NYT Article on Positive Benefits of Remorse and Contrition at Federal White Collar Sentencing (11/17/16)

I have written about Judge Jed S. Rakoff, a district judge in SDNY (Wikipedia here).  Judge Rakoff is again in the news in this article:  Peter J. Henning, Determining a Punishment that Fits the Crime (NYT Dealbook 11/7/16), here.  The general context is how federal judges calibrate a sentence under the advisory Sentencing Guidelines and their Booker discretion to vary from the Guidelines calculations.  One of the major points is the positive sentencing benefit that be gained by sincere shows of remorse and contrition.  The cases discussed are prominent white collar crime cases, but not involving taxes.  Still tax crimes are a subset of white collar crimes, so the article should be of interest to readers of this blog.

Here are some key excerpts which focus on the none-too-subtle bias in the guidelines and in judges' sentencing attitudes for pleading guilty rather than going to trial:

What judges really want to hear is an expression of contrition, word that the defendant is sorry for any harm caused while promising never to engage in such misconduct again. For those who plead guilty, like Mr. Caspersen and Mr. Thompson, the acknowledgment of guilt puts them in a much better position with the court because they can avoid the perception of trying to get away with something or planning the next crime. 

Bridget Anne Kelly and Bill Baroni, former aides to Governor Chris Christie of New Jersey who were convicted last Friday for their role in shutting access lanes to the George Washington Bridge as political payback for a New Jersey mayor who did not endorse the governor’s re-election effort in 2013, are in a difficult position when their sentencing occurs next year. By testifying that they did nothing wrong and continuing to proclaim their innocence, they are now locked into a position that prevents them from acknowledging that their conduct was illegal and asking for leniency. 

Under the sentencing guidelines, the two defendants could easily face a recommended prison term of more than four years for the corruption charges. Prosecutors may ask the court to find they committed perjury by testifying that they were unaware of any scheme to engage in misconduct on behalf of the governor, which could push the potential punishment even higher. 

They have suffered the same loss of their career and social status as Mr. Caspersen and Mr. Thompson, but by going to trial, any claim they might make that they have “suffered enough already” is likely to fall on deaf ears. 

Sentencing is certainly an art, not a science, despite the attempt at precision in the loss calculations in the sentencing guidelines. Judges are left with making a decision based on what they see in the defendant in front of them, in the hope that the punishment will be perceived as fair. Like it or not, that is the system we have, even if it leaves the public unsatisfied with a penalty that can be considered too lenient — or too harsh. 

Obviously, the Guidelines offer a 2 or, usually, 3 level reduction for acceptance of responsibility.  But, once the Guidelines calculations are made, the judge can determine the sentence based on sentencing factors not adequately addressed in the advisory Guidelines.  This is called Booker discretion, named for the case, United States v. Booker, 543 U. S. 220 (2005), which untethered sentencing judges from the principal constraints of the Guidelines calculations.  So, not only will a guilty plea get the Guidelines calculation starting point reduced, the contrition and remorse evidenced with the guilty plea can lead to a further Booker variance downward.

Significant prior blog entries on Judge Rakoff, in reverse chronological order, are:

Wegelin Sentenced (3/5/13)

Wegelin & Co. was sentenced on March 4, 2013.  The Press Release for USAO SDNY is here.  Since Wegelin is a lifeless, breathless artificial entity (although it may be a person in the Supreme Court's mythos), it cannot be sentenced to prison.  So, there are other punishments for criminal conduct.  Here they are as imposed by the Judge Rakoff (consistent with the plea agreement):

1. $16.3 million in forfeitures previously approved.
2.  $22.05 million fine
3. $20 million in restitution

Most of the press release recites a summary Wegelin's skulduggery / crimes,  most of which was known.  Here is the paragraph on the sentencing:

Preet Bharara, the United States Attorney for the Southern District of New York, and Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, announced that WEGELIN & CO. (“WEGELIN”), a Swiss private bank, was sentenced today and ordered to pay approximately $58 million to the United States for conspiring with U.S. taxpayers and others to hide approximately $1.5 billion in secret Swiss bank accounts, and the income generated in the accounts, from the Internal Revenue Service (the “IRS”). Together with the April 2012 forfeiture of more than $16.2 million from WEGELIN’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million. WEGELIN pled guilty in January 2013 to one count of conspiracy to defraud the IRS, file false federal income tax returns, and evade federal income taxes before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. This case represents the first time that a foreign bank has been indicted for facilitating tax evasion by U.S. taxpayers and the first guilty plea and sentencing of such a bank.

From Nate Raymond, UPDATE 2-Swiss bank Wegelin to pay $58 mln in US tax evasion case, here:

But while Rakoff approved the plea deal, he said there was a "funny tension" between the U.S. Justice Department's decision not to seek the maximum $40 million fine and its assertion Wegelin acted with "extreme willfulness." 

Rakoff said even including the $16.3 million the government recovered in April 2012 by seizing money in Wegelin's U.S. correspondent account, the bank will be giving up just 12 percent of the 560 million Swiss francs ($613 million) it earned after it sold most of its assets to regional Swiss bank Raiffeisen last year. 

"Not much pain there, is there?" Rakoff said. 

Rakoff, who has previously rejected U.S. Securities and Exchange Commission settlements with Citigroup Inc and Bank of America Corp, ultimately accepted the proposal, which prosecutor Daniel Levy called "very substantial." 

The judge said the government could justify a smaller fine to avoid the jurisidictional challenges of pursuing Wegelin. 

Wegelin said in a statement that it was pleased with the judge's decision.

Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (2/10/15)

I have previously linked readers to Judge Jed Rakoff's discussion of criminal law issues.  See The Honorable Jed Rakoff on Why Innocent People Plead Guilty (Federal Tax Crimes Blog 11/3/14), here.  Judge Rakoff has just published more comments, this time as a book review.   Jed S. Rakoff, Justice Deferred Is Justice Denied (NY Review of Books 2/19/15), here.  The book he reviews is Brandon L. Garrett's Too Big to Jail: How Prosecutors Compromise with Corporations (Belknap Press/Harvard University Press 2015), here.  Professor Garret, from UVA Law here, is an expert in this area and maintains very helpful databases and related materials on his law school website (including Federal Organizational Prosecution Agreements, here, and Federal Organizational Plea Agreements here.  (He also has written a book on Convicting the Innocent: Where Criminal Prosecutions Go Wrong, with his Data and Materials here.)

