Avoiding the Stipulations in a Plea Agreement for Purposes of Sentencing

In United States v. Gillen, 2011 U.S. Dist. LEXIS 12606 (WD PA 2/9/11), the defendant entered a plea agreement in which he stipulated to the tax loss involved for purposes of the Guidelines Offense level in S.G. 2T1.1 and 2T1.4 (Tax Table). This is all routine stuff. Prior to sentencing, however, the defendant notified the Government that he would attempt at sentencing to prove a lower tax loss. The Government cried foul and move to enforce the stipulation.

The district court agreed that the defendant's attempt to avoid his stipulation for purposes of the Guidelines calculation would be foul. But, the court reasoned, the Guidelines are just advisory and the court has an obligation to determine a fair sentence under 18 USC § 3553(a). The plea agreement did permit the defendant to urge a variance under 18 USC § 3553(a). So, the district court concluded (footnote omitted):
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The Triple Whammy from Breach of Trust Illegal Income -- Ouch, That Hurts

In United States v. Welch, 2010 U.S. App. LEXIS 19107 (5th Cir. 2010) (unpublished), the Court affirmed a relatively rare upward variance from the guidelines sentencing range in a tax case. The background (from an update in my book) is:

The Guidelines provide an upward adjustment if the defendant abused a position of public or private trust “in a manner that significantly facilitated the commission or concealment of the offense.” §3B1.3. A tax crime involving only the breach of the duty to the Government to report and/or pay tax does not invoke this upward adjustment, but if the tax crime involves or arises from some other conduct that does breach a position of public or private trust, then this upward adjustment may apply. For example, if the tax crime is failure to report embezzled income, this adjustment may apply as well as the two level adjustment §2T1.1(b)(1) for illegal income and then, even worse, a sentencing court may consider the nontax breach of trust conduct as a factor warranting an upward variance.

In Welch, the defendant was charged under Section 7206(1) (tax perjury) for failing to report embezzlement income of $622,000. In computing the Guidelines range, the sentencing court included an illegal source adjustment (S.G. §2T1.1(b)(1)) and a breach of trust adjustment under §3B1.3. The court then determined to vary upward from the thus enhanced Guidelines range because the defendant's embezzlement had not been prosecuted and thus, in the court's view, the Guidelines calculations even as thus enhanced did not adequately reflect the seriousness of the conduct.

The Fifth Circuit sustained as a proper application of the sentencing court's authority under Booker.  The Court said succinctly:

The district court was entitled to base its variance upon the embezzlement, even if that offense was already accounted for in the Guidelines calculation. United States v. Brantley, 537 F.3d 347, 350 (5th Cir. 2008); United States v. Williams, 517 F.3d 801, 810-11 (5th Cir. 2008) (holding that a district court may rely upon factors already incorporated by the Guidelines to support a non-Guidelines sentence).

Sentencing Commission Survey of Judges on Sentencing Issues

The Sentencing Commission issued a report titled: Results of Survey of United States District Judges January 2010 through March 2010 (June 2010).

These are the items that interested me on a quick look at the report:

Relevant Conduct (Question 5)

Percentages of judges agreeing that the following should be included in relevant conduct:

• Conduct that was charged in a count that was later dismissed? -- 31 %
• All reasonably foreseeable acts and omissions of others in furtherance of a jointly undertaken criminal activity? 79%
• Conduct that was charged in a count that was later dismissed? 31%
• Uncharged conduct that is presented at trial or admitted by the defendant in court? 77%
•Uncharged conduct referenced only in the presentence report? 32%
• Acquitted conduct? 16%

Standard of Proof in Sentencing Hearings (Question 6)

You should review the table in this question, but there seems to be clear support for a prependerance of the evidence standard for sentencing hearings, even for those findings that increase a sentence.  I think there is some argument that at least some of those findings require either a clear and convincing standard or even a beyond a reasonable doubt standard.  See Alan Ellis & Mark H. Allenbaugh, Standards of Proof at Sentencing, 24 Criminal Justice 62 (Fall 2009)

Departures (Question 14);

There is a high level of agreement (76%) that the departure provisions int the Guidelines Manual do not adequately reflect the reasons for the sentence outside the guideline range, with 65% finding the Guidelines policy statements too restrictive.

