*1 Smith, David L. Defendant. applying court The district erred Rosenberg requirements Campbell Docket No. 10-583-cr. appellees’ state-law claims.8 Appeals, States Court Second Circuit. III. Argued: Nov. 2011. February court’s We reverse district Decided: Nov. 2012. motion granting plaintiffs’ order the extent it ruling scope on of class to September class certified
expanded Owners, include Unbound February 24, denying 2012 order
and its stay proceedings motion to
Coverall’s for fur-
pending arbitration. We remand opin- with this proceedings
ther consistent
ion, including stay of a issuance pending Owners’ arbitra-
Unbound claims
tion. ordered. No are awarded.
So costs America,
UNITED STATES
Appellee,
v. COPLAN, Nissenbaum,
Robert Martin Shapiro, Vaughn,
Richard Brian Bolton, Defendants-Appel-
Charles
lants, analysis case-spe- applicable appropriateness "The is were here —which it is not— cases Campbell, 407 "fact-dependent.” cific” and suggest pro- we do not failed to that Coverall F.3d at 554. The circumstances of this case minimally to the Un- vide sufficient notice markedly Campbell differ from those Owners. bound Rosenberg. If the described in those test *7 Anderson, Jacobs,
G. Butler, Donna Brown Snow, O’Mara, Cannada, PLLC, Stevens & MS, Ridgeland, for Defendant-Appellant Brian Vaughn. Garber, Firm,
Marc N. The Garber Law P.C., Marietta, GA, for Defendant-Appel- lant Charles Bolton. Dratel,
Joshua L. Dratel, Joshua L. P.C., York, NY, New for amicus curiae New York Council of Defense Lawyers; Laura Birger Grossfield and Rachel B. Kane, LLP, Cooley York, NY, New for amicus curiae National Association of Lawyers; Criminal Defense in support of Defendants-Appellants. Tarlowe, Richard C. Assistant United KEARSE, McLAUGHLIN, Before: (Mark Attorney, Lanpher, States Andrea CABRANES, Judges. Circuit Surratt, Failla,
L. and Katherine Polk As- sistant Attorneys, United States on the Judge KEARSE part dissents brief), Bharara, for Preet United States separate opinion. Attorney for the Southern District of New CABRANES, JOSÉ A. Judge: Circuit York, York, NY, New Appellee United We consider here the fate of part- four States of America. employees ners and of Ernst & Young, (Donald Riordan, Dennis P. Horgan M. (“E Y”), LLP one largest & account- Dubcoff, brief), Gary on the Riordan & ing world, firms in the appeal who their Francisco, CA; Horgan, San Sampsell Ted convictions in connection with the develop- Jones, Law, William Mitchell College of St. ment and defense of “tax five shelters” Paul, MN, for Defendant-Appellant Rob- that were sold or implemented by E & Y ert Coplan. issue, between 1999 and 2001. At among Lewin, Lewin, Nathan (Alyza D. on the things, other scope is the of criminal liabil- brief), Lewin, LLP, Lewin & Washington, ity conspiracy in a to defraud the DC, for Defendant-Appellant Martin Nis- § States under 18 U.S.C. 371 and the suffi- senbaum. ciency of the evidence with respect to the *8 (Marc Shapiro,
Alexandra A.E. E. Is- criminal intent of certain defendants. Darrow, brief), serles and James on the defendants these ac- consolidated LLP, Shapiro, York, Arato & Isserles New attorneys, tions are three tax Robert Co- NY; Morvillo, Abramowitz, Grand, Iason, Nissenbaum, plan, Martin and Richard Bohrer, P.C., York, NY, Anello & New of accountant, Shapiro, one and Brian counsel; for Defendant-Appellant Richard Vaughn, formerly employed by E & Y. A Shapiro. defendant, Bolton, fifth Charles was an Bergman,
Paul B.
Law Offices of Paul
investment advisor who
operat-
owned and
PC,
York, NY;
Bergman,
B.
New
Robert
ed various asset-management companies.1
Smith,
charged
party
David
the sixth defendant
appeal.
and is not a
to this
case,
fugitive
this
awas
at the time of trial
seeking to
who were
Nissenbaum,
worth” individuals
Vaughn
and
Shapiro,
Coplan,
defendants”)
income
million from
appeal
at least
the “trial
shelter
(jointly,
$20
en-
of conviction
separate judgments
called the “VI-
liability. Originally
from
tax
States District Court
(for
the United
tered
Produce
Group
“Value Ideas
PER”
of New York
Southern District
for the
Results”),
group was
Extraordinary
17,
Stein,
February
on
Judge),
H.
(Sidney
(for “Strategic Individual
renamed “SISG”
2010,
jury trial on
following a 10-week
Nis-
Coplan,
in 2000.
Group”)
Solutions
Gov-
to defraud the
charges
conspiracy
of
senbaum,
were the
Shapiro,
Vaughn
and
evasion,
ernment,
tax
obstruction
Group/SISG.
of the VIPER
core members
(“IRS”), and
Revenue Service
Internal
relate to
principally
of this case
The facts
ap-
the IRS. Bolton
statements to
false
and audit de-
design, implementation,
en-
of conviction
judgment
from a
peals
developed
of four tax shelters
fense
April
on
by the District Court
tered
(1) Contingent
Group/SISG:
VIPER
single
to a
following
plea
guilty
his
(2)
(“CDS”);
Currency Op-
Swap
Deferred
charge.2
conspiracy
(“CO-
Reward Alternatives
Bring
tions
follow, we reverse
reasons that
For the
(“Add-On”);
BRA”);
Add-On
CDS
and
Shapiro
Nissenbaum
the convictions
Corporation
Personal Investment
Three,
One, Two,
and the
on Counts
(“PICO”)
Nissenbaum,
Coplan,
shelters.
Four,
of Nissenbaum
Count
conviction
in a
also
invested
personally
Coplan
affirm the convictions
and we
shelter,
“E & Y 11
known as the
fifth tax
entirety. We affirm
Vaughn in their
“Tradehill,”
or
which was
Transaction”
sentencing
order
Bol-
the District Court’s
Although the
marketed to E & Y clients.
imprison-
to 15 months of
principally
ton
shelters, only the
all five tax
IRS audited
ment,
por-
and remand the
but we vacate
subject
later
to tax
Add-On shelter was
a fine of
imposed
judgment
tion of the
the oth-
charges.
respect
With
evasion
million.
$3
shelters,
charged conduct
four tax
er
or mis-
alleged
relates to
false
principally
BACKGROUND
by the defen-
leading statements made
convictions,
underlying the
The evidence
audits,
with the IRS
dants
connection
light
“in
most favorable to
viewed
internal
by the defendants’
demonstrated
Virginia,
v.
U.S.
prosecution,” Jackson
testimony, and
correspondence, deposition
307, 319,
The COBRA shelter was a tax “elimina-
er, there was no
possibility
reasonable
strategy
tion”
involved creating an earning
profit
from
apart
Add-On
from
asset with a high
purposes,
“basis” for tax
scenario,
the “home run”
since the Add-On
taxpayer
which the
could then sell and
fee
required payments
structure
to E & Y
generate a deductible
taxpayer
loss. The
entity acting
and the
as general partner
liability
would create a limited
company
potential payoff.
exceeded the
As a
'digital' option
"A
corporations
referred
'pass-through'
to as an
to elect
taxation
—often
'all-or-nothing' option
option
whose
system
subjected
under which income is
—is
payout
long
spot price
is fixed as
as the
ex-
only one level of
corporation's
taxation. The
is,
price;
ceeds the
payout
strike
does
profits pass through directly to its sharehold-
increase as the difference between the
pro
reported
ers on a
rata
basis
are
spot price
price
and the strike
increases.”
the shareholders'
individual
tax returns.”
Gov’t’s Br. 33-34 n.* *.
C.I.R.,
206, 209,
v.
531 U.S.
121 S.Ct.
Gitlitz
(2001) (internal
motivated
essence,
DISCUSSION
sought
the Government
es.15 In
hid the
that the defendants
demonstrate
fewer than ten
raise no
The defendants
infor-
by withholding
from the IRS
truth
convictions
respective
to their
challenges
affirmative misstate-
making
and
mation
briefly
which we
appeal,
on
and sentences
7, 2009,
jury
returned
May
On
ments.
(1) the Govern-
follows:
summarize as
on all counts.
guilty
verdict of
general
a
theory
legally
was
conspiracy
ment’s Klein
2010,
22,
21 and
the District
January
On
(2)
invalid,
evidence
there was insufficient
prin-
the trial defendants
sentenced
Court
(a)
Shapiro
the convictions of
support
was sentenced
cipally
Coplan
as follows:
One, the con-
on
and Nissenbaum
Count
years
three
imprisonment,
months of
to 36
(b)
of Sha-
charge,
the convictions
spiracy
$75,000 fine;
release,
a
supervised
and
of
and
on Counts Two
piro and Nissenbaum
sentenced to 30 months
Nissenbaum was
(c)
Three,
charges,
tax evasion
and
years
supervised
three
of
imprisonment,
of
Four,
on
Nissenbaum’s conviction
Count
release,
$100,000 fine;
a
and
(3)
charge,
the District
the obstruction
imprisonment,
to 28 months of
sentenced
that venue was
finding
erred in
Court
release,
a
and
years
supervised
two
of
Six,
charged
which
proper
for Count
fine;
$100,000
Vaughn was sentenced
and
IRS,
false statements to the
Vaughn with
and two
imprisonment
to 20 months of
(4)
by admitting
the District Court erred
judg-
release. The
years
supervised
of
coconspirator
testimony
alleged
of
for the trial defendants
ments of conviction
attorney who com-
Taylor, a tax
January
Graham
were entered on
variety
involving
crimes
mitted a
of
22, 2009,
trial,
January
Bol-
Prior to
on
(5)
case,
unrelated to this
shelters
Superseding
Infor-
pleaded guilty to
ton
admitting
the out-
District Court erred
of
charging
single
him with a
count
mation
than 20 al-
of more
of-court statements
§
in violation of 18 U.S.C.
conspiracy,
(6) the District Court
leged coconspirators,
(1) to defraud the
having
objectives:
three
and
excluding portions Coplan’s
of
erred
de-
by impeding, impairing,
States
(7)
transcripts,
the de-
Vaughn’s deposition
govern-
the lawful
feating,
obstructing
and
prejudiced by prosecutorial
fendants were
(the
IRS
so-called
mental functions of the
rebuttal
misconduct in the Government’s
(2) to make false
conspiracy”);
“Klein
(8)
summation,
erred in
the District Court
IRS, in
of 18
violation
statements
(a)
give
“theory
de-
declining
(3)
1001;
§
ob-
corruptly
U.S.C.
(b)
instruction,
jury
instructing
fense”
impede the administration
struct and
(c)
theory, and
a conscious avoidance
laws,
of 26
internal revenue
violation
that “economic sub-
7212(a).
14, 2010,
instructing
jury
April
§
On
U.S.C.
a “rea-
only if there was
con-
stance” existed
judgment
entered a
District Court
to lack
resulting
quences.
transactions are said
Such
can disallow deductions
15. The IRS
”
Comm’r,
Lee v.
'economic substance.’
that "can not
[sic]
from a transaction
(internal
substance,
(2d Cir.1998)
quota-
purpose,
F.3d
be said to have
reason
omitted).
and citations
apart
anticipated tax conse-
tion marks
utility
from [its]
possibility”
profit,
spillover
place among
sonable
its
the internal revenue meas-
prejudice
Coplan’s
Vaughn’s
infected
ures and
among
general penal
included
convictions,
remaining
provisions.
Bolton’s
Id.
418 n. 36.
In United
Hirsch,
procedurally
sentence was
substan- States v.
100 U.S.
conspiracy provision generally applica- Validity I. of the Government’s ble to the body whole of federal law. In so Theory Conspiracy
Klein
holding, the
prohibit-
Court described the
“any
ed fraud as
against
fraud
United
[the
appeal
The first issue on
concerns the
coin,
may
against
It
be
States].
the
or
legal validity of the Government’s Klein
consist in cheating
government
of its
conspiracy theory under
the “defraud
property.”
land or other
Id. at 35.