Here is an excerpt from the beginning of Judge Rakoff's review to whet your appetite to read the whole review and even the book.

So-called “deferred prosecutions” were developed in the 1930s as a way of helping juvenile offenders. A juvenile who had been charged with a crime would agree with the prosecutor to have his prosecution deferred while he entered a program designed to rehabilitate such offenders. If he successfully completed the program and committed no other crime over the course of a year, the charge would then be dropped. 

The analogy of a Fortune 500 company to a juvenile delinquent is, perhaps, less than obvious. Nonetheless, beginning in the early 1990s and with increasing frequency thereafter, federal prosecutors began entering into “deferred prosecution” agreements with major corporations and large financial institutions. In the typical arrangement, the government agreed to defer prosecuting the company for various federal felonies if the company, in addition to paying a financial penalty, agreed to introduce various “prophylactic” measures designed to prevent future such crimes and to “rehabilitate” the company’s “culture.” The crimes for which prosecution was thus deferred included felony violations of the securities laws, banking laws, antitrust laws, anti-money-laundering laws, food and drug laws, foreign corrupt practices laws, and numerous provisions of the general federal criminal code. 

The intellectual origins of this approach to corporate crime can be traced back at least to the 1980s, when various academics suggested that the best way to deter “crime in the suites” was to foster a culture within companies of acting ethically and responsibly. In practice, this meant encouraging companies not only to provide in-house ethical training but also to enlarge their internal compliance programs, so that responsible behavior would be praised and misconduct policed. The approach found favor not just with some corporations (notably General Electric under the guidance of its then general counsel, Ben Heineman), but also with the US Sentencing Commission, which, in promulgating the Corporate Sentencing Guidelines in 1991, made the overall adequacy of a company’s prior internal compliance programs the most important factor in reducing (by as much as 60 percent) the size of the fine to be imposed on a company found guilty of a federal criminal violation. 

The Department of Justice then went a step further and, in a series of memoranda issued over the succeeding two decades, made the existence or absence of a meaningful internal compliance program an important consideration in determining whether or not to prosecute a company for crimes committed by its employees—the theory being that, if a company had a good compliance program already in place, its employees’ crimes were “aberrational” and not reflective of corporate irresponsibility, whereas the absence of a good compliance program indicated a lax corporate attitude toward crime. 

Court Denies Motion to Dismiss Counts Against Tax Shelter Lawyer (4/14/17)

In United States v. Levine, 2017 U.S. Dist. LEXIS 54071 (SD NY 2017), here, the court (Judge Rakoff) denied Howard Levine's motion to dismiss.  I had missed the indictment when it was announced last year, so I will first go over the announcement which fairly summarizes the indictment. See USAO SDNY announcement: Tax Attorney And CPA Indicted For Tax Evasion And Diversion Of Tax Shelter Fees From Major Manhattan Law Firm, here, with link to the indictment, here.  The key excerpts are:

HAROLD LEVINE, a tax attorney and former head of the tax department at a major Manhattan Law Firm (the “Law Firm”), schemed with RONALD KATZ, a certified public accountant, to divert from the Law Firm over $3 million in fee income from tax shelter and related transactions that LEVINE worked on while serving as a partner of the New York Law Firm.  In addition, LEVINE failed to report that fee income to the IRS on his personal tax returns during the period 2005-2011.  For his involvement in this scheme, KATZ received and failed to report to the IRS over $1.2 million in fee income.   

As part of the fee diversion scheme, for example, LEVINE caused tax shelter fees paid by a Law Firm client to be routed to a partnership entity he co-owned with KATZ and thereafter used those fees – totaling approximately $500,000 – to be used to purchase a home in Levittown, New York.  LEVINE caused the home to be purchased as a residence for a Law Firm employee (the “Law Firm Employee”) with whom he carried on a close personal relationship.  Although LEVINE allowed the Law Firm Employee to reside in the Levittown house for over five years without paying rent, LEVINE and KATZ prepared tax returns for the entity through which the home was purchased to claim false deductions as a rental property. 

In or about 2013, LEVINE was questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received for those transactions.  During that questioning, LEVINE falsely represented that the Law Firm Employee paid him $1,000 per month in rent while living in the Levittown home.  In addition, when the Law Firm Employee was contacted by the IRS and summoned to appear for testimony, LEVINE urged the employee to represent falsely to the IRS that she had paid $1,000 per month in rent to LEVINE.

The charged counts were (the numbering is for the count numbers in the indictment):

1. Tax obstruction, § 7212(a), Levine & Katz, Count 1
2. Conspiracy, 18 USC 371, Levine & Katz, Count 2
3. Tax evasion, § 7201, 2008 Levine, Count 3
4. Tax evasion, § 7201, 2009 Katz, Count 4
5. Tax evasion, § 7201, 2010, Katz, Count 5
6. False statements, 18 USC § 1001 and 1, Levine, Count 6
7. False statements, 18 USC § 1001 and 2, Levine, Count 7
8. Wire Fraud, 18 USC § 1343 and 2, Count 8

The following are the motion documents:

• Motion to Dismiss (Dkt 20), here.
• US Response (Dkt 22), here.
• Reply (Dkt 24), here.
• Docket Entries (as of 4/14/17), here.

The following are the key points from Judge Rakoff's Opinion and Order:

Count One - § 7212(a)

Basically, on this issue, the Court held that the indictment was sufficient.  Levine's defense went well beyond the allegations of the indictment and thus were not properly considered on motion to dismiss.  Judge Rakoff has some good discussion of when and how facts beyond the indictment may be considered on motion to dismiss.  I refer you to the opinion for that discussion.  I will cut and paste Judge Rakoff's discussion about § 7212(a) which I think offers good review for tax crimes lawyers:

The Honorable Jed Rakoff on Why Innocent People Plead Guilty (11/3/14)

Judge Jed Rakoff, a pre-eminent jurist (Wikipedia entry here), has this great article in the New York Review of Books.  Jed S. Rakoff, Why Innocent People Plead Guilty (New York Review of Books 11/20/14 Issue), here.  I would not even attempt to try to summarize Judge Rakoff's powerful development of the thesis presented here.  I can only present some excerpts that, I hope, will encourage practitioners and students to read and fully digest the whole article.

The criminal justice system in the United States today bears little relationship to what the Founding Fathers contemplated, what the movies and television portray, or what the average American believes. 