General Assessment of the Guidelines and Federal Sentencing (Question 17)

Only about one-third or less agreed with the following statements:

• Overall, the federal sentencing guidelines have reduced unwarranted sentencing disparities among defendants with similar records who have been found guilty of similar conduct.
• Overall, the federal sentencing guidelines have increased certainty in meeting the purposes of sentencing.
• Overall, the federal sentencing guidelines have increased fairness in meeting the purposes of sentencing.

Purposes of Sentencing (Question 19)

Overwhelming support for advisory Guidelines.

Tax Crimes Sentencing Questions

None

Fourth Circuit Cites S.G. Tax Sentencing Policy in Reversing Sentencing Variance

In United States v. Engle, ___ F.3d ___ (4th Cir. 2010), decided 1/13/10, the Fourth Circuit remanded an exceptional sentencing variance emphasizing the Sentencing Commission's introductory comment in S.G. Ch. 2, Pt. T:

The criminal tax laws are designed to protect the public interest in preserving the integrity of the nation's tax system. Criminal tax prosecutions serve to punish the violator and promote respect for the tax laws. Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines. Recognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators.

The Court also noted the following policy statement that the Guidelines

classify as serious many offenses for which probation was frequently given and provide for at least a short period of imprisonment in such cases. The Commission concluded that the definite prospect of prison, even though the term may be short, will serve as a significant deterrent, particularly when compared with pre-guidelines practice where probation, not prison, was the norm.

The factual background was this (at least the parts I feel most material):

The criminal information charged Engle with tax evasion for the 1998 tax year only, although the information alleged that Engle had evaded taxes for sixteen years between 1984 and 2002 and owed taxes of more than $600,000. With interest and penalties included, Engle's total tax liability exceeded $2 million. Engle's actions to avoid taxes included providing false information to the Internal Revenue Service, placing assets in others' names, and funneling income through shell corporations that he controlled.

Engle pleaded guilty to the information in 2004 and proceeded to sentencing almost two years later, in February 2006. Based on a total offense level of 17 and a category II criminal history, the presentence report calculated Engle's advisory sentencing range as 27-33 months. The district court concluded that Engle's criminal history was overstated and therefore reduced Engle's criminal history to category I, yielding an advisory sentencing range of 24-30 months.

The sentencing court clearly wanted a variance -- granting it not once but twice and chastising the Government attorney for wanting blood rather than money. The second time the sentencing court said:

It . . . seems to me to be appropriate to come up with a variance that would reflect this man's ability to pay this money. And I think that considering all of that -- I don't see any unwarranted sentencing disparities. Look at the Gall case. This isn't a particularly terrible . . . variance. It seems to be, then, that the sentence I originally thought about[, w]hich was fours years probation, 18 months house arrest on electronic monitoring with work release, and he will be permitted to make trips to China as demanded by his employer.

In reversing, after emphasizing the policy grounds noted above, the Court of Appeals said:

This case is a "mine-run" tax-evasion case only in the most generous (to Engle) understanding of that phrase. Engle evaded his tax responsibilities for sixteen years, altered tax returns prepared by his accountants, directed that income to him be paid to shell corporations in an effort to avoid withholding and reporting requirements, and lied to the IRS about the existence of these corporate accounts. Yet, with facts that could perhaps be viewed as warranting an above-Guidelines sentence, the district court imposed a significantly below-Guidelines sentence, based on views that are at odds with the clearly expressed policy views of the Sentencing Commission. The district court did not acknowledge the policy statements, and there is nothing in the statements made by the court during sentencing that offer any insight into why the court believed that a prison term was not required. There is no explanation of why the court believed that allowing Engle to continue to work and travel was consistent with the seriousness of his offense or that it would provide adequate deterrence for other would-be tax evaders. Moreover, as noted above, for more than four years after pleading guilty to tax evasion, Engle continued to work and travel, yet he paid nothing towards his tax debt. It was not until two weeks before the second sentencing hearing that Engle made the first payment (of less than $500), and even that nominal payment was spurred on by an inquiry from the IRS. The absence of any payments during a time when there is the greatest incentive for a defendant to be on his best behavior raises questions about the district court's belief that restitution would provide sufficient deterrence to Engle himself.

