Civil Liability for Conduct that is Acquitted in Criminal Case (11/20/21)

The Kyle Rittenhouse acquittal on all counts is in the news.  Acquittal or conviction (on some or all counts) was sure to become a political charged phenomenon.  I don’t deal with the political issues here. I respond to a question I was asked yesterday as to whether Rittenhouse’s acquittal absolves him of potential civil liability related to the same conduct for which he was acquitted and specifically address the criminal tax analog of the phenomenon.

For a discussion of the nontax answer, I point readers to this discussion:  Euguene Volokh, Could Kyle Rittenhouse Be Sued for Negligence? (The Volokh Conspiracy 11/20/21), here.  Professor Volokh answers the question succinctly at the beginning of the blog post:

A criminal acquittal doesn't preclude a civil lawsuit out of the same claims. First, the acquittal resolves only that guilt couldn't be proved beyond a reasonable doubt (requiring, say, a >90% confidence level); the standard for civil liability is preponderance of the evidence (which requires just >50%, or perhaps ≥50%, if the injury is easily proved and the burden is then shifted to the defendant to prove self-defense).

A similar phenomenon plays out in the criminal tax area.  A criminal tax evasion acquittal does not prevent the imposition of the civil fraud penalty in § 6663.  And, for the same reason:  the burden of proof for the civil fraud penalty is less than for the criminal penalty. so that acquittal is not issue or claim preclusive for the civil fraud penalty.  Civil liability for the civil fraud penalty requires that the Government prove civil fraud liability by clear and convincing evidence, a burden that as articulated is less burdensome (so to speak) for the Government than the beyond a reasonable doubt standard.

 Here is the key paragraph from my Federal Tax Procedure Book (2021 Practitioner Edition), p. 333 here (footnotes omitted from the quote but may be viewed at the link here):

If the taxpayer is acquitted of the tax evasion charge, however, the IRS may still assert the civil fraud penalty (the acquittal is not preclusive that there was no civil fraud).  Why?  A finding of not guilty is not necessarily a finding of innocence; it is only a finding that the government failed to prove guilt beyond a reasonable doubt.  In an ensuing civil tax case, the government must establish fraud only by clear and convincing evidence, a substantially lesser burden than the beyond a reasonable doubt requirement for criminal conviction.  Accordingly, the IRS may and usually does assert the civil fraud penalty when the taxpayer has been acquitted.

Most civil liability exposures relate to liabilities such as negligence discussed above that require proof of liability by a preponderance of the evidence.  Liability for the civil fraud penalty requires proof by clear and convincing evidence, a standard that falls somewhere between beyond a reasonable doubt (the criminal conviction standard) and preponderance of the evidence.  For discussion of the difficulties in articulating these standards, particularly in jury instructions useful to a jury, see discussion in my book pp. 331-332, here, particularly at n. 1414 and pp.601-602.

This blog post is cross-posted on my Federal Tax Procedure Blog here.

Reasonable Doubt About Reasonable Doubt Instructions (2/5/21)

I have written below about some of the problems with the venerable “beyond a reasonable doubt” for convictions for crimes.  E.g., Inspired by the Manafort Trial, On the Beyond a Reasonable Doubt Standard (8/15/18; 8/17/18), here (collecting some earlier posts).  See also my earlier pdf book the latest offering being for 2013 after discontinuing because of my chapter in the Saltzman book.   Townsend, John A., Federal Tax Crimes, 2013 (February 5, 2013). Available at SSRN: https://ssrn.com/abstract=2212771.  The key discussion starts on p. 680 [p. 717 of the pdf] beginning here.  I think the cited discussion is still a fair even though now over 7 years old.

Readers interested in the meaning and problems in the criminal standard “beyond a reasonable doubt” might be interested in a law review article I read yesterday.  Michael D. Cicchini, Reasonable Doubt and Relativity, 76 Wash. & Lee L. Rev. 1443 (2019), here.  The key discussion for present purposes starts with the outline  II.B. B. Reasonable Doubt is Not Self-Defining  1455 (pdf p. 14), here.

Key points 

1. After explaining problems in the approaches of not explaining to the jury what reasonable doubt means or attempting some explanation, the author notes from pp. 1455-1456 (pdf pp.. 14-15):  

With so many pitfalls awaiting the trial judge who attempts to define or explain reasonable doubt, many courts have determined  “that the better practice is not to attempt the definition.” Their justification is this: reasonable doubt is already “self-defining,” and, therefore, jurors require no further explanation to understand it. However, this assumption has now been thoroughly tested and debunked.

2. The author presents (pp. 1456-1460 (pdf pp 15-19)) some studies that indicate that jurors really do not reach different outcomes under the reasonable doubt standard as compared to the lesser burdens in civil cases – preponderance of the evidence and clear and convincing evidence.

3. The author discusses the so-called “60/65” rule (pp, 1460-1462 (pdf pp. 19-21), footnotes omitted):

In addition to the above studies showing no significant differences in acquittal rates under the three burdens of proof, researchers have also been testing the impact of reasonable doubt jury instructions in a different way: they seek to determine the subjective confidence level that jurors require before they are willing to convict. “This research has consistently shown that the jurors in criminal cases will often be satisfied with much less certainty than is conventionally assumed.”

