returned a Third Superseding Indictment adding two counts of making false statements to IRS agents in violation of 18 U.S.C. § 1001(a)(2) (“Counts Five and Six”) and one count of falsifying records in violation of 18 U.S.C. § 1519 (“Count Seven”).

          Count One’s allegations against Plezia are limited to his participation in redirecting checks to Esquivel. Count Five sets out that Plezia falsely told an IRS agent in Houston in December 2016 that he had never paid Esquivel any referral fees for clients in violation of the Texas bar rules. Count Six avers that Plezia made another materially false statement to IRS agents in September 2018 when he averred that any payments between him, Esquivel, and Stern were provided solely for the purpose of financing his ongoing benzene exposure toxic tort litigation against BP. Lastly, in Count Seven, the Government alleged that Plezia created a false document supporting or tracking the false statement he made in Count Six with the intent to impede a federal investigation under the jurisdiction of the IRS.

          Plezia pleaded not guilty to all charges and proceeded to a jury trial on January 9, 2023. He moved to dismiss the entirety of the Third Superseding Indictment for constitutional violations. Plezia argued that the Government’s delay in prosecuting all charges violated his Fifth and Sixth Amendment rights. He also filed a separate motion to dismiss Count Five as barred by the five-year statute of limitations in 18 U.S.C. § 3282 because it was filed over five years after the alleged false statement was made. He asserted that Count Five was filed five years and forty-two days after the alleged false statement was made even though the Government had all relevant information to charge him with that offense for at least three years before the Third Superseding Indictment. The Government opposed both motions and argued that the statute of limitations had been tolled due to the delays arising from its compliance with the district court’s COVID orders [*4] and from delays in processing Justice Department approvals during the pandemic. It further argued that the discovery of evidence of Plezia’s involvement in Stern’s scheme was hindered by COVID delays related to several steps of the investigation which prompted the addition of Count Five. 

Trump Superseding Indictment: More on the Defraud / Klein Conspiracy (8/28/24)

The D.C. grand jury approved a superseding indictment against former President Trump (“Trump”). The superseding indictment is on CourtListener here. The principal purpose of the superseding indictment is to eliminate charges that might implicate the President’s immunity as stated in Trump v. United States, 603 U. S. ____, 144 S. Ct. 231 (2024).

The Introduction to the superseding indictment contains a good summary on the issue I discuss in this blog – the defraud conspiracy in 18 U.S.C. §371 (Superseding Indictment pp. 1-3, ¶¶ 1-5).

INTRODUCTION

          1. The Defendant, DONALD J. TRUMP, was a candidate for President of the United States in 2020. He lost the 2020 presidential election.

          2. Despite having lost, the Defendant-who was also the incumbent President-was determined to remain in power. So, for more than two months following election day on November 3, 2020, the Defendant spread lies that there had been outcome-determinative fraud in the election and that he had actually won. These claims were false, and the Defendant knew that they were false. But the Defendant used his Campaign to repeat and widely disseminate them anyway-to make his knowingly false claims appear legitimate, create an intense national atmosphere of mistrust and anger, and erode public faith in the administration of the election.

          3. As a candidate and a citizen, the Defendant had a right, like every American, to speak publicly about the election and even to claim, falsely, that there had been outcome determinative fraud during the election and that he had won. He was also entitled to formally challenge the results of the election through lawful and appropriate means, such as by seeking recounts or audits of the popular vote in states or filing lawsuits challenging ballots and procedures. Indeed, in many cases, the Defendant did pursue these methods of contesting the election results. His efforts to change the outcome in any state through recounts, audits, or legal challenges were uniformly unsuccessful.

          4. Shortly after election day, the Defendant also pursued unlawful means of discounting legitimate votes and subverting the election results. In so doing, the Defendant  perpetrated three criminal conspiracies:

                   a. A conspiracy to defraud the United States by using dishonesty, fraud, and deceit to impair, obstruct, and defeat the lawful federal government function by which the results of the presidential election are collected, counted, and certified by the federal government, in violation of 18 U.S.C. § 371;

                   b. A conspiracy to corruptly obstruct and impede the January 6 congressional proceeding at which the collected results of the presidential election are counted and certified ("the certification proceeding"), in violation of 18 U.S.C. § 1512(k); and

                   c. A conspiracy against the right to vote and to have one's vote counted, in violation of 18 U.S.C. § 241.

