Justia White Collar Crime Opinion Summaries

From 1997-2001, Nacchio served as Qwest's CEO. Based on 2001 stock trades, Nacchio reported a net gain of $44,632,464.38 on his return and paid $17,974,832 in taxes. In 2007, Nacchio was convicted of 19 counts of insider trading, 15 U.S.C. 78j, 78ff. Following a remand, the court resentenced Nacchio to serve 70 months in prison, pay a 19 million dollar fine, and forfeit the net proceeds, $44,632,464.38. Nacchio settled a concurrent SEC action, agreeing to disgorge $44,632,464. Nacchio’s criminal forfeiture satisfied his disgorgement obligation. The Justice Department notified participants in private securities class action litigation or SEC civil litigation concerning Qwest stock that they were eligible to receive a remission from Nacchio’s forfeiture. Nacchio sought an income tax credit of $17,974,832 for taxes paid on his trading profits. The IRS argued that his forfeiture was a nondeductible penalty or fine and that he was estopped from seeking tax relief because of his conviction. The Claims Court held that Nacchio could deduct his forfeiture payment under Internal Revenue Code 165, but not under I.R.C. 162 and was not collaterally estopped from pursuing special relief under I.R.C. 1341. The Federal Circuit reversed as to section 165;Nacchio failed to establish that his forfeiture was not a “fine or similar penalty.” Because establishing deductibility under another section of the code is a prerequisite to pursuing relief under section 1341, Nacchio cannot pursue a deduction under that section. View "Nacchio v. United States" on Justia Law

From 2002 to 2007, Defendant-appellant Jerold Sorensen, an oral surgeon in California, concealed his income from the Internal Revenue Service (“IRS”) and underpaid his income taxes by more than $1.5 million. He used a “pure trust” scheme, peddled by Financial Fortress Associates (“FFA”), in which he deposited his dental income into these trusts without reporting all of it to the IRS as income. Over the years, he also retitled valuable assets in the trusts’ names. In 2013, after a series of proffers, the government charged him with violating 26 U.S.C. 7212(a) for corruptly endeavoring to obstruct and impede the due administration of the internal-revenue laws. A jury convicted him of the charged offense. On appeal, Sorensen argued his conduct amounted to evading taxes so it was exclusively punishable under a different statute; that the prosecution misstated evidence in its closing rebuttal argument; and (7) cumulative error. Furthermore, he argued the district court erred: (2) by refusing his offered jury instruction requiring knowledge of illegality; (3) by giving the government’s deliberate-ignorance instruction; (4) by instructing the jury that it could convict on any one means alleged in the indictment; and (5) by refusing to allow him to provide certain testimony from a witness in surrebuttal. Finding no merit to any of these contentions, the Tenth Circuit affirmed Sorensen's conviction. View "United States v. Sorensen" on Justia Law

In 2009, Clarke submitted 2006-2008 tax returns for a trust, each claiming $900,000 in income and $900,000 in fiduciary fees; they did not identify the income’s source. Each reported $300,000 of tax paid to the IRS and requested $300,000 in refunds. Clarke identified the trust’s fiduciary as “Timothy F. Geither” (an apparent misspelling of the name of then-Treasury Secretary, Geithner), which raised a red flag. The IRS notified Clarke that the returns would not be processed. Clarke resubmitted, but did not name “Geither.” The IRS mailed Clarke three $300,000 checks. Clarke opened a bank account, deposited the checks, and, within months, spent all of the funds. In 2013 Clarke was indicted on seven counts of presenting false claims. The manager of the check cashing company where Clarke tried to cash his first check, testified that Clarke told him that he had the check because of “a trust fund because his dad had passed.” Clarke argued that the government had not proven that he knew the claim was false. The court did not include a good faith jury instruction requested by Clarke. Though barred from trial, a psychiatric report explained that Clarke believed that the U.S. is a business front designed to regulate commerce and has established bank accounts for its citizens. The Seventh Circuit affirmed Clarke’s conviction. View "United States v. Clarke" on Justia Law

