On December 7, 2011, Louis Alba pled guilty to criminal tax charges (Internal Revenue Code section 7202) for failing to remit to the IRS employment taxes (FICA and/or FUTA) withheld from employee wages in the amount of almost $780,000 over approximately six years.   The case is United States v. Alba, case # 2:11-cr-730 (Eastern District of New York).

While the incident leading to Mr. Alba’s conviction is not uncommon, the prosecution is nevertheless instructive. Indeed, in tough economic times, business owners sometimes view employment taxes as a way to improve cash flow and use money collected from employees in the form of FICA and/or FUTA taxes as a de facto government bridge loan.  However, as revealed by this case, the IRS views this as stealing money from the employees who have contributed to social security, and the IRS can, and has, prosecuted those “responsible persons” in the business who have the obligation to ensure that employee withholdings go to the IRS.

The language of Internal Revenue Code section 6672(a) states:

Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 [IRC Sec. 6653] or part II of subchapter A of chapter 68 [IRC Sections 6662 et seq.] for any offense to which this section is applicable.

The language of Internal Revenue Code section 7202 states:

Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $ 10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.

As these statutory provisions make clear, section 6672(a) substantially tracks section 7202, and make available to the government criminal penalties for those that failure to collect and/or remit employment taxes.

If you have serious questions about this case or how it may apply to you or your business, feel free to contact us via telephone 305.350.5690 or email  contact@fuerstlaw.com for a confidential consultation.

On February 21, 2012, in Kawashima v. Holder, the Supreme Court affirmed the deportation of Mr. Kawashima, who pleaded guilty to one count of “willfully making and subscribing a false tax return” in violation of IRC §7206(1), and Mrs. Kawashima, who pleaded guilty to one account of “aiding and assisting in the preparation of a false tax return” in violation of IRC §7206(2).  A copy of the court’s decision is available here.

Specifically, the Supreme Court found that convictions under IRC §§7206(1) and (2) where the Government’s revenue loss exceeded $10,000, qualified as aggravated felonies pursuant to 8 U.S.C. §1101(a)(43)(M).  Because 8 U.S.C. §1227(a)(2)(A)(iii) provides that “[a]ny alien who is convicted of an aggravated felony at any time after admission is deportable,” the Supreme Court found that the Kawashimas convictions necessitated deportation. 
8 U.S.C. §1101(a)(43)(M) defines an aggravated felony as:

1. Involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or
2. Is described in section 7201 of title 26 in which the loss to the Government exceeds $10,000. 

Notably, the provision specifically cites to crimes under IRC §7201 and does not mention IRC §7206, the statute relating to the Kawashimas’ convictions.  Consequently, the classification of the Kawashimas crimes as “aggravated felonies” occurred pursuant to 8 U.S.C. §1101(a)(43)(M)(i) as crimes “involving fraud and deceit.”

The Kawashimas asserted that “textual differences between Clause (i) and Clause (ii) [of 8 U.S.C. §1101(a)(43)(M)] indicate that Congress intended to exclude tax crimes from Clause (i).”  Kawashima at 7.  The Supreme Court appeared to find Congress’s specific mention of tax crimes under IRC §7201 in Clause (ii) of 8 U.S.C. §1101(a)(43)(M) to be insignificant in its analysis.   

The difference in language does not establish Congress’ intent to remove tax crimes from the scope of Clause (i).  Clause (i) covers a broad class of offenses that involve fraud or deceit.  Clause (i) thus uses correspondingly broad language to refer to the wide range of potential losses and victims. Clause (ii), on the other hand, is limited to the single type of offense described in IRC §7201 (relating to tax evasion), which, by definition, can be only one type of loss (revenue loss) to one type of victim (the Government.)  Congress’ decision to tailor Clause (ii)’s language to match the sole type of offense covered by Clause (ii) does not demonstrate that Congress also intended to implicitly circumscribe the broad scope of Clause (i)’s plain language.

Id. (emphasis added).

Furthermore, the Supreme Court found it irrelevant that neither fraud nor deceit are formal elements to procure a conviction under IRC §7206. 

IRC §7206 provides in pertinent:

Any person who—

(1) Declaration under penalties of perjury
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; or

(2) Aid or assistance
Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document;
. . . shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.