Each of these conspiracies-which built on the widespread mistrust the Defendant was creating through pervasive and destabilizing lies about election fraud-targeted a bedrock function of the United States federal government: the nation's process of collecting, counting, and certifying the results of the presidential election ("the federal government function").

More on United States v. Boler (8/25/24)

Yesterday, I wrote a blog entry on United States v. Boler, ___ F.4th ___ (4th Cir. 2024). Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (Federal Tax Crimes Blog 8/24/24), here. (The blog entry was cross-posted on my Federal Tax Procedure Blog, here.) I think there is more that can and should be said about Boler. This post will be more of a “notice” post (like the fabled notice pleading lawyers at least of my generation learned about early in our law school careers).

1. The structure of the Federal Sentencing Guidelines. The 2023 version of the U.S. Sentencing Guidelines is here. The Guidelines (with accompanying Commentary and Policy Statements) are promulgated by the U.S. Sentencing Commission which is “a bipartisan, independent agency located in the judicial branch of government, was created by Congress in 1984 to reduce sentencing disparities and promote transparency and proportionality in sentencing.” See website here. So, we know at the outset that it is a strange creature in our constitutional framework—the only agency located in the judicial branch. 

JAT Side Note: Readers of this blog will surely have some passing acquaintance with the difficulty going back to the 1940s of determining precisely what the Tax Court was, even though the statute said since its earliest days (then the Board of Tax Appeals) that the Tax Court was an independent agency in the Executive Branch. As I have noted, the nature of the Tax Court was an issue was much discussed with more heat than light in the 1940s, including in the consideration of the APA; the Supreme Court in Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den., 321 U.S. 231 (1944), a unanimous opinion authored by Justice Jackson, the most tax procedure savvy Justice ever, held that the Tax Court was an agency rather than a court and applied Chevron-like deference to its statutory interpretations. I cover these issues in John A. Townsend, The Tax Contribution to Deference and APA § 706 (SSRN December 14, 2023), pp. 5-23)   https://ssrn.com/abstract=4665227.

2. Guidelines treated as Legislative Rules; Commentary Treated as Interpretive Rules. As an agency, albeit a Judicial Branch agency, the issue underlying Boler was the authority of the Guidelines and the Policy Statements and Commentary. In Stinson v. United States, 408 U.S., 36 (1993), GS here, the Court treated the Guidelines as analogous to legislative rules which make law pursuant to Congress’ delegation and treated Commentary as an interpretive rule interpreting the law (the law being the Guidelines). The Court said (p. 44-45, cleaned up to omit most case citations):

Although the analogy is not precise because Congress has a role in promulgating the guidelines, we think the Government is correct in suggesting that the commentary be treated as an agency's interpretation of its own legislative rule. The Sentencing Commission promulgates the guidelines by virtue of an express congressional delegation of authority for rulemaking, and through the informal rulemaking procedures in 5 U. S. C. § 553, see 28 U. S. C. § 994(x). Thus, the guidelines are the equivalent of legislative rules adopted by federal agencies. The functional purpose of commentary (of the kind at issue here) is to assist in the interpretation and application of those rules, which are within the Commission's particular area of concern and expertise and which the Commission itself has the first responsibility to formulate and announce. In these respects this type of commentary is akin to an agency's interpretation of its own legislative rules. As we have often stated, provided an agency's interpretation of its own regulations does not violate the Constitution or a federal statute, it must be given "controlling weight unless it is plainly erroneous or inconsistent with the regulation." Bowles v. Seminole Rock & Sand Co., 325 U. S. 410, 414 (1945). 

Bowles v. Seminole Rock is the predicate for Auer deference which I now call Auer/Kisor deference because of the authoritative treatment of Auer deference in Kisor v. Wilkie, 588 U.S. 558 (2019). As I discussed in yesterday’s blog on Boler, the issue was the application of Auer deference to Guidelines’ Commentary (Application Note) defining the Guidelines term “loss” to include “intended loss.”

3. Did Auer/Kisor Deference Survive the Demise of Chevron. One of the issues I presented in yesterday’s blog was whether Auer/Kisor deference survived the demise of Chevron deference. I just want to make a few bullet points about that issue.