Comments on Manafort Jury Day 1 Deliberation Questions (8/17/18)

I thought I would offer some quick additional comments on the four questions the jury asked after its first day of deliberation in the Manafort trial.  I will take the questions and Judge Ellis' answers as reported by WAPO in this article:  Manafort jury enters second day of deliberations (WAPO 8/17/18 10:49am), here, and will offer my comment after each question and answer:

First, jurors asked if someone was required to file a form called an FBAR — which is required of people with foreign bank accounts containing more than $10,000 — if they owned less than 50 percent of such an account and did not have signature authority but did have the ability to direct disbursement. At trial, Manafort’s lawyers suggested their client might have believed he did not have to file such forms, because the companies in question were set up under his consulting firm. After 2011, he shared ownership of the firm equally with his wife. 

In response, the judge read to them again the legal instructions he provided on that point Wednesday. He told the jury that along with the requirement for people who own more than 50 percent of a company with foreign bank accounts, a person must file FBARs if he “controls the disposition of money, funds, or other assets held in a financial account by direct communications.”

JAT Comments on First Question:  Although I don't have the specific instructions as given by Judge Ellis, the law is clear that the Government has to prove that Manafort actually knew of the FBAR obligation and specifically intended to violate the obligation.  (Students and practitioners in this area will recognize this as the Cheek requirement made applicable to FBARs by Ratzlaf.) This is a specific knowledge and intent crime.  (Of course the required intent assumes that the defendant knew the obligation.)  Since a defendant rarely admits the specific knowledge and intent, the Government usually proves knowledge and intent by circumstantial evidence.  I don't know the state of the record on knowledge and intent.  Now, on the more specific question of whether there was an FBAR filing obligation in the first place, I presume that, if WAPO reports the judge's instructions correctly, the obligation arises in the disjunctive (i) if Manafort owned more than 50% which he apparently didn't or (ii) if Manafort had control over the account as the judge instructed.  While it seems clear that Manafort did have overall control over the account, the finer question under the instruction  is whether he could exercise that control by direct communications to the financial institution.  I don't know whether the Government proved that beyond a reasonable doubt.  (I have to say, however, that if there were no evidence sufficient to prove that type of control, the judge presumably would have directed a verdict in Manafort's favor, so I assume that there is some evidence of the required level of control.)  Also, I wonder whether the FBAR obligation can be avoided by having some minion (such as Gates) be the person with direct communication authority and what the state of the evidence and the instructions were on that issue.  In any event, if the jury does not get comfortable with the requirements for knowledge and intent, it would seem that the beyond a reasonable doubt instruction would require the jury to find not guilty on the FBAR count.

Second, jurors asked if the judge could define “shelf company” and the filing requirements related to income. Witnesses testified at Manafort’s trial that he used so-called shelf companies — companies previously created by a lawyer in Cyprus that could be used to control the bank accounts in question — in order to move Manafort’s money. To that question, the judge said the jury would have to rely on their memory of the evidence presented at trial.

JAT Comments on Second Question:  This seems like a fair question that a jury might ask.  The report of Judge Ellis' answer is curious to me.  It seems to me that the question, as reported by the WAPO article, is asking both a factual question -- a definition of "shelf company" -- and a legal question -- the relationship of a shelf company to income (presumably as the income must be reported on the return).  If I am right, the judge could and should have answered that legal question.  Perhaps the witnesses spoke to that issue, but usually in trials witnesses do not testify as to the law; nevertheless, in constructing the unreported income, the summary witness (presumably an IRS agent) would have to base the construction of income on the law as to whether the item is taxable income.  Since it is a question infused with a legal issue, I think the judge could have offered the jury some guidance -- such as that cash earned in the way the Government alleges would be taxable if the jury finds that the cash was received by the company (I am not sure that the judge would have to go into assignment of income, sham corporations or the subpart F reporting rules).  But that suggested answer depends upon the state of the record; I don't know the state of the record.  As with my concluding FBAR question comment, if the jury does not get comfortable that the law required Manafort to report the income, then it should acquit.  (Note, though, that if the law did not require him to report the income, Judge Ellis should have instructed a verdict.)

Inspired by the Manafort Trial, On the Beyond a Reasonable Doubt Standard (8/15/18; 8/17/18)

WAPO reports:  Rachel Weiner, Matt Zapotosky, Lynh Bui and Devlin Barrett, Jurors in Paul Manafort trial send judge four questions, including asking him to redefine reasonable doubt (WAPO 8/16/18 5:33pm), here.  I address all four questions in a subsequent blog:  Comments on Manafort Jury Day 1 Deliberation Questions (Federal Tax Crimes Blog 8/17/18), here.  Since I had already posted on the beyond a reasonable doubt question here, I will just leave that answer here and link it in the later blog:

The Beyond a reasonable doubt question and Judge Ellis' answer as reported in the WAPO article are:

Third, they asked if the judge could “redefine reasonable doubt.” Jurors sometimes struggle with what constitutes a reasonable doubt of someone’s guilt, versus an unreasonable doubt. The judge told them reasonable doubt “is a doubt based on reason,” but added: “The government is not required to prove guilt beyond all possible doubt.”  

Defense attorneys emphasized in their closing argument that it’s not enough to believe a defendant is “likely” guilty or even “highly likely” guilty, using a thermometer chart to make the point.

I offer as an addendum at the bottom of this blog a discussion of Beyond a Reasonable Doubt from my Federal Tax Crimes publication that I discontinued when I began working on the Tax Crimes Chapter in the Saltzman publication on Tax Procedure.  I think the discussion is still good, but without updated cases.