§
previous-
clause” of 18
371.16 As
U.S.C.
noted,
ly
Count One of the Redacted In-
“It is a well-established rule of con
Nissenbaum,
charged Coplan,
dictment
struction that
Congress
where
uses terms
§
Shapiro,
Vaughn
conspiracy
in a
371
that have accumulated settled
un
meaning
(1)
objectives:
with three
to defraud the
law,
der
...
the common
a court must
(the
(2)
conspiracy),
United States
Klein
to infer,
dictates,
unless the statute otherwise
taxes,
evade
to make false state-
Congress
means to incorporate the
objective
ments to the IRS. The core
established meaning of
these terms.”
argued by the Government at trial was the
States,
1, 21,
Neder v. United
527 U.S.
119
conspiracy,
Klein
and that conspiracy
1827,
(1999) (internal
S.Ct.
A. The of the property rights by another of dishonest Conspiracy Klein means.17 See Hammerschmidt v. United 1867, States, 182, 188, 511, original Enacted federal 265 44 U.S. S.Ct. 68 (1924); conspiracy appended statute was to “An L.Ed. 968 Porcelli v. United (2d Cir.2002) States, 452, existing relating Act to amend Laws 303 F.3d 457 n. 1 Internal Revenue and other Purposes.” (noting the “familiar common law ‘ ’ Goldstein, Conspiracy Abraham S. to De- meaning” of the term “fraud” involved States, 405, “using falsity money United 68 Yale L.J. to do the victim out of fraud interests”). 2, 1867, 418 Act (quoting property of March or Other federal 484). 30, § ch. generally Stat. the 1875 criminal statutes are in accord. codification, See, Pierce, the statute e.g., was moved from United States v. 224 F.3d prohibits conspiracies advantage; gaining 16. Section 371 all ar- ei- unlawful or unfair any against ther "to commit Unit- offense right tifice which the or interest of another (the clause”), ed or deceit; States” "offense "to de- injured; injurious stratagem; is States, any agency fraud the United or thereof Dictionary trick.” Id. at 541. The American (the any any purpose” manner or for "de- English Language, published by Noah of clause”). § fraud 18 U.S.C. 371. 1864, is, course, Webster of to be Heritage confused with the American Dictio- dictionary day, In the authoritative nary English Language, published by deprive "defraud” was defined as "[t]o Houghton any Mifflin in or modern fraud, right by deception or artifice.” The dictionary bearing great the surname of the Dictionary English. Language American lexicographer. American (1864). "Fraud” was defined as "[d]e- ception deliberately practiced with a view to by interfering (2d Cir.2000) (“In States of defraud the context fraud, military I draft words ‘to War fraud and wire World mail wronging ‘to one and circulation commonly through printing refer defraud’ meth- rights by subject dishonest to the draft property urging in his those handbills ” marks (quotation re- obey Supreme ods or schemes’.... it. The Court not to omitted)). § hold- convictions under versed the the Unit- conspire to defraud ing “[t]o
Nonetheless,
the word “defraud”
to cheat the
primarily
ed States means
much more
interpreted
§
has been
money, but
property
out of
government
understanding of
broadly. The current
obstruct
to interfere with or
it also means
liability may be
“conspiracy to defraud”
*14
by
functions
governmental
of its lawful
one
Supreme Court
traced to two seminal
deceit,
by
at
least
trickery,
or
or
Henkel,
case,
v.
In the
Haas
cases.
first
craft
Hammer-
means
that are dishonest.”
462,
249,
61
of the government
property
out of
or
conspiracy
to defraud the Govern-
money, but “also means to interfere with ment is to be read
broadly
more
than a
governmen-
conspiracy
or obstruct one of its lawful
private person.
defraud a
deceit,
Goldstein,
by
tal functions
trickery,
craft or
See
62 — Yannotti, novo, States, 541 States v. de United Skilling v. example of United (2d Cir.2008), 2896, 2928, uphold will 120 we -, 177 130 S.Ct. F.3d U.S. (2010), “any if ration- body judgments of conviction “pare” L.Ed.2d 619 core,” id., have found the essen- to its al trier of fact could § “down precedent beyond the crime a reason- to a tial elements of properly are directed arguments such doubt,” Jackson, ap- able U.S. authority. As an intermediate higher court, are bound to follow S.Ct. 2781. we pellate no Supreme precedents, Court dictates of argu- find the persuasive we
matter how
Sufficiency of the Evidence
A.
the moor-
breaking loose from
ments for
Supporting
One
Count
by “par-
judicial norms
ings of established
Nissenbaum
Shapiro and
Defendants
'
ing” a statute.
sufficiency
of the evi-
challenge
first
sum,
de-
because the Klein doctrine
three
with
to each of the
respect
dence
of the
scope
falls within the
rives from and
§
conspiracy.
alleged objectives of
(itself
long-
grounded
law of the Circuit
noted,
Count One
previously
As
decisions),
reject
we
Supreme
lived
Court
charged the trial de-
Redacted Indictment
validity
challenge to the
the defendants’
§
three
conspiracy
in a
fendants
theory
liability.
of criminal
(1)
to defraud
objectives:
(the
to evade
conspiracy),
Klein
States
Sufficiency Challenges
II. The
taxes,
§
in violation of 26 U.S.C.
le
challenging
In addition
IRS, in
to make false statements
theory,
validity
conspiracy
of the Klein
gal
§ 1001.
violation of 18 U.S.C.
*16
Shapiro
and Nissenbaum
defendants
convic
conspiracy
“To sustain a
sufficiency challenges.19
mount a series of
tion,
some
matter,
present
the Government must
challeng
a defendant
general
As a
reasonably
it can
be
that led evidence from which
sufficiency of the evidence
ing the
person charged
with con
heavy
a
inferred that
to his conviction at trial “bears
Heras,
the existence of the
burden,”
spiracy
F.3d
knew of
States v.
609
United
(2d Cir.2010)
and
alleged in the indictment
101,
(quotation marks
scheme
105
in it.”
omitted),
joined
participated
knowingly
of review is “ex
as the standard
539,
F.3d
deferential,”
Rodriguez,
v.
States v.
392
States
United
ceedingly
United
(2d Cir.2004)
(2d Cir.2008).
108,
marks omit
Hassan,
(quotation
545
F.3d
126
578
ted).
conspiracy
In
context of a
con
sufficiency challenge, we
evaluating
a
viction,
jury’s findings
to the
is
light
in the
most
“deference
“must view the evidence
...
a con
especially important
ev
because
government, crediting
favorable
very nature is a secretive
spiracy
have been drawn
its
ery inference that could
where all
favor,
operation, and it is a rare case
deferring
to
government’s
in the
laid bare in
credibility aspects
conspiracy
of a
can be
of witness
jury’s
assessment
Rojas, 617 F.3d
of the
court.”
States v.
weight
of the
and its assessment
Cir.2010)
(2d
Chavez,
669,
marks
(quotation
674
v.
evidence.” United States
omitted) (alteration
Where,
Cir.2008) (internal
(2d
original).
119,
cita
F.3d
here,
jury
guilty
“a
returns a
verdict on
tions,
marks
quotation
alterations
omitted).
acts in the
charging
an indictment
several
Although sufficiency review is
Coplan
challenges
argument
sufficiency
ic
of his own.
Vaughn joins
Shapiro’s
re-
19.
insufficiency
evidence to
garding
sufficiency challenge.
of the
a
does not raise
conspiracy,
specif-
no
prove a Klein
but raises
summation,
if
conjunctive,
...
the verdict stands
the were not true.
In rebuttal
respect
any
Government argued
you
evidence is sufficient
credit
“[i]f
Mr.
charged.”
Dougherty’s testimony,
one of the acts
v. Unit-
...
that alone
Griffin
States,
46, 56-57, 112
proof beyond
ed
502 U.S.
S.Ct.
is
a reasonable doubt on the
466,
(quotation
Advice to CDS Account aspects.” There is little such evidence Open. example decep- As additional context,” with respect Shapiro’s intent. The rec- tion “in the Government points to ord of suggestion by Cinquegra- communication between Coplan, Shapiro, and Nis- ni and reflects a trading Shapiro senbaum that CDS clients continue sometimes tense working relationship, in which past early termination date in re- order argument peatedly questions their tax as raised strong “mak[e] concerns 214; (Sha- possible.” language A IV: see id. at 212 about the draft opinion. piro e-mail advocating “keeping the trad- See A III: (Cinquegra- 144/3873-145/3876 *19 lawyer's obligation zealously pro- priate during of “the swap period, time the will GP interests, pursue legitimate tect and a client’s swaps terminate the with the bank.” In re- law”). within the bounds of the advice, sponse Shapiro’s Step 45 was edit- read, "Swap ed to terminates.” original 22. In the draft of the CDS Action Plan, Step appro- 45 read follows: “At the faith good consistent with appears equally as “a describing Shapiro testimony ni tasked with because he role as a “technician” “high maintenance” his pain” and questions ask the same struc- frequently “would the transactions were making sure the and “would revisit multiple times” law. compliance with tax Id. tured been ad- previously that had same issues testimony); see (Cinquegrani 140/3857-58 dressed”). ex- example, Shapiro For (Six testimony); A II: also 544-45/2865-67 that “the nature of the “concern” pressed testimony).23 (Rydberg III:A 398/4882 making ... investors are rep[resentation]s A 455. On strong.” IV: may be too Objective Tax Evasion b. occasions, revi- Shapiro proposed several incorporated into Cinquegrani sions that Shapiro challenges also result, early a an As documents. PICO respect to sufficiency of the evidence with that PICO clients had representation § objective tax evasion was re- purpose investment “principal” “It is charged in Count One. conspiracy representation PICO placed crime, conspiracy is a elementary that nontax business had a “substantial clients and distinct from the substantive separate Shapiro purpose.” A III: 165/3955-56. Pinckney, 85 States v. offense.” United opin- a draft version of questioned also (2d Cir.1996). “Although the F.3d inaccurately suggested ion letter prove need not commission government transac- consequences tax of the PICO secure a con offense” to substantive A not discussed with clients. tion were conviction, prove “it must that the spiracy result, opinion the final 457. As a IV: conspirators] conduct intended future [the inves- potential letter disclosed that PICO upon includes all the elements of agreed an overview of the “provided tors were (internal quo the substantive crime.” Id. trading strategy, includ- economics of the omitted). tation marks and alterations A consequences.” tax V: ing potential case, the substantive crime of tax this 575. “(1) proof of the exis requires evasion argues strenuously The Government debt, willful tence of a substantial tax opinion final letter still appeal that nonpayment, and an affir ness of the misleading statements contained lies and defendant, performed mative act the “real reason” for the PICO about to evade or defeat the calcula with intent that, But we note as Cin- transaction. of the tax.” United payment tion testified, very himself quegrani fact (2d Litwok, 208, 215 States v. 678 F.3d prepared letter was indi- opinion Cir.2012) omitted); see (quotation marks anticipated cates that the client substantial § U.S.C. A III: tax benefits from the transaction. deficiency Government’s sole tax Thus, to fault be- 146/3880-81. theory at trial was that the Add-On opinion affirmatively letter failed cause offered investors no reasonable shelter to state that the “real reason” for the and that the tax losses possibility profit, provide transaction was “to tax loss- PICO therefore could not resulting from Add-On spurious. At a mini- es” borders on from the investors’ mum, properly be deducted with Shapiro’s respect conduct argued tax returns. The Government crafting opinion letter PICO analysis objective of that evasion below. Our 23. For the sake of convenience and to avoid is, course, equally applicable in repetition, the evidence evidence undue we set forth objec- conspiracy Shapiro’s with the Klein respect involvement in the connection the tax tive. Add-On tax shelter under the rubric of *20 that, explana- in to create a non-tax involved in drafting order factual section of the Add-On tion for the mechanics of letter, legal the Add-On opinion and was transaction, adopted trial a defendants from excluded e-mails which others dis- story” proposed by false “cover Bolton. cussed economics of the transaction. story key step That cover attributed a Marketing. Add-On The Government’s transaction —the transfer of the Add-On claim that Shapiro was involved in market- digital options partner- from the individual ing the primarily Add-On shelter rests a a ship newly request formed LLC—to receipt his of various e-mails. In June Krieger from trader Andrew to consolidate 2000, Coplan Vaughn, Shapiro, sent accounts for administrative convenience. meaningful dispute There was no at trial a proposed Nissenbaum e-mail to other E story” the “consolidation cover was professionals & Y announcing the new false. shelter, Add-On and asked them to review “accuracy for and tone.” AIV: 127. That argues
The Government that sufficient repeated e-mail the consolidation cover supported objec- evidence the tax evasion story. Similarly, July Coplan tive sent because involved “w[as] junctures develop- critical of Add-On’s an e-mail asking Vaughn, Shapiro, Nis- ment, marketing, and defense.” In what senbaum, and others to “make any final follows, we consider evidence with re- changes” to a draft client solicitation let- spect to Shapiro’s involvement at each of contrary ter. But to the Government’s junctures.” these “critical assertions, there Shapi- is no evidence that actually ro habitually “reviewed” the Development. parties Add-On do dispute strategy not that the for the Add- Add-On solicitation they letters before On tax initially proposed by shelter was Indeed, were sent to clients. according to Vaughn developed by and thereafter Six, testimony cooperator trial of Belle Vaughn, Coplan, and members of the in- Shapiro among was not the people who operated by vestment firm Bolton. Al- “part process” “sending were of th[e] though Shapiro copies early received e- out A to clients.” II: letters 424-25/2391- describing “precursor concept” mails a 93. shelter, the Add-On participated Shapiro maintains that he had no reason telephone prelimi- conferences about that suspect understand or the economics of idea, nary “specifics” of the transaction February the Add-On shelter until only A developed subsequently. were III: years marketing after the Add-On (this 237/4241; see AII: was “not 2003— 496/2674 campaign he received draft “Talk way ultimately the Add-On transaction —when be”). ing Points” that contained the details nec Moreover, Shapiro came to did essary profit potential to assess the early attend an at which the al- meeting discussed, draft, leged story” reviewing “cover was not transaction.24 After "objective” prong jective objective pre-tax purpose Under the so-called business doctrine, profit potential) the economic substance transactions that must be satisfied before may profit potential lack a will be disallowed transaction be accorded tax benefits Libin, claimed.”); Congress the IRS. See Jerome B. see also Modem Tax Controver- sies, 478-1, Practicing Should Address Tax Avoidance Head-On: The Law Inst. 478-35 GAAR, ("To analyze pres- Internal Revenue 30 Va. Code Needs transaction for substance, ("Some objective Tax Rev. 345-46 lower ence of economic courts objective potential courts have viewed ‘economic substance’ as a look to see if there is an risk.”). (sub- having separate requirements profit presence genuine test two and/or *21 amnesty template, ments on the Add-On “the 2:1 ratio”25 asked whether Shapiro does not reflect although was “correct” the record describing potential payoff suggestions. of fees” was on or content of his impact scope and what “the then leaving transaction. Shapiro of the faults profitability Government .He in Coplan “[apparently, amnesty from learned in the story cover undisturbed payoff 2:1 would not apparent [A]dd-[0]n it not at all template, but is to E & Y paid exceed the transaction story cover in fact knew that the Shapiro fees of the loss totaling Bolton 1.5% and argues “bogus.” The Government was under premium net was amount since the an “instant Shapiro that because had seen added). The (emphasis A 1%.” V: Vaughn proposing message” from why explanation for offers no Government the “consol- he knew that concept, Add-On ratio payoff ask Shapiro would about But purpose was false. idation” business already knew that impact of fees if he exchange message in the instant nothing profit potential. lacked the Add-On shelter pur- business suggested that the Add-On instead, false; story the cover pose The Government was Add-On Defense. that, calls and by “reviewing developed during was conference argues further in an IRS de- Shapiro for use in which approving” correspondence e-mail chart af- himself committed an position, Shapiro participate. did chart at act of tax evasion. The firmative depicted the “home run” “sweet
issue
Objective
c. False Statement
in which the Add-On shel-
spot” scenario
huge windfall to the
produce
ter would
objective
and final
The third
the Government con-
Although
client.