Finally, the Court of Appeals also chastised the sentencing court for giving too much emphasis to foregoing incarceration in order to permit the defendant to pay his taxes.  The Court of Appeals said (some case and some record citations omitted for readability):

The district court made it clear that, but for Engle's earning capacity, it would have imposed a within-Guidelines sentence of imprisonment: "[A]bsent the apparent ability to generate the income, I would simply impose a Guideline sentence and be done with it." In fact, other statements suggested that the district court believed not simply that Engle's payment of his tax debt was desirable, but that it was improper for the government to seek anything other than restitution. See J.A. 60 (asking the government whether the government wanted "blood or money"); J.A. 63 ("I'm concerned that I'm not hearing any effort to try to balance this out other than let's put him in jail and take away his livelihood, which will destroy the ability of the government to collect the money. I don't see how that necessarily promotes respect for the law.").

Reduced to its essence, the district court's approach means that rich tax-evaders will avoid prison, but poor tax-evaders will almost certainly go to jail. Such an approach, where prison or probation depends on the defendant's economic status, is impermissible. That was the consistent view of courts before Booker and its progeny.

While Booker and Gall have worked a substantial change in the manner in which sentencings are conducted and have vested district courts with substantially broader discretion than they possessed under the former sentencing regime, we do not believe the change wrought by Booker was so great that it permits district courts to rest a sentencing decision exclusively on such constitutionally suspect grounds. See Bearden v. Georgia, 461 U.S. 660, 661 (1983) (noting the "impermissibility of imprisoning a defendant solely because of his lack of financial resources"); United States v. Seacott, 15 F.3d 1380, 1389 (7th Cir. 1994) ("Allowing sentencing courts to depart downward based on a defendant's ability to make restitution would thwart the intent of the guidelines to punish financial crimes through terms of imprisonment by allowing those who could pay to escape prison. It would also create an unconstitutional system where the rich could in effect buy their way out of prison sentences."); cf. United States v. Tomko, 562 F.3d 558, 570 (3d Cir. 2009) (en banc) (post-Gall case affirming probationary sentence in tax evasion case; rejecting the government's claim that the district court permitted the defendant "to buy his way out of prison" because "the record exhibits no connection between the fine imposed and the failure to incarcerate").

We do not mean to suggest that the economic status of a defendant is never relevant in sentencing. It is certainly relevant when setting the amount of a fine or establishing a payment schedule, and it may well have relevance in other ways in other cases. And while we recognize the broad discretion possessed by district courts with regard to sentencing matters, we have no difficulty concluding that in this case, the district court abused that discretion. Accordingly, we conclude that the sentence imposed by the district court was substantively unreasonable because the sentencing decision was driven solely by Engle's ability to pay restitution.

[JAT Note: for a similar application of the Sentencing Guidelines' policy with respect to tax offenses, see United States v. Ture, 450 F.3d 352, 357-359 (8th Cir. 2006).]

Finally, of course, the real subtheme here is that Court of Appeals apparently believed that the particular district judge just did not have the stomach for criminal sentencing as indicated in the following footnote to its concluding mandate that a different district judge hear the case on remand (the linked decision, although a nonprecedential decision, might be worth a read).

n4 The district judge in this case also presided over the tax-evasion trials and sentencings in United States v. Baucom, No. 08-4493, and United States v. Davis, No. 08-4512, cases that, though not formally consolidated with this case, were argued before this court seriatim with this appeal. In the sentencing hearing for Davis, the district judge, who has taken senior status, stated that he no longer intended to handle criminal matters.

Sometimes Booker Works Against the Taxpayer

Booker now gives the sentencing court considerable discretion to vary from the Guideline Sentence calculation. In tax cases, such variances are usually defendant-friendly -- i.e., the sentencing court sentences below the Guidelines range. If the Government is unhappy with the downward variance and appeals, the court of appeals will give considerable deference to the sentencing judge in the application of 18 U.S.C. § 3553(a). This works in reverse as well -- i.e., the sentencing court can impose an above-Guidelines sentence that will receive considerable Booker deference on appeal. See particularly United States v. Tomko, 562 F.3d 558, 564, 567 (3d Cir. 2009) (en banc). An above Guidelines sentence does not happen often in tax cases, but it does happen.

In a recent nonprecedential decision, the Court of Appeals addressed this type of above guidelines sentence. In United States v. Evans (3d Cir. No. 08-2528), the sentencing judge sentenced a tax protestor to an above guidelines sentence. The defendant was not pleased and appealed. The Court said (footnote omitted):

Finally, Evans argues that the District Court improperly relied on the two civil tax suits filed by Evans against the United States in its consideration of the 18 U.S.C. § 3553(a) factors. This is Evans' only complaint regarding his sentencing; he does not challenge the calculation of the Guidelines range or the Court's consideration of the § 3553(a) factors in general.

