U.S. v. Govereh
                 (Continued)

Florida fraud conviction was properly admitted under Rule 404(b). Evidence of criminal activity other than the offense charged is not extrinisic under 404(b) if it is (1) an uncharged offense which arose out of the same transaction as the charged offense, (2) necessary to complete the story of the crime charged, or (3) inextricably intertwined with the evidence regarding the charged offense. Mr. Govereh also alleged jury misconduct in support of his motion for new trial. The court rejected the argument and stated that Rule 606(b) mandates, when assessing a claim of jury misconduct, that a  juror not testify as to any matter or statement occurring during deliberations. The only exception is if (1) extraneous prejudicial information was brought to the jury’s  attention, (2) any outside influence  was improperly brought to bear upon any juror, or (3) there was a mistake in entering the verdict onto the verdict form.

         U.S. v. Ohle and Bradley
        2010 U.S. Dist. Lexis 2150
       (S.D. N.Y. January 12, 2010)

  The government filed a second superseding indictment against Mr. Ohle and Mr. Bradley alleging various tax and fraud offenses.  The indictment alleged a massive scheme involving tax shelters and the failure to report the results of

   January 2010 was an active month for reported decisions in  federal tax fraud cases.  This issue of the Tax Fraud Case Report reviews them all.

              U.S. v. Jinwright
       2010 U.S. Dist. Lexis 844
     (W.D. N.C. January 6, 2010)
 
        The defendant was charged with five counts of tax evasion, five counts of filing false returns, false statements to federal agents and mail fraud. The United States continued the grand jury investigation and added charges against Mr. Jinwright in a superseding indictment.
    The defendant filed a motion to suppress the new evidence. Mr. Jinwright argued that the grand jury had been improperly used to gather evidence for trial rather than to obtain an indictment.  The court agreed that the use of a grand jury for this purpose would be improper and stated: “We recognize the universal rule that prosecutors cannot utilize the grand jury solely or even primarily for the purpose of gathering evidence in pending litigation. U.S. v. Moss, 756 F.2d 329, 330 (4^th Cir.1985). Therefore, once a criminal defendant has been indicted, the Government is barred from employing the grand jury for the sole or dominant purpose of developing additional evidence as to the charged counts is discovered."
     The court also found that there is a presumption that the jury was used for the good faith purpose of investigating new charges even if additional evidence as to the

charged counts was discovered. The court held that  it is the defendant’s burden to overcome the presumption. Ultimately, the court  found that Mr. Jinwright had failed to overcome the presumption and denied  the motion.

                  U.S. v. Yip
       2010 U.S. App. Lexis 771
       (9^th Cir. January 13, 2010)     

Andy Yip operated an “off the books” business selling watches.  He failed to report the income to the IRS or to disclose his foreign bank accounts. Mr. Yip went to trial and was found guilty on one count of conspiracy, one count of filing a false return, and two counts of failing to report foreign financial agency transactions (31 USC 5314, 5322). 
       Mr. Yip appealed his sentence on the basis that the sentencing court had used an amount that overstated the actual tax loss.  The court found that the calculation for tax loss may include state income

taxes.  In U.S. v. Newbert, 962 F.2d 281, 284 (9^th Cir. 1991) the court approved “non-federal conduct” as part of the sentencing  calculation.  Mr. Yip also argued that if his state income taxes were considered then he was entitled to the offsetting deductions these taxes would have created.  The court distinguished the holding in U.S. v. Valentino, 19 F.3d 463 (9^th Cir. 1994) by stating that the sentencing guidelines had changed and offsetting deductions may now be relevant.  See U.S. v. Martinez-Rios, 143 F.3d 662, 671 (2d Cir. 1998).  However the 11^th Circuit disagrees U.S. v. Clarke, 562 F.3d 1158, 1164 (11^th Cir. 2009).  The court followed the 11^th Circuit’s reasoning and determined that unclaimed deductions are not permitted to reduce tax loss for sentencing. The sentence was upheld.

