Justia White Collar Crime Opinion Summaries

Plaintiffs, American citizens, had bank accounts in UBS, Switzerland’s largest bank, in 2008 when the UBS tax-evasion scandal broke. The accounts were large and the plaintiffs had not disclosed the existence of the accounts or the interest earned on the accounts on their federal income tax returns, as required. Pursuant to an IRS amnesty program, they disclosed the interest and paid a penalty. They brought a class action to recover from UBS the penalties, interest, and other costs, plus profits they claim UBS made from the class as a result of the fraud and other wrongful acts. The Seventh Circuit affirmed dismissal, noting that the “plaintiffs are tax cheats,” and rejecting an argument that UBS was obligated to give them accurate tax advice and failed to do so. Plaintiffs did not argue that they asked UBS to advise them on U.S. tax law or that the bank volunteered advice. The court stated that: “This is like suing one’s parents to recover tax penalties one has paid, on the ground that the parents had failed to bring one up to be an honest person who would not evade taxes.” The court noted, but did not decide, choice of law issues. View "Thomas v. UBS AG" on Justia Law

Defendant was convicted of one count of attempting to evade or defeat a tax; four counts of willful failure to file a tax return; and one count of attempting to interfere with the administration of internal revenue laws. Defendant appealed. Although the court granted defendant's motion to reconsider the clerk's denial of his motion to extend the time for filing a reply and allowed the brief to be submitted to the court, the court nevertheless concluded that the district court did not err in any respect. Because the court held that there were no merits to any of defendant's substantive points, and because the court held that the statute of limitations accrued from the last evasive act under 26 U.S.C. 6531(2), the court affirmed the judgment. View "United States v. Irby, Jr." on Justia Law

Defendants Michael Powers and John Mahan, who ran an employment agency supplying temporary workers, were convicted after a jury trial of conspiracy to defraud the United States by impeding the functions of the IRS and mail fraud. Powers was also convicted of subscribing false tax returns and Mahan of procuring false tax returns. The tax fraud amounted to $7.5 million. Powers was sentenced to eighty-four months' imprisonment and Mahan to a term of seventy-six months. Defendants' appealed, alleging that the trial court committed errors requiring a new trial. The First Circuit Court of Appeals affirmed Defendants' convictions and sentences, holding (1) there was no prejudice to Defendants in the trial court's failure to give an defense instruction on advice of counsel; (2) various witnesses were not allowed to testify as to the ultimate issues, and thus the role of the jury was not invaded; (3) defense counsel was afforded a reasonable opportunity to impeach adverse witnesses; and (4) the district court did not plainly err in excluding testimony by Defendants' witnesses. View "United States v. Mahan" on Justia Law

Preacely pleaded guilty in 2009 to tax fraud, 26 U.S.C. 7206(2). The district court sentenced him to 18 months’ imprisonment to be followed by three years of supervised release, with a special condition, prohibiting him from participating in his former occupation of tax preparer. When the district court imposed the special condition, counsel asked: “may he own the business if he himself does not prepare any taxes himself?” The court responded, “No … you should not engage in the business of tax preparation directly or indirectly.” After his release from prison, Preacely transferred ownership of his business to his wife, but when an undercover IRS agent asked to speak to the vice-president, he was directed to Preacely. The IRS also executed a search warrant at the business and interviewed a number of employees. The district court revoked Preacely’s supervised release. The Seventh Circuit affirmed, rejecting arguments that the condition was unconstitutionally vague and that Preacely was involved only administratively with the business by doing things such as dropping off food, office supplies, and signing paychecks. View "United States v. Preacely" on Justia Law

Four defendants were convicted of conspiring to defraud the U.S. by impeding the functions of the IRS and of related fraud and tax offenses in connection with abusive trusts promoted by two Illinois companies. Although the system of trusts was portrayed as a legitimate, sophisticated means of tax minimization grounded in the common law, the system was in essence a sham, designed solely to conceal a trust purchaser’s assets and income from the IRS. It was promoted through a network of corrupt promoters, managers, attorneys, and accountants, but prospective customers who sought independent advice were routinely warned of its flaws. Defendants were sentenced to prison terms of 120 to 223 months. The Seventh Circuit affirmed. View "United States v. Vallone" on Justia Law