To the Founding Fathers, the critical element in the system was the jury trial, which served not only as a truth-seeking mechanism and a means of achieving fairness, but also as a shield against tyranny. As Thomas Jefferson famously said, “I consider [trial by jury] as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.” 

* * * *  

In 2013, while 8 percent of all federal criminal charges were dismissed (either because of a mistake in fact or law or because the defendant had decided to cooperate), more than 97 percent of the remainder were resolved through plea bargains, and fewer than 3 percent went to trial. The plea bargains largely determined the sentences imposed.' 

* * * * 

The practice of plea bargaining never really took hold in most other countries, where it was viewed as a kind of “devil’s pact” that allowed guilty defendants to avoid the full force of the law. But in the United States it became commonplace. And while the Supreme Court initially expressed reservations about the system of plea bargaining, eventually the Court came to approve of it, as an exercise in contractual negotiation between independent agents (the prosecutor and the defense counsel) that was helpful in making the system work. Similarly, academics, though somewhat bothered by the reduced role of judges, came to approve of plea bargaining as a system somewhat akin to a regulatory regime. 

* * * *

In addition to mandatory minimums, Congress in 1984 introduced—with bipartisan support—a regime of mandatory sentencing guidelines designed to avoid “irrational” sentencing disparities. Since these guidelines were not as draconian as the mandatory minimum sentences, and since they left judges with some limited discretion, it was not perceived at first how, perhaps even more than mandatory minimums, such a guidelines regime (which was enacted in many states as well) transferred power over sentencing away from judges and into the hands of prosecutors. 

One thing that did become quickly apparent, however, was that these guidelines, along with mandatory minimums, were causing the virtual extinction of jury trials in federal criminal cases. Thus, whereas in 1980, 19 percent of all federal defendants went to trial, by 2000 the number had decreased to less than 6 percent and by 2010 to less than 3 percent, where it has remained ever since. 

The reason for this is that the guidelines, like the mandatory minimums, provide prosecutors with weapons to bludgeon defendants into effectively coerced plea bargains. In the majority of criminal cases, a defense lawyer only meets her client when or shortly after the client is arrested, so that, at the outset, she is at a considerable informational disadvantage to the prosecutor. If, as is very often the case (despite the constitutional prohibition of “excessive bail”), bail is set so high that the client is detained, the defense lawyer has only modest opportunities, within the limited visiting hours and other arduous restrictions imposed by most jails, to interview her client and find out his version of the facts. 

More on Defraud Conspiracy as Requiring Object to Obtain Money or Property (5/11/20)

On 5/11/20 at 10:00 pm EDT, I revised this post, where appropriate, to use conspiracy lingo -- object rather than intent.  I have made some other, principally editorial changes, as well (principally adding a new JAT Comment #2 and moving the later comments up one number).

I recently posted on the Supreme Court’s opinion in Kelly v. United States, 590 U.S. ___, ___ S.Ct. ___ (5/7/20), here, and potential implications for the defraud/Klein conspiracy.  Supreme Court Reverses Bridgegate Convictions, Holding that Fraud Means Fraud; Implications for Defraud/Klein Conspiracy? (Federal Tax Crimes Blog 5/7/20), here.  Briefly, my concern  expressed in that blog and previously expressed (perhaps ad nauseum) was that the term defraud in the defraud/Klein conspiracy under the conspiracy statute, 18 USC § 371, is interpreted to permit conviction in the absence of an object to commit fraud (meaning obtaining something of value by fraudulent means).  I discuss that anomaly in the criminal law in the blog and in substantially more detail in the article I link in the blog.  Today, I want to follow through that discussion with an arguably related consideration from a nontax case earlier this year.

In United States v. Miller, 953 F.3d 1095 (9th Cir. 2020), here.  To start the discussion, I offer this from the summary preceding the opinion (the footnote indicates that the summary is prepared by the staff and not part of the opinion, but I think it useful for purposes of this blog; bold-face supplied by JAT):

Overruling prior decisions of this court in light of the Supreme Court's intervening decision in Shaw v. United States, 137 S. Ct. 462, 196 L. Ed. 2d 372 (2016), the panel held that wire fraud under 18 U.S.C. § 1343 requires the intent to deceive and cheat — in other words, to deprive the victim of money or property by means of deception — and that the jury charge instructing that wire fraud requires the intent to "deceive or cheat" was therefore erroneous. The panel nevertheless held that the erroneous instruction was harmless.

The wire fraud statute in relevant part (18 USC § 1343) describes the person criminally liable:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire [etc.]”

As written, the use of "or" seems to be disjunctive but, if the word defraud is interpreted to require an intent to obtain money or property by fraud, the two seem to be parallel (perhaps one or the other redundant).

The issue then was further set up (p. 1100):

At trial, Miller requested a jury instruction stating that, to be guilty of wire fraud, he must have intended to "deceive and cheat" MWRC. The trial court, however, delivered the Ninth Circuit's model jury instruction, which states that wire fraud instead requires only the intent to "deceive or cheat" (emphasis supplied) the victim. As his first issue on this appeal, Miller argues that this jury instruction misstated the law.

The Ninth Circuit (per the opinion drafted by USDJ Jed S. Rakoff (SDNY) sitting by designation, see comment #4 below) states in pertinent part (pp. 1101-1103, footnotes omitted):

Judge Rakoff Speaks on the Dearth of Prosecutions from the Financial Crisis (12/18/13)

The notable and quotable Judge Jed Rakoff does it again in this article, The Financial Crisis: Why Have No High-Level Executives Been Prosecuted? (New York Review of Books 1/9/2014), here.  Yes although I often make mistakes on dates, this is on the one the printed --- well, the web -- page.  Perhaps that is the print publication date, but you can access it immediately via the link above.

Some commenters on this blog have lamented the prosecution off Swiss banks and their enablers and asked why, in effect, those who live in glass houses should cast those stones.  Perhaps this is an instance that tends to prove their case.

The whole article is a good read.  Excerpts I found interesting are:

But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years. Indeed, it would stand in striking contrast to the increased success that federal prosecutors have had over the past fifty years or so in bringing to justice even the highest-level figures who orchestrated mammoth frauds. Thus, in the 1970s, in the aftermath of the “junk bond” bubble that, in many ways, was a precursor of the more recent bubble in mortgage-backed securities, the progenitors of the fraud were all successfully prosecuted, right up to Michael Milken. 

