Justia White Collar Crime Opinion Summaries

Barringer was the Executive Vice President and a Board member of J&R, a Virginia manufacturing company. By 2014, J&R was delinquent on filing and paying its 941 (employee withholding) taxes. Fearing personal liability, Barringer submitted a Hardship Withdrawal Form requesting $311,859.04 from her 401(k) account “[t]o prevent eviction or ... foreclosure of the mortgage on [her] principal residence.” Barringer deposited the funds into J&R's account to pay the delinquent taxes. Barringer’s mortgage balance was approximately $200,000 at the time; her payments were not delinquent. In 2016, J&R was again behind on its 941 taxes. Barringer requested a final distribution from her 401(k) account, falsely citing the end of her employment with J&R. Barringer again deposited the funds, plus some of her personal savings, into the J&R account. Instead of paying delinquent taxes, Barringer paid herself and vendors. After providing misinformation to federal agents, Barringer was convicted of willfully failing to collect and truthfully account for and pay taxes, 26 U.S.C. 7202, and making materially false statements to federal agents, 18 U.S.C. 1001(a)(2).The Fourth Circuit affirmed the convictions and 36-month sentence. Any error in the denial of Barringer’s pretrial motion to dismiss the wire fraud counts was harmless because the court subsequently granted her motion for a judgment of acquittal on those charges. Barringer’s false statements to investigators were “material to a matter within the jurisdiction of the agency.” The court upheld an abuse-of-trust enhancement under U.S.S.G. 3B1. View "United States v. Barringer" on Justia Law

The government accused Orrock of tax evasion for concealing income he received from the sale of a vacant lot that he controlled. Rather than report the sale proceeds on his personal tax return, Orrock belatedly disclosed the sale in the tax return for a partnership that he also controlled. In that return, he significantly underreported the sale proceeds.The Ninth Circuit affirmed his conviction for evading the assessment of taxes, 26 U.S.C. 7201, rejecting Orrock’s argument that the statute of limitations barred his conviction because it ran from the date he filed his false personal tax return, not from the later act of filing the partnership return. Acknowledging that some language in precedent may seemingly support that argument, the court clarified that the statute of limitations for evasion of assessment cases under section 7201 runs from the last act necessary to complete the offense, either a tax deficiency or the last affirmative act of evasion, whichever is later. The court aligned evasion of assessment cases with evasion of payment cases and joined all the other circuit courts that have addressed the issue. The indictment was filed within six years of Orrock’s last affirmative act of evasion, the filing of the partnership tax return, and was timely. View "United States v. Orrock" on Justia Law

Desu co-owned Heights Pharmacy with Desai. Desai collected Heights' cash earnings and deposited a small portion of that cash into the pharmacy’s bank account, leaving the rest undeposited. After paying for certain items from the undeposited cash, such as part of Desai’s salary, Desai split the undeposited cash between herself and Desu. Desai kept the cash earnings off the general ledger. The underreporting on Heights Pharmacy’s tax returns led to underreported net income on Desu’s individual tax returns. Following a government investigation, Desai pleaded guilty and testified against Desu. Desu also co-owned Arthur Avenue Pharmacy, with Pujara. Desu and Pujara also kept the cash earnings off Arthur’s general ledger. Pujara testified against Desu, who was convicted under 18 U.S.C. 371 for conspiracy to impede the lawful government functions of the IRS and willfully assisting in the preparation and presentation of materially false tax returns.The Third Circuit affirmed, rejecting arguments that the jury received a faulty government exhibit for use in its deliberations; two counts in the indictment fail to state an offense; the district court erred in excluding testimony regarding the Desais’ cash transactions on relevancy grounds; the district court erred in denying a “Franks” evidentiary hearing; the government constructively amended the indictment; and the district court erred at sentencing by failing to account for certain deductions and exclusions in Desu’s income when calculating the tax loss. View "United States v. Desu" on Justia Law