Shapiro
conspiracy imputed
§ 371
on the
at trial that “the numbers
ceded
One,
the false state-
charged
Count
true,”
argues
it
that the chart
chart are
objective,
clearly directed to
ments
by attempt-
the IRS
was used to mislead
Six and
charged
the conduct
Counts
a false non-tax motivation
ing to establish
(“Section
A
Seven. See VI: 420/6161
response, Shapiro
for a transaction.
only charged
object
as an
is not
no evidence that he
argues that there is
conspiracy,
charged
but is also
Counts
chart,
affirmative with the
anything
did
of-
separate substantive
Six and Seven as
variety
correctly
which
sets forth a
of out-
Coplan and
against
fenses
defendants
transaction,
including the
comes for the
”).
noted,
previously
Vaughn....
As
run.” At
extraordinarily unlikely “home
charged
Six and Seven
defendants
Counts
most,
reflect that
Shapiro’s time records
Vaughn
making
false
Coplan and
a half.
“he reviewed it” for an hour and
IRS. The Government
statements to the
even knew
Shapiro
does not contend that
Finally,
points
the Government
to corre-
Vaughn depositions
Coplan
about the
the Add-On “amnes-
spondence regarding
occurred,
they
before
much less discussed
template”
Shapiro’s par-
as evidence of
ty
There was no
testimony
It
their
with them.
conspiracy.26
in a tax evasion
ticipation
substantive
false
statements
provide
separate
did
com-
appears
premium)
In December
the IRS announced
(profit:
25. The "2:1 ratio”
refers to
amnesty program
taxpayers who
under which
that,
unlikely
highly
"home
the fact
absent
voluntarily
engaged
could
had
in tax shelters
post,
potential
scenario discussed
run”
to the IRS
order
disclose those transactions
payoff
transaction before fees
Add-On
potential penalties. The defendants
to avoid
the net investment amount.”
was "two times
amnesty templates that E &
helped
craft
Y’s clients could submit to
IRS.
*22
Conspiracy
charge against Shapiro
Against
connection with
Evidence
deposition.
his own IRS
Nissenbaum
Conspiracy
d. The
“As a Whole”
Conspiracy Objective
a. Klein
Having reviewed the record and
Amnesty Template.
PICO
The princi-
counsel,
arguments
we
conclude
pal conspiracy
against
evidence
Nissenb-
against Shapiro
the evidence
is insufficient
aum relates to his participation in the de-
support
to
his conviction on
One.
Count
velopment of
amnesty
the PICO
template.
conclusion,
reaching
this
we are mindful
26,
See note
ante. The Government as-
that the absence of direct evidence is not
“drafted,
serts that Nissenbaum
and then
dispositive,
government
since “the
is enti
Shapiro
circulated to
and Coplan for their
prove
solely through
tled to
its case
cir
review,
template
evidence.”
a
for the
amnesty
cumstantial
United States v.
PICO
(2d Cir.2004).
539,
Rodriguez, 392 F.3d
544
strongest
submission.” The
evidence to
Nevertheless,
the evidence
viewed
“[i]f
support
the Government’s assertion is a
the light most favorable to the prosecution
February
2002 e-mail Nissenbaum sent
gives equal
nearly equal
circumstantial
Shapiro
to
and Coplan with the draft
a
support
theory
guilt
theory
and a
template
PICO
attached. The text of the
innocence, then a
jury
reasonable
must-
“Gentlemen,
e-mail reads as
your
follows:
necessarily entertain a reasonable doubt.”
Bob,
you
comments.
did
also want me to
Huezo,
United States v.
546 F.3d
template [referring
do
SDI
ato
differ-
(2d Cir.2008) (internal quotation marks
ent
Because the
shelter]?”
PICO
omitted).
case,
In this
an essential ele
template
misleading
contained false and
conspiracy
ment of the
charged
Count
transaction,
descriptions of the
the Gov-
required proof beyond
One
a reasonable
ernment claims that Nissenbaum knowing-
Shapiro joined
alleged
doubt that
con
ly participated in providing false informa-
spiracy with
“specific
intent” to violate
directly
tion
to the IRS. But
again,
once
Ogando,
the law.
v.
United States
the record belies the Government’s gloss.
(2d
102, 107-08
Cir.2008);
F.3d
Rodriguez,
Dougherty testified that he “drafted the
(“To
Advice
in the Klein
participation
of his
the ex-
evidence
regarding
The e-mail chain
Open.
account,
Coplan
In March
sent
conspiracy.
trading
raised
of the CDS
tension
Nis-
above,
amnesty template to
see Part
Add-On
draft
respect
& Y
II.A.l.a, ante,
conspir-
senbaum,
in the
and another E
Shapiro,
features
also
*23
In a No-
look it over “to
request
Nissenbaum.
with a
acy
against
employee
case
e-mail,
asked Sha-
make it easi-
Coplan
unnecessary facts or to
vember
avoid
Twenty
about a
shelter
min-
accurately.”
and Nissenbaum
CDS
piro
complete
er to
terminated,
later,27
swaps
replied
have
with a
in which
Nissenbaum
“[t]heir
utes
partner-
that the
suggesting
Bolton is
but
e-mail:
three-line
essentially 13.5
down after
ship be shut
except
fine to me
looks
disclosure
Coplan’s question
A
219.
months.”
IV:
necessary to
I
believe that it’s
don’t
E & Y should “intercede and
was whether
option
each
trade
specifics
of
put
year out with the
suggest running another
here, presumably
If we do it
the letter.
respond-
Nissenbaum
trading account?”
the hundreds of
we’d have to include
way too anxious to
They
‘Yes.
sound
ed:
trades that are done PICO.
exchange, the Gov-
From this
get out.”
re-
Nothing in Nissenbaum’s
Id. at 400.
defendants
argues
“[t]he
ernment
“stamp
ap-
of
knowing
evinced a
sponse
.
understandably concerned about the
were
story in
cover
for the consolidation
proval”
get
anxious to
taxpayers appearing ‘too
Similarly,
amnesty template.
the Add-On
account because that
trading
of the
out’
July
a
2000 e-
also received
Nissenbaum
hasty
would undermine
false de-
exit
Coplan suggesting that Nissenb-
mail from
in-
trading account as an
scription of the
“any final
aum
others should make
vehicle.”
vestment
client solicita-
changes” to draft Add-On
that,
of
it
in the context
appears
But
But,
Shapiro,
there is
tion letter.
“they”
exchange,
pronoun
the e-mail
actually
that Nissenbaum
“re-
no evidence
e-mail is
in Nissenbaum’s two-sentence
letters;
the Add-On solicitation
viewed”
“taxpayers.”
not a reference to anxious
of
“part
process”
he
of th[e]
nor was
Coplan’s
initial
appended
The e-mail
out letters to clients.”
“sending
Hasseltine,
from
inquiry was a note
Cam
Objective
b. Tax Evasion
firm,
Bolton
which was
employee
an
trading
accounts.
managing
CDS
alleged
tax evasion
respect
With
e-mail,
suggested
which
Hasseltine’s
§
conspiracy,
Nissenb-
objective of
account, was ad-
termination of the CDS
similarly
that the evidence is
aum contends
Six,
Coplan, Belle
dressed to Robert
partici-
Nissenbaum did not
insufficient.
employees
E & Y
two other
—not
meetings
conferences or
pate
telephone
anyone
If
clients at issue.
taxpayer
of the Add-On
development
related to the
get
anxious to
out” of
CDS shel-
“too
Although Nissenbaum occasional-
shelter.
ter,
manag-
employees
it was the Bolton
copies
correspondence
of e-mail
ly received
accounts,
taxpay-
not the
ing
trading
Add-On,
re-
appears
it
that he
related to
the transaction.
ers who entered
three-line e-
only once—in the
sponded
Indeed, the Govern-
Finally,
quoted
mail
above.
Documents.
Review Add-On
acknowledge the dearth
appeared
ment
points to Nissenbaum’s
the Government
computers
the two
that the clock on one of
stamp
Coplan’s
initial e-mail
27. The time
a.m.;
stamp
the time
on Nissenb-
was 9:16
was off
one hour.
Thus,
appears
reply
it
aum’s
was 8:36 a.m.
ILAl.b,
to Nissenbaum in the
of direct evidence as
transaction. See Part
ante.
response
judgment
that,
to his motion for
argues
The Government
because Nis-
acquittal pursuant
to Federal Rule of
senbaum was also aware that the IRS was
A III: 516
Criminal Procedure
See
conducting depositions
ongo-
related to the
(Nissenbaum
...
“[a]dmittedly
doesn’t
shelter,
ing audit of the Add-On
it was
have the same involvement that Mr. Co-
reasonably foreseeable to him that a co-
plan
Vaughn
and Mr.
and Mr.
conspirator would commit
tax evasion.
do”).
not,
course,
The Government does
as-
proposition
sert the
that the mere fact of
Instead,
the Government’s
ongoing
inquiry suggests,
IRS
much
theory
principal
liability
evasion
shows,
less
criminal
knowledge
intent or
*24
Nissenbaum was based on Pinkerton v.
subject
inquiry
of the
is unlawful.