* * * * 

Without giving further examples, the point is that, in the aftermath of the financial crisis, the prevailing view of many government officials (as well as others) was that the crisis was in material respects the product of intentional fraud. In a nutshell, the fraud, they argued, was a simple one. Subprime mortgages, i.e., mortgages of dubious creditworthiness, increasingly provided the chief collateral for highly leveraged securities that were marketed as AAA, i.e., securities of very low risk. How could this transformation of a sow’s ear into a silk purse be accomplished unless someone dissembled along the way? 

* * * * 

But what I do find surprising is that the Department of Justice should view the proving of intent as so difficult in this case. Who, for example, was generating the so-called “suspicious activity reports” of mortgage fraud that, as mentioned, increased so hugely in the years leading up to the crisis? Why, the banks themselves. A top-level banker, one might argue, confronted with growing evidence from his own and other banks that mortgage fraud was increasing, might have inquired why his bank’s mortgage-based securities continued to receive AAA ratings. And if, despite these and other reports of suspicious activity, the executive failed to make such inquiries, might it be because he did not want to know what such inquiries would reveal?
This, of course, is what is known in the law as “willful blindness” or “conscious disregard.” It is a well-established basis on which federal prosecutors have asked juries to infer intent, including in cases involving complexities, such as accounting rules, at least as esoteric as those involved in the events leading up to the financial crisis. And while some federal courts have occasionally expressed qualifications about the use of the willful blindness approach to prove intent, the Supreme Court has consistently approved it. As that Court stated most recently in Global-Tech Appliances, Inc. v. SEB S.A. (2011): 

The doctrine of willful blindness is well established in criminal law. Many criminal statutes require proof that a defendant acted knowingly or willfully, and courts applying the doctrine of willful blindness hold that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances. 

Thus, the department’s claim that proving intent in the financial crisis is particularly difficult may strike some as doubtful.

Judge Rakoff, the Wegelin judge, Is Interviewed on the U.S. Initiative Against Swiss Banks (12/12/13)

Judge Jed Rakoff (Wikipedia here), who presided over the Wegelin case that brought the venerable firm down, is interviewed by this publication:  Matthew Allen, ‘US is no bully’ says judge in Swiss bank case (swissinfo.ch 12/12/13), here.

I highly recommend reading the interview for it offers a rare look into the view of the Court.

Key excerpts:

However, the US perception is that Swiss banking secrecy is an economic decision taken by Switzerland to foster its strong banking activity. That’s not sufficient justification for the harm done to us through massive tax evasion. 

* * * * 

There have been far worse financial crimes to have come before me or other judges, such as WorldCom and Madoff. These were committed by people who set out to commit fraud on a mammoth scale. 

 No one views the cases of the Swiss banks in that magnitude, but no one views them as trivial either. There were large sums of money involved and no government can operate unless people pay their taxes.

JAT Comment:  With due respect to Judge Rakoff, I think the systemic problem that evidenced itself in Switzerland's economic choice to actively violate the tax laws of not only the U.S. but other countries (Germany, France and others) does rise at least equal to WorldCom and Madoff.  Indeed, in those cases you had just a few people whose greed caused the problelm.  By contrast, the Swiss banking system is, in my view, massively corrupt.  They have enabled crooks, swindlers, potentates stealing from their people and other unsavory characters (not to mention tax evaders) for years.  And, lest we forget, they tried to steal the deposits of Holocaust victims.  See Wikipedia entry here.  The Swiss felt themselves entitled to the economic rewards of their questionable activities, and that attitude infected a wide swath of the Swiss population.  I am not meaning to "indict" all the Swiss.  Far from it, but the Swiss banking empire was built on this type of systemic skullduggery and thus had a corrupt influence on the country.  The Worldcoms and Madoffs don't do that, although to be fair much of the financial activity that brought the recession of 2008 was based on equally questionable and systemic activity in the U.S.

Tax Attorney Sentenced to Two Years for Evasion and Obstruction (10/16/17)

USAO SDNY announced here the sentencing of a tax attorney, Harold Levine, to two years imprisonment for counts of tax evasion and tax obstruction to which he pled.  I previously wrote on denial of his earlier motion to dismiss.  Court Denies Motion to Dismiss Counts Against Tax Shelter Lawyer (Federal Tax Crimes Blog 4/14/17), here.  The following are the key excerpts from the USAO SDNY press release for the sentencing:

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that HAROLD LEVINE, a Manhattan tax attorney, was sentenced today by U.S. District Judge Jed S. Rakoff to 24 months in prison for tax evasion and obstruction of the Internal Revenue Service (“IRS”), stemming from his scheme to siphon millions of dollars of tax shelter fee income from the law firm at which he worked and failing to report the diverted fees as income.  LEVINE’s scheme also involved making false statements to IRS auditors, and urging a witness to provide false testimony to the same IRS auditors who were investigating LEVINE’s receipt of the fees.  

* * * * 

Between 2004 and 2012, LEVINE, a tax attorney and former head of the tax department at a major Manhattan Law Firm (the “Law Firm”), schemed with co-defendant Ronald Katz, a certified public accountant, to obstruct and impede the due administration of the Internal Revenue laws by evading income taxes on millions of dollars of fee income generated from tax shelter and related transactions that LEVINE worked on while a partner of the Law Firm.  Specifically, LEVINE failed to report approximately $3 million in income to the IRS on his personal tax returns during the period 2005-2011.  Most of the fee income LEVINE failed to report was routed by him through a limited liability company LEVINE controlled, which was nominally owned by a family member. 

 As part of the scheme, for example, LEVINE caused tax shelter fees paid by a Law Firm client to be routed from the Law Firm’s escrow account to a partnership entity he co-owned with Katz and thereafter used those fees – totaling approximately $500,000 – to purchase a home in Levittown, on Long Island.  LEVINE caused the home to be purchased as a residence for a Law Firm employee (the “Law Firm Employee”) with whom he then enjoyed a close personal relationship.  Although LEVINE allowed the Law Firm Employee to reside in the Levittown house for over five years without paying rent, LEVINE and Katz prepared tax returns for the entity through which the home was purchased that claimed false deductions as a rental property. 

