Another Attorney Pleads to Obstructive Conduct (12/31/12)

William A. Hirst, a Pleasanton, Calif. attorney, pled guilty to making a false statement to the IRS (18 USC Section 1001, here).  See press release of USAO ND CA, here.  The press release has a link to the indictment; the link is here.

The background is that the attorney apparently tried to cover his tracks for some incompletely implemented estate planning.  The press release says:

According to the plea agreement, in February 2004, Hirst assisted a client in estate tax planning. Hirst prepared 11 deeds gifting fractional interests in eleven parcels of his client’s real properties to his client’s daughter. On Feb. 12, 2004, Hirst also acted as the notary public for the client’s signature on all 11 deeds. Eight of the deeds were recorded with the county recorder in March 2004. The remaining three deeds were lost or destroyed after having been signed by the client. The client died on Feb. 27, 2004, and the estate’s accountant filed the estate’s federal estate tax return with the IRS on Feb. 2, 2005. That return did not list the daughter’s interests that were conveyed by the three lost or destroyed deeds. Hirst re-drafted the three missing deeds and signed the client’s name. They were recorded on April 4, 2005. During an IRS estate tax return audit, Hirst was served a summons to produce his notary log reflecting the execution of the 11 deeds and was later questioned by IRS estate tax attorneys about the deeds, including the three deeds recorded on April 4, 2005. Hirst told the IRS he found the three lost deeds in a file and recorded them, which was false since Hirst knew he signed the client’s signature to the three deeds recorded on April 4, 2005.

This is a variation of a theme we have see before.  See Cincinnati Attorney Pleads to Tax Obstruction (Federal Tax Crimes Blog 5/3/12), here.

First Circuit Addresses Circuit Split Over Over Standard of Review Involving the Denial of an Advice-of-Counsel Jury Instruction (12/22/12)

The Circuit Splits Blog has this entry, Circuits Split Over Standard of Review Involving the Denial of an Advice-of-Counsel Jury Instruction (Circuit Splits Blog 12/17/12), here, addressing the First Circuit's decision in United States v. Powers, 702 F.3d 1 (1st Cir. 12/14/12), here.  The advice of counsel defense is often encountered in tax cases as a specific nuance on the requirement that the defendant have acted with intent to violate a known legal duty; if the defendant relied upon advice of counsel that it was not a legal duty, then the defendant should be acquitted.

The Circuit Splits Blog explains:

When a defendant's argument at trial boils down to, "My attorney advised me that it was okay to proceed, so I did.", a defendant may ask the court to give the jury such an instruction. When the court's response is "No.", should an appellate court review the lower court's determination de novo or apply an abuse-of-discretion standard? 

The answer:  It depends.

One unusual aspect of Powers is that the Government itself asked for the reliance on counsel instruction, in anticipation of the defendant raising the defense as it he claimed he would.  But then, the defendant's evidence was less than expected, so the Government withdrew  the request and the Court refused to give the instruction.

Here is the First Circuit's answer in full context and its affect on the bottom-line holding (footnote omitted):

Evasion of Payment Statute of Limitations Runs from the Last Affirmative Act (12/22/12)

In United States v. Irby, 703 F.3d 280 (2d Cir. 12/18/12), here, the taxpayer was convicted for tax evasion under Section 7201, here, for the combination of (i) failing to file a return and (ii) subsequent affirmative acts thereafter to avoid payment of the tax due.  The latter affirmative acts, of course, transformed a failure to file case into a tax evasion case.  The statute of limitations for evasion is six-years, but from which date.  Section 6531(2), here.  In this type of case, involving failure to file which itself is a lesser misdemeanor crime, what makes it a felony is the affirmative act.  Hence, the Fifth Circuit sustained counting the period from the date of the last affirmative act after the due date of the return.  The Court said (most cases and quotation marks omitted):

The other circuits that have expressly considered the issue have concluded that the statute of limitations for section 7201 offenses runs from the later date of either: when the tax return was due or the defendant's last affirmative act of tax evasion. In Dandy, The Sixth Circuit addressed facts similar to those at issue here, where the defendant did not file tax returns for 1982 and 1983, but the last act of evasion did not occur until 1985. The Dandy court found that the statute of limitation runs from the last evasive act because it is these evasive acts  which form the basis of the crimes alleged in the indictment." In Ferris, the First Circuit supported the rule by pointedly stating, the defendant, however, by deceitful statements continued his tax evasion through date of last act of evasion. No circuit has rejected the last affirmative act of tax evasion rule. 