We review the District Court's sentence for reasonableness under an abuse of discretion standard. United States v. Tomko, 562 F.3d 558, 564, 567 (3d Cir. 2009) (en banc). "Where, as here, a district court decides to vary from the Guidelines' recommendations, we 'must give due deference to the district court's decision that the § 3553(a) factors, on a whole, justify the extent of the variance.'" Id. at 561 (quoting Gall v. United States, 128 S. Ct. 586, 597 (2007)).

The Guidelines range was 15 to 21 months. The District Court imposed an above-Guidelines sentence of 36 months. It discussed at length the factors set forth at 18 U.S.C. § 3553(a). We do not think it was improper for the Court, in evaluating those factors (including the nature and circumstances of the offense), to consider that, despite several courts' unequivocal rejection of Evans' claims that his income was not subject to taxation, Evans continued to violate the law. The Court noted Evans' disrespect for the court process, his disdainful interactions with IRS agents, the need for him genuinely to appreciate the authority of the law, and the need to deter the public. We have no hesitancy in concluding that it rationally and meaningfully considered the § 3553(a) factors, and the sentence of 36 months was reasonable in this case.

Lenient Sentencing in White Collar Crime / Tax Crime Cases

I have previously noted in this blog the lenient sentencing in the offshore financial account sentences to date (see here). The concept of lenient sentencing is a relative concept; lenient means relative to the Guidelines Sentence -- i.e., downward departures and variances from the Guidelines. Booker and its progeny seem to have encouraged lenient sentencing. Sentencing judges realize that they have considerable leeway to fashion an appropriate sentence and often find some reason, particularly in white collar crime cases (of which tax crimes are a subset), to depart downwards, sometimes significantly.

In a case decided yesterday, the Eleventh Circuit reminded sentencing judges (at least those in the Eleventh Circuit) that their discretion is not boundless in white collar crime cases. In United States v. Livesay, ___ F.3d ___ (11th Cir. 2009), the defendant was a player in the "massive accounting fraud conspiracy at Healthsouth Corporation." He participated in "an illegal scheme to artificially inflate HealthSouth’s earnings and to falsely report HealthSouth’s financial condition is at the heart of the fraud." Basically, he would manipulate various financial accounts via fraudulent entries to meet senior Healthsouth officials' earnings goals and the results of these manipulations were reported in public documents filed with the SEC.

Livesay pled to three counts: (i) conspiracy to commit wire fraud, securities fraud, and falsifying books and records; (ii) falsely certifying financial information filed with the SEC; and (iii) a forfeiture count related to count one. The Government's bargain in the plea agreement was (i) to recommend the 3 level reduction for acceptance of responsibility; (ii) recommend that he be sentenced at the low end of the Guidelines range; and (iii) recommend a 5K1 departure.

The sentencing pursuant to the plea then commenced a saga involving three appeals in total in which the sentencing judges (on the third time, the original sentencing judge recused himself) were fixed upon a sentence of probation and the Eleventh Circuit saw it differently and sufficiently differently to reverse. I will let you read the short summary of that saga in the opinion.

In any event, the Guidelines calculations all along was a range of 78 to 97 months (note that this is after the acceptance of responsibility reduction but before the 5K1 departure). The sentence on this third appeal was 5 years probation. The Eleventh Circuit reversed because it found the sentence unreasonable. In a prior opinion involving another defendant from the same conspiracy, the Eleventh Circuit had said that sentencing in white collar crime cases serves important deterrence goals and that "[a] sentence of probation for a high-ranking officer in a corporation where over a billion dollars of fraud was perpetrated on an unsuspecting work force and investing public is not reasonable." The Livesay court emphasized the deterrence factor in white collar crimes and has some good language which I do not cherry pick because the opinion is short and pungent and should be read.

I think this reaction of appellate judges to the deterrence factor is a trend that may well play out in sentencing for tax crimes, which I have noted are merely a subset of white collar crime. Indeed, the Guidelines raise deterrence as a principal factor in tax crimes sentencing. The introductory commentary at S.G. 2T1 says:

The criminal tax laws are designed to protect the public interest in preserving the integrity of the nation’s tax system. Criminal tax prosecutions serve to punish the violator and promote respect for the tax laws. Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines. Recognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators.