With regard to Mr. Kawashima’s conviction under IRC §7206(1), the Supreme Court stated:

Although the words ‘fraud’ and ‘deceit’ are absent from the text of IRC §7206(1) and are not themselves formal elements of the crime, it does not follow that his offense falls outside of [8 U.S.C. §1101(a)(43)(M)(i)].  The scope of that clause is not limited to offenses that include fraud or deceit as formal elements.  Rather Clause (i) refers more broadly to offenses that “involve” fraud or deceit – meaning offenses that necessarily entail fraudulent or deceitful conduct . . . Because Mr. Kawashima’s conviction established that ‘he knowingly and willfully submitted a tax return that was false as to a material matter,’ he therefore committed a felony that involved ‘deceit.’ 

Id at 5. (emphasis added).

With regard to Mrs. Kawashima’s conviction under IRC §7206(2), the Supreme Court stated that her conviction “establishes that, by knowingly and willfully assisting her husband’s filing of a materially false tax return, Mrs. Kawashima also committed a felony that involved ‘deceit.’”  Id. at 6.

In its holding, the Supreme Court has refused to acknowledge the ambiguity of 8 U.S.C. §1101(a)(43)(M), is facially open to more than one interpretation.  While recognizing this ambiguity, Justice Ginsberg stated in her dissent:  

If the two proffered constructions of subparagraph (M) are plausible in roughly equal measure, than our precedent directs us to construe the statute in the Kawashimas’ favor . . .  We resolve doubts in favor of the alien because deportation is a drastic measure. 

Id. at 3.  (emphasis added).
In her dissent, Justice Ginsberg also identified numerous other offenses, which pursuant to the Court’s analysis, would now be deemed “aggravated felonies” requiring deportation.

Many federal tax offenses, like IRC § 7206 involve false statements or misleading conduct.  See, e.g., §7202 (failing to truthfully account for and pay taxes owed).  Conviction of any of these offenses, if the Court’s construction were correct, would render an alien deportable.  So would conviction of state and local tax offenses involving false statements . . . [S]ee, e.g., Del. Code Ann., Tit. 30 §574 (2009) (submitting a tax return false as to any material matter is a criminal offense); D.C. Code §47-4106 (2001-2005) (same); Ala. Code §40-29-114 (2003) (same); Va. Code Ann. §58.1-1815 (2009) (willfully failing to account truthfully for or pay certain taxes is a criminal offense.).

Id. at. 8. (emphasis added).

Following Justice Ginsburg’s logic, it becomes likely that immigration proceedings may now be initiated in a variety of instances where deportation was previously little more than a remote threat.  Not only foreign persons residing in the U.S., but return preparers, accountants, immigration lawyers, tax lawyers, and criminal defense lawyers should be aware of this decision and govern themselves accordingly.

If you have any questions regarding tax crimes under IRC §7206, IRC §7201, or any other tax provision, please contact Fuerst Ittleman, PL at contact@fuerstlaw.com.

On February 22, 2012, Joseph A. DiRuzzo, III, Esq., CPA, a senior tax associate at Fuerst Ittleman, filed a Petition for Writ of Certiorari in the United States Supreme Court in United States v. John M. Crim. Mr. Diruzzo’s Petition is available here.

The Petition seeks to review a decision of the Third Circuit Court of Appeals, which affirmed in part, and vacated and remanded in part, a judgment of conviction for a violation of 18 U.S.C. section 371 (a Klein conspiracy) and a violation of 26 U.S.C. section 7212(a) (interfering with the due administration of the Internal Revenue Code).  The Third Circuit’s decision is available here.

The background of the case is as follows.  On November 28, 2006, an indictment was filed against John Michael Crim (“Crim”) and other co-defendants, charging them in Count One with conspiracy to defraud the United States in violation of 18 U.S.C. § 371.  On April 24, 2007, a superseding indictment was filed against the Crim and other co-defendants, charging them again with conspiracy to defraud the United States in violation of 18 U.S.C. § 371.  Crim was also charged in Count Two of the Superseding Indictment with corruptly endeavoring to interfere with the administration of the Internal Revenue laws in violation of 26 U.S.C. § 7212(a). 

Count One of the superseding indictment alleged that Crim was the co-founder of an organization known as the Commonwealth Trust Company (“CTC”).  Count One charged as follows: “[f]rom at least January 2000 through at least July 2003, in the Eastern District of Pennsylvania and elsewhere, defendants [Crim and co-defendants] conspired and agreed, together with others known and unknown to the grand jury, to commit an offense against the United States, that is, to defraud the United States by impeding, impairing, obstructing, and defeating the lawful functions of the [IRS] of the Department of the Treasury, in the ascertainment, computation, assessment, and collection of income taxes.”