Anzaldi, DeSalvo, and Latin concocted an $8 million fraudulent tax scheme based on a sovereign citizen-type theory that the U.S. government holds hidden bank accounts for its citizens that can be accessed through various legal maneuvers. By filing false tax returns, the three requested more than $8 million for themselves and others in tax refunds. The IRS accepted five of their returns, paying out more than $1 million in refunds before catching onto the scheme. A jury convicted all three of conspiracy to file false claims, 18 U.S.C. 286 and filing false claims upon an agency of the United States, 18 U.S.C. 287. Anzaldi and Latin appealed their convictions. The Seventh Circuit affirmed, rejecting Anzaldi’s claim that the court should have ordered a competency examination pursuant to 18 U.S.C. 4241(a) before allowing her to represent herself pro se; upholding admission of evidence of how Anzaldi structured her fees to be under $10,000; and rejecting a claim that the court erred by not instructing the jury that willfulness was required to convict, and instead instructing that the defendants had to have acted “knowingly.” View "United States v. Latin" on Justia Law

Black repeatedly tried to pay off a more than $5 million tax debt with checks drawn on checking accounts that he knew were closed to prevent the IRS from collecting taxes from him. A jury convicted Black of one count of obstructing and impeding the IRS from collecting taxes and four counts of passing and presenting fictitious financial instruments with intent to defraud. The district court sentenced Black to 71 months in prison. The Seventh Circuit vacated and remanded for resentencing, agreeing that the district court erred in determining his sentencing range under U.S.S.G. 2T1.1, by improperly calculating the tax loss by aggregating the face value of the fraudulent checks and by including penalties and interest in the calculation. The court upheld refusal to consider audit errors and apply available deductions because Black could not establish that he was entitled to any reduction in taxes owed. View "United States v. Black" on Justia Law

Poynter operated an Original Issue Discount (OID) scheme, under which taxpayers falsely list large amounts of OID interest income from municipal bonds and certificates of deposit and corresponding amounts of withholding and claim large tax refunds. Johnson recruited clients and paid Poynter 50 percent of the fee. Her contract included a statement that Poynter’s material was not legal or tax advice. By signing the contract, Johnson agreed that she was not affiliated with the IRS. Clients signed a contract that listed a $20 million penalty for disclosure and certified that the client was not affiliated with any government agency. Johnson completed Kennedy’s 2008 return stating that Kennedy had earned $89,605 in OID income, that $87,492 was withheld, and that Kennedy was entitled to a $61,959 refund. Kennedy was unemployed and received only disability income, none of which was withheld. Kennedy paid Johnson $4117 by deposit into a third party’s bank account. Poynter submitted Gray’s 2007 tax return, listing income of $401,068 and withholding of $401,067. The IRS deposited a $278,874 refund; Gray paid Poynter $15,000. Gray filed additional fraudulent returns for other tax years. After Poynter’s scheme was uncovered, 14 defendants were indicted. Johnson and Gray were each convicted of making a false claim for a tax refund, 18 U.S.C. 287. Johnson was sentenced to 48 months’ imprisonment; Gray to 60 months. The Eighth Circuit affirmed, rejecting challenges to the sufficiency of the evidence; to calculation of the intended amount of loss; and to application of an increase for an offense that involved sophisticated means. View "United States v. Johnson" on Justia Law

Kaplan operated an illegal sports-booking business in New York that moved to Costa Rica in the 1990s. In 2004, the company went public on the London Stock Exchange. Before going public, Kaplan placed $98 million in trusts off the coast of France. Kaplan neglected to pay federal income or capital gains tax for the trusts for 2004 and 2005. In 2006, Kaplan was indicted for operating an illegal online gambling business within the U.S. Kaplan accepted a plea agreement, which stated: [N]othing contained in this document is meant to limit the rights and authority of the United States … to take any civil, civil tax or administrative action against the defendant. The court asked: Do you understand … that there is a difference between a criminal tax proceeding and a civil tax proceeding … that [this] doesn't preclude the initiation of any civil tax proceeding or administrative action against you? Kaplan replied, "I understand." The court sentenced Kaplan to 51 months of imprisonment, and ordered forfeiture of $43,650,000. Later, the IRS issued Kaplan a notice of deficiency with penalties, totaling more than $36,000,000. The Eighth Circuit affirmed: since Kaplan failed to file a return, the period to assess taxes never began to run; the plea agreement was unambiguous; and the government's failure to object to the Presentence Report did not prevent the government from bringing a civil tax proceeding. View "Kaplan v. Comm'r of Internal Revenue" on Justia Law