             U.S. v. Govereh
      2010 U.S. Dist. Lexis 551
      (N.D. Ga. January 5, 2010)    

The defendant was charged with twenty counts of filing false claims arising from twenty tax returns.  He was convicted on fourteen counts.  Mr. Govereh moved for judgment of acquittal or new trial.  The court found that there was sufficient evidence to support the convictions and denied the motion for acquittal. The court also found that the introduction of evidence of a
                                          (Continue)

to commit several crimes is not duplicitous. Finally the defendants moved to severe the tax offenses from the non-tax offenses. The court found that the tax
offenses did not directly result from funds produced by the non-tax offenses. As a result, the court granted the defendants’ motion for severance. Because the proceeds of the conspiracy count had a direct link to the tax counts the court severed the conspiracy count with the tax counts.

                 O’Brien v. U.S.
         2010 U.S. Dist. Lexis 541
        (S.D. Cal. January 4, 2010)

Susan O’Brien, pro se, moved pursuant to 28 U.S.C. 2255 to vacate her sentence.  Ms. O’Brien and seven  others were indicted in 2003. Ms. O’Brien was charged with conspiracy and twelve counts of evasion and thirty    four counts of assisting the preparation of false tax returns.  The motion alleged that the Speedy Trial Act had been violated by the trial court continuing the trial.  The court found that the continuance was ordered to afford the defendants adequate time to prepare for trial to prevent a miscarriage of justice Ms. O’Brien also alleged ineffective assistance of counsel based upon the fact that she did not understand her right to a speedy trial. The court found that the record contradicted this allegation and denied the petition.

David M. Garvin and Commissioner
Arthur E. Teele, Jr. at trial.

                    U.S. v. Engle
        2010 U.S. App. Lexis 793
        (4^th Cir. January 13, 2010)

         Fredrick Engle pled guilty to tax evasion pursuant to 26 U.S.C. 7201 At sentencing the defense argued that Mr. Engle was primarily a victim of poor record keeping. The court sentenced him to four years of probation conditioned upon 18 months of home confinement. Mr. Engle was given work release and travel privileges. The government appealed the sentence as unreasonable.       Based upon the sentencing guidelines the base total offense level was 17 and the criminal history category was 2.  This resulted in a recommended sentence of 27 to 33 months.  The trial court found that the criminal history category overstated the defendant's criminal history. The recommended sentence under category 1 was 24 to 30 months.
         The sentencing court found that Engle had failed to pay his taxes for years and wanted to fashion a sentence that would afford the  defendant the opportunity to continue to work so the IRS would get paid. The government requested jail time to promote deterrence.
     The Fourth Circuit noted that since the ruling in Booker the sentencing guidelines are no longer mandatory. The court noted  however, that a sentence was required to be procedurally

           David M. Garvin, Esq.

the shelters accurately.  Mr. Ohle was a CPA and an attorney.
  The defendants moved to dismiss the indictment and cited U.S. v. Henderson as authority for the proposition that schemes aimed at defrauding the United States of taxes do not fall within the scope of the mail and wire fraud statutes.  The court declined to follow Henderson and cited numerous cases that have held that the mail and wire fraud statutes cover schemes to defraud the government of taxes. The motion to dismiss was denied.  Ohle and Bradley also argued that the indictment was duplicitous. An indictment is duplicitous if it joins two or more distinct crimes in a single count.U.S. v. Arcic, 968 F.2d 1512, 1518 (2d cir. 1992). However, a duplicitous pleading is not presumptively invalid. It is impermissible only if it prejudices the defendant.  The allegation in a single count of conspiracy

           Indianapolis 500 winner
    Helio Castroneves and David Garvin
           after his tax trial in 2009

reasonable in view of the factors contained in 18 U.S.C. 3553(a).The court vacated the sentence and remanded the matter back to the sentencing court to develop a more complete record to justify a sentence with no period of incarceration 

                     U.S. v. Dirr
       2010 U.S. Dist. Lexis 4309
    (E.D. Tenn. January 20, 2010)

.  Husband and wife were charged with conspiracy to defraud the government by obstructing the collection of taxes from 2000 to 2008.  The defendants filed a motion to suppress the evidence obtained by the government during the execution of two search warrants.  The motion was largely based upon the allegation that the search warrants lacked particularity.  The court found that a majority of the items were properly obtained by the agents and  denied the motion except for certain letters. The  magistrate found that financial

records were properly within the scope of the search warrants and did not result in the agents using their unfettered discretion.  The agents also obtained a CD that was labeled “Tax Answers the IRS doesn’t Want You to Know.”
    The defendants argued that because documents were seized that neither came under the search warrant nor within the plain view doctrine, the searches were general searches that require suppression of all evidence seized.  The Court disagreed and held that items unlawfully seized that were not taken in flagrant disregard of the warrant’s limits did not require all items seized to be suppressed.