ORIGINAL POSTING IS BELOW EXCEPT FOR THE ADDENDUM AT THE BOTTOM:

I write today because of the Manafort case.  Yesterday, Manafort's attorneys did not put on evidence in defense and Manafort waived his right to testify.  Technically, the defense rested after the prosecution concluded its case.  The defense would say that they did elucidate evidence in Manafort's favor by cross examination of the prosecution's witnesses which, they will claim, produced some affirmative evidence in Manafort's favor and, in any event, they will claim, precludes the prosecution of meeting its burden to prove guilt beyond a reasonable doubt.

Addendum 2:24pm (EDT): WAPO has here a running report on the Manafort arguments as they progress.  Relevant to the beyond a reasonable doubt standard, the WAPO running report has this:

1:52 p.m.: Manafort attorney says defense put on no evidence because case wasn’t ‘beyond a reasonable doubt’ 

Defense attorney Richard Westling began his closing argument on behalf of Paul Manafort not with specific evidence but broad concepts — presumption of innocence, burden of proof and reasonable doubt. 

“You took a solemn oath” to abide by these legal precepts, he said. “Be steadfast.” 

One juror nodded as Westling emphasized the the fact that Manafort stands innocent. “If you’re thinking right now any of this evidence adds up to anything, you shouldn’t be,” Westling said. “Put it out of your mind.” 

He went on to explain that the burden of proof is on the government, and that the defense “made a decision not to put on evidence because… we believe the government has not met that burden.” 

The burden the prosecutors have to overcome, he explained with a thermometer-like chart, is not that Manafort “possibly,” “probably,” “likely” or “even highly likely guilty,” but that he is “guilty beyond a reasonable doubt.”

I thought readers might appreciate some links to discussions of what proof beyond a reasonable doubt means and how it is explained to the jury.  I first offer some of the more significant discussions I have had on the issue in this blog.  These offerings are in reverse chronological order.

• Reasonable Doubt and Jury Nullification (Federal Tax Crimes Blog 12/30/14), here.
• Daugerdas Retrial Jury Instructions - Part 01 Reasonable Doubt (Federal Tax Crimes Blog 11/12/13), here.
• Proof Beyond a Reasonable Doubt - Ramblings (Federal Tax Crimes Blog 9/1/13), here.
• Article on Importance of Jury Instructions in White Collar, including Tax, Crime Cases (Federal Tax Crimes Blog 1/29/13), here.
• Reasonable Doubt and Mickey Mouse (Federal Tax Crimes Blog 3/6/12), here.
• Reasonable Doubt - What is It? (Federal Tax Crimes Blog 10/16/09), here.

Fourth Circuit Rejects Two-Inference Jury Instructions in Criminal Case (1/29/17)

In United States v. Blankenship, 2017 U.S. App. LEXIS 961 (4th Cir. 2017), here, the Court sustained Blankenship's conviction for conspiring to violate federal mine safety laws and regulations.  Although not a tax case, the case is noteworthy here because of the Court's holding that the two-inference jury instruction, although inappropriate, was harmless error.

So, what is the two inference instruction?  The two inference instruction given was that if the jury "view[ed] the evidence in the case as reasonably permitting either of two conclusions—one of innocence, the other of guilt—the jury should, of course, adopt the conclusion of innocence."

In United States v. Khan, 821 F.2d 90, 92 (2d Cir. 1987), here, cited by the Fourth Circuit in Blankenship, the Second Circuit held (bold-face supplied by JAT):

In our view, trial judges should not include any variation of the "two-inference" language in their charge. See Sand, Siffert, Loughlin Reiss, Modern Federal Jury Instructions ¶ 4.01, at 4-5 (1986). The "two-inference" language, that if the jury believes the evidence permits either the inference of innocence or of guilt, the jury should adopt the former, is obviously correct as far as it goes. But such an instruction by implication suggests that a preponderance of the evidence standard is relevant, when it is not. Moreover, the instruction does not go far enough. It instructs the jury on how to decide when the evidence of guilt or innocence is evenly balanced, but says nothing on how to decide when the inference of guilt is stronger than the inference of innocence but no strong enough to be beyond a reasonable doubt. In a charge that properly instructs the jury on reasonable doubt, the "two-inference" language "adds nothing." Id., ¶ 4.01, at 4-9. Therefore, we want to make clear now that the "two-inference" language should not be used because, standing alone, such language may mislead a jury into thinking that the government's burden is somehow less than proof beyond a reasonable doubt.n1 In addition, we expect the government, as well as defense counsel, to assume responsibility for bringing these comments to the attention of trial judges.
   n1 This opinion was circulated to all active judges of the Court prior to filing.

Following that lead, in Blankenship, the Court said (bold-face supplied by JAT):

Although this Court has not had an opportunity to pass judgment on the two-inference instruction, our Sister Circuits disfavor it. See, e.g., United States v. Dowlin, 408 F.3d 647, 666 (10th Cir. 2005); United States v. Jacobs, 44 F.3d 1219, 1226 (3d Cir. 1995); Khan, 821 F.2d at 93. In Khan, the Second Circuit explained that, although correct as a matter of law, the two-inference instruction "by implication suggests that a preponderance of the evidence standard is relevant, when it is not. . . . It instructs the jury on how to decide when the evidence of guilt or innocence is evenly balanced, but says nothing on how to decide when the inference of guilt is stronger than the inference of innocence but no[t] strong enough to be beyond a reasonable  doubt." 821 F.2d at 93. We agree and therefore direct our district courts not to use the two-inference instruction going forward.