Count One further alleged that: “CTC marketed two domestic fraudulent trust packages and one offshore fraudulent trust package to its clients. The domestic trust packages consisted of a Pure Trust Organization (“PTO”) and a Private Company Trust (“PCT”). The offshore trust package consisted of an Internationally-based Corporation (“IBC”). In the domestic trust PCT system, CTC instructed clients to remove funds earned from legitimate businesses and, instead of paying income tax on those funds, to divert that income through a series of domestic trusts under the clients’ control. CTC represented to its clients that, by diverting the income through a series of trusts, the clients could escape paying taxes on that income or could significantly reduce the amount of taxes they owed. CTC also instructed clients to transfer assets they already owned into CTC’s other domestic fraudulent trust package, the PTO, to conceal and protect real and personal property from IRS levies and seizure attempts.” Count One alleged that Crim was the Head Trustee of CTC, a member of the CTC Executive Board, and a promoter of CTC trust products.

In the “manner and means” segment of the superseding indictment, Count One alleged that it was part of the conspiracy that Crim and others “met with taxpayers within the Eastern District of Pennsylvania and elsewhere to solicit and maintain clients for CTC’s offshore and domestic trust packages by falsely representing that taxpayers could lawfully avoid paying income taxes by placing their income and assets into CTC’s trust packages.”

Count Two charged that, on May 10, 2002, in Lancaster, Pennsylvania, Crim and other co-defendants corruptly endeavored to obstruct and impede the due administration of the Internal Revenue laws by speaking at a conference to CTC clients at which the defendants intended to cause the fraudulent use of CTC products by teaching the CTC clients how to engage in sham paper transactions that would result in the concealment from the IRS of clients’ property and of their receipt of income.  According to the Superseding Indictment, all of this violated 26 U.S.C.  § 7212(a).

On January 7, 2008, the trial began against Crim and co-defendants Taylor, Paul Crim, and Brownlee, before the Honorable Anita B. Brody and a petit jury.  On January 25, 2008, the District Court charged the jury. On January 28, 2008, the jury returned guilty verdicts against Crim on Count One (18 U.S.C. § 371) and Count Two (26 U.S.C. § 7212(a)).  On July 7, 2008, the District Court sentenced Crim to 96 months imprisonment on Count One and Count Two, with each count to be run concurrently.  Restitution was ordered to the government in the amount of $17,242,806.57. 

Mr. DiRuzzo did not represent any of the defendants at trial but was retained by Mr. Crim for representation before the United States Supreme Court. The Petition for Writ of Certiorari presents the following discrete questions:

Whether, in light of the Court’s holding in United States v. Aguilar, 515 U.S. 593, 132 L. Ed. 2d 520, 115 S. Ct. 2357 (1995), and its progeny, the Court of Appeals erred in failing to conclude that the “Omnibus Clause” of 26 U.S.C. § 7212(a) requires the prosecution prove that a criminal defendant have (i) knowledge of some pending Internal Revenue Service action of which the criminal defendant was aware, and (ii) that there be a “nexus” between a criminal defendant’s actions and the actions taken by a third-party, which is also contrary to a decision of another circuit.

The Petition argues that the Third Circuit’s opinion is contrary to the decisions of the Supreme Court of the United States, in Aguilar, and is in conflict with the Sixth Circuit Court of Appeal’s decision in United States v. Kassouf, 144 F.3d 952 (6th Cir. 1998), which held that “due administration of the Title [26] requires some pending IRS action of which the defendant was aware.”  Id. at 957. 

The attorneys at Fuerst Ittleman handle cases involving complex litigation (including income tax litigation) at the District Courts, the Court of Federal Claims, Circuit Courts, and if necessary in the U.S. Supreme Court.  You can reach an attorney by emailing us at contact@fuerstlaw.com, or by calling us at 305.350.5690.

On February 2, 2012, the U.S. Department of Justice announced the indictment of Wegelin & Co., a Swiss private bank, for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts and the income these accounts generated from the Internal Revenue Service (IRS).  This is the first time an overseas bank has been charged by the United States for facilitating tax fraud by U.S. taxpayers.