 In February 2013, LEVINE was questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received by LEVINE from those transactions.  During that questioning, LEVINE falsely told the IRS that the Law Firm Employee paid him $1,000 per month in rent while living in the Levittown home.  In addition, when the Law Firm Employee was contacted by the IRS and summoned to appear for testimony, LEVINE urged the employee to falsely tell the IRS that she had paid $1,000 per month in rent to LEVINE.

I do not have the transcript of the sentencing hearing and will post it if and when I get it.  The USAO SDNY press release linked about quotes the sentencing judge as follows:  “There was no one in the world who knew better that he was committing a crime than Harold Levine.”

I do have the following documents that readers interested in the process from acceptance of the plea to the sentencing hearing:

• Levine Plea Hearing Transcript, here.
• Defendant's Sentencing Memo, here.
• U.S. Sentencing Memo, here.
• U.S. Sentencing Memo, Exhibit C, Sentencing Data Chart, here.
• Defendant's Reply Sentencing Memo, here.
• U.S. Letter Response to Defendant's Reply Sentencing Memo, here.
• Docket Entries as of today, here.

I have just a few comments on the linked documents:

Judge Rakoff''s Criticism of the Mechanics of the Sentencing Guidelines (12/7/12)

I am a bit late on this report but it comes from a nontax criminal case of some prominence.  It is United States v. Gupta, 2012 U.S. Dist. LEXIS 154226 (SD NY 10/24/12), here, where a former Goldman Sachs director was sentenced for conviction of one count  of conspiracy and three counts of securities fraud.  Judge Rakoff is yet another in a long line of judges who complain about the numbers approach of the Sentencing Guidelines.  Tax crimes practitioners need to be aware of criticisms of the Guidelines because they maybe able to use them some day.

Here is the opening that all white collar practitioners (including tax crimes practitioners) can appreciate:

Imposing a sentence on a fellow human being is a formidable responsibility. It requires a court to consider, with great care and sensitivity, a large complex of facts, and factors. The notion that this complicated analysis, and moral responsibility, can be reduced to the mechanical adding-up of a small set of numbers artificially assigned to a few arbitrarily-selected variables wars with common sense. Whereas apples and oranges may have but a few salient qualities, human beings in their interactions with society are too complicated to be treated-like commodities, and the attempt to do so can only lead to bizarre results. 

Nowhere is this more obvious than in this very case, where the Sentencing Guidelines assign just 2 points to Mr. Gupta for his abuse of a position of trust -- the very heart of his offense -- yet assign him no fewer than 18 points for the resultant but unpredictable monetary gains made by others, from which Mr. Gupta did not in any direct sense receive one penny.

UBS Again in Prosecutors' Sights (2/12/15)

It has been reported over the last couple of days that UBS is again in U.S. prosecutors' sights -- this time for the using unregistered securities (sometimes referred to as bearer bonds) for tax evasion. Christie Smythe and David Voreacos, UBS Bond Probe Said to Look at Whether Bank Breached Tax Deal (Swissinfo using Bloomberg 2/12/15), here.  A few excerpts:

Investigators are looking into UBS’s use of so-called bearer securities, which can be redeemed by anyone holding the paper, making them a potential tool for hiding assets. Authorities are focusing on whether UBS issued the securities to clients or invested in them on their behalf, according to the person. Investigators suspect the conduct may have occurred when the bank was still bound by the deferred-prosecution agreement, which expired in October 2010, the person said, asking not to be identified because the inquiries aren’t public. 

If that’s true, the Justice Department could take the unusual step of reopening the accord and prosecuting the bank on the original conspiracy charge, according to lawyers including Michael Perino, a law professor at St. John’s University in New York. 

“If you’re violating the terms of a deferred-prosecution agreement, that means the government can go back on its decision not to prosecute you,” Perino said. 

New Charges 

Prosecutors also could file new charges against UBS and seek stiffer penalties and oversight at sentencing for violating the previous agreement, according to Brandon Garrett, a University of Virginia law professor who has written a book examining corporate prosecutions. 

“UBS has already settled three prosecution agreements since 2009,” Garrett said. “UBS is already a recidivist many times over,” he said. The government may decide to seek a conviction with probation supervision, he said. 

* * * * 

Popularized after the U.S. Civil War, bearer bonds were traditionally issued in paper form and were payable to whomever physically held them. Because they’re unregistered, they can be used to evade taxes or launder money, according to tax specialists including Stephen Land, a lawyer with Duval & Stachenfeld LLP. 

‘Mostly Illicit’ 

Rendered virtually illegal in the U.S. by tax regulations, they are still common investments in Europe, he said. If held in paper form, a bearer bond offers complete anonymity. 

“When you think of that kind of anonymity, you can understand why the government hates bearer bonds,” Land said. 

Bearer securities largely disappeared from the U.S. market following the 1982 budget law. U.S. restrictions tightened further within the past few years, making it impractical for U.S. companies to issue bearer bonds, Land said. 

U.S. investors also face strict regulations and tax consequences making the bonds unattractive, according to a 2012 client notice published by law firm Milbank Tweed Hadley & McCloy LLP. 

“A lot of people believe that the advantages would be mostly illicit” and “the legitimate advantages are few,” said Richard Painter, a corporate law professor at the University of Minnesota. 

While the bonds can be traded electronically, eliminating some of the secrecy benefits, they may still be treated as unregistered for the purposes of a financial institution’s internal procedures, tax experts said. 

“Until you actually take the bond out of the clearing system, there is an electronic record,” said Remmelt A. Reigersman, a lawyer with Morrison & Foerster LLP. “It’s just that nobody decides to look behind the curtain.” 

Also those with access to Tax Notes Today might want to read Amy S. Elliott,  UBS Discloses Bearer Bond Tax Evasion Investigation, 2015 TNT 29-2 (2/12/15) (no link available) for further or at leastl different detail.

Finally, Professor Brandon Garrett is quoted.  I posted a couple of days ago on Jed Rakoff's review of Professor Garrett's book:  Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here.  The book is Too Big to Jail: How Prosecutors Compromise with Corporations (Belknap Press/Harvard University Press 2015), here.

New Swiss Enabler Indictments - Bankers Related to UBS and, Allegedly, Wegelin (1/3/12)

Three Swiss enablers, reputedly employed by or affiliated with Wegelin & Co., have been indicted in NYC.  The indictment is here; the USAO SDNY press release is here, see quote below].