JAT Comments:

Sixth Circuit Affirms Tax Protestor Conviction, Rejecting Evidence and Reasonable Doubt Arguments (10/22/16)

In United States v. Myr, 2016 U.S. App. LEXIS 18963 (6th Cir. 2016) (unpublished), here, the Court affirmed the Myr's conviction for "count of tax evasion, 26 U.S.C. § 7201, and four counts of willful failure to file individual income tax returns, 26 U.S.C. § 7203."  Myr was "a self-employed auto mechanic with a professed interest in tax-protester theories."

Myr ran an auto-repair and brokerage business specializing in rare and exotic cars from a farm in Port Huron, Michigan. When he was not fixing luxury vehicles, Myr spent his free time studying the federal income tax laws. His reading list included the Internal Revenue Code as well as various tax-protester pamphlets and books which opined that the income tax applied to corporations but was "voluntary" or "unconstitutional" as applied to individuals.

Myr put those theories into action as he was earning substantial income from his business.  As in most supposed tax protestor cases, the ultimate issue in a criminal case is whether the taxpayer (or nontaxpayer) really believed that he was not subject to tax or was just hiding behind supposed tax protestor theories to disguise his "willful" conduct.  This is the so-called cheek willfulness issue, named for Cheek v. United States, 498 U.S. 192 (1991).  For many protestors, the objective elements of the charged crime -- e.g., for failure to file, he did not file -- is the only potential defense.  Myr's defense at trial was that the Government's proof did not meet the mens rea element beyond a reasonable doubt.  The jury rejected the defense.

Apparently realizing a frontal attack on the jury's holding was a loser, the issues Myr raised on appeal were (i) that the district court erred in excluding from evidence a civil complaint filed by DOJ Tax against the return preparer for the corporate return (the suggestion being that the preparer did the dastardly deed of preparing the false return and not the taxpayer); and (ii) the jury improperly instructed the jury on beyond a reasonable doubt.  The latter issue although applying to all elements of the crime is in the facts of these types of cases directed at the mens rea element, since the other objective elements of the crime are proved beyond a reasonable doubt.

So, let's look at the issues he did raise and the Court of Appeals rejected.

Exclusion of the Complaint Against the Tax Preparer

Myr uses the district court's decision to exclude the Pope complaint from evidence as the basis for two challenges to his conviction. The first asks us to consider the decision as an evidentiary matter under Rule 401. The second asks us to address it as a constitutional issue. Although these challenges differ somewhat conceptually, both rely on common propositions: that the complaint supported Myr's defense and its exclusion possibly affected the trial's outcome. We find no reversible error under either theory because the complaint offered—if anything—equivocal evidence on an insignificant point. 

* * * * 

As an initial matter, it is important to keep in mind that Myr was not charged with filing a false return. Rather, he was charged with willfully evading the tax obligation assessed in May 2007 for tax years 2000 to 2003. The On Track tax return—which was prepared by Pope, underreported the $610,000 proceeds from the engine sale, and took unjustified deductions—was simply one piece of evidence offered in support of the Government's theory that Myr hid assets to avoid paying the amounts assessed for back taxes and penalties. The On Track return had no relevance to the charges that Myr willfully failed to file his individual income tax returns, and thus the Pope complaint also had no relevance to those charges. 

Assuming arguendo that the Pope complaint would have decreased the evidentiary value of the On Track return in relation to the evasion charge, it is clear that the complaint's exclusion, even if erroneous, was harmless. Myr equates the complaint's exclusion to a total inability to offer a defense on willfulness. See United States v. Canty, 499 F.3d 729, 734 (7th Cir. 2007) (holding that the decision to forbid defendant in a counterfeiting trial from even testifying about his motive for printing fake bills was harmful when intent was the only issue at trial). At multiple points in his briefing, he asserts that the complaint was "critically important" or related "directly" to his intent. And evidence going to intent should particularly matter here, he reminds us, because lack of intent was his only defense. See id. 

But these bare assertions belie what actually happened at trial. The jury heard Myr's intent defense in detail and received instructions on his theory. They also heard him testify about his role in the filing of On Track's return—an event that played a minor role in the proceedings. The indictment alleged three intentionally evasive acts as part of the tax-evasion charge: (1) conveying his property to a nominee entity after notice that the IRS intended to place a tax lien on it; (2); using nominee entities, including On Track and Hosea Holdings, to conceal his income and assets; and (3) dealing in cash. The allegations surrounding the Ferrari transaction—the use of nominee entities, the dealing in gold coins, the bank-account withdrawals with checks written to cash, and, yes, the On Track return—merely evidenced a single act that satisfied the evading charge. The government presented overwhelming evidence on all three alleged intentionally evasive acts. And it specifically offered voluminous evidence that Myr violated a known legal duty—to pay his tax debt—in bad faith: it presented multiple direct communications where-by the IRS informed Myr that, indeed, he was liable for the federal income tax. 

The falsity of the On Track tax return was offered by the government as one piece of evidence showing that Myr had used nominees to conceal income, itself one of three core allegations underlying the single tax-evasion charge. Had the complaint been admitted into evidence, it would have been—at most—evidence that minimally rebutted minor evidence related to the tax-evasion charge. On this record, admitting the complaint into evidence would not have affected the verdict on this or any other charge.