States,
640,
1180,
328
66
United
U.S.
S.Ct.
(1946).
Pinkerton,
jury necessarily must entertain Sufficiency of the Evidence C. marks omit (quotation able doubt.” Id. Supporting Four Count ted). that Accordingly, we conclude Nis the suf- Finally, challenges conviction on One must Nissenbaum senbaum’s Count Four, ficiency of the evidence on Count be reversed. of the charged which him with obstruction Sufficiency Evidence B. 7212(a). § 26 IRS in violation of U.S.C. Supporting Two Counts 7212(a) noted, prohibits § previously As . and Three “corruptly conduct which a defendant ... ob- by force or threats of force Shapiro and Nissenbaum or Defendants to ob- impedes, of the evi- structs or or endeavors challenge sufficiency also challenges highly fact-specific dissenting Judge sufficiency are partial opinion, 28. In her suggests Shapiro and Nissenb- inquiries require Kearse examination of a careful 2 and 3 See, aum could be convicted on Counts e.g., Ospina v. Trans World the record. because, disagree We under Pinkerton. Airlines, Inc., (2d 1992) Cir. 975 F.2d 37 above, evidence noted there is insufficient ("[Tjhis plaintiffs case turns on whether intro “knew of the or Nissenbaum jury's support the evidence to duced sufficient alleged indict- in the existence of scheme necessarily fact-specific inqui verdict ... a knowingly joined participated ment and above, our close ry.”). For the reasons stated (quotation Rodriguez, in it.” 392 F.3d 545 to the conclu review of the record leads us omitted). marks presented at trial fell that "the evidence sion short’; considerably but more than ‘a trifle dissent, Judge partial Kearse reach- 29. In her is insufficient.” United even a trifle short regard opposite conclusion with to es 1995) Muniz, (2d v. F.3d Cir. States Shapiro’s and Nissenbaum’s convictions J., (Kearse, dissenting). response, simply we note that Counts 1-3. impede, struct or the due administration was that “the Tradehill transaction was internal revenue 26 U.S.C. fully hedge [the code].” intended partners’ expo- 7212(a) 7212(a). key § “The words in [§] sure to fluctuation the euro.” The Re- ” ‘corruptly’ are and ‘endeavors.’ United dacted Indictment alleged that this state- (2d v. Kelly, States F.3d Cir. ment was false “in reality, because 1998). The District Court instructed the transaction had no capacity to do so.” AI: jury as follows: corruptly To act means to act with the The statement at appeared issue in re- advantage intent to secure an unlawful sponse to the first question in the IDR or benefit either for oneself or for anoth- questionnaire: your “Describe all of rea- Acting corruptly requires er. conscious- objectives sons entering into the and/or wrongdoing. ness of Transaction. For each reason ob- and/or A Although VI: we have 428/6193-94. jective, were these objec- reasons and/or previously declined read willfulness letter, tives response achieved?” The IDR 7212(a), § requirement into we have held which was submitted signed by Pros- substantially jury that a similar instruction (“Proskauer”) kauer Rose LLP attorney comprehensive
was “as
and accurate as if
(“Gutwein”),
Abraham Gutwein
included a
‘willfully’
the word
incorporated
ten-paragraph answer
to question one.
Kelly,
statute.”
was that the E & Y had entered fluctuation the value of the euro. into the Tradehill transaction in order to SA 812. generate profits. After Nissenbaum’s counsel made a Rule 29 motion on Count argues The Government that the direct Four, the Government agreed to withdraw Flashner, examination of Blank and allegation this statement was principal respect witnesses with to Count misleading” “false and and to redact the Four, conclusively they established that Indictment accordingly. did not enter the Tradehill transaction exposure. alleged- hedge against Euro The second exposure order to the
ly response, false statement in the IDR disagree. testimony, euro. We Blank’s Indictment, example summarized the Redacted for both on cross-examination and Q. asking you your primary I’m examination showed that his tax- not redirect objective, asking you purpose only was not the ob- sir. I’m [whether] minimization objective entering into jective the Tradehill On th[e] transaction. examination, Blank testified as fol- transaction was to hedge direct [Tradehill] currency? objective. lows: An THE no. you Yes or Can COURT. enter into transaction Q: you Did answer it? hedge your exposure in order Q. euro? At that time. time, yes. A. At that No,
A: I did not. Q. you did not question The ask [IDR] Q: your purpose then was it not Why was, your objective what it? primary did the euro? hedge A. That is correct. purpose entering A: The into really to generate was transaction Q. objectives that par- So the three the real ... I That was reason
loss. against ticipants hedge had were to my that for- made investment. fact money, make currency, were to and the used, currency options were there eign obvious, why every- tax motive. That’s ... certainly it exposure, was an this, correct, body is is that doing sir? competing factor or a factor that we on, foreign to focus ... were able but
currency exposure was the reason A. Yes. into the deal. we entered The reason Id. at And on redirect exam- 609/3121-23. the tax loss. get was to ination, harked the Government back to
Blank’s testimony Cap that because the Gemini stock he had received “was not What, Q: any, you if understanding did rather denominated in dollars” but “was have at the time of the transaction about foreign currency, in a ... denominated hedge much of a how this transaction justification entering into the transac- provide? could *27 from perspective tion a business was to be A: I had none. to, effect, try able to hedge in reduce What, any, Q: you if did discussions owning the risk associated with non-U.S. have with other members of the transac- dollar denominated investments.” Id. at how much of a this hedge tion about sought It clarification: 570/2966-67. provide? transaction could Q. you On direct examination said that A: None. hedging justification the euro was a for you the Do transaction. remember us- Q: response] In that says: This [IDR that ing word? taxpayer fully manner the intended to Yes, sir, A. I do. hedge exposure his fluctuation in the Q. you mean that? What did euro, is that
value of the statement true? A. At the time we entered into correct. A: It’s not transaction, assuring I was desirous of purpose A But on II: cross examina- there was a business for 588/3037-38. tion, transaction, at that time I equivocated acknowledging Blank did currency exposure, in have hedging against foreign fluctuations be- cause, that we objective,” again, euro was “an follows: the stock were foreign in the sale was not denom- investment. The fact that curren- awarded dollars, used, cur- foreign cy options inated in it was were there was exposure ... rency, certainly and to the extent that trans- it was a or a compet- factor offered, on, we entered to the best of ing action factor that we were able to focus time, my knowledge possibili- at the but ... foreign currency exposure was not ty trying mitigate hedge or some we reason entered into the deal.” A going with the dollar the risk associated II: straightforward impli- The 588/3037. down, that to me up going dollar cation of testimony hedging Blank’s is that time, at that based what I understood on against fluctuations the euro was not the then, represented purpose a business for primary entering reason for the Tradehill entering into transaction. this transaction. But that was question not the Q. you posed by Question it the entered into the IDR. Was reason number one “[djescribe prompted taxpayer the transaction? all of your reasons objectives entering primary A. It was not the reason. and/or the Transaction.” Blank’s statement —in Id. at 618/3156. excerpted by the same sentence the Gov- The record reflects a similar tension foreign currency exposure ernment —that Flashner, respect who testified on “certainly appears factor” consistent direct examination that he did not enter with the statement in the IDR response hedge the Tradehill transaction in order to “[pjartly the transaction was entered euro, 24/3395, A III: exposure his in order to hedge.” (emphasis SA 812 but examination that the admitted cross added). E & Y partners “exchange discussed (S) understandings. Non-written presented by receipt rate risk” their allegedly third IDR false statement euros, stock denominated in id. at 32/3424. “[tjhere response was that were ho non- Flashner further testified that “it would understandings” partic- written among protect “by make sense” to his investment ipants in the Tradehill transaction. The trying money to make some from this alleged Redacted Indictment this against downward movement of the euro reality, statement was false because “in Finally, the dollar.” Id. at 33/3430-31. understanding among there was an all the goals Flashner admitted that his in invest- parties to the that the E & Y transaction ing Tradehill were “two-fold”: to obtain partners option positions would exit their profit losses and “to earn a from the before the end of in order to claim transaction.” Id. at 24/3394. ... they tax losses could use to offset their Faced with obvious internal tension AI: income.” testimony principal within the of its two *28 Four, testimony witnesses on no Count the Government There was affirmative jury rely that “the the avers was entitled to on about existence of “non-written under- the direct examination.” Gov’t’s Br. 185- standings” among partici- the Tradehill fact, jury fully pants. 86. But even if the credited the In both Blank and Flashner examination, in engaging any direct as we must assume denied discussions with here, testimony E & Y their implicit support partner exiting lends other about 578/2997,579/3000, A option positions. Nissenbaum’s defense as well. As not- II: (Flash- above, (Blank); A testimony ed Blank’s direct was III: 580/3005 23/3389 ner). Nevertheless, purpose entering into the the Government in- “[t]he really generate transaction was the loss. that the “entire thrust” of their sists testi- my mony partners entering That was the real ... I was that the were reason made testify any expec- Flashner did not a tax generate Tradehill transaction to the would take future business to year, the or referral of loss for same tation any affirma- necessary to that end. In the absence steps the Proskauer. only “specu- left with the proof, tive we are that the Gov- assuming arguendo Even expecta- lation and surmise” that such the “thrust” of ernment is correct about Smith, 630 F.3d Langston v. tion existed. a more fundamental defect testimony, the (“[A] (2d Cir.2011) conviction the Tradehill in remains: allegation this and surmise alone speculation based on retained Gutwein—not Nis- participants ” omit- marks (quotation cannot stand.... regard represent them senbaum—to ted)). Gutwein, pow- who had to the IRS audit. partici- attorney from the Tradehill ers of the record and Having reviewed substantially response pants, revised counsel, conclude that arguments of we the “under- proposed that Nissenbaum about of Nissenb- compels the record reversal E & Y standings” among partners. the Four. Given aum’s conviction on Count response, IDR Nissenbaum noted a draft testimony by Blank and equivocal the ‘understandings’ involved the “[a]ny and the role of Gutwein draft Flashner options, and contribution of purchase jury IDR “a reasonable ing response, the creation of the various entities and necessarily entertain reasonable must generated the loss- sale of the assets corrupt as to whether Nissenbaum doubt” A 130. Gutwein then revised the es.” V: Glenn, IRS. ly impeded obstructed or were no response to state that “[t]here omitted).30 (quotation F.3d at 70 marks understandings between the non-written Thus, appears it participants].” [Tradehill Six, Propriety for Count III. of Venue language suggested by that the Nissenb- Charging Vaughn with False the language aum was more accurate than IRS Statements IDR response. of the final challenges pro- Vaughn Defendant (Jf) The fi- Future business. referral Six, charging of venue for priety Count IDR allegedly nal false statement in the making him with false statements expecta- was that there was no response during deposition IRS a June any tion referral of future business to or Nashville, Tennessee, in violation of 18 Proskauer, reality, “when in § U.S.C. clients to [Pros- defendants referred PICO letters.” The Govern- opinion kauer] Legal A. Standard on the fact that about the time ment relies in criminal “[p]roper pro Because venue legal opin- completing Proskauer was ceedings was a matter of concern to shelter, given for the Tradehill it was ions founders,” States Nation’s the United Con opinions, paid writing work of PICO safeguards “twice defendant’s stitution prepared by which to that been point had Cabrales, right.” venue States v. timing, Arnold & Porter. Based on the 1772, 141 1, 6, 118 L.Ed.2d 1 524 U.S. S.Ct. argues jury that the the Government (1998). requires Article III that “the Trial conclude that there was indeed an free to ... State all shall be held of future busi- of Crimes “expectation referral” *29 have been ness, where the said shall rendering the IDR Crimes statement Const, 2, Ill, § art. cl. But Blank committed.” U.S. contrary misleading. false and Judge Four on sufficien- underscoring the fact that aum's conviction on Count 30. It bears cy grounds. agrees of Nissenb- Kearse with our reversal
77
(2d
202,
Cir.2010) (internal
provides
3. The Sixth Amendment further
F.3d
205
quota-
omitted).
all criminal
the ac-
prosecutions,
tion
“[i]n
marks
alterations
Con-
enjoy
right
speedy
cused shall
to a
gress has codified the so-called “continuing
trial,
public
impartial jury
of the
offense”
3237(a),
§
rule in 18 U.S.C.
which
State and district wherein the crime shall provides in
part:
relevant
VI;31
have been committed.” Id. amend
Except as
expressly
otherwise
provided
(requiring
see also Fed.R.Crim.P. 18
by enactment
Congress,
any offense
government
prosecute
“the
must
an of-
against the United States
begun
one
fense in a district where the offense was
another,
district and
completed
or
committed”).
district,
committed
more than one
may be ... prosecuted
any
district in
When
relevant federal statute
which such offense was begun, contin-
specify
does not
how to determine the
ued, or completed.