The three are Michael Berlinka, Urs Frei, and Roger Keller.  The amount of money hidden allegedly exceeds $1.2 Billion (with a B).

The bullet points are:

Enabler Defendants:  Michael Berlinka, Urs Frei, and Roger Keller

Unindicted Co-Conspirators:  (i) the U.S. taxpayers involved (numbering over 100, although only U.S. taxpayers A - W (numbering 23) and two by name, Arthur Joel Eisenberg, see here, and Kenneth Heller, see here) are discussed specifically in the indictment; and (ii) other Swiss enablers, such as Client Advisor A, Managing Partner A, Swiss Asset Manager, Swiss Bank A Executive and Gian Gisler, see here.and Beda Singenberger, see here.

Banks : Principally Swiss Bank A (reputedly Wegelin & Co.); UBS AG and Swiss Bank No. 1 (unknown) play roles.

Entities: Yes (the taxpayers frequently employed entities)

Charges:  One count of conspiracy (both the ubiquitous Klein / defraud conspiracy and offense conspiracy to violate 7206(1) (tax perjury) and 7201 (evasion), charged as a single count).

Maximum Incarceration Period: 5 years (10 years on theft count; 3 years on tax count)

Court: USDC SDNY

Judge: Jed D. Rakoff (see Wikipedia entry here)

Interview of Professor Brandon Garrett About DOJ's Swiss Bank Program (10/27/15)

Tax Controversy Posts Blog has this entry:  A Conversation with UVA Law's Brandon Garrett About the DOJ's Swiss Bank Program (Tax Controversy Posts Blog 10/22/15), here.  In this blog entry, Carolyn Kendall, an attorney with Post & Schell, interviews Professor Brandon Garrett of UVA Law School, author of recent book Too Big to Jail: How Prosecutors Compromise with Corporations (Harvard Univ. Press 2014), here.  See also my prior blog on Judge Rakoff's review of Professor Garrett's book, here.  Professor Garrett also maintains on his UVA Law site, here, some great statistics and links for nonprosecution and deferred prosecution agreements.

The Vanishing Federal Criminal Jury Trial (8/7/16)

This NYT article offers a good introduction, with quotes from noted federal judges in SDNY (Kaplan Rakoff, et al., about the vanishing criminal jury trial.  The myth is that juries delivery better community justice and service on juries makes better citizens.  See Benjamin Weiser, Jury Trials Vanish, and Justice Is Served Behind Closed Doors (NYT 8/7/16), here.  But, the system from overcriminalization and the resulting smorgasbord of choices given to prosecutors virtually compels a plea agreement in the overwhelming number of cases that are charged.  The NYT article is by no means a complete analysis of the issue, but it does introduce the issue in a straight-forward and understandable way.

This phenomenon is present generally in the federal criminal system and in the particular subset of federal criminal tax cases.  The prosecutor can lard up the charging document with any number of charges arising from a pattern of conduct which may be fairly characterized generally as tax evasion. Or he may charge down tax evasion to a lesser crime, such as tax perjury or a tax misdemeanor (although the misdemeanor is rarely charged). The Sentencing Guidelines will usually mitigate the effect of overcharging because the sentence will be primarily driven by the tax loss related to the overall pattern of conduct (including relevant conduct).  So, that is good.  But the perverse side is that the Sentencing Guidelines offer a better deal for acceptance of responsibility, most often achieved by plea agreement which means, in theory, that the Government's charge of criminal conduct may never get tested by trail (oh, sure the Government and the defendant must agree on the elements of the crime to which a plea is made, but that may not be critically tested).  And, of course, the prosecutor has virtually unfettered discretion as to what crimes to charge in the first instance..

I was reading through the recent cases this past Friday and found the following from a federal habeas corpus type proceeding under 28 USC § 2255.  United States v. Crowe, 2016 U.S. Dist. LEXIS 103706 (WD VA 2016).  In these proceedings, a common complaint by the person incarcerated after conviction is that his or her lawyer in the criminal proceeding rendered ineffective assistance of counsel.  One of Crowe's claims was that counsel failed to pursue the issue of selective criminal enforcement of the tax laws.  Here is the full, cryptic presentation and discussion of the issue in the opinion:

D. Selective Prosecution 

Next, Crowe argues that counsel failed to object to the fact that he was being prosecuted for tax fraud when only a fraction of those who commit such crimes are criminally charged. The Due Process Clause does not allow the government to prosecute a criminal case based on an "unjustifiable" factor, such as race, religion, or the exercise of a constitutional right. United States v. Armstrong, 571 U.S. 456, 464 (1996). However, absent a clear and substantial showing of such impermissible conduct, the government's decision to prosecute is presumed to be motivated by proper considerations. Id.; see also United States v. Hastings, 126 F.3d 310, 313 (4th Cir. 1997) (noting that "[a] criminal defendant bears a heavy burden in proving that he has been selected for prosecution in contravention of his constitutional rights"). "The Attorney General and the United States Attorneys retain broad discretion to enforce the Nation's criminal laws." Armstrong, 571 U.S. at 464 (internal quotation marks omitted). 

Crowe does not even make a bare allegation that he was prosecuted based on a discriminatory purpose. The government made clear that it was prosecuting him because he had been convicted of very similar conduct previously, and began the process of purchasing Southside less than 30 days after he was released from incarceration. (Ex. 13 § 2255 Mot. at 17-18, ECF No. 31-1.) Therefore, Crowe's selective prosecution argument lacks merit, and counsel was not deficient for failing to raise it. Strickland, 466 U.S. at 687.

It is just the nature of our system that many more taxpayers cheat than can be prosecuted and the Government knows of many more that cheat than can be prosecuted.  The prosecution bullet is usually retained for use against the worst offenders.  I say usually, because sometimes the Government goes after less egregious tax cheats in order to make a point to the public -- e.g., the prosecution of tax protestors or defiers.  It can't prosecute them all, but perhaps some prosecution -- perhaps it could be called selective prosecution -- will send a message to the larger group and will, at the same time, give the general public some idea that the Government is "on the beat."