The Justice Department press release  also notes that the U.S. Government seized more than $16 M from Wegelin’s U.S. correspondent bank accounts, pursuant to a civil forfeiture complaint.  The press release details the allegations in the criminal indictment, the thrust of which are succinctly summarized as follows:

In the wake of the IRS investigation of UBS, members of Wegelin’s senior management affirmatively decided to capture the illegal business that UBS exited.   To capitalize on the business opportunity this presented and to increase the assets under management, along with the fees earned from managing those assets, Berlinka, Frei, Keller and others, acting on behalf of Wegelin, told various U.S. taxpayer-clients that their undeclared accounts would not be disclosed to U.S. authorities because the bank had a long tradition of secrecy.   They also persuaded U.S. taxpayer-clients to transfer assets from UBS to Wegelin by emphasizing, among other things, that unlike UBS, Wegelin did not have offices outside of Switzerland and was therefore less vulnerable to U.S. law enforcement pressure.   Members of the Swiss bank’s senior management approved efforts to capture the clients who were leaving UBS and also participated in meetings with U.S. taxpayer-clients who were fleeing UBS.

However, the timing of indictment is conspicuous.  On January 30, 2012, eight Swiss banks (Credit Suisse, Julius Baer, and Basler Kantonalbank, among others) handed over to the United States government data on U.S. clients  suspected of evading U.S. income taxes.  This disclosure was made in order to avoid prosecution in the United States.  However, remarkably, the data was encrypted at the Swiss government’s request, and Switzerland has indicated that it will not provide the encryption key to unlock the data  until the Swiss and the United States reach a broader agreement on exchange of information.

The clear implication of the Wegelin indictment is that the Department of Justice is making good on its threats of prosecution.  Indeed, in taking the unprecedented move to indict a foreign bank that has no branches to the United States, the Justice Department is sending a clear message to foreign banks, and U.S. taxpayers, that income tax evasion, and assisting those that evade income taxes, will not go unpunished.

The press release is available here.

The attorneys at Fuerst Ittleman have extensive experience dealing with IRS audits and Justice Department prosecutions.  You can reach an attorney by emailing us at contact@fuerstlaw.com.

On January 3, 2012, a grand jury sitting in the Southern District of New York returned an indictment charging Michael Berlinka, Urs Frei, and Roger Keller with conspiracy to defraud the United States in violation of 18 U.S.C. section 371.  The indictment alleges that the three Defendants worked at a Swiss Bank that actively solicited American taxpayers who were fleeing UBS in the wake of the 2008 Department of Justice investigation and deferred prosecution agreement against UBS.

The indictment alleges that the Defendants sought to take advantage of the UBS investigation by offering to allow American taxpayers to open bank accounts that would not be disclosed to the IRS.  American taxpayers maintaining financial accounts abroad have an obligation under Title 31 of the United States Code to file Form TD90-22.1 (Report of Foreign Bank and Financial Accounts (“FBAR”)), available here, with the United States Treasury Department.  The willful failure to file an FBAR form is a felony.  The Defendants, according to the indictment, gave as part of their sales pitch to prospective clients assurances that the bank accounts would not be disclosed because the bank had a long tradition of bank secrecy and did not have offices outside of Switzerland.   The Defendants opened accounts at the bank in the name of sham corporations and foundations in jurisdictions that the IRS considers to be tax havens.

In order to ensure that the accounts would remain secret, account holders names were not used, statements  were not mailed to the United States, and emails were sent from personal accounts instead of business email accounts, all with the aim of reducing the risk of detection by U.S. law enforcement.  To that end, according to the indictment, the Defendants used a third-party website called “SwissPrivateBank.com” to solicit new business from American taxpayers.  The indictment goes on to detail, without naming, various individuals who had accounts opened by the Defendants with the aim of avoiding IRS detection and to avoid income tax obligations.     

A full copy of the indictment is available here. 

The attorneys at Fuerst Ittleman have experience with IRS and Department of Justice investigations of U.S. taxpayers who have unreported income and undeclared foreign bank accounts.  You can reach an attorney by emailing us at:  contact@fuerstlaw.com, or by calling us at  305.350.5690.

On November 8, 2011, a grand jury sitting in the U.S. Virgin Islands returned a second superseding indictment in the case of United States of America and People of the Virgin Islands, v. Joseph Edge and Laura Edge, case # 3:10-cr-44. The indictment charged that the defendants had conspired to structure financial transactions and had violated and 33 V.I.C. section 1521, the Virgin Islands tax evasion statute.

A copy of the indictment can be found here

The Bank Secrecy Act (BSA) is codified at Title 31 of the United States Code and prohibits, among other things, the structuring of transactions with financial institutions in order to avoid the $10,000 reporting requirement for cash transactions. The indictment alleged that the Defendants used various business entities to attempt to conceal earned income by causing personal debts to be paid through the business entities.