The rule, therefore, is well-supported in Supreme Court precedent and in the caselaw of other circuits. One element of the section 7201 offense is the commission of an affirmative act seeking to evade tax liability, which can be shown through the individual's willful failure to file a tax return, or through continued evasive acts intending to avoid the payment of taxes. The statute of limitations accrues from the later of the two. 

Irby last acted to evade the payment of his taxes in 2006, by using nominee trusts to conceal his assets. Because he was indicted in 2011, the district court did not err in concluding that Count I was not barred by the statute of limitations.

Charging Decisions for Trust Fund Tax Crimes - 7202 or 7201 (12/22/12)

In United States v. Farr, 701 F.3d 1274 (10th Cir. 12/27/12), here, the defendant served as administrator of her late husband's medical clinic.  The clinic did not withhold from its employees (by paying them net of withholding) but failed to pay over the deemed withheld amount to the Government.  The IRS assessed a trust fund recovery penalty (TFRP) under Section 6672, here.  She dilly-dallied.  "When . . . Farr did not pay the penalty assessed against her, a civil proceeding evolved into a criminal one."  The Government then charged her with tax evasion under Section 7201, here.  After some trial level sparring and some appeals, the Government sought a new indictment for tax evasion under Section 7201.  The defendant was convicted.  This appeal ensued.

The key issue in this appeal that I want to discuss is defendant's argument that the conviction should be reversed because the Government improperly charged her for tax evasion under Section 7201 rather than for willful failure to collect and pay over under Section 7202, here.  Her argument, as stated by the Court of Appeals, was:

Farr argues, as she did in her motion to dismiss, that the Internal Revenue Code (IRC) "provides a specific criminal penalty for those responsible for collecting and paying trust fund taxes who willfully fail to do so under § 7202." App. at 29-30. She argues that the indictment should therefore have charged her with violating § 7202 rather than § 7201. In support, she asserts that "[w]hile ordinarily the government is free to charge under whatever statute it deems appropriate under the facts in question, when Congress sets forth provisions governing the duties, penalties, and procedures with respect to specific conduct or individuals as it did in Section[] 7202 . . . , the government may not ignore th[at] provision[] specifically deemed by Congress to be the appropriate vehicle under which to impose prosecution, simply because it favors another better." Id. at 31.

The Court of appeals rejected the argument as follows:

More Swiss Bank Enablers Indicted (12/18/12)

There is a newly unsealed indictment, here, today of three Swiss bankers in the usual venue, the Southern District of New York.  The press release by USAO SDNY is here.  The defendants are Stephan Fellman, Otto Huppi, and Christof Reist who worked for Bank 1, a Zurich bank, as "client advisor to various individuals, including U.S. taxpayers who maintained accounts at Swiss Bank No. 1."  Similar allegations, although fewer, are made regarding one or more of the defendants' activities at Swiss Bank No. 2, Swiss Bank No. 3.and Swiss Bank No. 4.  [I will post the names of the pseudononymous banks when I get that information.]

The indictment alleges a Klein conspiracy "to defraud the United States, to conceal from the IRS the existence of bank accounts maintained at Swiss Bank No. 1, and the income earned in these accounts (hereafter "the undeclared accounts"), and to evade U.S. taxes on income generated in those accounts."  Specifically, they (with other client advisors of Swiss Bank No. 1"conspired with U.S. taxpayer-clients to hide at least $423,000,000 in assets from the IRS."  The U.S. taxpayer-clients are alleged to be members of the conspiracy.  The trio, in the order listed, "personally managed undeclared U.S. taxpayer assets worth at least $104,000,000, $14,800,000, and $5,400,000 respectively."