Between 2007 and 2012, Fountain, an IRS employee, helped orchestrate several schemes that involved filing false tax returns, claiming refunds under the Telephone ExciseTax Refund,the First Time Homebuyer Credit, or the American Opportunity Tax Credit. Fountain employed her knowledge of IRS fraud detection to avoid detection. Fountain and Ishmael enlisted people, including Johnson, to recruit claimants to provide their personal information in exchange for part of a cash refund. A jury convicted Fountain, Ishmael, and Johnson on multiple counts of conspiracy and filing false claims to the IRS, 18 U.S.C. 286, 287. Fountain was also convicted of Hobbs Act extortion and making or presenting false tax returns, 18 U.S.C. 1951(a); 26 U.S.C. 7206. Additionally, Johnson was convicted of filing false claims while on pretrial release. The court sentenced Fountain to 228 months in prison and ordered her to pay $1,740,221 in restitution; sentenced Ishmael to 144 months and $1,750,809 in restitution; and sentenced Johnson to 216 months in prison and to pay $1,248,592 in restitution. Each sentence fell within the Guidelines range after various enhancements were applied. The Third Circuit affirmed. View "United States v. Fountain" on Justia Law

Eagan, Minnesota, assisted in apprehending Procknow, who had absconded while serving supervised release imposed by a Wisconsin state court for forgery. Authorities had received information that Procknow and his girlfriend were staying at an Eagan hotel. The girlfriend was registered at the hotel. Officers spotted Procknow’s car, chased Procknow through the lobby, and arrested him. Through the windows of Procknow’s car, they saw a scanner or copier. Learning of the arrests, the hotel manager stated that the their stay was being terminated and asked the officers to collect a dog, believed to be in their room and ensure that there were no other occupants. Officers knocked, and announced. No one answered, so they used a hotel key and found a dog. Entering to ensure that there were no other occupants, officers saw, in plain view, an electric typewriter, a credit card issued in the name of “Smith,” and financial forms bearing various names and social security numbers. Officer photographed the room, sealed it, and obtained search warrants for the room and car. They seized blank W‐2 forms, partially completed tax forms, lists of business employer identification numbers, and prepaid debit cards (tax refunds) in the names of different people. Further investigation revealed that Procknow had obtained the personal identifying information of at least 40 individuals, which he used to file fraudulent tax returns and claim refunds. Procknow pleaded guilty to theft of government money and aggravated identify theft. The Seventh Circuit affirmed denial of a motion to suppress evidence obtained by the warrantless entry into the hotel room and evidence obtained by grand jury subpoena following the withdrawal of IRS administrative summonses requesting the same information. View "United States v. Procknow" on Justia Law

Curtis, a lawyer, filed 1996-1997 returns reporting tax obligations of $218,983 and $248,236, but made no payments. His partner had taken $600,000 from the practice and declared bankruptcy; Curtis underwent an expensive divorce. Curtis failed to file a return for 1998. Curtis entered into an installment agreement. He filed a return for 2000 but failed to pay $90,000. He entered into a second agreement, but filed returns for 2003 and 2004 reflecting unpaid tax liabilities of $176,802 and $61,000. Curtis did not make estimated payments and stopped making installment payments. He filed returns for 2007, 2008 and 2009, but paid nothing. Curtis was charged with misdemeanor willfully failing to pay taxes owed for 2007, 2008 and 2009, 26 U.S.C. 7203. The court allowed evidence under Rule 404(b), of Curtis’s history of failing to pay his taxes and his withdrawals of money from his law practice for personal expenses. Curtis did not object, but objected to the government’s proposed evidence that he failed to pay payroll taxes for his employees in 2013, arguing that any violations after the charged years did not bear on his state of mind during the time of the charged offenses. Although the court gave Curtis’s proposed instruction on good faith, it declined to modify the pattern instruction to include a requirement for bad motive, with respect to willfulness. The Seventh Circuit affirmed his convictions. View "United States v. Curtis" on Justia Law