Lesley and Fogg presented the Benistar 419 Plan to the Ouwingas, their accountant, and their attorney, providing a legal opinion that contributions were tax-deductible and that the Ouwingas could take money out tax-free. The Ouwingas made substantial contributions, which were used to purchase John Hancock life insurance policies. In 2003, Lesley and Fogg told the Ouwingas that the IRS had changed the rules; that the Ouwingas would need to contribute additional money; and that, while this might signal closing of the “loophole,” there was no concern about tax benefits already claimed. In 2006, the Ouwingas decided to transfer out of the Plans. John Hancock again advised that there would be no taxable consequences and that the Plan met IRS requirements for tax deductible treatment. The Ouwingas signed a purported liability release. In 2008, the IRS notified the Ouwingas that it was disallowing deductions, deeming the Plan an “abusive tax shelter.” The Ouwingas filed a class action against Benistar Defendants, John Hancock entities, lawyers, Lesley, and Fogg, alleging conspiracy to defraud (RICO, 18 U.S.C. 1962(c), (d)), negligent misrepresentation, fraudulent misrepresentation, unjust enrichment, breach of fiduciary duty, breach of contract, and violations of consumer protection laws. The district court dismissed. The Sixth Circuit reversed, View "Ouwinga v. Benistar 419 Plan Servs., Inc." on Justia Law

In 2005 Anderson was charged with federal tax evasion (26 U.S.C. 7201) for tax years 1995 through 1999, while Anderson was an entrepreneur and venture capitalist involved in operating several international companies, including G & A, which generated hundreds of millions of dollars of income. The government alleged that because G & A was a “controlled foreign corporation,” he was required to recognize a share of its income on his tax return; that he fraudulently failed to do so; and thatAnderson had fraudulently underpaid his taxes by $184 million, 99% of which stemmed from G & A. He pleaded guilty with respect to two years and was sentenced to 108 months imprisonment. In 2007 Anderson filed a petition to redetermine his tax deficiencies, 26 U.S.C. 6213(a). The Tax Court granted partial summary judgment to the IRS. The Third Circuit affirmed. Anderson’s conviction for tax evasion in 1998 and 1999 precludes him, by virtue of collateral estoppel, from contesting in civil fraud proceedings that G & A income was taxable to him in those years. The IRS’s concession of all deficiency and penalty issues for the years 1995, 1996, and 1997 has no preclusive effect on those issues for 1998 and 1999. View "Anderson v. Comm'r of Internal Revenue" on Justia Law

Chapman was convicted of six counts of forging checks (18 U.S.C. 513(a)) that were made payable to the IRS and given to him by a client who had hired Chapman to resolve a tax dispute. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence and to the district court’s admission of a previous forgery conviction. View "United States v. Chapman" on Justia Law

The target witness learned in 2009 that the IRS had opened a file on him, and that an IRS special agent and DOJ tax division prosecutor were assigned to investigate whether he used secret offshore bank accounts to evade income taxes. Two years later, a grand jury issued a subpoena requiring that he produce all records required to be maintained pursuant to 31 C.F.R. 1010.420 relating to foreign financial accounts that he had a financial interest in, or signature authority over. The requested records are required under the Bank Secrecy Act of 1970. The Government argued that the Required Records Doctrine overrides the Fifth Amendment privilege. The district court quashed the subpoena, concluding that the required records doctrine did not apply because the act of producing the required records was testimonial and would compel the witness to incriminate himself. The Seventh Circuit reversed, finding the Doctrine applicable. View "In re: February 2011-1 Grand Jury Subpoena" on Justia Law

McKinney and his brother own a construction business. In 2003, the IRS filed notice of tax liens and pursued collection. McKinney avoided payment by transferring money from the business into accounts used for personal expenses. He made false statements about his ability to pay. He failed to pay taxes during 1999, 2000, 2002, 2003, 2004, 2005, and 2006. Because of the tax liens, McKinney was unable to obtain a residential mortgage. His wife obtained a loan to purchase a home, falsely stating that she was a full-time manager of the construction business with a gross monthly income of $15,374.23. Her husband signed a false employment verification; he earned the income used to pay the mortgage. His brother and his brother’s wife acted similarly. McKinney entered a plea to charges of conspiracy to defraud, impede, impair, obstruct, and defeat functions of the IRS in collection of income taxes, 18 U.S.C. 371; tax evasion, 26 U.S.C. 7201; and false statements to revenue agents, 26 U.S.C. 1001. He received a two-level enhancement to his base offense level for failing to report income exceeding $10,000 from criminal activity, U.S.S.G. 2T1.1(b)(1), and a two-level enhancement for obstruction of justice, U.S.S.G. 3C1.1. The Seventh Circuit affirmed. View "United States v. McKinney" on Justia Law