Now familiar acts of stealth to impair or impede the IRS are alleged: (i) code names; (ii) no mail to U.S.; (iii) meetings in Switzerland; (iv) meetings in the U.S., (v) sham corporate entities, (vi) use of a correspondent bank account in the U.S. for client access to funds, and (vii) U.S. taxpayer-clients filed false returns and failed to file FBARs.  UBS appears several times as a bank from which funds were transferred into Swiss Bank No. 1 after the pressure and resulting publicity on UBS beginning in 2008.

The indictment makes specific allegations for clients names "Client 1," "Client 2," and so forth, but these merely make specific allegations in the nature of the stealth allegations summarized above.

On my quick review, I saw nothing out of the ordinary in this indictment of the enablers.  If I have or obtain from others any more insight of potential use to readers, I will post it.

Further on the Second Circuit Detour on the Interpretation of the Defraud / Klein Conspiracy (12/18/12)

I write today on the Second Circuit's detour in Coplan to question the foundations of the expansive reading in Hammerschmidt of the defraud conspiracy (a Klein conspiracy in a tax setting).  Readers of this blog will know that I have a long-term interest in the subject -- see e.g., my earlier post on the Coplan case, Coplan #1 - Panel Questions Validity of Klein Conspiracy (Federal Tax Crimes Blog 12/1/12), here, and my 2009 article covering the scope of the Klein conspiracy and its Code counterpart, tax obstruction under Section 7212(a), John A. Townsend, Is Making the IRS's Job Harder Enough?, 9 Hous. & Bus. Tax L.J. 260 (2009), here).

Tax Notes Today has an article on the topic, Shamik Trivedi, Is Klein on the Ropes?, 2012 TNT 244-1 (12/19/12).  I thought I would use this pulpit -- not a bully pulpit, but my pulpit -- to address some of the issues raised in the article.

To state the obvious, the issue is all about interpretation.  In Hammerschmidt, the Supreme Court interpreted the word "defraud" in the defraud conspiracy statute (now 18 USC 371, here) broadly and atypically to the usual meaning of the word "defraud."  The "atypicalness" of the interpretation is what prompted the Second Circuit's detour in Coplan.  In hindsight, that expansive interpretation cannot be justified by the normal techniques of interpreting a statute, but the Supreme Court clearly so interpreted the statute.  The Supreme Court's interpretations are the law until overruled.  It is all about interpretation, and the Supreme Court has interpreted.  (Sorry for the redundancy, but it is important.)

I am reminded of a similar process of interpreting the Bible.  In his monumental work, Professor Jim Kugel addresses that process in a way that, I think parallels what happens in this type of interpretation process.  James L. Kugle, How to Read the Bible: A Guide to Scripture, Then and Now (Free Press 2008), here.  Professor Kugel makes the point that the process of interpretation could -- and I think he would say should -- involve giving words meanings not necessarily intended by the original drafters.  I know that will strike religious fundamentalists and constitutional originalists as blasphemy, but it happens both in the context of religion and law (Justice Scalia notwithstanding).  Just to pick a quote from Professor Kugel's book to illustrate:

Articles on Offshore Bank Accounts (12/18/12)

Villanova Law Review has the following series of articles arising from a Villanova seminar:

Introduction

OFFSHORE ACCOUNTS, CORPORATE INCOME SHIFTING, AND EXECUTIVE COMPENSATION
Leslie Book
Page 421, here.

This article is an introduction to the seminar and article topics,

Taxation of Offshore Accounts

SOME SUGGESTIONS FOR TAX REFORM
Michael C. Durst
Page 433, here.

This article is a short discussion of some ideas for reform.

GO WEST: HOW THE IRS SHOULD FOSTER INNOVATION IN ITS AGENTS
T. Keith Fogg
Page 441, here.

This article discusses the development of the original offshore initiative in the late 1990s, dealing with credit cards issued by banks in some Caribbean countries which seemed to offer an evidence proof method of repatriating money in offshore banks; but the John Doe summons to credit card companies and processers and good stealth detective work helped the IRS identify many U.S. taxpayers and the first offshore voluntary disclosure initiative drew in many taxpayers.

ABA Tax Section Webcast on Opting Out and FBAR Litigation

The ABA Tax Section is sponsoring a CLE Teleconference and Live Audio Webcast titled:  Through the Looking Glass (Parts I and II): Opting Out of the OVDI Penalty Structure and Litigating FBAR Penalties, on January 16, 2013 1-3pm..  The weib site for the presentation, with a link for signing up, is here.  The participants are major players in the OVDI brouhaha, so I look forward to learning from them.