The Mass Document Dump and the Prosecutors' Brady Obligations (2/11/11)

In United States v. Ohle, 2011 U.S. Dist. LEXIS 12581 (SD NY 2011), here, aff'd 2011 U.S. App. LEXIS 21275 (2d Cir. 2011), the defendants moved for a new trial, complaining that the prosecutors violated their Brady obligations. Prior to trial, the prosecutors turned over to the defendants a massive quantity of documents that the Government had obtained from Jenkins & Gilchrist (J&G). The format for the turn over of documents was a Concordance database, in which the documents were viewable and searchable. The prosecutors thought that all J&G documents were in the database. After trial, at the Fatico sentencing hearing, the prosecutors admitted that the turn over did not include approximately 110 boxes. The principal question presented was whether the 110 boxes contained Brady material that should have been disclosed contained Brady material that should have been disclosed, but a related question was whether a mass document disclosure without specifically identifying the Brady material was appropriate. The court, Jed Rakoff, rejected the claim, finding no Brady violation.

I address only the larger issue of the ground rules for the prosecutors' obligations when making mass document disclosures, often referred to as an open file policy. In large white collar cases, including large tax crimes cases (such as Ohle and the KPMG related criminal cases), the turnover of massive quantities of documents is common. The Court had an interesting discussion of the ground rules that apply. I quote (footnote omitted):

IRS Concludes that Payments in Lieu of Forfeiture Are Not Deductible (4/8/15)

Deferred prosecution agreements ("DPAs") and, their cousin, nonprosecution agreements ("NPAs"), are much the rage in the federal criminal universe.  See e.g., Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here (with links to Professor Garrett's web site data on DPAs and NPAs.)  For example, a key component of the DOJ program for Swiss banks is the ability for so-called Category 2 banks to obtain NPAs.  DPAs and NPAs are better solutions for organizations otherwise subject to criminal prosecution than criminal prosecution.

One of the issues addressed in DPAs and NPAs is the monetary consideration imposed on the offending party.  Such monetary consideration might be in lieu of fines, restitution or forfeiture that the offending party might owe of suffer if convicted of the crime.  The question that arises is whether these payments may be deductible.

For deductibility, the usual authority invoked is Section 162, which permits deductions for "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business."  Section 162(f) provides that: "No deduction shall be allowed under subsection (a) for any fine or similar penalty paid to a government for the violation of any law."  By contrast, depending on the origin of the claim, restitution is not subject to this prohibition and may be deductible if the origin of the claim arises from the party's trade or business.

In LTR 201513003, here, the IRS addressed the question of whether payments in lieu of forfeiture under a DPA are deductible.  In relevant part, the LTR reasons and concludes:

The deferred prosecution agreement (DPA) states that the taxpayer has violated several criminal statutes and provides for a forfeiture payment in lieu of proceedings that would result in criminal and/or civil forfeiture under 18 U.S.C. sections 981 and 982 and 28 U.S.C. section 2461(c). The DPA is a settlement for purposes of the regulation as it is an agreement between the taxpayer and the government that resolves all issues associated with the taxpayer's criminal conduct in exchange for certain consideration outlined in the DPA, including a payment in lieu of forfeiture. It is the Service's longstanding position that a monetary forfeiture under the U.S.C. sections the taxpayer violated, as well as the sections referenced above, is a civil or criminal fine or penalty for purposes of the regulation. As such, the money paid in lieu of forfeiture pursuant to the DPA resolves the taxpayer's actual or potential liability for a civil or criminal fine or penalty and is not deductible under section 162. 

The taxpayer argues that Treas. Reg. sections 1.162-21(b)(1) and (2) do not prohibit it from deducting the forfeiture payment because (1) it has not pled guilty or nolo contendere in any court proceeding and (2) the forfeiture payment is earmarked for restitution to the victims of the fraud. The first argument requiring a plea of guilty or nolo contendere has no merit, as a settlement of the taxpayer's actual or potential liability is included under section 1.162-21(b)(1)(iii). Likewise, the taxpayer's second argument that the forfeited funds will be used to compensate victims has no merit, as the DPA specifically states that the payment is in lieu of criminal and/or civil forfeiture. The DPA is a negotiated settlement between the government and the taxpayer that specifically requires a forfeiture payment rather than requiring that part or all of the payment be allocated as restitution. The Department of Justice has the authority to use forfeited funds at its discretion for various uses including payment to victims. DoJ's stated intention for the use of the funds does not change the character of the payment from a non-deductible forfeiture to a potentially deductible restitution payment.

Of course, this is just the IRS's informal conclusion.  I suspect that the actual taxpayer involved will try to get a more favorable resolution.

Now, focusing back on the payments made by the Category 2 banks under the DOJ program, those banks will in many -- perhaps most -- cases not be concerned with U.S. tax deductions for the payments.  In any event, if they were, the payments are simply described as a penalty without further elaboration.  Since, however, the payment is made to resolve potential criminal exposure (as evidenced by the relevant agreement being a "nonprosecution" agreement), I suspect that the IRS would tkae the position that Section 162(h) applies if it were otherwise applicable.

Second Circuit Decision Applying Fifth Amendment to Foreign Compelled Testimony (7/19/17)

The Second Circuit issued an important decision today dealing with the use -- directly or indirectly -- of testimony compelled by a foreign government in a U.S. criminal case.  United States v. Allen, ___ F.3d ___ (2017), here. This is not a tax prosecution, but the holding could apply in all U.S. prosecutions, tax or otherwise, where foreign compelled testimony is used.

The opinion is very long and very good.  The Court's summary of the opinion is:

 This case—the first criminal appeal related to the London Interbank Offered Rate (“LIBOR”) to reach this (or any) Court of Appeals—presents the question, among others, whether testimony given by an individual involuntarily under the legal compulsion of a foreign power may be used against that individual in a criminal case in an American court. As employees in the London office of Coöperatieve Centrale Raiffeisen‐Boerenleenbank B.A. in the 2000s, defendants‐appellants Anthony Allen and Anthony Conti (“Defendants”) played roles in that bank’s LIBOR submission process  during the now‐well‐documented heyday of the rate’s manipulation. Defendants, each a resident and citizen of the United Kingdom, and both of whom had earlier given compelled testimony in that country, were tried and convicted in the United States before the United States District Court for the Southern District of New York (Jed S. Rakoff, Judge) for wire fraud and conspiracy to commit wire fraud and bank fraud.
While this appeal raises a number of substantial issues, we address only the Fifth Amendment issue, and conclude as follows.   

First, the Fifth Amendment’s prohibition on the use of compelled testimony in American criminal proceedings applies even when a foreign sovereign has compelled the testimony.    