The Reasonable Doubt Issue

Bullshit Tax Shelter Salesman Avoids Fraud Finding for Investment in Bullshit Tax Shelter (4/8/15)

In Jacoby v. Commissioner, T.C. Memo. 2015-67, here, the Tax Court relieved a bullshit tax shelter salesperson who drank his own poison from liability for the tax and penalties (and, as a result, the interest thereon).  How did / could that happen?  The short answer is - I don't know.  The opinion is quite cryptic.  Which may be the answer -- it may be just a mystery.

So, let's wade into the cryptic opinion.

1.  Jacoby had an accounting degree and a law degree.

2.  He had a short stint with a major accounting firm doing financial audit (not tax) work.  In 1987, he joined Twenty-First Securities Corp., a major player in the sophisticated tax strategy market.  He focused on strategies for high net worth individuals and large companies.  The strategies he sold were developed by others in the firm or outside the firm.  During the 9 years he worked there, he earned between $5 and $6 million.  Obviously, he learned enough about the working of the strategies to sell them to others.  (JAT comment:  One example of a strategy developed by Twenty-First Securities is the strategy blessed blasted by the Tax Court and then blessed by the Fifth Circuit in Compaq Computer Corp. v. Commissioner, 113 T.C. 214 (1999), rev’d 277 F.3d 778 (5th Cir. 2002); I have no idea whether Jacoby worked on that strategy, but that strategy was apparently in-house while he was with First Securities.

3.  In 1996, Jacoby joined Diversified Group Inc. ("DGI"), a tax shelter boutique run by James Haber.  DGI and Haber were major players in the bullshit tax shelter market.  See also e.g., Ironbridge v. Commissioner, T.C. Memo. 2012-158 (noting that, "Although he has not been indicted or tried, the principal of petitioners, James Haber, believes he was one of the persons involved in the criminal investigation.Mr. Haber stated during deposition testimony that he believes he became a potential “target” of the criminal investigation around “2002 or 2003;" lot more history there, but not developed in the Jacoby opinion, so I pass for now).  The Jacoby opinion says that Jacoby was interviewed in the criminal investigation, agreed to extend the statute of limitations for criminal prosecution, but was never prosecuted.  (Haber was never prosecuted either.)

4. Jacoby's arrangement with DGI was a joint venture agreement ("JVA") with Jacoby's company, SMD Capital Corp. ("SMD"), through which he would get 50% of the net profits from business he brought to DGI.

Reasonable Doubt and Jury Nullification (12/30/14)

This is good stuff guys.  Read and enjoy:  Eugene Volokh, ‘If you do not have a reasonable doubt … then you will enter a verdict of guilty’ (Volokh Conspiracy 12/24/14), here.

I will post later some recent musings I have had about reasonable doubt.  In the meantime, those with an interest should just link to this short blog entry.

Proof Beyond a Reasonable Doubt - Ramblings (9/1/13)

I am writing a chapter in a publication.  My chapter is on tax crimes.  It is too long.  I am having to cut.  So, today, I am cutting the discussion on beyond a reasonable doubt.  It is an important criminal law concept, but not enough tax specific to leave in a chapter that is already too long.  But since it is my latest ramblings on the subject, I am going to offer the materials here.  

The text with the footnotes is here.

The text without the footnotes is:

[a] Beyond a Reasonable Doubt. 

In a criminal tax prosecution, just as any other criminal prosecution, the Government bears the burden of proving guilt beyond a reasonable doubt.  

There is no universally accepted jury instruction defining reasonable doubt.  Some courts and commentators urge that the bare words – beyond a reasonable doubt – should be used with no attempt to further define the term.  Other offerings of instructions provide more words, without perhaps more guidance and clarity.  Some perhaps would argue that this is a good state of affairs, for it permits the jury in its collective wisdom to shape the fact finding process to its perception of the needs of the community and the individual charges and defendant.  

Trial lawyers love to describe burdens in percentage terms: 

  Consider what “proof beyond a reasonable doubt” actually mandates that the jury do. Surely it requires more proof than the preponderance of the evidence standard, which governs in civil cases. As commonly explained to civil juries, the preponderance standard is quantified as any amount of certainty greater than 50%, and proof beyond a reasonable doubt must mean more than that.  But how much more proof than a preponderance is needed in a criminal case? The quantity of certainty is never quantified; instead, it is kept quite vague. Is 90% certainty required? 95%? 99%? Or could the amount of certainty be much lower, say perhaps 75%?

Indeed, whatever the “percentage” level of certainty imagined to be inherent in the standard, it is reported that “research has consistently shown that the jurors in criminal cases will often be satisfied with much less certainty than is conventionally assumed.” 

Consider the following from Judge Posner: 

Daugerdas Retrial Jury Instructions - Part 01 Reasonable Doubt (11/12/13)

I have received the prepared jury instructions drafted by Judge Pauley (Wikipedia here) in the Daugerdas retrial.  The full set of jury instructions is linked here.  I did not get the transcript as they were actually read to the jury, but this should be pretty much as delivered for present purposes.  

I will use a series of posts to address various facets of the instructions that I find interesting.

This first post will deal with the reasonable doubt instruction.  The instruction as given is:

Reasonable Doubt  

I have said that the Government must prove a defendant guilty beyond a reasonable doubt. The question naturally arises: what is a reasonable doubt? The words almost define themselves. It is a doubt based in reason and arising out of the evidence in the case, or the lack of evidence. It is a doubt that a reasonable person has after carefully weighing all of the evidence in the case. 