Fourth Circuit Applies Auer/Kisor Deference to Include in Guidelines "Loss" the Commentary Inclusion of "Intended Loss" (8/24/24)

 In United States v. Boler, ___ F.4th ___ (4th Cir. 2024), CA4 here and GS here [to come], the Court held that the term loss included the pecuniary loss that Boler intended from filing false refund claims with the IRS. Boler filed six returns claiming false refunds; the IRS paid refunds on only four of the returns. Boler wanted the loss to be calculated using only the amounts actually refunded and thus to exclude the refund amounts claimed but not refunded. The district court held that Sentencing Guidelines inclusion of loss included intended loss. Since the pecuniary loss is a principal driver of the Sentencing Guidelines calculations, the inclusion of the intended loss increased the advisory Guidelines sentence and factored into the resulting sentence. On appeal, Boler argued that the Guidelines required inclusion of the loss, which facially does not include intended loss and that, the Guidelines Commentary interpretation of “loss” to include intended loss was an invalid interpretation of the Guidelines term “loss.” The Court of Appeals held that loss included the intended loss. (This is perhaps a moot issue in the future, because the definition of loss in the Guidelines was changed effective November 1 to include intended loss.)

The issue, as framed by the majority, turned on the application of Auer/Kisor deference. So, what is Auer/Kisor deference? As interpreted in Kisor v. Wilkie, 588 U.S. 558 (2019), GS here, the Court updated and constricted Auer deference, but, as constricted, held that in some cases courts should defer to agency interpretations of ambiguous agency legislative regulations. The majority in Loper Bright did not mention Auer/Kisor deference, although it cited Kisor several times; the dissent said (S.Ct. at 2306-2307) that Kisor approved Auer deference “which requires judicial deference to agencies' interpretations of their own regulations.” (Hereafter, whenever I use the term regulations, I mean agency notice and comment regulations required for legislative regulations and permitted for interpretive regulations.) The Loper Bright opinions make no statement that Auer/Kisor deference is affected.

I should note that, in my thinking, the Court analogized Auer/Kisor deference to Chevron deference which applied to agency regulations’ interpretations of ambiguous statutory text. The analogy is logical: Chevron deference applied to agency regulations interpretation of law (there statutory law); Auer deference applied to agency interpretations of law (legislative regulations that function like statutes to impose the law); so both forms of deference apply to agency interpretations of law.

Taxpayer Liable for Willful FBAR Penalties Despite Alleged ADHD, Stress, Depression, and Stage 3 Prostrate Cancer (8/10/24)

In United States v. Rund (E.D. Va. No. 1:23-cv-00549 Memo Opinion & Order 8/6/24), CL here and GS here, the Court granted the Government summary judgment on Rund’s liability for FBAR willful penalties and ordered judgment for “$2,915,663 as of April 30, 2021, consisting of an assessment against him under 31 U.S.C. § 5321(a)(5), plus pre- and post-judgment interest and penalties accruing on that assessment in accordance with 31 U.S.C. § 3717.”

Significant features of the opinion:

1. Rund “participated in OVDP from 2010 through 2016” and apparently either withdrew or was terminated. (Slip Op. 6.) While in OVDP he apparently did not fully disclose offshore accounts and even failed to file FBARs as due. (Id.) He alleged as a defense “improper termination and/or denial of entry from the OVDP program.” (Slip Op. 7 n6.) There is no further discussion of that adventure, and  Rund apparently failed to address the defense in his motion for summary judgment. (Id.)

2. More significantly, Rund claimed certain personal characteristics that he felt negated willfulness. The Court addressed that claim as follows (Slip Op. 13-14):

Sentencing Guidelines under the Loper Bright Non-Deference Regime (8/7/24; 8/9/24)

Three leading authorities on federal sentencing have co-authored an article that might be of interest to those interested in the confluence of federal sentencing and the demise of deference in Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024), SC Slip Op. here & GS here. The article is Mark Allenbaugh, Doug Passon, and Alan Ellis, Post-Chevron, Good Riddance To The Sentencing Guidelines (Law 360 7/15/24), here. I learned from the article and made appropriate changes to the federal crimes section of the 2025 working draft of my Federal Tax Procedure book.