“committed,”
location where the crime was
The Government bears
locus delicti must
“[t]he
determined
be.
burden of proving that venue is proper.
alleged
from the nature
the crime
Tzolov,
F.3d
(quoting
Rodri
statute,
The federal false statements
guez-Moreno, 526
U.S.
119 S.Ct.
1001(a),
§
crime,
U.S.C.
makes it a
inter
1239).
alia, “in any
jurisdiction
matter within the
executive,
legislative,
judicial
or
“When a crime consists of a sin
branch of the Government of the United
act,
gle, non-continuing
proper
venue
States, knowingly
...
willfully
[to]
is clear: The crime is ‘committed’ in the
false, fictitious,
any materially
make[ ]
performed.”
district where the act
is
fraudulent statement or representation.”
Ramirez,
United States v.
420 F.3d
1001(a)(2).
§
18 U.S.C.
(2d
(other
Cir.2005)
quotation
internal
omitted).
cases,
marks
In other
“where
We have considered the issue of
1001(a)
constituting
§
acts
the crime and the
pri-
venue
violation on two
nature of the crime charged implicate
or occasions. In United States v. Candel
location,
la,
(2d Cir.1973),
more than one
the Constitution
making false statements
of New
in the Southern District
to a venue
affidavits that were submitted
lent
disagree.
and York. We
Brooklyn
municipal branch office
Housing
the
and Urban
conveyed
then
begin by identifying the “es
We
in Manhattan.
Id. at
Development office
1001(a)(2).
§
elements” of
sential conduct
that,
crime
although the
1227. We held
280,
at
119
526 U.S.
Rodriguez-Moreno,
District of New
in the Eastern
began
Ali,
v.
1239.
In
States
S.Ct.
United
York,
that
the crime
“it does not follow
(2d Cir.1995), amended on deni
F.3d 1468
terminated,
transpired
that what
then
(2d Cir.1996), we
reh’g,
79 “jurisdic- requires ... the States” is evidence that those tion of statements phrase in a language appears conveyed tional were to or an [that] had effect on the prohibited conduct” and separate investigators working from IRS in the Southern “predicate circumstance” simply is District of New York. Oceanpro, 674 F.3d Yermian, States v. 468 329; Salinas, offense. United at v. see United States 373 2936, 63, 68-69, (1st Cir.2004) (“When 104 82 L.Ed.2d 161, U.S. S.Ct. F.3d 167 mate- omitted). marks Sim- (quotation 53 riality component is a critical of the statu- requirement consti- ilarly, the mens rea definition, tory it perfect makes sense to “a element that tutes circumstance does consider the crime continuing as into the determining not contribute to the locus in district which the effects of the false delicti of the crime.” United States v. felt.”); statement are v. United States Indus., Ltd., 323, Oceanpro (7th Cir.2002) 674 F.3d 329 788, Ringer, 300 F.3d 792 (4th Cir.2012).34 Thus, the essential con- (finding venue the district where the 1001(a)(2) § prohibited by duct is the mak- investigation “reasonably likely was to be fictitious, false, ing materially of a statements”). affected [the defendant’s] fraudulent statement. Smith, But see v. United States 641 F.3d (10th Cir.2011) 1200, venue, 1208 (finding case, materiality In re this recorded, where false statement was not quirement proves dispositive respect only in jurisdiction where the false 1001, § to venue. a statement is “Under made). statement was We therefore con- tendency material if it has a natural clude that venue for Six proper Count was influence, capable influencing, or be in the Southern District of New York.35 decisionmaking body decision of the addressed, capable which it was or if it is fully This result is consistent with our distracting government investigators’ holdings Candella and Ramirez. It is away attention from a critical matter.” undisputed Vaughn the false “ma[de]” Adekanbi, 178, United States v. 675 F.3d during deposi- statements issue the IRS (2d Cir.2012) (internal citations, quota 182 tion in Nashville—but “it does not follow omitted). marks, tion and alterations Ac terminated, that the crime then and that cordingly, Vaughn’s whether false state transpired what in Manhattan was irrele- tendency ments were material turns on the Candella, purposes.” vant for venue 487 or capacity of those statements to influ Ramirez, F.2d at 1228. offense decisionmaking body ence the at issue—in began Jersey, New where the fraudu- case, this the IRS. filed, paperwork lent was and ended in the York, materiality Proving Vaughn’s juris- Southern District of New necessarily Jersey false statements Tennessee diction to which New officials for- (4th Cir.2000) Clenney, (holding language 34. United States v. 434 F.3d "de- Cf. (5th Cir.2005) (holding 782 the intent fin[ing] requisite intent for the offense” of statute, parental kidnapping element harboring fugitive, § 18 U.S.C. was § "merely speaks U.S.C. to the offend- element). not an essential conduct rea er's mens as he commits conduct crime; plainly essential it is Vaughn similarly argues grand required by element’ 'essential conduct jury jurisdiction lacked to return Count 6 of Ramirez, Rodríguez-Moreno"); F.3d at Superseding the of- Indictment because ("While certainly a scheme to defraud is outside the district fense was committed fraud, one of three essential elements of mail element____ impaneled. jury where the This chal- it is not an essential conduct It lenge substantially fraud.”); the same reasons fails for is the mens rea element of mail Bowens, III.B, challenge. United States v. 224 F.3d as his venue See Part ante. *32 Ramirez, Magassouba, trial.” States v. 420 his United paperwork. warded the (2d Cir.2010). 202, 2 of- 205 n. We Similarly, the instant 619 F.3d F.3d at 137-38. Tennessee, pro- where in this case the District Court began fense case think care consider- required statements to IRS with the made the false ceeded Vaughn officials, Reed and ing into the Southern the factors enumerated but continued York, deposition concluding that “the sub- of New where his Saavedra before District weighs in favor analysis reviewed and discussed contacts transcript was stantial ongo- Vaughn in connection with the does not IRS officials of venue this district.” of that Vaughn’s challenge fact that the substance ing appear E & Y audit. The “ appeal. to be false and ‘continued determination statements the jurisdiction in the of continued to be of Graham IV. Admission finally reached they States when
United
”
Taylor Testimony
Candella,
Manhattan,’
(quoting
at 143
Id.
1228),
our view that
at
confirms
487 F.2d
validity,
to their
suffi
In addition
District
proper
venue
in the Southern
was
ciency,
jurisdictional challenges,
and
of New York.
variety
mount a
of
trial defendants also
occasion,
supplemented our
On
we have
In
first of
evidentiary challenges.
a
contacts”
inquiry
these,
venue
with “substantial
they argue that the District Court
into account a number of
testimony
test that “takes
of Gra
admitting
erred in
acts,
the defendant’s
attorney
factors —the site of
who worked at
Taylor,
ham
a tax
crime,
nature of the
the elements and
who
Pillsbury
the law firm of
Madison and
conduct,
the effect of the criminal
variety
locus of
a
of crimes
indisputably committed
for accu-
suitability
and the
of each district
unrelated to this
involving tax shelters
Reed,
v.
factfinding.”
rate
States
United
rul
case. We review the District Court’s
Cir.1985).
(2d
477,
Since
admissibility
773 F.2d
481
of evi
ings regarding
Reed,
ig-
alternately applied
we have
of discretion.
dence at
trial
for abuse
Williams,
703,
the substantial contacts test. Com-
nored
States v.
585 F.3d
United
886,
Royer,
(2d
Sims,
v.
549 F.3d
pare
Cir.2009);
United States
In re
534 F.3d
cf.
(2d Cir.2008)
approv-
(2d Cir.2008)
(citing
Reed
that the
(explaining
al);
Saavedra, 223 F.3d
States v.
includes
term of art “abuse of discretion”
Cir.2000)
(2d
(same);
law).
with Unit-
92-93
errors
(2d
Tzolov,
ed States v.
642 F.3d
of discus-
Taylor
had
series
Cir.2011)
to a ‘sub-
(“Though Reed refers
with E &
about the CDS transaction
sions
determining
contacts rule’ for
ven-
stantial
Smith,
partner
Y
David
the defendant
regarded
ue ...
it is clear that the [court]
at the time
fugitive
this action who was a
the defendant’s acts as
locale of
Taylor
opinion
drafted an initial
of trial.
(al-
venue.”
establishing
sufficient basis for
transaction,
regarding
letter
CDS
(other
quota-
internal
original)
teration in
eventually
the transaction
brought
Smith
omitted)).
tion marks
E
Y.
opinion letter to
&
and the draft
held,
letter contained a
Taylor’s
opinion
we
draft
previously
We have
variety
regarding
of statements
CDS
clarify,
now
that use of the substantial
false,
where,
in-
that he knew were
may
appropriate
be
transaction
contacts test
(1)
purpose
here,
cluding
statements that
“argue[s]
the defendant
his
profit;
...
partnership
in the
was investment
prosecution
district]
[contested
risk;
him,
money
have
the investors would
hardship
preju
in a
[will]
]
result!
swap
him,
early
termination
the fairness
undermine[ ]
]
dice!
104(b).
predetermined. Taylor
testified
introduced
later.”
Fed.R.Evid.
agreed
he and Smith had
that these
faced with a
question
When
conditional
relevance,
elements of the transaction could not
core
district court should “exam-
disclosed in
letter if the
all the
opinion
ine[ ]
be
evidence in the case and de-
yield the intended tax
jury
cide!]
transaction were to
whether the
could reasonably
*33
a
phone
by
Other than
brief
call
find the
...
benefits.
conditional fact
a prepon-
& Y employees
with two unknown E
derance
the evidence.” Huddleston v.
1999,
States,
681,
Taylor
no contact with
June
had
United
485 U.S.
108 S.Ct.
anyone
(1988).
E Y ultimately
else at E & Y.
&
case,
L.Ed.2d 771
In this
engaged Brent
at Locke
Clifton
Liddell
the defendants
the
argue that
relevance of
Taylor
Taylor’s
rather than
write the
opin-
testimony
upon
to
CDS
depended
pre-
a
letter.
liminary
ion
“conditional fact”—that the con-
versations between Taylor and Smith were
Tay-
The
to exclude
defendants moved
ultimately conveyed to the defendants.
trial,
testimony prior
arguing
lor’s
that
Taylor
the absence of
that
evidence
had
testimony
primarily
his
would consist
anyone
substantive
with
conversations
else
recounting his
with Smith.
conversations
Y,
E & or
anyone
at
that Smith told
Eat
that,
argued
The defendants
since there
Y about
Taylor,
&
his conversations with
no
evidence that
the substance of
argue
the defendants
that the Government
relayed
been
those conversations had
carry
failed to
prove
its burden to
the
defendants, Taylor’s testimony was not
the
by
conditional fact
a preponderance.
relevant. The Government conceded that
produce
it would not
direct “evidence that
Despite the
appar
Government’s
Taylor
directly
anyone
with
communicated
104(b)
ent failure to
the Rule
confront
E & Y
falsely
what was
stat-
regarding
analysis
appeal,
persuaded
arewe
that
in,
from,
or intentionally
ed
omitted
his Taylor’s testimony was admissible as di
opinion,”
argued that a jury
draft
but
conspiracy.
rect evidence of the
a pre
As
could infer that
matters necessarily
“those
matter,
liminary
we note that
the draft
conveyed by
would have been
Smith to one opinion
by Taylor
letter prepared
and the
or more of the
The District
defendants.”
opinion
by
final
letter
Locke
issued
Liddell
denied the defendants’ motion
Court
similar,
substantially
were
and that some
allowed the
to present Tay-
Government
passages appeared
copied nearly
to be
ver
testimony,
warning
lor’s
while
that
the
Indeed,
the
batim.
even
defendants ac
required
Government would be
to “connect knowledge
certainly
that “it was
reason
up”
evidence.
able to conclude that Locke Liddell had
letter,
copy Taylor’s
received a
and that
appeal,
princi
On
defendants
it had
as a starting point
used
letter
argue
admitting Taylor’s
pally
tes
Thus, Taylor’s
for its own.”
testimony
timony, the District Court misunderstood
opinion
about
content of the draft
let
obligations
its
under Federal Rule of Evi
independently
ter was
admissible
as to
104(b),
questions
dence
which
governs
manifesting the
circumstances
formation of
104(b)
Rule
pro
conditional relevance.
conspiracy.
vides
the relevance of evi
“[w]hen
exists,
depends
Taylor’s
a fact
testimony
dence
on whether
about his conversa-
proof
admittedly presents
must be
sufficient
sup
introduced
tions
Smith
finding
fact
port
question
does exist.
closer
of conditional relevance.
may
proposed
Taylor
court
length
admit
evi
testified at
about the various
proof
dence on the
that the
be
facts about the
condition
CDS transaction
had
Alameh,
v.