Wegbreit founded Oak Ridge, a financial-services company, and worked with attorney Agresti to reduce his tax liability. At Agresti’s suggestion, Wegbreit transferred his Oak Ridge interest to a trust that would convey that interest to an offshore insurance company as a premium for a life insurance policy benefitting the trust. Agresti, as trustee, acquired a variable life insurance policy from Threshold (later Acadia), which shares a U.S. office with Agresti’s law firm. The Wegbreits leveraged the policies by means of policy loans and purchases by shell companies. Acadia, at Samuel’s direction, sold his Oak Ridge interest for $11.3 million. The proceeds were wired directly to Agresti, who conveyed them to Acadia; the Wegbreits did not report any taxable income from the sale. After an audit, the IRS determined that the trust income and policy gains, including those from the Oak Ridge sale, were taxable to the Wegbreits, who had underreported their 2005-2009 income by $15 million. The Wegbreits disputed that conclusion in the tax court. After discovery revealed suspicious documents related to the trust and policies, the IRS asserted civil fraud penalties.The judge found that the trust was a sham lacking economic substance that should be disregarded for tax purposes, agreed with the IRS assessment of tax liability, and imposed fraud penalties. The Seventh Circuit affirmed, noting that the Wegbreits had previously “stipulated away” their assertions, and ordering the Wegbreits’ attorney to show cause why he should not be sanctioned under Rule 38 for filing a frivolous appeal. View "Wegbreit v. Commissioner of Internal Revenue" on Justia Law

Bittner non-willfully failed to report his interests in foreign bank accounts on annual FBAR forms, as required by the Bank Secrecy Act of 1970 (BSA), 31 U.S.C. 5314. The Act imposes no penalty for a non-willful violation if “such violation was due to reasonable cause.”The government assessed $2.72 million in civil penalties against him—$10,000 for each unreported account each year from 2007 to 2011. The district court found Bittner liable and denied his reasonable-cause defense but reduced the assessment to $50,000, holding that the $10,000 maximum penalty attaches to each failure to file an annual FBAR, not to each failure to report an account.The Fifth Circuit affirmed the denial of Bittner’s reasonable-cause defense. Bittner did not exercise ordinary business care and prudence in failing to fulfill his reporting obligations. In assessing reasonable cause, the most important factor is the extent of the taxpayer’s effort to assess his proper liability. The court reversed with respect to the application of the $10,000 penalty. Each failure to report a qualifying foreign account constitutes a separate reporting violation subject to penalty. The penalty applies on a per-account, not a per-form, basis. View "United States v. Bittner" on Justia Law

Married since 1967, John and Frances Rogers filed joint federal income tax returns for many years. They underreported their tax obligations many times; the misreporting was the product of a fraudulent tax scheme designed by John, a Harvard‐trained tax attorney. The Seventh Circuit has affirmed the Tax Court’s rulings in favor of the IRS every time.Frances challenged two Tax Court decisions denying her “innocent spouse relief,” 26 U.S.C. 6015. The Seventh Circuit affirmed, having previously affirmed the denial of Frances’s request for innocent spouse relief for the 2004 tax year. The Tax Court took considerable care assessing Frances’s claims, denying them largely on the basis that she was aware of too many facts and too many warning signs during the relevant tax years to escape financial responsibility for the clear fraud perpetrated on the U.S. Treasury. The Tax Court applied the correct standard, with the possible exception of one factual error in its 2018 opinion regarding the couple’s lavish lifestyle but any error was harmless. Frances holds a master’s degree in biochemistry, a law degree, an M.B.A., and a doctorate in education. She assisted in managing her husband’s law firm while he sought treatment for alcoholism; she fired the office manager, maintained accounting records, endorsed and deposited checks, and paid expenses. View "Rogers v. Commissioner of Internal Revenue" on Justia Law