The authors engage Loper Bright over the Sentencing Guidelines. The authors note that there are two key categories within the Guidelines.

• The Guidelines which “are the equivalent of legislative rules adopted by federal agencies,” quoting Stinson v. United States, 508 U.S. 36. 41, 45 (1993). The Guidelines are thus like, in the Treasury context, the consolidated return regulations under § 1502 which contain many rules (including interpretations of the rules). They are the law if within the legislative rulemaking authority conferred by Congress.
• What I call Sub-Guideline Rules which are Policy Statements and Commentary (including Application notes). Sub-Guidelines rules are not legislative rule-equivalents but more like interpretations of the regulations-equivalent Guidelines. Since they are not law but interpretations, they can be tested for validity of the interpretation.

As I said, legislative rules are the law if within the scope of the authority delegated and thus are not tested as to whether “reasonable” (under Chevron) or “best” (under Loper Bright). They are the law if within the scope of the legislative rulemaking authority granted. While an unreasonable definition in a legislative rule would likely be rejected as arbitrary and capricious (which could overlap but was never the same as the reasonableness test under Chevron), so long as the interpretation in a legislative rule is reasonable, it should be the law, just as interpretations and definitions in the consolidated return regulations under § 1502 are the law. (I know, this sounds like smuggling in Chevron deference, but I am just applying the traditional distinction between legislative rules and interpretive rules which Loper Bright did not reject.)

Is It Too Much to Ask that the Defraud Conspiracy Crime Require Fraud? (8/3/24; 8/6/24)

In United States v. Lingat, (S.D. N.Y. No. 1:21-cr-00573 Dkt # 191 Opinion & Order 7/30/24), CL here & GS here [to come], the court rejected the defendants’ motions for acquittal after conviction. The defendants asserted as a principal basis for the motions United States v. Coplan, 703 F.3d 46 (2d Cir. 2012), here, cert. den. 571 U.S. 819 (2013) which questioned the Klein defraud conspiracy (the § 371 defraud conspiracy) for which the defendants were convicted. In affirming the Klein defraud conspiracy convictions, Coplan strongly questioned the validity of the Klein conspiracy but was compelled to follow Supreme Court opinions approving the broad interpretation of the defraud conspiracy. 

I believe that most readers of this blog are familiar with the Klein conspiracy and perhaps even the saga of Coplan. The Second Circuit in Coplan was concerned that, through an expansive reading of the text of § 371, the Supreme Court had judicially created the Klein conspiracy crime to include an object to impair or impede the function of Government without any fraud in its traditional meaning for criminal statutes to deprive another of money or property. In short, the defraud conspiracy does not require fraud, at least fraud as the word is used in other criminal statutes. For readers wanting a short summary, I link a section of my Federal Tax Procedure Book (Practitioner Ed. 2024), pp. 318-319, here. I have posted a number of blogs on the issue presented in Coplan, but here will just link to some of the more prominent blogs. Coplan #1 - Panel Questions Validity of Klein Conspiracy (Federal Tax Crimes Blog 12/1/12), here; Further on the Second Circuit Detour on the Interpretation of the Defraud / Klein Conspiracy (Federal Tax Crimes Blog 12/18/12), here; and Oral Argument in Supreme Court Case on Trump Immunity Discussing the Defraud / Klein Conspiracy (Federal Tax Crimes Blog 4/26/24), here.

The key troubling aspect of the Klein conspiracy is that the precedent going to Hammerschmidt v. United States, 265 U.S. 182 (1924) and even earlier is now certainly “settled law,” a refrain we have heard so much over the last few years as the Court’s current conservative super-majority court has “unsettled’ much “settled law.” I think the Court’s super-majority has been unsettling too much settled law. But, if the Court's super-majority really wants to fix something worth fixing, it could not find a more worthy issue than the proper interpretation of the defraud conspiracy. Since first wading into the issue in the late 1990s and early 2000s, I have been convinced that the Court went too far in Hammerschmidt and its ilk and now should fix the issue simply because the defraud conspiracy can sweep too broadly. For my ruminations on that concern, see John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255 (2009), here, and its online appendix with examples Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough? Online Appendix, 9 Hous. Bus. & Tax L.J. A-1 (2009), here.