The Hammer is Hammered or Slammered - Tom Delay and the Reliance on Professional "Defense"

I read in the paper yesterday and today about Tom Delay's three year sentence for money laundering and conspiracy. Among other claims (e.g., political persecution), Mr. Delay is reported to have claimed that "Everything I did was covered by accountants and lawyers telling me what I needed to do to stay within the law." See Washington Post Article (at p. 2) here. Readers will recognize this as the reliance on professionals so-called "defense" that raises its head in many tax prosecutions. In tax prosecutions, the Government must prove that the defendant acted willfully (under Cheek, meaning that the defendant intended to violate a known legal duty).  To the extent the defendant relied on professionals, the defendant did not act willfully. In this light, therefore, reliance on professionals is not a defense but rather an element that the Government's proof beyond a reasonable doubt must negate.

One of the problems with the "defense," of course, is that in order to put the issue in play in the trial in chief, the defendant will usually have to take the stand to say that he or she relied. Most defense attorneys in white collar crime cases (of which Mr. Delay's prosecution and tax prosecution are simply subsets) are loath to have their clients take the stand and usually for very good reasons -- the testimony alone may be what nails the coffin and, even worse, if the judge thinks he was laying might be considered some type of obstruction of justice to enhance the sentencing.
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Fifth Circuit on the Nature of 7206(1), Commonly Called Tax Perjury

In United States v. Bishop, 629 F.3 462 (5th Cir. 2010), the Fifth Circuit affirmed the defendant's conviction for 3 counts of tax perjury (Section 7206(1)). The panel rejected the defendant's arguments that (1) her trial violated the Sixth Amendment right to speedy trial, (2) that "the trial court violated her constitutional right to present a complete defense by preventing her from arguing that her case was a 'perjury case' rather than a 'tax case;'" and (3) the trial court erred in denying her motion for new trial based on ineffective assistance of counsel.

The Fifth Circuit's panel decision, authored by Judge Garza, addresses the first and the third issues well. Those issues are not unique to criminal tax trials, so I refer the interested reader to the opinion. I address here the third issue -- dealing with the 'perjury case' issue.

For context, section 7206(1) defines the crime as:

Any person who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter

The panel first sets up the issue as being subject to "plain error" review. Turning to the merits of the defendant's argument under the plain error review standard, the panel says (discussion quoted in full, with parallel citations omitted):

Bishop's allegation of error stems from the district court's ruling preventing her attorney from asking IRS Special Agent Robert Whalen whether this case was "basically a perjury case." The Government objected to the question, and the court sustained the objection, observing, "This is a tax case." Bishop then moved on in her cross-examination. Her counsel took no steps to inform the district court that barring the question potentially violated Bishop's constitutional rights or to clarify the nature of the defense she was pursuing. Her argument on appeal, therefore, must be reviewed for plain error. To establish plain error, Bishop must demonstrate: (1) there was an error; (2) the error is "plain"; and (3) the error affected her substantial rights, was prejudicial and affected the outcome of the district court proceeding. United States v. Olano, 507 U.S. 725, 731-32 (1993). We will correct a plain error only if the error "seriously affects the fairness, integrity or public reputation of judicial proceedings." Id. at 736.

Bishop's argument hinges on a misreading of our discussion of § 7206(1) in State v. Adams, 314 F. App'x 633, 638 (5th Cir. 2009). In that case, we stressed, in obiter dicta, that a § 7206(1) false return case is "a perjury case," unlike, for example, a tax evasion or failure to file case. We interpret those remarks simply to distinguish a charge under § 7206(1) from other types of tax-related charges. We did not hold, nor would it make sense to hold, that false return cases are not "tax cases." n1 Regardless, even if Bishop's characterization of Adams were accurate, she could not show that the district court's ruling affected the outcome of its proceedings, as is required for a reversal based on plain error. The court's lone ruling on her questioning of Whalen did not prospectively prevent her from emphasizing the elements of the Government's case that she considered weakest. Moreover, we see no reason to think that the jury's verdict would have been any different even if she had emphasized those points in the manner she says she would have preferred. Reversal on this point is not warranted.
FOOTNOTE
n1 In fact, later in the opinion, we made clear that Adams was a "tax case." 314 F. App'x at 652 (referring to another case as "also a tax case").

I am not sure exactly what the defendant's attorney hoped to gain strategically by classifying the Section 7206(1) charges as a perjury case.  I do think that counsel was properly entitled to ask that question and argue the point, though.  In my judgment, that is a fair characterization of the Section 7206(1) crime.  Although not admitting that point, the panel rejects the argument under the plain error standard because (i) defendant's counsel 's failed to press the point and (ii) the context, in the panel's mind, showed that error (if there were one) did not influence the jury's verdict.

Perhaps readers can address the issue of whether the defendant was prejudiced by the failure to characterize the case as a perjury case.

Conviction in Foreign Account Plus Case

There is a recent opinion in United States v. Simon (ND IN No. 3:10-cr-00056) \about which I previously blogger here. The new opinion is here. The new opinion, dated 1/1/11, is short and cryptic -- assuming some familiarity with earlier rulings in the case to understanding the judge's exasperation. The new opinion rejects the defendant's post trial motion for judgment of acquittal and alternative motion for new trial. The Court's opening paragraph under Background, gives the reader an indication of how the court will rule:

A 23-count indictment was handed down in April 2010, charging Mr. Simon with filing false federal income tax returns (Counts 1-4), failing to file foreign bank account reports (FBARs)(Counts 5-8), mail fraud (Counts 9-19), and fraud involving federal financial aid (Counts 20-23). More than seventeen pretrial motions required four hearings, numerous oral rulings [Doc. Nos. 25, 33, 71 and 109], and three detailed written opinions and orders [Doc. Nos. 62, 74 and 100]. Trial began on November 2, 2010. Evidentiary objections were the rule, rather than the exception, during trial, and the court frequently had to restate earlier evidentiary rulings. Mr. Simon seemed to change his theory of defense mid-trial, requiring additional briefing.

The Government dismissed Count 5, and, after trial the jury convicted on all remaining counts except Counts 13, 14 and 16 (mail fraud counts). Not a good day for Mr. Simon.

The issue I previously blogged was the Court's rejection of the claim that the IRS's extension of time for signatories on foreign accounts to file delinquent FBARs by 6/30/11 operated to preclude prosecution for the original delinquencies which, if they occurred with the required willfulness, were criminal acts at the time. In this new opinion, the Court begins its Discussion as follows:

Mr. Simon's renewed motion for judgment of acquittal is premised on arguments previously raised, considered, and rejected.

And, the Court concluded its Discussion with the following:

The court carefully considered Mr. Simon's arguments, has given detailed reasons for rejecting them, and believes that it properly ruled on each of the issues raised. Mr. Simon hasn't presented any authority or identified any error or circumstance that would warrant reconsideration at this stage of the proceedings or a new trial.

Not a good opening or closing discussion for the defendant.

There is not a whole lot in between that I think particularly worthy of note for readers of this blog. The opinion is short so it might be worth scanning by those whose interest is piqued.  I mention the case only because the underlying scheme did involve foreign accounts and foreign entity intrigues and there were FBAR count convictions. The Government has another notch under its belt in this area. But, it is clear from this and the prior opinion that this was not a garden variety foreign account case. The facts underlying the federal financial aid fraud counts makes this case quite an outlier to the cases I have encountered involving foreign accounts. I just wonder whether, if facts had not involved federal financial aid fraud, the dispute between Mr. Simon and the IRS / DOJ Tax (which also had some other predicate intrigues) could not have been resolved short of criminal prosecution.