I have a separate blog entry reporting on this webinar:  Report on Webinar on Opting Out and Litigating FBAR Penalties (Federal Tax Crimes Blog 1/17/13), here.

Description

This panel will discuss matters relating to opting out of the IRS Offshore Voluntary Disclosure Initiative, including “opt-out” mechanics and procedures, and issues relating to examination, negotiation and settlement expectations arising in various “opt-out” scenarios. The panel will also emphasize procedural and substantive issues that are emerging in FBAR assessments and litigation.

Presenters:

Megan L. Brackney, Kostelanetz & Fink LLP, New York, NY
David A. Breen, Senior Counsel, Office of Chief Counsel, SB/SE, IRS, Philadelphia, PA
Caroline D. Ciraolo, Rosenberg Martin Greenberg LLP, Baltimore, MD
David H. Dickieson, Schertler & Onorato LLP, Washington, DC
Mark E. Matthews, Caplin & Drysdale Chartered, Washington, DC
John C. McDougal, Special Trial Attorney, Small Business/Self-Employed Division, Office of Chief Counsel, IRS, Washington, DC
Richard J. Sapinski, Sills Cummis & Gross PC, Newark, NJ
Thomas J. Sawyer, Senior Litigation Counsel, Counsel for International Tax Matters, Tax Division, Department of Justice, Washington, DC
Zhanna A. Ziering, Caplin & Drysdale Chartered, New York, NY

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.

Third Circuit on Crime-Fraud Exception to Attorney-Client and Work-Product Privileges (12/12/12)

The Third Circuit yesterday issue a major opinion involving assertions of the attorney-client and work-product privileges and the application of the crime-fraud exception to those privileges.  In Re: Grand Jury John Doe 1; John Doe 2; ABC Corporation, 705 F.3d 133 (3d Cir. 12/11/12), here.  The introduction of the majority opinion is (footnotes omitted):

ABC Corp., John Doe 1, and John Doe 2 are subjects of an ongoing grand jury investigation into an alleged criminal tax scheme.1 As part of that scheme, ABC Corp., under the direction of John Doe 1 and John Doe 2, purchased and subsequently sold numerous companies. These consolidated appeals concern whether documents and testimony relating to legal advice obtained by ABC Corp. in connection with these transactions are shielded by the attorney-client and work product privileges. 

When ABC Corp. objected that the Government had improperly served a subpoena for documents on ABC Corp., the Government issued grand jury subpoenas for those documents to ABC Corp.'s current outside counsel—LaCheen, Wittels & Greenberg, LLP, and Blank Rome, LLP. Later, it also served subpoenas for documents and testimony on three attorneys formerly employed by ABC Corp. as in-house counsel. In each instance, the firms and counsel asserted attorney-client and work product privileges on ABC Corp.'s behalf, the Government moved to enforce the subpoenas, and ABC Corp. opposed the motion as the purported privilege holder. 

The District Court granted the Government's motions to enforce based in part on the crime-fraud exception, which permits the Government to obtain access to otherwise privileged communications and work product when they are used in furtherance of an ongoing or future crime. Finding that the requested communications and work product either did not qualify as privileged or that any protection afforded was vitiated by this exception, the Court largely rejected ABC Corp.'s privilege claims and issued corresponding disclosure orders—the first directed to ABC Corp., LaCheen Wittels, and Blank Rome in March 2012 (the "March Order"), and the second directed to the three in-house counsel in June 2012 (the "June Order").

Another Required Records Case; Another Government Win (12/11/12).

We have another required records case and the Government continues its trend of winning these cases.  In re Grand Jury Subpoena Dated February 2, 2012, 908 F. Supp. 2d 348 (ED NY 12/10/12), Bianco, J.  There is nothing particularly exceptional about the case except perhaps two makeweight predicate taxpayer (in this context, "witness") arguments before reaching the required records issue.