Second, when the government makes use of a witness who had substantial exposure to a defendant’s compelled testimony, it is required under Kastigar v. United States, 406 U.S. 441 (1972), to prove, at a minimum, that the witness’s review of the compelled testimony did not shape, alter, or affect the evidence used by the government.   

Third, a bare, generalized denial of taint from a witness who has materially altered his or her testimony after being substantially exposed to a defendant’s compelled testimony is insufficient as a matter of law to sustain the prosecution’s burden of proof. 

Fourth, in this prosecution, Defendants’ compelled testimony was “used” against them, and this impermissible use before the petit and grand juries was not harmless beyond a resonable doubt. 

Accordingly, we REVERSE the judgments of conviction and hereby DISMISS the indictment

Prosecuting Corporate Employees and Officers, with Focus on Swiss Banks (1/15/16)

I have previously blogged on Professor Brandon Garrett (UVA Law) who have carved out an academic niche on how the Government deals with corporate crime, particularly large corporate crime (the too big to jail group).  See e.g., Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here.  At the risk of oversimplifying his arguments, I summarize them in part relevant to this blog entry:  When the Government goes after corporate misconduct, it too often focuses only on the corporation in terms of criminal sanctions and not the individuals, particularly those higher up the chain, who committed the underlying conduct.  Corporations cannot go to jail; individuals can. Prosecuting and convicting individuals in addition to corporations could, he thinks, provide more front-end incentive for individuals to forego illegal conduct within the corporations.  However, as fans of tax crimes know at least anecdotally, it is hard to convict higher level corporate officers for conduct that their underlings actually commit.  The poster child example is the acquittal of Raoul Weil, a high-level UBS banker who "remoted" himself from the dirty work of actually servicing U.S. taxpayers seeking to evade U.S. tax.  See e.g., Raoul Weil Found Not Guilty (Federal Tax Crimes 11/3/14; 11/6/14), here.

One might turn a common phrase and say that lifeless, breathless, unthinking, unfeeling corporations do not commit crimes; people do.  Still in our jurisprudence, corporations can commit crimes.  They just can't be jailed.  To the extent that actual incarceration incentivizes people to avoid misconduct, people should be jailed.  In September of 2015, DOJ announced a new policy of more aggressively pursuing people for misconduct in corporations.  See the DAG memo here and my blog entry, New DOJ Policy on Prosecuting Individuals Beyond Corporate Crime (Federal Tax Crimes Blog 9/10/15), here.

Professor Garrett has a new article that updates in summary fashion his research.  The Year Banks Finally Paid (Slate 1/13/16), here.  The following are excerpts:

Nevertheless, we need to keep asking whether this strategy of chasing dollars rather than changing practices and prosecuting executives makes any sense. In the past decade, data I have collected show that federal prosecutors have set new records each year in corporate fines. For all their success and zeal, however, it’s not clear that fines alone are stopping bad actors on Wall Street. 

* * * * 

A remarkable number of banks, 80 of them, finalized cases with federal prosecutors. Most were Swiss banks that settled out of court as part of a DOJ Tax Division program designed to incentivize them to come clean or face the music. Next year we will see still more cases with less-cooperative Swiss banks that won’t get such lenient deals. More mammoth bank cases lumber along in the courts; last spring, several major banks, including Wall Street giants JPMorgan Chase and Citicorp, agreed to plead guilty in cases relating to foreign-exchange currency manipulation. Those cases have not resulted in sentencing yet, but when they do, prosecutors will rake in $5 billion more in fines. 

* * * * 

Banks pay the fines, but bankers don’t usually do any time. I have found that among the 66 cases of financial institutions that received deferred or nonprosecution agreements from federal prosecutors from 2001 to 2014, only 23 of them—33 percent—had any employees prosecuted. 

Now, I don't have Professor Garrett's expertise and have not spent enough time on his marvelous web site at UVA Law, here, but I thought I would add some thoughts from my even narrower niche of the universe in which he teaches -- the offshore account and enabler activities.

Julius Baer Group Ltd. Expects to Pay $547 Million to US to Conclude Criminal Investigation (12/31/15)

Julius Baer Group Ltd. ("Julius Baer) expects to pay $547 million to conclude the criminal investigation pursuant to an agreement in principle with the U.S. prosecutors.  See Juilius Baer's news release here; and Giles Broom & David Voraceos, Julius Baer to Pay $547 Million to Resolve U.S. Tax Probe (BloombergBusiness 12/30/15), here, and Mark Scott, Julius Baer Reaches Preliminary Tax Deal With U.S. Authorities (NYT  DealBook), here

Key points from these sources:

1.  Julius Baer was one of the category 1 banks under criminal investigation excepted from the opportunity to join the U.S. DOJ Swiss Bank Program, here, as a category 2 bank to achieve a nonprosecution agreement.

2. The resolution is a “comprehensive resolution regarding its legacy U.S. cross-border business.” It is not clear what this means.  I would expect that Julius Baer will have to plead guilty to some criminal charge, perhaps conspiracy.  However, the NYT Dealbook reported that

While analysts said the potential settlement might end the issue for Julius Baer, it remained unclear whether the bank would be forced to plead guilty to criminal charges related to suspected conspiring to aid tax evasion.

UBS was required to enter a deferred prosecution agreement; Credit Suisse was required to plead guilty to a conspiracy crime.  See Credit Suisse Pleads to One Count of Conspiracy to Aiding and Assisting (Federal Tax Crimes Blog 5/19/14; 5/20/14), here.

Since a corporate or other juridical entity can't go to jail, its criminal punishment consists of monetary exactions (such as fines, penalties and restitution) and whatever collateral effects a guilty plea may have.  See generally Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here.  For financial institutions, the collateral effects can be significant if they preclude the financial institution from certain lines of business or otherwise limits or affects their business models.  Credit Suisse threaded the needle on that.  But I still can't imagine that the U.S. will not require a guilty plea to some crime, just as it did for Credit Suisse.

3.  Two Julius Baer employees, Daniela Casadei and Fabio Frazzetto, were indicted in 2011, but have not yet come to the U.S., so the case has not proceeded beyond the indictment stage.  See BloombergBusiness article.  And, they are reported to still be with Julius Baer.  I would not expect that their criminal indictments will be resolved by the resolution with Julius Baer and would expect that their relationship with Julius Baer will be terminated.  (I am surprised that Julius Baer had not already terminate them in an attempt to curry favor with DOJ.)