The significance of the indictment is that the U.S. Department of Justice has now turned its eye on those U.S. citizens residing in the U.S. Virgin Islands who are in violation of the BSA and for related tax crimes.

The attorneys at Fuerst Ittleman have extensive experience defending against criminal violations of the BSA and the Internal Revenue Code throughout the country and in the U.S. Virgin Islands. Additionally, Joseph A. DiRuzzo is licensed to practice in the U.S. Virgin Islands and has litigated dozens of criminal cases there. You can reach an attorney by emailing us at: contact@fuerstlaw.com.

On December 13, 2011, the U.S. Department of Justice ("DOJ") announced that it formally brought charges against eight former executives and agents of Siemens AG. The indictment, found here, charges the defendants with violating various federal laws, including conspiracy to violate the Foreign Corrupt Practices Act ("FCPA").

According to the DOJ, the defendants sent bribes to officials in the Argentine government in order to secure a coveted contract for the Documento Nacional de Identidad ("DNI Project"), a project to replace the country’s national identity booklets with national identity cards. In addition to the alleged bribes to secure the contract, Siemens AG executives allegedly made further corrupt payments when the DNI Project was suspended and later pursued fraudulent arbitration in Washington D.C. against the Argentine government in an effort to recover profits that the company would have received had the Project not ultimately been terminated. In sum, the DOJ alleges that the conspiracy spanned almost two decades, from 1996 to 2009, and involved the commitment of over $100 million in bribes.

The FCPA makes it a crime for U.S. persons or companies, along with their subsidiaries and agents, to bribe officials of foreign countries in return for some business advantage. As we previously reported, the U.S. government has made it a priority to prosecute individuals and companies for violations of the FCPA, having secured lengthy prison sentences as well as hefty fines for offenders in 2011 alone. The DOJ has emphasized that heightened enforcement efforts aimed at thwarting corrupt payments to foreign officials will continue. This indictment against senior executives of a huge multi-national corporation with worldwide operations showcases the high profile of FCPA enforcement and prosecutions within the DOJ.

For more information about the FCPA or Fuerst Ittleman’s experience in defending against criminal investigations and prosecutions for white collar offenses, please contact us at contact@fuerstlaw.com.

On November 17, 2011, a grand jury in the Northern District of California returned an indictment against Ashvin Desai alleging violation of 26 U.S.C. sections 7201 (tax evasion) and 7206(2) (aiding in the preparation of a false tax return); 31 U.S.C. sections 5314 and 5322 (failure to file report of foreign bank and financial accounts). A copy of the indictment can be found here.

The indictment against Mr. Desai provides as follows:

“[The Defendant] who during the calendar year 2008 was married, did willfully attempt to evade and defeat a large part of the income tax due and owing by him and his spouse to the United States of America for the calendar year 2008, by preparing and causing to be prepared, and by signing and causing to be signed, a false and fraudulent joint U.S. Individual Income Tax Return, Form 1040, on behalf of himself and his wife, which was filed with the Internal Revenue Service. In that false income tax return, it was stated that their joint taxable income for the calendar year 2008 was $69,917.84 and that the amount of tax due and owing thereon was $6,156.88. In fact, as DESAI then and there knew, their joint taxable income for the calendar year was in excess of the amount stated on the return, and, upon the additional taxable income an additional tax was due and owing to the United States of America, and he had an interest in, and signature or other authority over, bank accounts located in India during calendar year 2008.”

The significance of this criminal indictment is that the IRS’s and the U.S. Department of Justice’s investigation of those holding unreported foreign bank accounts at HSBC have now started to produce tax evasion and FBAR failure to file cases against U.S. citizens who have attempted to use HSBC to avoid paying taxes to the U.S. government. This appears to be the first of many such cases as Title 31 violations are the criminal charge of the moment.

The attorneys at Fuerst Ittleman have experience defending against IRS investigations/audits and Department of Justice investigations and criminal prosecutions for those with unreported foreign bank accounts and unreported/under-reported income. You can reach an attorney by emailing us at: contact@fuerstlaw.com.

On December 20, 2011, Brent Beckley, co-owner of Absolute Poker, an internet poker website, pled guilty to conspiracy to violate the Unlawful Internet Gambling Enforcement Act (“UIGEA”), mail fraud, and wire fraud in connection to his operation of the internet poker website. In pleading guilty before Magistrate Judge Ronald Ellis of the United States District Court for the Southern District of New York, Beckley admitted his wrongdoing: “I knew that it was illegal to accept credit cards from players to gamble on the internet.”