States
spiracy.”
opinion
the tax
be omitted from
Cir.2003)
(2d
(quotation
As the
misleading
terms.
F.3d
described
omitted).
notes,
about
striking
“preliminary
“what is
These are
marks
Government
they
precisely
are
is that
Taylor’s concerns
to be resolved
questions of fact”
defendants, in e
that the
same facts
preponderance
court under a
district
e-mail,
against
people
cautioned
mail after
Bourjaily v. United
evidence standard.
these
Based on
revealing to the IRS.”
171, 175,
States,
107 S.Ct.
483 U.S.
similarities,
concluded
District Court
(1987).
Taylor’s error a dis review for clear We present circumstances In the defendants. to whether “there findings trict court’s *34 here, Although the defen agree. we ed the declarant conspiracy involving awas there is no evidence protest that dants nonoffering party, and [whether] and the the de directly with Taylor communicated the course during was made the statement fendants, a state required have never we conspiracy.” the and in furtherance of member to each ment to be disseminated Embassies Bombings Terrorist U.S. re to be admissible conspiracy the order (2d Cir.2008) 93, 137 Africa, in E. 552 F.3d States v. the whole. United against Cf. omitted) (alteration in marks (quotation (2d Cir.1988) Friedman, 535, 562 854 F.2d noted, we review original). previously As (“[Tjhere that each requirement is no the as to a district court’s determination conspire directly conspiracy of a member admissibility of evidence at trial for abuse conspira the other member of every with Williams, at 707. 585 F.3d of discretion. we affirm the District cy.”). Accordingly, trial, identified Prior to the Government Taylor’s testimo decision to admit Court’s with the defen- people coconspirators 50 as ny- dants, figures central such as including Coconspirator Admission of Smith, V. Belle Cinquegrani, Peter David Statements offered out-of- Six. When the Government alleged coconspira- court statements of the argu in an Vaughn, Defendant trial, that the objected the tors at defense the trial defen joined by ment each of had not carried its burden Government dants, com that the District Court argues excep- coconspirator elements of the by admitting error mitted reversible the evi- The District Court admitted tion. 20 of more than out-of-court statements pro- subject to connection under dence Federal Rule of alleged coconspirators. Bourjaily v. United cedure established is provides 801 that a statement Evidence States, 171, 107 S.Ct. 97 483 U.S. a hearsay against if it both offered is (1987), permits 144 which dis- L.Ed.2d by party’s cocon- and is “made party hearsay to “examine the state- trict court in furtherance of the spirator during and “making a sought ments to be admitted” 801(d)(2)(E). conspiracy.” Fed.R.Evid. Id. at preliminary factual determination.” testimony Rule hearsay To under admit 2775. At the close of 107 S.Ct. 801(d)(2)(E), court “must find the district case, filed a mo- (b) Government’s the defense (a) conspiracy, a that its that there was the out-of-court statements tion to strike the declarant and the members included After hold- coconspirators. alleged of whom the statement is party against (c) re- (the ], on the motion and ing argument oral party”) “nonoffering fered [ for addi- copies of certain exhibits during questing that the statement was made review, a made tional the District Court in furtherance of the con- course of and
83 ruling prerequisites ruling. blanket that “the of of the District Court’s Vaughn See 801(d)(2)(E) (“In fact, Rule have been shown a Reply point of it is the sum mary of the evidence with re- preponderance fashion which the District Court spect conditionally detailed, to each of the admitted dispensed with these specific ob jections by statements.” the Defendants which forms of Vaughn’s argument concerning basis argue appeal The defendants that the point this on appeal.”). Although the blan District blanket admission of the Court’s ruling by ket certainly District Court coconspirator transgresses statements difficult, appellate makes review more we Rule proper use of “limit[s] [on] have never required district court to 801(d)(2)(E) coconspirator to admit testi- particularized make rulings or conduct mony.” Gigante, States v. separable analyses respect to each (2d Cir.1999). Specifically, F.3d coconspirator, coconspira much less each that, Vaughn argues as to most or all of tor statement. United States v. Al Cf. alleged coconspirators, the Govern- (2d Cir.2008) Moayad, 545 F.3d prove they ment failed to had (vacating the judgment because “[t]he join intent to further an illegal ven- court findings, by preponder made no (“It ture. unity See id. is the *35 otherwise, ance of the evidence or about stemming specific interests from a shared conspiracy” (emphasis the existence of a justifies criminal task that Rule added)). The record makes clear that the 801(d)(2)(E) in place....”). the first For experienced judge able and district re example, argue the defendants two papers, viewed the defendants’ motion held accountants, outside Fred Goldman and argument, oral obtained additional evi Cooper, “merely Robert were outside func- Government, dence from the applied tionaries” and “cannot be considered ‘co- standard, legal correct and a consid made conspirators’ with the defendants under facts, ruling. light ered oral In of these any definition of reasonable the term.” clearly the District did not err in its Court response, the Government accuses factual determination that the out-of-court Vaughn “cherry-pick[ing]” testimony of statements were made in furtherance of argue his case when there “ample conspiracy, and therefore did not Goldman, evidence” to establish Coo- by admitting abuse its discretion the out- per, coconspirators and others were with coconspira of-court statements under In particular, the defendants. the Govern- exception. tor Cooper acknowledged ment notes that given trial that he had false and mislead- Coplan VI. Exclusion of Portions of ing testimony during an IRS tax audit and Vaughn Deposition and helping that he believed he was clients Transcripts signed commit tax evasion when he tax that the Dis- Coplan Vaughn argue and for the returns Add-On transaction. by ex- trict Court abused its discretion Upon foregoing cluding portions review of the ar from evidence of their de- guments, appears it an position transcripts. part defendants’ As IRS Y,36 objection fundamental to the exam” of E & the IRS coconspirator “promoter in June generalized deposed Coplan Vaughn evidence relates to the nature both and laws, (as "promoter organizer opposed principal 36. A exam” to an "in- or an under the exam”) underlying come tax to determine and whether transactions aims entity whether under examination is a constitute tax shelters. admissible.”). Here, hearsay, and it is not formed deposition transcripts 2002. The challenge the District Coplan Vaughn and Seven of the the basis for Counts Six ruling that the bulk of predicate Indictment, Court’s charged which Co- Redacted offered for transcripts were deposition making false state- Vaughn plan But as trial, the truth of the matter asserted. the Govern- to the IRS. At ments concedes, tacitly see the Government only portions sought to introduce ment by the questions posed Br. Gov’t’s containing deposition transcripts hearsay, because as a agent IRS were not Six alleged in Counts the false statements law, questions are “asser- matter Vaughn sought to Coplan and Seven. meaning of Rule see tions” within the transcripts in deposition their entire admit F.2d statements, Oguns, States v. that the order to demonstrate Cir.1990) (“An (2d inquiry is not ‘asser- false, to the even if were not material tion,’ is not and cannot be accordingly exam. The District Court promoter marks hearsay (quotation statement.” counter-desig- certain accepted thereafter omitted)). Thus, erred defendants, the District Court but proposed by nations rule exclude by invoking hearsay transcripts, to admit the entire refused deposition in the questions contained portions the excluded were holding by transcripts. “largely hearsay offered inadmissible defendants, they simply irrele- [we]re hearsay the defen status of vant to the issues here.” ques a closer responses presents dants’ again,
Once we review district court’s Coplan responses insists that his tion. admissibility determination as the mat were not offered for the truth of evidence at trial for abuse discretion. asserted, “the over ter but to demonstrate *36 Williams, 585 F.3d 707. interview, in all of the the context purpose made, were charged which the statements Alleged
A. The Error fully in willingness cooperate [his] that, in Coplan Vaughn argue ex- Coplan Reply the interview.” n.5. percent depo- Coplaris more than 80 of the true cluding Government counters that, transcripts, jury sition the District Court erred convince the purpose was to (1) deposi- bulk of the ruling lengthy deposition, that the the course of a he was hearsay; transcripts mostly tion constituted truthful. The Government’s con failing to admit the statements under the from support tention finds a letter brief counsel, failing completeness; rule of which made clear that he Coplaris under the state of tran deposition admit statements wished to admit the entire exception hearsay forthcoming mind to the rule. in order to show “his script proceeding.” SA 303. In approach Hearsay facts, light of these the District Court did by invoking not abuse its discretion Federal Rule of Evidence
Under hearsay deposition rule to exclude the re 801, hearsay a statement is an out-of-court sponses. ... prove “assertion” that is “offerfed]
the truth the matter asserted in the Completeness” 2. “Rule of 801(a), (c); statement.” Fed.R.Evid. see Marin, Federal Rule of Evi States v. 669 F.2d Under (2d (“When Cir.1982) all party the defendant seeks where a introduces or dence statement, an adverse part of a recorded prior to introduce his own statement for asserted, any the introduction of party may require truth the matter it is ought “in to be part transcript other fairness tions of the were admissible un- considered at the same time.” Fed. der this “state of mind” exception. particular, R.Evid. 106. The so-called “rule of com Coplan argues that a statement that “even pleteness” provides though evincing his confusion about the definition may hearsay, por be an omitted of a “digital option” statement should have been ad- must be placed tion of statement mitted “to show lack understanding [his] necessary to explain evidence if admit of some of the financial instruments in- portion, place portion ted the admitted Coplan volved.” Br. although 83. But context, 803(3) misleading jury, Coplan to avoid or raised Rule “in general below, fair impartial understanding to ensure appears terms” it that his current portion.” argument of the admitted v. United States certain statements were —that (2d Cir.2009) 141, 144 Kopp, (quo 562 F.3d prove admissible to his lack of technical omitted). not, tation marks The rule “does acumen—was never presented to the Dis- however, (District require the portions admission of trict A III: Court. 218/4167 explanatory statement that are neither ruling noting Court that defendants “ha- of nor relevant to the admitted passages.” given ven’t any specificity of statements omitted). Id. (quotation marks that show state of of Vaughn mind Coplan”). case, Coplan In this and Vaughn
argue that the District Court erred in Prejudice B. concluding portions transcript of the offered under Rule 106 could still be ex event, In any even assuming arguendo hearsay cluded under the Although rule. that the District Court erred not admit- initially the Government misstated the ting entirety deposition tran- below, standard Coplan identified the mis scripts, the error was harmless. Fed. immediately, take almost and there is no 52(a) (defining R.Crim.P. “harmless error” indication that misap District Court error, defect, “[a]ny irregularity, or var- prehended or misapplied the Rule 106 iance that does not affect substantial standard in electing to admit the defen rights”). The argue defendants that the counter-designations dants’ but not the en “gutted” erroneous exclusion their defense *37 transcripts. Citing tire the relevant stan “were, best, that the false statements Jackson, dard from United States v. 180 ancillary investigation.” Coplan to the Br. (2d 55, Cir.1999), F.3d 73 the District record, 85. But the full context of the it Court “[u]sing stated it was [Rule] is clear that ample defendants had polestar” 106 as a filter or a in refusing to opportunity arguments to make these deposition transcripts admit the in their through their cross-examination of the IRS entirety, but a admitting number of coun agent and their closing arguments. More- ter-designations. We find no abuse of dis over, jury testimony heard explaining cretion in that determination. how all of the information sought IRS material promoter was to the exam Exception
3. “State of Mind” subject that was the of the deposition. On 803(3) record, that, Federal Rule of Evidence Rule this we conclude even if the provides hearsay exception for state- exclusion of the deposition testimony “[a] was erroneous, ment of the then-existing declarant’s state the error harmless. was See emotional, Farhane, ... or sensory, phys- 127, mind States v. 634 F.3d United 803(3). (2d Cir.2011) ical condition.” (deeming Fed.R.Evid. 164 harmless defendants contend that por- the excluded exclusion of state of evidence where mind
86 error, prejudicial the level of was marks rise to contrary evidence
Government’s
severity of the miscon-
we examine ‘the
v.
overwhelming”); United States
“clearly
Cir.2006) duct,
(2d
to cure
137,
adopted
the measures
F.3d
140
Song, 436
misconduct,
certainty
of conviction
the erroneous exclusion
(deeming harmless
”
States v.
the misconduct.’ United
absent
mind evidence where defendant
of state of
Cir.2011)
(2d
85,
Gansman, 657 F.3d
96
testify in
de-
sufficient
permitted
“was
Caracappa,
v.