First, the witness argued that the summons should not be enforced because the Government already has copies of the documents it seeks from the witness.  The Court rejects this argument as follows:

[R]espondent's argument that the government already possesses the information requested by the Subpoena is based upon sheer speculation and is denied by the government. (See Gov't Reply Mem. of Law at 2) ("The respondent's argument begins with the false premise that the government already possesses the records sought by the Subpoena."); (id.) ("The respondent . . . has no basis for his contention that the government 'already possesses the documents sought by the subpoena.'" (quoting Resp't's Mem. of Law in Opp'n at 3)). Although the government attached to its motion to compel a selection of documents from one foreign bank account with dates spanning from 1992 to August 2008, those documents are hardly (on their face) co-extensive with the scope of the Subpoena. Specifically, the Subpoena required the production of documents for a five-year period prior to February 2012. Thus, the government's selection does not contain any documents for the majority of the five-year period covered by the Subpoena. Moreover, there are no documents from other foreign banks at which the respondent, unbeknownst to the government, may have had accounts. In other words, it is self-evident that the government would have no way of ensuring that all such records from all foreign bank accounts — for which respondent has a financial interest, or is a signatory, or has authority over — have been uncovered unless respondent complies with the Subpoena. In short, there is no reason to believe that the government already possesses all documents sought by the Subpoena. Additionally, the fact that the government has some of respondent's foreign bank records clearly does not preclude it from seeking all such relevant foreign bank records. See, e.g., United States v. Dionisio, 410 U.S. 1, 13 (1973) ("The grand jury may well find it desirable to call numerous witnesses in the course of an investigation. It does not follow that each witness may resist a subpoena on the ground that too many witnesses have been called.").

Statistics on Tax Prosecutions - A New Article Offers Some Insight (12/11/12)

Readers interested in the broader role of plea agreements in the Federal criminal universe, should read a new article, Kyle Graham, Crimes, Widgets, and Plea Bargaining: An Analysis of Charge Content, Pleas and Trials, 100 Calif. L. Rev. 1572 (2012), here.

The author bases the article on a lot of statistics that he has combined into a database useful for the subject of the article.  The sources of the database are summarized at p. 1574 n. 2.  The author concludes the article as follows (pp. 1629-30):

In the final analysis, this Article argues that in at least one important way, crimes should be treated more like widgets, or at least more like "normal" products. Just as corporations engage in market studies prior to a product launch, they also will periodically assess whether their existing products have generated substantial profits, or are leading to losses. Congress and state legislatures have manufactured thousands of crimes. It is difficult to believe that all of these crimes have produced the "profits" - social gains - that legislators believed they would. Close review of crime-specific data would allow states and the federal government to shut down poor-performing product lines, streamline others, and perhaps even add a few new models. Crimes may  [*1630]  not represent widgets, but that does not mean we cannot take an inventory of our previous orders.

The author makes some interesting comments in the body of the article about criminal tax prosecutions are follows:

More IRS and DOJ Entreaties to Join OVDP 2012 (12/11/12)

I have blogged some reports of events at a criminal tax fraud and tax controversy conference sponsored by the American Bar Association Section of Taxation and Criminal Justice Section.  I continue with a summary of a new article, Jeremiah Coder, Numerous New John Doe Summonses in the Works, 2012 TNT 238-1 (12/11/12).  I have requested permission to post the article and will do so if  I receive permission.  In the meaning.  The gravamen of the report is that Government officials are encouraging taxpayers to join OVDP 2012 because of the risk -- at least for some -- of worse consequences if they do not.  Here is a summary of the reports:

1.  John McDougal, a major IRS player in the offshore initiative:
a. The IRS has more John Doe Summonses being prepared, targeting banks and other entities in countries other than Switzerland.
b. The IRS' increased activity, including prosecutions, will increase the incentive to join OVDP.
c.   The IRS is deploying the resources to handle the opt outs consistently through experienced agents, managers and counsel.
d. Opt out agents are taking "neutral positions" in order to properly apply the penalties."
e. Treaty requests are increasing and productive.
f. Checking the schedule B foreign account question "no" will not necessarily result in the willful penalty.