Of course, if the Government does not appeal a downward variance that does not serve the deterrence purpose, then the sentencing judges do have free rein. Presumably, the Government is not appealing the lenient variance sentences in the offshore financial account pleas. But those who have cases in the pipeline (or, for that matter, in the future) should be aware of this appellate trend to view such generous downward variances with skepticism. The trend, if it continues, will not go unnoticed by sentencing judges.

Another UBS Client is Sentenced

Press reports note that another UBS client was sentenced on 11/6. The highlights from the first I have seen, a Bloomberg report here.

1. Guts of the Guilty Plea (DOJ Tax Press Release here): The guilty plea was a bare bones plea to a single count of filing false income tax return (§ 7206(1), with a maximum possible sentence of 3 years (less good time credit of about 15%). The details which are often seen in plea agreements were left to flesh out in the sentencing process.

2. Key Sentencing Factors as Reported; (i) taxes evaded apparently "less than $26,000 for 2001-2007 (so why'd this guy do it???); (ii) $1.89 million FBAR penalty (this amount may include the civil tax penalty which, in any event on the numbers report would have been around $19,500 (does require accrual of interest)); and (iii) contrition for having done it (subtext for having been caught).

3. Sentence: 2 months of home incarceration; 150 (about 5 months) days home confinement; 215 days probation (about 7 months).

4. Leniency. Prosecutors sought leniency because of substantial assistance. I have not seen the prosecutors' motion, but will post further when and if I see it. The article does report that publicity about his case (presumably his guilty plea) helped spur more than 7,500 taxpayers to join the voluntary disclosure program that ended 10/15/2009. (As I have mentioned before, counsel in all criminal cases should encourage the Government to publicize the indictment, conviction and sentence so that this downward sentencing factor may be in play).

5. Judge's comments about offshore accounts:

“I think the public has become weary about people with all the trappings of success becoming involved in tax evasion,” said U.S. District Judge James Cohn in federal court in Fort Lauderdale, Florida. “Why does one set up offshore banking accounts? I’m sorry, it’s to set up to hide money and deceive the government.”

6. Collateral Consequences. Moran is a yacht broker. The article reports that, according to this lawyer, he will lose his Florida license to sell new yachts. [JAT tacky comment: Perhaps he will take that business offshore, which would not seem to be too difficult for yacht sales.] Tax crimes practitioners and students are aware that there may be collateral consequences of guilty pleas. One of the problems that surfaced in the voluntary disclosure initiative was whether such collateral consequences might attend entering the program; even though there will be no conviction, the required cooperation may require a taxpayer to admit facts from which a crime may be inferred (even if perhaps not a direct admission).

JAT additional comment: the lenient sentencing relative to other tax crimes continues. See my question to readers here.

Second UBS Client, Chernick, Sentenced

The press reports today proclaim the sentencing of Jeff Chernick on October 30. (See, e.g., the associated press article here.) The sentence is 3 months of incarceration (no good time credit), 6 months of home confinement, and no fine. The Government had requested 9 months incarceration for the alleged substantial cooperation Chernick had given, but probably signaled the judge that some home confinement may be OK. The Government's 9 months request was 50% of the low end of the Sentencing Guidelines calculated range. The 3 incarceration and 6 months home confinement gives the Government its request of 9 months, but, as I have said before, if you must be incarcerated, home confinement is the way to go.

The sentencing judge, Judge Cohn, was unmoved by a request for probation, reasoning that a sentencing that amounts to a "slap on the wrist" is "negative publicity," which "informs the public that you can cheat on your income taxes and get away with probation."

Chernick paid back taxes and a $4.5 million penalty. In the plea agreement he had agreed to a 50% FBAR penalty, which on the reported $8 + million foreign accounts would account for most of the reported penalty.

Chernick also prostrated himself (figuratively) before the court with the appropriate mea culpa and contrition.

Chernick had accounts at UBS and NZB Neue Zurcher Bank (sometimes NZB Neue Zuercher Bank).

Chernick had attempted a voluntary disclosure (even before the special initiative was announced and found that the Government already had him in its sight.

JAT editorial comment: I am not sure I see a material difference between Rubinstein (1 year home confinement) and Chernick (3 months incarceration and 6 months home confinement).