Reasonable doubt is a doubt that appeals to your reason, your judgment, your experience and your common sense. If, after a fair and impartial consideration of all the 8 evidence, you can candidly and honestly say that you are not satisfied with the guilt of a defendant, that you do not have an abiding and firm belief of a defendant’s guilt; in other words, if you have such a doubt as would reasonably cause a prudent person to hesitate to act in a matter of importance in his or her own affairs, then you have a reasonable doubt, and in that circumstance it is your duty to acquit.  

On the other hand, if after a fair and impartial consideration of all the evidence, you can candidly and honestly say that you do have an abiding belief of a defendant’s guilt—a belief that a prudent person would not hesitate to act on in a matter of importance in his or her own affairs—then you have no reasonable doubt, and under such circumstances it is your duty to convict.  

One final word on this subject: reasonable doubt is not whim or speculation. It is not an excuse to avoid the performance of an unpleasant duty. Nor is it sympathy for one party or the other. “Beyond a reasonable doubt” does not mean a positive or mathematical certainty. The Government has met its burden if the guilt of a defendant is established beyond a reasonable doubt, not beyond all possible doubt.

I have no reason to believe that this is not as good as it gets for this genre of instruction.  Certainly Judge Pauley is one of the best and knows how to do justice with instructions.

The problem I have with the reasonable doubt standard for conviction is that it is not as certain a standard as one would hope for criminal convictions.    I do offer my thoughts on the subject from the following excerpt from my Federal Tax Crimes book (footnotes omitted; but caveat that the devil is in the footnotes which I omit so as not to devil up this blog entry; I do provide a pdf with the text and the footnotes here):

Does Our Criminal Justice System Find Truth Well And What is the Tolerance for Error? (10/28/13)

Today, I address a larger question than one about federal tax crimes.  The question is whether our traditional criminal justice system for finding truth by triers of fact -- usually juries but sometimes judges -- really do it well and how much confidence can we have that they do it well.  At the outset, we all recognize that no system is perfect.  Our system requires proof of guilt beyond a reasonable doubt -- not proof beyond any doubt, but proof beyond a reasonable doubt.  So, as articulated -- beyond a reasonable doubt -- suggests the possibility that some are wrongly convicted even though a jury could find that they were guilty beyond a reasonable doubt.  But, even the concept of what is proof beyond a reasonable doubt is uncertain, further exacerbating the possibility of a wrongful conviction.  See Reasonable Doubt - What is It? (Federal Tax Crimes Blog 10/16/09), here.

I point readers interested in this topic to a recent article:  Mark Godsey, We Are Naturally Bad Sleuths..and Frequently Fail to Find the Truth (10/25/13), here.  Mr. Godsey offers a good introduction to problems of memory as they play out in our judicial system, referring principally to Elizabeht Loftus's Ted Talks:  The Fiction of Memory (6/13, posted 9/13), here.    Her talk is an outgrowth of the Innocence Movement.  See the web site for the innocent project here.

Readers interested at any level in the criminal justice system should be familiar with the phenomena discussed in these postings.

Article on Importance of Jury Instructions in White Collar, including Tax, Crime Cases (1/29/13)

I write today to direct readers to a recent very good article by Susan E. Brune and Laurie Edelstein titled Jury Instructions: Key Topics in Federal White Collar Cases, 36 Champion 26 (2012), here.  The authors' web site is here and their bios are here (Brune) and here (Edelstein).

The introduction:  "The right jury charge can make the difference between conviction and acquittal. "  The article then explores some contexts in which instructions can be particularly helpful in white collar crime cases.  As most readers will know (and as I remind my Tax Fraud class), tax crimes are a subject of white collar crimes, hence it is not surprising that the authors deal with instructions in tax crimes cases.

The six areas discussed are (1) Reasonable Doubt, (2) Willful Blindness, (3) Venue, (4) Securities Fraud, (5) Tax Evasion: Economic Substance, and (6) Antitrust.  I will focus on the comments on (1) Reasonable Doubt, (2) Willful Blindness and (3) Tax Evasion: Economic Substance.

Reasonable Doubt

The authors clearly summarize the courts' continuing inability to formulate instructions to explain reasonable doubt to a jury in a way that we can have confidence that the jurors understand the concept.  None of the various circuit courts' formulations is perfect, but the suggest that (footnotes omitted):

Defense counsel might consider proposing the Federal Judicial Center's (FJC) pattern instruction on reasonable doubt, which Justice Ginsburg highlighted in Victor. This instruction does away with the "hesitate to act" analogy and instead focuses on whether the government has met its burden of proof: "Proof beyond a reasonable doubt is proof that leaves you firmly convinced of the defendant's guilt." The "firmly convinced" standard, which certain circuits have approved, more accurately reflects the state of certainty required to find a defendant guilty.  

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Because the Supreme Court's decision in Victor effectively held that problematic words or definitions in a reasonable doubt charge can be neutralized by words or phrases that preclude the jury from requiring more than a reasonable doubt to acquit, it is unlikely that a reasonable doubt charge will provide grounds for reversal of a guilty verdict on appeal. Advocating for a charge that focuses on the government's burden and instructs the jury that it cannot convict unless it is firmly convinced of the defendant's guilt thus can be critical. It may help secure an acquittal in the first instance.

Supreme Court Decision on Burden of Proof for Affirmative Defense of Withdrawal from Conspiracy (1/10/13)

Conspiracy charges are common in the federal crimes universe and in federal tax crimes universe, specifically.  This blog has dealt frequently with the principal conspiracy charge, the Klein conspiracy which is the tax iteration of the defraud conspiracy in 18 USC 371, here.