                U.S. v. Lange
       2010 U.S. App. Lexis 173
       (8^th Cir. January 27, 2010)

         Mr. Lange was indicted on 55 counts of embezzlement, bank fraud and filing false returns.  Mr. Lange pled guilty to a single count. At sentencing the government introduced testimony of the amount of the loss through an IRS special agent.
       Mr. Lange argued that the embezzlement loss could not include the sales commissions that he earned on the transactions. The court was intrigued by the argument but, ultimately found that Mr. Lange had failed to introduce evidence that his commissions related to the transactions where embezzlement occurred.

               U.S. v. Phipps
          2010-1 U.S. Tax Cases
       (5^th Cir. January 25, 2010)

      Mr. Phipps was convicted of mail and wire fraud, obstruction, and income tax evasion. Phipps alleged on appeal that his tax evasion advocacy is protected by the First Amendment. The court found that Phipps told others that he did not report certain income for tax purposes and encouraged others to do the same.  This action violated section 7212.   Mr. Phipps also argued that he did not know that cash receipts were required to be reported as income.  The court cited Cheek v. U.S. and confirmed that the charge of evasion requires “willfulness” or a voluntary, intentional violation of a known legal duty.  However, the court found that because Phipps was advising others and had received prior IRS notices, there was sufficient evidence of willfulness to support the jury’s guilty verdict.

                  Allamby v. U.S.
          2010-1 U.S. Tax Cases
      (Ct. Fd. Cl. January 21, 2010)

      Allamby filed suit for damages for his purported unjust conviction for income taxes.  The court found that section 1495 requires the plaintiff to allege that the conviction has been reversed or set aside and that he did not commit the violation.  Since Allamby’s conviction had not been reversed, the case was dismissed.

 

IRS VOLUNTARY DISCLOSURE       
   UBS  AND RELATED MATTERS

                  U.S. v.  Barouh,
                    10-cr-20034
       ( S.D. Fla January 25, 2010)

      Barouh was charged by U.S. prosecutors with filing a false tax return for 2007 that failed to disclose his Swiss accounts at UBS AG and income he,.earned on them.. Barouh, a resident of Golden Beach, Florida, was charged in federal court in Miami through a criminal information, which typically precedes a guilty plea. Six U.S. clients of UBS, the largest Swiss bank, pleaded guilty to tax crimes last year. Barouh faces up to three years in prison. The case was assigned to U.S. District Judge Adalberto Jordan in Miami. Court records show UBS avoided U.S. prosecution on Feb. 18 by admitting it aided tax evasion, paying $780 million, and handing over data on 255 accounts. The U.S. sued in federal court in Miami to obtain data on thousands of other accounts. UBS settled that case on August 19, 2009

by agreeing to turn over information on 4,450 accounts involving “tax fraud or the like.” U.S. prosecutors are combing through data on the 255 accounts covered by the criminal investigation of UBS and have said they opened 150 criminal tax investigations. Beyond the six clients who plead guilty, several European financial professionals were indicted in the U.S. Former UBS banker Bradley Birkenfeld, a key informant in the U.S. investigation of offshore tax evasion aided by the bank, reported on Jan. 8 to a federal prison in Pennsylvania to start a 40-month term.

The Tax Fraud Case Report is a newsletter reflecting the latest tax fraud cases. The content is not legal advice and should not be relied upon. Taxpayers and their professionals are encouraged to contact a Florida Bar Certified Tax Specialist with criminal trial experience before making any decision concerning a matter with the IRS that may become criminal in nature. For more information contact.


     David M. Garvin, Esq.
           200 S. Biscayue Blvd.
                     Suite 3150
               Miami, FL. 33131
             Tel: (305) 371-8101
       E-mail: ontriaI2@aol.com
       Web: DavidMGarvin.com