Questions to readers: Do you see a material difference between persons who cheat through foreign accounts and persons who cheat the old fashion, historically more visible way who do not get such lenient sentencing (the ordinary cheats who are routinely sentenced to significant jail time, even post-Booker)? What is the explanation(s) for the leniency for cheating through foreign accounts? (In this regard, I assume that, at least in the gut, there may be some difference between (i) a foreign account tax cheat who funds the foreign account with U.S. tax paid money or money not subject to U.S. tax and (ii) a foreign account tax cheat who funds the foreign account with money that was subject to U.S. tax but U.S. tax was not reported and paid (e.g., funds that went to the foreign account without U.S. reporting or by claiming improper deductions).)

First UBS Client, Rubinstein, Sentenced

The New York Times Deal Book and other publications report today that the first UBS client to plead in the current round, Steven Michael Rubinstein (previously blogged here), was sentenced yesterday to home confinement for one year. If you gotta go, that's the way to go.

Rubinstein is the first of the former UBS clients to be sentenced. Jeffrey Chernick (blogged here and here) will be sentenced tomorrow. I have not seen the sentencing filings in the Chernick case. If any reader has one or more of those filings, I would appreciate receiving them via email -- jack@tjtaxlaw.com.

The New York Times Deal Book report is here.

Another UBS Related Plea Agreement

Juergen Homann pled guilty. The DOJ press release is here. The key points are:

1. The plea agreement is to one count of willful failure to file the FBAR in violation of 31 U. S. C. §§ 5314 and 5322(a). This is a 5 year count.

2. The defendant is relieved of criminal prosecution for tax crimes related to his UBS accounts. For my students, I offer some nuance on this. Normally, one U.S. Attorney's office (USAO) cannot bind other USAOs, but this agreement joins DOJ Tax as a contracting party. DOJ Tax must approve tax and tax related crimes. Thus, as a practical matter, this binds the DOJ (which includes all USAOs). Nice. But, in true cautionary fashion, the agreement later provides that the agreement is limited only the USAO for DNJ and "cannot bind other federal, state or local authorities." The Government will, however, "bring this agreement to the attention of other prosecuting offices, if requested to do so."

3. The judge may order restitution. Note that the plea is to a nontax crime. Restitution is not allowed for a tax crime unless contractually agreed to in the plea agreement or imposed as a condition to some sentencing benefit. The other parts of the agreement suggest that the "victim" -- the United States -- may be paid before sentencing, so restitution may not be a practical issue.

4. The Government retains the right to bring appropriate sentencing factors to the sentencing court (subject to the stipulated sentencing factors discussed below). The form of this agreement is:

Rights of the Offices Regarding Sentencing
Except as otherwise provided in this agreement, the Offices reserves its right to take any position with respect to the appropriate sentence to be imposed on Juergen Homann by the sentencing judge, to correct any misstatements relating to the sentencing proceedings, and to provide the sentencing judge and the United States Probation Office all law and information relevant to sentencing, favorable or otherwise. In addition, the Offices may inform the sentencing judge and the United States Probation Office of: (1) this agreement; and (2) the full nature and extent of Juergen Homann's activities and relevant conduct with respect to this case.

5. As noted, the parties stipulate as to certain sentencing factors, but the Government reserves the right to avoid any stipulation that it subsequently determines to be untrue. Furthermore, the stipulations do not prevent the Government from responding to questions from the Court or correcting misinformation provided to the Court.

6. The civil income tax aspects are not resolved in the plea. However, the civil liability for the FBAR penalty is resolved by an agreement to pay 50% of the highest amount in the account for 1 year in the period from 2001 through 2007. Note that the FBAR penalty exposure at least for the years after 2004 is 50% of the highest amount in the account, so this civil settlement is quite a deal for this convicted FBAR felon. Note in this regard that the civil penalty is in no way limited by the fact that the defendant pled to only one count involving one year.

7. The parties stipulate as follows: "Pursuant to U.S.S.G. §2S1.3(c)(1), since this offense was committed for the purposes of violating the Internal Revenue laws, the applicable guidelines are U.S.S.G. §§ 2T1.1 and 2T4.1." I have previously addressed before concerns I have about this particular genre of stipulation to funnel the sentence into the tax guidelines, so shall not repeat them now. The bottom-line, of course, is that, if this stipulation is accepted, Homann gets sentenced the same as if he had entered plea to the common tax crime used in this context -- tax perjury under § 7206(1) -- except that his potential sentence is 5 years rather 3 years. Of course, just focusing on the Guidelines, his amount involved may be low enough that the risk involved in the extra exposure is not that great. (Note that according to my calculations below, Homann may be close to the 36 months (depending on where the judge sentences in the guidelines range), that the plea to a 5 year rather than a 3 year count could make a difference.)