The Supreme Court yesterday delivered a major conspiracy decision in a non-tax case, holding that the defendant must prove the defense of withdrawal from the conspiracy.  Smith v. United States, ___ U.S. ___, 2013 U.S. LEXIS 601 (2013), here.  The decision is unanimous and is authored by Justice Scalia.  Although not couched in this language, the Court held that, on the affirmative defense of withdrawal, the defendant bears the burden on persuasion (stated in risk terms, the risk of nonpersuasion).  It is a very short opinion, so I encourage readers interested in the subject of withdrawal from a conspiracy or burdens imposed upon the parties in a criminal case with respect to affirmative defenses to read the opinion.  I will introduce the opinion by the key excerpts from the Syllabus (page and case citations omitted):

Held: A defendant bears the burden of proving a defense of withdrawal.
(a) Allocating to the defendant the burden of proving withdrawal does not violate the Due Process Clause. Unless an affirmative defense negates  an element of the crime, the Government has no constitutional duty to overcome the defense beyond a reasonable doubt. Withdrawal does not negate an element of the conspiracy crimes charged here, but instead presupposes that the defendant committed the offense. Withdrawal terminates a defendant’s liability for his co-conspirators’ post-withdrawal acts, but he remains guilty of conspiracy.
Withdrawal that occurs beyond the statute-of-limitations period provides a complete defense to prosecution, but does not render the underlying conduct noncriminal. Thus, while union of withdrawal with a statute-of-limitations defense can free a defendant of criminal liability, it does not place upon the prosecution a constitutional responsibility to prove that he did not withdraw. As with other affirmative defenses, the burden is on him. Pp. 3-6.
(b) Although Congress may assign the Government the burden of proving the nonexistence of withdrawal, it did not do so here. Because Congress did not address the burden of proof for withdrawal in 21 U. S. C. §846 or 18 U. S. C. §1962(d), it is presumed that Congress intended to preserve the common-law rule that affirmative defenses are for the defendant to prove. The analysis does not change when withdrawal is the basis for a statute-of-limitations defense. In that circumstance, the Government need only prove that the conspiracy continued past the statute-of-limitations period. A conspiracy continues until it is terminated or, as to a particular defendant, until that defendant withdraws. And the burden of establishing withdrawal rests upon the defendant.

Reasonable Doubt - Explaining It to a Jury (12/12/12)

In United States v. Catlett,  (4th Cir. 12/11/12), here, an unpublished opinion, the Court affirmed Catlett's conviction for "conspiracy to defraud the Internal Revenue Service, in violation of 18 U.S.C. § 371 (2006); ten counts of aiding in the preparation of false tax returns, in violation of 26 U.S.C. § 7206(2) (2006); and corruptly endeavoring to obstruct the administration of the internal revenue laws and aiding and abetting, in violation of 18 U.S.C. § 2 (2006), 26 U.S.C. § 7212(a) (2006)."  The opinion is unpublished and seems to have little ongoing import, since it covers ground previous covered.

I did note the following from the opinion:

Catlett also argues that the district court erred in refusing his proposed jury instruction on the definition of reasonable doubt. However, the district court did not err as "[i]t is well settled in this circuit that a district court should not attempt to define the term 'reasonable doubt' in a jury instruction absent a specific request for such a definition from the jury." United States v. Oriakhi, 57 F.3d 1290, 1300 (4th Cir. 1995) (citation omitted).

This is an odd notion that courts tell the jury that they must convict beyond a reasonable doubt but then do not, at the beginning, offer to tell them what the concept means.  In those circuits that offer no further explanation -- at least until the jury inquires -- there is an assumption that the jury knows what those words mean.  And most juries do not inquire further.  Do they know what it means?  I don't know, for as we know (and have discussed on this blog),  juries are a bit of a black box in terms of how they reach their verdict.  See e.g., Coplan #2 - The Sufficiency Challenge for the Conspiracy Counts (Federal Tax Crimes Blog 12/2/12), here.

I offer as a download here the portion of my Federal Tax Crimes book dealing with the concept of reasonable doubt and explaining it to a jury.

Reasonable Doubt and Mickey Mouse (3/6/12)

Everyone knows that, in our system, to convict of a crime requires that the fact finder determines guilt beyond a reasonable doubt.  I have written before about the concept of reasonable doubt.  Reasonable Doubt - What is It? (10/16/09), here.

Today, I refer readers to an excellent discussion of the reasonable doubt defense where the defense's case is weak in terms of affirmative evidence.  Does the defense lawyer do his client a service by making the central theory of the case that the the prosecutors did not prove the case beyond a reasonable doubt?  To state the proposition starkly, can the defense lawyer make a credible argument that the prosecutors may have proved that the defendant was more likely than not guilty, but they did not prove that he was guilty beyond a reasonable doubt?  I hope readers will instinctively realize that this type of argument is weak, even if presented some other way (say, not acknowledging that the prosecutors made a more likely than not case and emphasizing only that they did not prove guilt beyond a reasonable doubt).

A defense lawyer might be tempted to do this where the case is really weak.  I presume that the defendant did not take the stand in such a case because of the risk of making the prosecutor's case stronger.  A jury may be convinced of guilt beyond a reasonable doubt by disbelieving the defendant. The jury may wonder why the defendant did not take the stand to proclaim his innocence, but a judge will instruct the jury that they can draw no inference from the fact that the defendant did not testify.  Rather they must look to the quality of the evidence actually presented in determining guilt beyond a reasonable doubt.

