Lawyers and Obstruction: the Stevens Case (NonTax) Lessons for Tax Lawyers (9/5/11)

This is a guest blog by Scott Schumacher.  Scott is an Associate Professor of Law and Director of the Graduate Program in Taxation at the University of Washington School of Law in Seattle, Washington. Prior to entering academia, he was an attorney with the Department of Justice Tax Division and in private practice with the law firm of Chicoine & Hallett in Seattle. He writes frequently on criminal tax matters and is one of the authors, along with our blog host Jack Townsend, of the book Tax Crimes, here.

In May of this year, the U.S. District Court for the District of Maryland granted a motion for judgment of acquittal in the case of United States v. Stevens (No.: RWT 10 CR 0694 (D. Md. 2011), here. Lauren Stevens, former vice president and associate general counsel of pharmaceutical giant GlaxoSmithKline (GSK), had been charged with obstruction of justice and making false statements during a civil investigation by the FDA.

In a stinging rebuke of the government’s case, the court held that “only with a jaundiced eye and with an inference of guilt that's inconsistent with the presumption of innocence could a reasonable jury ever convict this defendant, and that “it would be a miscarriage of justice to permit this case to go to the jury.” The court concluded that “the defendant in this case should never have been prosecuted and she should be permitted to resume her career.”

Even though the court acquitted Stevens, as I discuss in the Tax Notes article, “Stevens: Is Zealous Advocacy Obstruction of Justice?”, 132 Tax Notes 1169 (9/12/11) here, this prosecution has implications for any lawyer, including tax lawyers, who regularly deal with the government.
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Opting Out Considerations - A Jeff Neiman Guest Blog (9/10/11)

The OVDP and OVDI programs have come to an end and many taxpayers who participated in the programs are about to get their tax bill from Uncle Sam. In the programs, the formula to calculate tax and penalties was rigid and inflexible. The programs dictated that penalties are the same for the taxpayer who knew of his reporting obligations and the taxpayer who innocently was not in compliance. As I described in more detail in a Tax Notes opinion piece entitled, “Jeffrey A. Neiman, Opting Out: The Solution for The Non-Willful OVDI Taxpayer," Tax Notes 11135 (9/23/11), here, the failure to differentiate between the two distinct taxpayers has prevented thousands of taxpayers from coming forward as they view the programs as too expensive.

As we turn the corner, taxpayers who entered the program and who were not aware of their obligation to file an FBAR or to report their worldwide need to consider opting out of the voluntary disclosure program. Under the program, the IRS and DOJ assumed every taxpayer acted intentionally or willfully. However, in fact, I think in many cases, it will be very difficult for the government to prove that a taxpayer willfully violated the law.

Willfulness is defined as the intentional violation of a known legal duty. It is the cornerstone to any criminal prosecution, to the civil fraud penalty, and to the draconian 50% per year FBAR penalty. The government proves willfulness by looking at a taxpayers conduct. When I was a federal prosecutor, examples of conduct I looked to in order to infer willful behavior included using nominees, misleading the IRS, providing incomplete information to an accountant, dealing in cash, and maintaining a double set of books. Without some of these factors, it is very difficult to prove willfulness and without willfulness, there is no criminal case, no civil fraud penalty, and no 50% FBAR penalty.
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