While internet pay-for-play poker remains very popular, generating $5.1 billion in revenues last year alone, Beckley’s prosecution stems from a larger effort by Federal prosecutors to target internet gambling websites for violations of federal law. Although the law does not specifically address internet pay for play poker sites, UIGEA defines “unlawful internet gambling” as: 1) placing, receiving or transmitting a bet, 2) by means of the Internet, even in part, 3) but only if that bet is unlawful under any other federal or state law applicable in the place where the bet is initiated, received or otherwise made. However, since UIGEA’s passage, debate has raged over whether pay for play poker actually violates federal law with poker sites and federal prosecutors reaching opposite conclusions. Internet poker site operators have argued that UIGEA does not apply because poker should be classified as a game of skill, not a game of chance, and thus beyond the reach of UIGEA.

As we previously reported, on April 15, 2011, federal prosecutors indicted eleven people, including Mr. Beckley, in connection with their involvement in running internet poker websites PokerStars, Full Tilt Poker, and Absolute Poker. Prosecutors alleged that after the passage of a 2006 law which prohibited banks from processing payments to offshore gambling websites, the defendants engaged in a fraudulent scheme to deceive US banks and financial institutions as to the true identity of the funds being transferred by using third party payment processors to make funds appear as payments for goods and services to non-existent online merchants and fake companies.

Beckley is scheduled to be sentenced on April 19, 2012 and is expected to receive between 12 and 18 months imprisonment as punishment. If you have questions pertaining to UIGEA, the BSA, anti-money laundering compliance, and how to ensure that your business maintains regulatory compliance at both the state and federal levels, or for information about Fuerst Ittleman’s experience litigating white collar criminal cases, please contact us at contact@fuerstlaw.com.

On December 12, 2011, the Third Circuit Court of Appeals entered an opinion and order in the consolidated case of United States of America, v. John M. Crim, et al.  case numbers 08-3028, 08-3931, 08-4077, and 08-4316.  The consolidated cases involved the appeals from the convictions obtained by the United States against  John M. Crim, John Brownlee, Constance Taylor, and Anthony Trimble.  John M. Crim was represented on appeal by Fuerst Ittleman’s Senior Tax Associate Joseph A. DiRuzzo, III. Mr. Crim was not represented at trial by Mr. DiRuzzo.

The facts of the case are somewhat complex, and are, in relevant part, as follows:  Mr. Crim founded the Commonwealth Trust Company (“CTC”), and according to the Government used CTC to assist taxpayers in evading their federal income tax obligations.  CTC allegedly marketed both domestic and offshore trusts to be used to siphon off income and profits from domestic taxpayers and advised taxpayers not to file federal income tax returns.  CTC also allegedly advocated the use of liens to avoid IRS seizures and tax liens.

The Government indicted Crim, Brownlee, Taylor, and Trimble and charged violations of 18 USC section 371 (conspiracy to defraud the United States), commonly referred to as a Klien conspiracy and 26 USC section 7212 (the “omnibus clause” prohibiting the administration of the Internal Revenue Code) in the Eastern District of Pennsylvania.  Crim, Brownlee, Taylor, and Trimble were convicted at trial of all counts.  

On appeal, Mr. Crim raised various issues, such as the improper admission at trial of evidence concerning CTC’s celebrity client Wesley Snipes (who was convicted of failing to file income tax returns as a result of heading CTC’s advice); that the restitution order was improperly entered; and that the 96 month sentence on both counts was procedurally improper.

The Third Circuit ultimately held that the sentence imposed against Mr. Crim was improper and vacated his sentence and remanded to the District Court for resentencing.  The Third Circuit also remanded Mr. Crim’s case for clarification of the restitution order. A full copy of the opinion can be found here.

A petition for rehearing en banc was filed and was denied on December 12, 2011.  Joseph A. DiRuzzo, III will be filing a petition on behalf of Mr. Crim before the U.S. Supreme Court early next year.

Among other things, what the Third Circuit’s Decision in the Crim teaches is that having an attorney who is well versed in substantive tax and substantive criminal law is an absolute necessity in a criminal tax case.  Having an attorney who is versed in one area of the law but not the other may result in opportunities being lost for a criminal defendant.  The attorneys at Fuerst Ittleman have proficiency in substantive tax law and criminal law and have experience litigating civil tax cases, criminal cases, and criminal tax cases.  You can contact an attorney by emailing us at contact@fuerstlaw.com.