In this situation, how credible is the defense attorney's argument that the jury should not find guilt beyond a reasonable doubt?  Keep in mind that the argument can be presented to the jury only after a motion for acquittal has failed on the ground that a reasonable jury could not find guilt beyond a reasonable doubt.

I refer the readers to an excellent discussion of the issue.  Jim McElhaney, The Burden of Reasonable Doubt: When a Standard Designed to Protect Defendants Actually Hurts Them (10/1/11), here.

Oh, and Mickey Mouse?  Read McElhaney's article.

Reasonable Doubt - What is It? (10/16/09)

A comment by Anonymous to an earlier blog here addressed whether, as a variation of a theme of jury nullification in reaction to prosecutorial overreaching, juries might require that guilt be "super proven." I thought my readers might find some background discussion on the criminal burden of proof issue. I offer some materials from my Federal Tax Crimes book (the one in process for the next edition).

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In a criminal tax prosecution, just as any other criminal prosecution, the Government bears the burden of proving guilt beyond a reasonable doubt. The Supreme Court has explained the compelling need for this burden as follows:

The reasonable-doubt standard plays a vital role in the American scheme of criminal procedure. It is a prime instrument for reducing the risk of convictions resting on factual error. The standard provides concrete substance for the presumption of innocence -- that bedrock “axiomatic and elementary” principle whose “enforcement lies at the foundation of the administration of our criminal law.” . . . “[A] person accused of a crime . . . would be at a severe disadvantage, a disadvantage amounting to a lack of fundamental fairness, if he could be adjudged guilty and imprisoned for years on the strength of the same evidence as would suffice in a civil case.”

The Court then held that “we explicitly hold that the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.”

Courts and commentators have noted the utilitarian function of burdens of persuasion to a civilized society such as we imagine ours to be. In criminal cases, societally, it is oft stated that it is better to acquit a guilty person than convict an innocent one; Blackstone even stated that it is better to acquit 10 guilty persons than convict one innocent one. But, even in this simple – perhaps simplistic – construct for analysis, can or are we willing to say that it is better to acquit 100 guilty persons than convict one innocent person? And, when we layer on the fact that different major crimes present different risks to the community, can the equation of the risks of conviction of the innocent be assessed differently in different cases and contexts? Specifically, for example, while we might be able to let 10 or even 100 tax evaders go free rather than convict one innocent person of tax evasion, would we want the same odds to apply to persons accused of terror? You see where I am going, since we are never going to have a standard requiring certainty – whatever that is – we are necessarily going to have a standard that allows the innocent to be convicted. So, what do we give jurors – the usual guilt or innocent finders in criminal cases – to help them keep the risk of conviction of innocent persons to an acceptable level? We give them an elusive “one-size fits all” instruction on the meaning of beyond a reasonable doubt to which I now turn.

A Tax Crimes Fable - Plea Dilemmas for the Innocent Defendant (3/9/09)

Once upon a time a major accounting firm looking for revenue and thus profits began a tax shelter operation. The tax shelter operation involved accounting firm personnel at the center (the designers and the decision makers that the strategy should be promoted) and personnel at the periphery in the regional offices of the firm who would market the shelter designed and approved by those at the center. Persons outside the firm were engaged to design and implement a trading strategy that would, at least facially, support the shelter. One such person was a true market expert who designed a trading program that, while independent of the tax rules play giving rise to the shelter, would be wrapped into it to supply the claimed profit motive. A lawyer with an independent law firm worked with this team to refine the program in a way that he felt would give him a basis for rendering a more likely than not tax opinion to the taxpayers buying into the shelter. The tax shelter was successfully marketed. Billions of dollars of tax liability escaped the fisc. The Government was not happy and spied a conspiracy with a cast of hundreds. In a first wave, the Government convinced the grand jury to indict the promoters. The promoters indicted included 12 of those at the center (including accounting firm personnel, the outside lawyer, and the market expert) and three of those in the field whose only role was to sell the shelter. The indictment alleged an overall conspiracy (both offense and defraud / Klein conspiracy) and 39 substantive counts of tax evasion (with perhaps overlapping Pinkerton and accomplice aiding and abetting liability for those not directly involved in some or all of the substantive counts) with respect to the shelters sold.

The Government then tried to pick off some of the vulnerable defendants to offer a plea. The plea negotiation went like this: If we are successful in prosecution, you (the defendant being solicited for the plea) are at risk of a sentence that the Guidelines (then mandatory) pegged at a low range of 25 years. The Government’s first offer to shake this defendant down was for 2 counts of tax evasion (maximum 10 year sentence). Getting a no, the Government then sweetened the pot with a 1 tax evasion count offer (maximum 5 year sentence). The defendant who has always maintained his innocence is a rational actor and is tempted by the new offer. Being a rational actor and knowing the risks that he might be tarred by being included in a conspiracy where there are some persons with less compelling objective facts than his, he perceived that a certain cap at 5 years, even with the loss of some civil liberties, would be better than the risks of going to trial – to wit up to 25 years. He wanted the 1 proffered count but he was unwilling to profess guilt in order to get the plea. The fable ends there with his dilemma.

Comments:

1. The concept of permitting a truly innocent defendant to plea to and be convicted of a crime that he did not commit is disturbing but it does illustrate a truth. In our system, the innocent are convicted because those involved in prosecuting, determining guilt and imposing punishment draw the wrong conclusion (even when that may be a – or even the – logical conclusion from the incomplete evidence).