8. In the stipulations, the parties agree to a tax loss for sentencing purposes of between $400,000 to $1,000,000. That tax loss under the Guidelines produces a Base Offense Level of 20. Curiously, the parties limit that stipulate to a specific UBS account disclosed to the Government pursuant to the UBS deferred prosecution agreement. Were there other accounts that, presumably, Homann should have disclosed to the Government and should disclose to the Probation Office and be considered by the sentencing court in determining the tax loww? Are the parties attempting to push such other accounts, if they even exist, under the rug?

9. The parties stipulate, rightly, that the sophisticated means 2 level enhancement applies. Nothing unusual here.

10. The parties stipulate that the 2 level acceptance of responsibility reduction applies and that defendant will be entitled to the additional 1 level acceptance of responsibility if applicable. Nothing unusual here.

11. The parties then stipulate that, with the foregoing adjustments, the sentencing level is 19 and further stipulate:

7. The parties agree not to seek or argue for any upward or downward departure, adjustment or variance not set forth herein. The parties further agree that a sentence within the Guidelines range that results from the agreed total Guidelines offense level of 19 is reasonable.

Note in this stipulation that the parties will not "seek or argue" for a "departure" (in the jargon a departure authorized by the Guidelines) or a "variance" (in the jargon a sentence outside the range otherwise determined under the post-Booker regime for sentences outside the Guidelines after departures). So that the apparent expectation is that the sentence will be within the range determined by the offense level of 19.

12. The parties do not stipulate a sentencing history, and this is curious to me. The parties do stipulate that they "reserve any right they may have under 18 U.S.C. § 3742 to appeal the sentencing court's determination of the criminal history category." This suggests that there is a sentencing history issue that the parties could not resolve.

13. So, given the offense level of 19, the indicated range under the 2008 Guidelines which the parties stipulated is: 30-37 months at Criminal History I or 33-41 months at Criminal History II.

14. It is lore among practitioners that the Government's particular prosecutorial angst will be directed against those persons who created additional subterfuge beyond the mere establishment of a foreign bank account. The DOJ Tax press release here spells this out with respect to Homann. With the assistance of a previously indicted Swiss enabler (Mattias Rickenbach), Homann established a foreign entity to appear as the nominal account owner. Further, with the assistance of Rickenbach, Homann "conducted a sham loan by transferring $5 million from an account in the name ELM Finance Limited to a second Hong Kong entity in order to obtain financing for Homann's U.S. business without alerting authorities that he controlled the assets in the ELM at UBS." Finally, "Rickenbach and a Swiss banker persuaded the defendant not to seek out and enter into the IRS's Voluntary Disclosure program."

15. The DOJ Press Release drums up business / revenue for the IRS as follows by reminding those with such offshore accounts that (i) the voluntary disclosure program is available to avoid prosecution and (ii) absent voluntary disclosure, they can be prosecuted. As further inducement, the release identifies those already prosecuted.

Major 3d Circuit En Banc Decision on Booker Sentencing in Tax Case

Thanks to the Doug Berman's Sentencing Law & Policy Blog, I learned of the Third Circuit's en banc decision in United States v. Tomko, ___ F.3d ___ (3d Cir. 2009). There is lots of good stuff there, and I will probably pontificate on it after I have thoughtfully considered it (perhaps even one or two beers deep). However, my initial impression is that, perhaps, just perhaps, the Courts of Appeals and the Supreme Court (is that the right order?) do not believe that it is or should be their duty to micromanage sentencing decisions. Sure, there are policy arguments back and forth on that issue, but, really guys, is micromanagement of those decisions at the appellate level any way to run a justice system (with emphasis on justice), particularly with our history which, after all, informs us of who we are and who we ought to be?

Someone has said that, perhaps, post-Booker, we are back in the wild, wild west days of sentencing. I would not say wild, wild west. I would say that the judges are given the discretion to fashion the punishment to fit both the crime and the person.