614
(quoting
States
United
theory of the case”
tail as to his
Cir.2010)).
(2d
30, 41
F.3d
overwhelming evi-
presented
Government
guilt).
dence of
re
“surprise”
respect
With
well
argument, it is
established
buttal
Alleged
Misconduct
Prosecutorial
VII.
provides
government
“[r]ebuttal
Vaughn,
joined by Coplan and
Shapiro,
respond
to defendant’s
opportunity
the Government committed
argues that
govern
It does not allow
arguments.
by introducing
misconduct
prosecutorial
matters.”
bring
ment to
in new
United
misrepresenting
surprise arguments
(2d
Giovanelli,
479,
945 F.2d
495
States v.
Spe-
in its rebuttal summation.
evidence
omitted).
Cir.1991)
In
(quotation marks
(1) the
challenge
cifically, the defendants
context, however,
appears
it
that the “sur
“surprise” arguments about
Government’s
argument
briefly
IDR
prise” PICO
IDR;
responses
client
PICO
opening
in the Government’s
discussed
description
Government’s
COBRA
galling
of the most
summation as “one
“amazing”
and an
and “ex-
as a “trick”
by the
examples”
prepared
of statements
of the relevant tax
traordinary” distortion
falsely described their
defendants that
regulations.37
The Govern
subjective intent.
clients’
IDR ar
then returned to the PICO
ment
matter,
general
a defen
As
rebuttal, highlighting
the fact
gument
remarks
asserting
prosecutor’s
that a
dant
counsel had ad
“
that none of the defense
heavy
trial
‘faces a
bur
warrant a new
Re
responses.
IDR
dressed
PICO
den,
alleged
the misconduct
must
because
although
turning
argument
to an
noted—
as to result
significant
be so severe and
the Government
its
emphasized by
” not
—
right
to a fair trial.’
the denial of his
regarded
cannot be
opening summation
Banki,
v.
685 F.3d
United States
Br.
and unfair.”
“deceitful
Cir.2012)
(2d
v. Lo
(quoting United States
the context of a rebuttal summation
(2d Cir.1993) (alter
cascio, 6 F.3d
transcript,
of trial
spanned
pages
some 120
omitted));
v.
see also
States
ations
any
here cannot be deemed
misconduct
(2d Cir.2010)
Whitten,
610 F.3d
Newton,
States v.
severe. See United
(“We
ground
prose-
will reverse on the
(2d Cir.2004)
(cautioning
F.3d
*38
only
cutorial misconduct
if that misconduct
“disproportionate emphasis
against
[on]
by
infect
prejudice
caused substantial
so
error”).
alleged
isolated incidents of
the
the trial with unfairness as to make
ing
challenge
pro
The defendants also
resulting conviction a denial of due
omitted)).
(internal
description of the
the Government’s
CO
quotation marks
cess.”
a “trick” and an
re- BRA transaction as
considering
inappropriate
“In
whether
already
we have
argues
BRA transaction. Because
Shapiro
that the Government's
also
Shapiro’s conspiracy
the rec-
convic-
rebuttal summation mischaracterized
that
concluded
by telling
jury
Dougherty had
ord
the
that
sufficiency grounds,
reversed on
tion must be
why
them that "Mr.
lied about
"told”
argument.
we decline to address this
corporation
for the CO-
the S
was needed”
matter,
a
“extraordinary”
general
distortion
As
we review
“amazing” and
regulations.
relevant tax
This ar-
a properly preserved
claim of error re
novo,
It
is
gument
equally unpersuasive.
is
garding jury instructions de
revers
that
the Government
where,
well established
ing only
“viewing
charge
the
as a
it
latitude in the inferences
whole,
“has broad
prejudicial
there was a
error.”
jury
may reasonably suggest to the
dur-
Aina-Marshall,
States v.
336 F.3d
States v. Ed-
ing summation.” United
(2d Cir.2003).
167, 170
The trial court
Cir.2003)
(2d
wards,
342 F.3d
“enjoys broad discretion in crafting its in
omitted).
case,
(quotation mark
In this
structions[,] which
only
is
circumscribed
ample
had
evi-
presented
Government
requirement
charge
that the
be fair
support
dence to
the inference that CO-
Brand,
to both sides.” United States v.
that,
BRA—a shelter
rather
than defer-
(2d Cir.2006)
(quotation
467 F.3d
taxes,
ring
converting
eliminated tax
omitted). A
challenging
marks
defendant
liability altogether
ag-
based on an
—was
give
request
a district court’s refusal to
a
gressive, although
necessarily
not
unlaw-
jury instruction
“heavy
ed
carries the
bur
See,
ful, interpretation of the tax code.
showing]
den ....
that
proposed
his
[of
e.g.,
(testimony
A II:
of Belle
364/2149
charge accurately represented the law in
Six) (“We did look at elimination strate-
every respect,
that
charge actually
gies
Group].
The consen-
[the VIPER
whole,
given,
prejudiced
viewed as a
him.”
them,
sus was not that we wouldn’t sell
Feliciano,
United States v.
223 F.3d
very unlikely
but
it would be
(2d Cir.2000) (internal quotation
marks
Young
Ernst &
would ever reach a level omitted).
them.”).
authority
to sell
The Govern-
ment’s comments about
in rebut-
COBRA
Theory
A.
Instructions on the Defense
summation,
arguably imprecise,
tal
“while
First,
argue
defendants
light
were
no means unreasonable in
jury
instructions on Count One
presented
of the evidence
at trial and
theory
omitted their
of defense and unfair
charged
nature of
...
scheme.”
ly emphasized
theory
the Government’s
Cohen,
v.
427 F.3d
United States
guilt. Although a defendant is “entitled to
(2d Cir.2005).
reason,
For that
we find
any
charge
jury
have the court
on
prosecutorial
the defendants’ assertions of
theory
defense
for which a foundation ex
misconduct to be without merit.
record,
necessarily
in the
he
isted
[is]
Jury
VIII.
Instructions
entitled to have that instruction communi
jury
in the
language
cated to
his
Coplan, Shapiro,
argue
and Nissenbaum
Brand,
(quota
choice.”
In this
the defendants
clients
the interests of their
represent
to
empha-
One that
jury instruction on Count
with adversar-
dealings
in their
vigorously
acts that
the distinction between
sized
IRS.”).
ies,
The District Court
such as the
difficult and acts
job
made the IRS’s
more
proposed
of the
adopted
substance
deceitfully
dishonestly.
or
that were done
to include the defen-
charge, but declined
instruction included a
requested
Their
jury
examples or to inform
dants’
that,
in the defen-
examples
of
number
obligations
profes-
of tax
special
about
view,
conspir-
could not constitute a
dants’
clients in an adver-
represent
sionals who
defraud,
acy
in order to advance the
to
setting.38
sarial
le-
theory that their conduct was
defense
advocacy on behalf of their
gitimate
ruling
We affirm the District Court’s
See,
(proposed
A
e.g.,
clients.
VI:
pro-
primarily because the defendants’
instruction) (“It
illegal simply
is not
jury
“accurately repre-
posed charge did not
harder.
is
job
every respect.”
to make the IRS’s
This
Felici-
the law
]
sente
defendants,
ano,
marks
(quotation
true for the
whose
89 fraud, deceit, means.”). proffered by lawful conduct the defendants or other dishonest following: agreement included the “an be- whole,” “[Vliewing charge as a we find tween witnesses not to tell the government Ainar-Marshall, no prejudicial error. 336 something specifically unless asked about F.3d at 170.
it; attorney advice from an ato client to right
assert his constitutional
not to speak
B. Conscious Avoidance Instruction
government
investigators;
an agree-
The
argue
defendants further
ment not to
a
create
document that indi-
there was no factual basis for the
obligation
viduals had no
to create.” A VI:
conscious avoidance instruction in connec
Although
these acts are not neces-
Three,
tion with Counts Two and
the tax
deceitful,
sarily
bright
no
line rule ex-
“
charges.
evasion
‘A conscious avoidance
supporting
cludes such acts from
a con-
permits
jury
instruction
a
to find that a
spiracy to defraud. See
v.
Cont’l Ore Co.
defendant had culpable knowledge of a fact
&
Corp.,
Union Carbide
Carbon
370 U.S.
when the evidence shows that the defen
690, 707,
1404,
82 S.Ct.
tential ratio for argue also Finally, to eval- the defendants points necessary three data two of Two and Three the instructions Counts profit potential. Specifically, uate of “eco- improper contained an definition the investment spreadsheet showed in- The District Court 0.5% nomic substance.” taxpayer approximately for each cost loss, that the Add-On transac- jury the maxi- structed the and that desired “economic substance” if taxpayer each was tion lacked payout mum ratio for possibil- offered “no reasonable (profit premium). transaction approximately 2:1 in a that the transaction would result (describing payoff ity the 2:1 See note ante ratio). variables, taxpayer it the relevant had profit,” From these two in the purpose” engaging “no business profit poten- Add-On lacked apparent that challenge The defendants transaction.40 tial if the fees exceeded 1.0%. Given Co- Now, say your me a few words about respect let 40. With to the economic substance test, there jury as to whether or not Court instructed determination District possibility was a reasonable shelter follows: profit. in a This element re- would result In to establish that a transaction order you objective judgment substance, quires to reach an government lacks economic government proved about whether the has beyond prove two elements a reason- must possibility was no reasonable that there The first element is that there able doubt: profit. in a the shelter would result possibility that the trans- was no reasonable words, upon depend other this does profit. The action would result in a second taxpayer profit what the believed about the taxpayer that the relevant had no element is requires you all of engaging potential. It to consider purpose for in the trans- business and reach a conclusion about question apart from the creation the evidence action in government proved beyond has whether of the tax deduction. that there was no rea- a reasonable doubt *42 inconsistently that within possibility the “no reasonable circuits.” Modern Controversies, profit” Practicing would result in a lan- Tax 957 Law transaction Inst, (summarizing “disjunc in the first element of the instruc- at 478-35 guage tive, tion, conjunctive, instead a transaction lacks arguing unitary formulations” doctrine).41 only economic substance where there is the economic substance “no market risk.” exception. Our is In Circuit no United Atkins, approved States v. we an instruc- matter, general
As a
a transaction
tion that a transaction lacks economic sub-
will not pro
that lacks economic substance
subject
stance if it was
to “no market
Fergu
vide the basis for a tax deduction.
(2d Cir.1989)
135,
risk.” 869 F.2d
140
Comm’r,
(2d
98,
v.
29 F.3d
101
son
Cir.
a
(upholding charge that the transaction at
1994). A transaction lacks economic sub
issue lacked economic substance if
it
if it “can
with
stance
not
reason be
[sic]
was “not intended either to make or pre-
substance,
purpose,
utility
said to have
or
any profit
any
serve
or to limit a
loss
from
apart
anticipated tax conse
[its]
way,”
subject
it was
to no market
Comm’r,
584,
quences.” Lee v.
155 F.3d
“changes
prices
risk
in market
(2d Cir.1998) (quotation
586
mark omit
any
cannot have
(quotation
effect”
marks
Comm’r,
ted); see
v.
915
also Jacobson
omitted)).
In
(2d Cir.1990) (“A
Regan,
United States v.
937
832,
F.2d
837
sham
(2d
823,
Cir.1991),
F.2d
827
we suggested,
analysis requires
transaction
a determina
expressly ruling,
without
“no mar-
a
any
tion
prac
whether
transaction has
ket risk” instruction was erroneous on the
ticable economic effects other than the
(internal
particular facts of that case. Most recent-
creation of income tax losses.”
omitted)).
ly,
nonprecedential disposition,
ap-
in a
we
quotation marks
proved
instruction that a transaction
substance,
The law of economic
it must
lacks economic substance when there is
said,
clarity.
be
is not a model of
possibility
“no reasonable
that the transac-
was,
economic
“if
substance doctrine
not
profit.”
tion would result
in a
formulated,
popularized” by
then at least
(2d
Pfaff,
Fed.Appx.