2.  Mark Daly, a DOJ Tax attorney,
a. enablers of foreign bank accounts have found it in their interests to provide information to DOJ Tax.
b. The information received under the deferred prosecution agreement is not covered by the privacy restrictions of Section 6103.  (JAT note:  this apparently would not include the 4,500 (app) which I think was received under the Exchange of Information provision of the Double Tax treaty, so that it would be subject to Section 6103.)

3.  Kevin Downing, a practitioner and formerly major DOJ Tax player in the offshore prosecutions:  "taxpayers can expect future bombshell announcements to come from the government, in part because of whistleblower activity"

I Should At Least Mention Stolen Identity Refund Fraud (12/10/12)

I have not spent any time discussion stolen identity refund fraud ("SIRF") on this blog.  I know it exists and is important, indeed very important in terms of revenue and confidence in the system.  But, SIFR is just blatant stealing and is not the type of tax fraud (more subtle stealing?) that interests me or, I think, most of my readers.  As mentioned in a new article on the Criminal Tax Fraud conference in Las Vegas last week, commentators lamented, in effect, that the IRS is devoting valuable resources to SIRF rather than the type of tax fraud we all know and love.  See Shamik Trivedi, Current and Former CI Officals Debate Focus on Stolen Identity Refund Fraud, 2012 TNT 237-8 (12/10/12).  As reported, they said:

In 2006 CI was running 4,000 open investigations per year, and the most recent figures, from 2011, show more than 5,100 investigations per year, Speier [Richard Speier, former Chief of CI and now on the good side] said. "So I'm trying to figure out, with the escalation of enforcement priority devoted to refund crime, what that leaves for the rest?" 

Ian M. Comisky of Blank Rome LLP was more direct: "You're taking the finest financial investigators in the world, and you're having them do street crime."

I doubt that I will be spending much, if any, time on this blog with SIRF.

Fourth Circuit Rejects Claims of Wrongful Tax Return Information Disclosures by IRS CI Agents Assisting Grand Jury (12/10/12)

In Tucker v. United States, 2012 U.S. App. LEXIS 25076 (4th Cir. 12/5/12), here, unpublished, the taxpayer sued the United States for alleged wrongful disclosures of tax return information under Sections 6103, here, and 7431, here.  The alleged wrongful disclosures were by CI agents assisting in a tax grand jury investigation.  The alleged disclosures were that (1) someone -- being the taxpayer -- would be going to jail for tax evasion (or some variation thereof) and (2) that the CI agents were assisting a grand jury conducting a tax investigation.  The district court rejected the taxpayer's claims.  The Fourth Circuit affirmed.

The first claim addressed was that one Agent told the taxpayer's son that "he [the agent] didn't see any reason why he [the son] should go up the river for something somebody else did."  Without explanation for its conclusion, the Fourth Circuit held:

We agree with the district court that the alleged "up the river" comment did not constitute a disclosure of Tucker's return information as defined in § 6103(b)(2)(A), and therefore, is not actionable under § 7431(a)(1). Accordingly, we affirm the judgment in favor of the government with respect to this statement.

This holding is too cryptic to comment on it.  However, the Fourth Circuit panel's ex cathedra conclusion without analysis does not give a great deal of comfort that the holding is correct.  It may be; I just don't know.  Certainly, the statement as quoted does contain an allegation that "somebody else" committed a crime and, in context, that "somebody else" appears to be the taxpayer.  And, since that conclusion was likely reached based at least in part upon information developed in the IRS phase of the investigation, that information would appear to be return information.  So, I can wonder, but can conclude only that the Fourth Circuit did not articulate a basis for its conclusion.

DOJ Tax and IRS Entreaties to Join OVDP 2012 (12/8/12)

I posted an earlier blog on a report from the American Bar Association Section of Taxation's annual National Institute on Criminal Tax Fraud in Las Vegas.  See IRS and Practitioners Comment on Streamlined OVDI Procedure (12/7/12), here, reporting on Shamik Trivedi, IRS Urges Low Risk Account Holders to Apply Under Streamlined Procedures, 2012 TNT 236-3 (12/7/12).

Some other key points from the article are:

1. Per Kathryn Keneally, AAG TAX, DOJ Tax and IRS priority is to identify those who moved money "from one investigated bank  to another, especially to those banks that may not have any U.S. operations;" their time is running out.  I think this is a bit too cryptic.  There's some detail behind it that I could speculate.  My speculations are often wrong, so I refrain and spare the reader.