In 1989, Bilzerian was convicted on nine counts of securities fraud, making false statements to the Securities and Exchange Commission, and conspiracy to commit certain offenses, and defraud the SEC and the Internal Revenue Service (IRS). The Southern District of New York sentenced Bilzerian to four years in prison, imposed a $1.5 million fine, and ordered him to disgorge $62,337,599.53.In 2012, Bilzerian’s wife, Steffen, filed a pro se complaint in the Claims Court seeking an $8,243,145 tax refund under 26 U.S.C. 1341. The dispute stems from transactions that Bilzerian made in 1985-1986 related to the purchase and sale of certain common stocks, for which he was convicted of securities fraud. Steffen and Bilzerian later filed a second amended complaint as joined parties.In 2018, the court dismissed that complaint with prejudice. The Federal Circuit affirmed. The plaintiffs cannot establish a reasonable belief of having an unrestricted right to the disputed funds when the money was first reported as income. A reasonable, unrestricted-right belief cannot exist where a taxpayer knowingly acquires the disputed funds via fraud. The “taxpayer’s illicit hope that his intentional wrongdoing will go undetected cannot create the appearance of an unrestricted right.” View "Steffen v. United States" on Justia Law

The IRS began a criminal investigation of Gaetano, who owns Michigan cannabis dispensaries. Portal 42, a software company that provides the cannabis industry with point-of-sale systems, confirmed that Gaetano was a client. Agents served a summons, ordering Portal 42 to produce records “and other data relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning [Gaetano] for the periods shown.” The IRS did not notify Gaetano about the summons. Portal 42 sent the IRS an email with a hyperlink to the requested records. An IRS computer specialist copied the documents. None of the personnel in the IRS’s Criminal Investigation Division have viewed the records.Gaetano filed a petition under 26 U.S.C. 7609, seeking to quash the summons, arguing that the IRS should have notified Gaetano about the summons and that it was issued in bad faith. The Sixth Circuit affirmed the dismissal of the action for lack of subject-matter jurisdiction because Gaetano lacked standing. Section 7609 waives the government’s sovereign immunity to allow taxpayers to bring an action to quash certain third-party IRS summonses. An exception applies because the summons here was issued by an IRS criminal investigator “in connection” with an IRS criminal investigation and the summoned party is not a third-party recordkeeper. Without a statutory waiver of sovereign immunity, subject-matter jurisdiction cannot obtain. View "Gaetano v. United States" on Justia Law

Blake, who has an MBA, engaged in a fraudulent tax scheme but claims unnamed users in internet chat rooms persuaded him to pursue his hidden federal “legacy trusts.” Blake filed eight different individual tax returns using fraudulent information, at one point faking his own death. He was convicted of presenting a false or fictitious claim to a U.S. agency, 18 U.S.C. 287, and theft of government money, 18 U.S.C. 641. Blake’s base offense level was six; 16 levels were added for an intended loss in excess of $1.5 million (U.S.S.G. 2B1.1(b)(1)(I)). Two more levels were added for obstruction of justice (3C1.1). Blake’s guidelines range was 51–63 months' imprisonment. Blake objected to including in the loss calculation $900,000 in claimed refunds in the 2008–2010 filings, arguing he was not responsible for those filings. He also claimed $300,000 should be the intended loss amount because he intended to obtain only his “legacy trust” funds which he believed were about that amount. Under Blake’s calculations, his guidelines range was 33–41 months.The district court rejected his arguments. The Seventh Circuit affirmed his sentence of 36 months in prison plus restitution. The district court did not commit reversible error. Blake's ineffective assistance of counsel claim was dismissed without prejudice as “better raised on collateral review.” View "United States v. Blake" on Justia Law

Igboba was convicted on 18 counts under 18 U.S.C. 286, 18 U.S.C. 1343, 18 U.S.C. 287, and 18 U.S.C. 1028A(a)(1), (b), and (c)(5), based on his participation in a conspiracy to defraud the government by preparing and filing false federal income tax returns using others’ identities. He was sentenced to 162 months’ imprisonment, followed by three years of supervised release, and required to pay restitution, special assessment, and forfeiture sums.The Sixth Circuit affirmed, rejecting arguments that when the district court increased his base offense level based on the total amount of loss his offense caused, U.S.S.G. 2B1.1(b)(1), it failed to distinguish between the loss caused by his individual conduct and that caused by the entire conspiracy and that the district court erred in applying a two-level sophisticated-means enhancement, section 2B1.1(b)(10). the district court could rightly attribute $4.1 million in losses to “acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by” Igboba. The court noted his “sophisticated” use of technology and multiple aliases. View "United States v. Igboba" on Justia Law