2.  Per IRS Deputy Chief Counsel, the IRS is getting information from "lots of whistleblowers," treaty requests and data mining of information received from other taxpayers in the offshore voluntary disclosure programs.

These are in effect pleas / warnings to taxpayers to turn themselves in by joining OVDP 2012.  I suspect that the truth is that, if a significant number of taxpayers do not turn themselves in, the IRS will have limited ability to discover, investigate and prosecute criminally or civilly all of that dataset.  DOJ Tax and the  IRS are trying to convince taxpayers that the form of audit lottery they play going far now will have worse odds than it had previously.  Perhaps everyone involved will not suffer the consequences, but many will and, among the many that will, could be you.  And the consequences could be far worse than if you come clean now and get right for the past and going forward.

Hale Sheppard Article on Lessons from Williams (12/8/12)

Hale Sheppard, a frequent commentator on the IRS's offshore account initiative, has published a new article on the Williams case that has been a frequent topic on this blog.  The new article appears in the December 2012 issue of Journal of Taxation and is titled Third Time's the Charm: Government Finally Collects ‘Willful’ FBAR Penalty in Williams.  The article can be obtained from the Tax Blawg blog entry titled IRS Finally Collects Civil “Willful” FBAR Penalty in Williams Case – Court Introduces New Lower Standard for Penalizing Taxpayers with Unreported Foreign Accounts (Tax Blawg 12/7/12), here (providing a link with a summary) or directly with this link, here, provided on that blog here.  The article itself has a good history of the civil and criminal journey of Mr. Williams which produced several noteworthy case opinions.

The blog summary end (substantially as the article ends) s as follows:

Alarmists might conclude that Williams stands for the proposition that (i) the standard for asserting civil FBAR penalties is willfulness, (ii) in this context, the government can establish willfulness by showing that the taxpayer was merely reckless, (iii) recklessness exists where a taxpayer does not read and understand every aspect of a complex tax return, including all schedules and statements attached to the return (including Schedule B), as well as any separate forms (including the FBAR) alluded to in the schedules, and (iv) the taxpayer’s motive for not filing an FBAR is not relevant.  Pragmatists, on the other hand, might see Williams as an aberration, based on narrow facts, with little precedential value, and with questionable real-world applicability.  Most people likely will fall somewhere in between.  Regardless of the viewpoint, it is undeniable that Williams introduced issues critical to the FBAR debate, many of which remain unresolved.  Taxpayers and their advisors would be wise to follow the evolving issues, as the incidence of FBAR and other international tax enforcement issues will continue to rise in the future.

Now, some of the related drill down from the article including only the parts I think particularly relevant for my blog (footnotes omitted):

IRS and Practitioners Comment on Streamlined OVDI Procedure (12/7/12)

The American Bar Association Section of Taxation's annual National Institute on Criminal Tax Fraud in Las Vegas is going on now.  A topic of discussion was the relatively new New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers (see IRS Instructions here).  Here are excerpts from the program regarding this Procedure  (Shamik Trivedi, IRS Urges Low Risk Account Holders to Apply Under Streamlined Procedures, 2012 TNT 236-3 (12/7/12)):

Taxpayers who do not necessarily meet all the factors under the IRS's streamlined filing compliance procedures for previously unreported offshore accounts should nonetheless apply to the program if they are low-risk account holders, senior IRS officials said December 6. 

The streamlined program, introduced August 31, was meant as a way to allow low-risk, noncompliant account holders to come clean to the government. It introduced a $1,500 threshold for tax due in a year, as well as factors that would increase a taxpayer's risk. Those taxpayers that had no risk factors and met the $1,500 threshold would have their applications "processed in a streamlined manner," the IRS said at the time.  

Just because a taxpayer fails to qualify under the criteria as being low risk is not a reason to avoid applying to the program, said David Horton, director of the IRS Large Business and International Division's international individual compliance function. Missing one of the factors only means that a revenue agent will review the taxpayer's application, Horton said at the American Bar Association Section of Taxation's annual National Institute on Criminal Tax Fraud in Las Vegas.