States v.
Judge Learned
opinion
Hand’s
Helver
Cir.2010)
omitted).
(quotation marks
In
(2d Cir.1934),
ing Gregory,
v.
paid.
you
government
(paragraph
If
find that the
has
A VI:
breaks omit-
424/6176-77
ted).
proved beyond a reasonable doubt
possibility
there was no reasonable
of a
2010, Congress finally
codified the eco-
profit,
you
then
move on to the second
element,
nomic substance doctrine at 26 U.S.C.
taxpayer
whether the relevant
had
7701(o).
applies pro-
§
The codified version
purpose
engaging
no
for
in the tax
business
you
spectively to transactions entered into after
government
shelter.
If
find that the
30, 2010,
proved
inapplicable
therefore
has not
the lack of a reasonable
March
is
possibility
profit,
you
reject
of a
then
must
to this case.
(2d
substance,
Pfaff,
v.
619 F.3d
United States
purpose,
to have
reason be said
Cir.2010).
anticipated
utility apart
[its]
from
(em-
Lee,
To we hold that: including b. a conscious avoidance (1) challenge The to the defendants’ so- instruction; or conspiracy theory called Klein of instructing jury c. that “econom- liability criminal under 18 U.S.C. only if there ic substance” existed § 371 fails the law of the under Cir- possibility” was a “reasonable of cuit, good which remains law absent profit; review or modification the Su- Court; preme (9) Spillover prejudice did not infect the convictions; (2) remaining and respect sufficiency With chal- lenges: portion of Bolton’s sentence Shapiro imposing a.The convictions of and a fine is VACATED and One, charg- Nissenbaum on cause is REMANDED for the sole Count On”); Personal Investment Cor- fine to the and reducing of purpose (“PICO”) $250,000. poration shelters. statutory maximum of at 54. “The IRS Majority Opinion ante holdings, judg- light of these resulting from a can deductions disallow Vaughn of Coplan ments of conviction with reason that ‘can not [sic] transaction AFFIRMED, of con- judgments are substance, or purpose, to have be said are Shapiro viction of and Nissenbaum tax con- utility apart anticipated from [its] REVERSED, of the District portion are said to sequences. Such transactions sentencing principal- Bolton Court’s order ’ ” Majority lack “economic substance.” is AF- ly imprisonment to 15 months of with (quoting, ante at 58 n. 15 Opinion FIRMED, of Bolton’s portion and the Commissioner, alterations, Lee v. 155 F.3d a million fine is VA- imposing sentence $3 Cir.1998)). (2d 584, 586 is REMANDED CATED and cause reducing the fine purpose for the sole superseding One of the indict- Count $250,000. statutory maximum of four alleged that each of the above ment respect to defendants Sha- Judgment other, shelters, along with one tax enter on all piro Nissenbaum, and Nissenbaum shall fraudulent, Shapiro, and that which we have reversed the counts as to Coplan Robert and defendant —each District judgment Court. Master’s De- lawyer whom was a with a experience gree in tax law and decades of KEARSE, dissenting in Judge, Circuit persons other known practice tax —and part: unknown, agreed to de- conspired I from so much of respectfully States, dissent to violate the fraud the United Majority Opinion as finds the evidence laws, and to make false federal income (1) the convictions support insufficient to Majority statements to the IRS. As the Martin of defendants Richard Opinion acknowledges, the evidence as conspiracy, in violation of Nissenbaum conspiracy’s objectives is not deficient (a) § defraud the United 18 U.S.C. if there is sufficient evidence of least by impairing the lawful functions of States objectives. Majori- alleged one of the See govern- States agency of the United ty Opinion ante at 62-63. Govern- “[T]he ment, wit, the Internal Revenue Service sought ment to demonstrate the de- *47 (b) (“IRS”), evasion, see 26 commit tax from the IRS fendants hid the truth (c) 7201, § make false state- U.S.C. and withholding making information and affir- IRS, § to the 1001 ments see U.S.C. mative misstatements” about these shel- (2) (Count One); those two defen- 58, and ters, Majority Opinion ante at IRS attempted convictions of tax evasion dants’ with a audit interviews and in connection (Counts § in violation of 26 U.S.C. amnesty program 2000 IRS that would Three). Two and in tax person allow a who had invested shelters, legit- if them not the IRS deemed out, Majority Opinion As the sets this transactions, penal- paying imate to avoid prosecution principally focused ties on those transactions. audit design, implementation, Majority suggest does not developed of four tax shelters The defense (“E Y”) jury there insufficient evidence for the Young & LLP & [Ernst ] (1) with conspiracy that there existed a Contingent to find Group/SISG: VIPER (“CDS”); Currency objectives alleged Swap one or more of Deferred it, given Nor could that Co- Reward Alternatives Count One. Options Bring (“Add- (“COBRA”); Vaughn, Brian a certi- plan and defendant CDS Add-On accountant and certified finan- duce public Extraordinary fled Results —and whose Y, E planner employed by cial & were name changed was later to Strategic Indi- (see participating alleged (“SISG”) convicted of in the vidual Solutions Group Gov- (“GX”) conspiracy 73), and that we affirm con- ernment those Exhibit which mar- Rather, (see Majority victions. finds that keted tax shelters Trial Transcript 1069). (“Tr.”), 4619, the evidence was insufficient Coplan to show that was the lead- Shapiro and Nissenbaum knew of the con- er “high of this net worth market group” (Tr. spiracy 4619-20); in it. participated Majori- See and Nissenbaum ty (see, Opinion ante 62-63. were core e.g., members id. at 2135- 2236). Majority Opinion out the sets well trial, government At introduced nu- legal principles established “[i]n merous e-mails between or among Shapiro, conviction, context of a conspiracy ‘defer (and Nissenbaum, others) and Coplan dis- jury’s ence to the findings especially is alia, cussing, inter the need to prevent important ... a conspiracy by because its materials, certain which E mentioned & Y very nature is a operation, secretive and it clients’ interest in minimizing or eliminat- aspects is a rare case where all of a con taxes, ” ing falling from into the hands of court,’ spiracy can be Majori laid bare the IRS. These included: ty Opinion (quoting ante at 62 — (Coplan GX 795 e-mail dated No- (2d Rojas, States v. 617 F.3d “ 27, 2000, vember copies to Shapiro, Cir.2010)); government ‘the is enti others, among stating, “we refrain from prove solely through tled to its case cir ” sending leaving out—or with a client— evidence,’ Majority Opinion cumstantial promotional materials that go through ante at 69 (quoting United States v. Rodri steps of a strategy, highlight or even (2d Cir.2004)); guez, 392 F.3d the tax benefits of a strategy. Business evaluating sufficiency chal “[i]n purpose is a critical element to prove for lenge, we ‘must view the evidence in the solutions, these and the less evidence light government, most favorable to the there is that the client responded to a crediting every inference that could have tax-saving promotion, the better his favor, government’s been drawn in the argument that there were non-tax moti- deferring jury’s assessment of wit guiding vations his actions.” (emphasis credibility ness and its assessment of the ” added)); weight of the Majority Opin evidence.’ — (Shapiro GX 860 e-mail May ion dated (quoting ante at 62 v. United States 22, 2001, Merk, Chavez, (2d to Melinda a member of 549 F.3d 124-25 Cir. 2008)). group who PFC worked with SISG But in finding the evidence insuffi (see 1281), Tr. stating general that “as a cient to permit jury to infer that Sha *48 rule, presentation materials piro and SHOULD conspir Nissenbaum knew of the NOT be left with the acy it, client. Clients participated and in the Majority notes, etc., may take but apply does not materials principles. these should be handed back at the end of the meeting. In an meeting audit i [sic] A. Conspiracy Count Minneapolis had in on a COBRA trans- Y, firm, action, E & an accounting had a Per- one of requested the items of the (“PFC”) sonal Financial Counseling group taxpayer any promotional materials that included a group, initially they called VI- had.” in (capitalization origi- nal)); acronym PER —an for Value Ideas Pro-
— (Merk be out the window.” from would dated No- COBRA e-mail GX 795 added)). an E & Y tax (emphases to vember “I am stating employee department subparts 1-4 and below in As discussed any provide and prepare to hesitant below, pre- government also Part B delivery potential summary for to witnesses, in- testimony many from sented client, my recent conversa- based on cluding Bob Shapiro and tions with Richard — Thomas partner E & Y tax former very careful about that we be Coplan that, in the A. who testified Dougherty, writing in such information providing others, he lied Shapiro and presence into the dissemination potential in connection with the CO- to the IRS receipt n by me- marketplace and/or ” shelter, “plau- false making but BRA added)); dia, Treasury.... (emphases he dis- had representations sible” — July e-mail dated (Coplan GX 555 Shapiro; with cussed 17, 2001, employees, 60 E & Y to some — Nissenbaum, Kathryn E & Y client Mun- “in- former including Shapiro and ro, immediately delete to statements made— struct[ing to who testified them] in any and all materials her E dispose not made—to statements computers drawers and with investments [their] [their] & Y connection other shelters, transaction related to COBRA and with re- and Add-On CDS re- letters and documents opinion than” amnesty misleading false and spect to currency to the client’s trades lated by E & Y for submis- prepared letters supporting the economic “documents IRS; sion to the and bona nature purpose fide — manager E & Y Jason former (emphas- in the transaction” investment Munro Bryant Rydberg, who dealt with added)); es to, alia, prepara- inter and testified — July e-mail dated (Coplan GX 602 misleading opinion let- tion of false and 23, 2001, Y employees, to some 60 E & following and letters to the IRS its ters Nissenbaum, re including Shapiro and amnesty regard to CDS offer of Leak,” stating that a Materials “PICO shelters, Add-On tax and testified of E & Y’s potential client had sent set requirement presenta- E & Y competitor, to an E & Y PICO materials regard tions with to those shelters be sug- was “not although Coplan and that to Shapiro; shown in advance necessarily is a calami- gesting that this — manager E & Y Belle Six— former event[, negative re- potential tous t]he a total of some million who earned $22 obvious, are and a percussions fax of selling both from CDS commissions [including] people materials to certain with, Y working while at E & shelters have calami- government WOULD ” others, and Nis- Shapiro, Coplan, among origi- (capitalization tous results senbaum, selling E & Y Add- and from nal)(other added)); and emphasis plead- thereafter —who had On shelters — e-mail dated June (Coplan GX 639 conspiring to defraud guilty ed 14, 2000, regional an E & Y senior required and had been government re “Fi- manager, copy with a govern- that total to the pay or forfeit Slides,” stating, Add-On nal Set CDS *49 (see 2106-10); ment Tr. and alia, ever inter these slides “[i]f — practicing lawyer Peter Cin- ... former IRS way made their to the to, pleaded guilty who had argument quegrani, purpose entire business alia, give with others to conspiring inter ability distinguish this gives us false false statements and documents mid-March Sullivan received with the the IRS connection PICO notice from the IRS that the WRB Lake shelter, having Shapi- collaborated with partnership being was audited. He in- so fashioning opinion ro in letters PICO Dougherty, formed who in turn informed Cinquegrani testified he knew con- fax, Coplan by e-mail and Coplan which misleading tained false and statements to, others, among forwarded Shapiro, Nis- (Tr. 4015). story” a constituting “cover (see senbaum, and Denis Conlon Tr. 1171- 75), a member of E & Y’s national tax 1. Shapiro and COBRA practice specialty whose responding Shapiro was the E & Y leader on the (see 540; contacts from the IRS GX Tr. presentation national roll-out of the CO- 1175-76). In a early conference call in 4588.) BRA tax shelter Tr. {See April, Dougherty discussed with Coplan Dougherty about the principally testified and Conlon the “facts that could hurt the professed purported of (Tr. 1186). —and —interests client’s case” Dougherty, [sic ] partnership three members of a called Coplan, and Conlon ... come “tr[ied] WRB Lake who invested in a COBRA tax up may with some ideas that presented he Dougherty shelter. been had instructed agent why for [IRS] WRB the[]” by E & Y’s tax division director to ask two partners Lake entered the COBRA trans- of those & Y clients Bill partners Wan- —E (id. added)), action at 1182 (emphases even Sullivan, ner and Brian whose business though Dougherty, Coplan, and Conlon purification was water and desalinization transaction, “knew that this was a COBRA were a a selling company profit who at one all three principals had entered into of more than million each—whether $20 (id. 1181). ... savings” to realize the tax at they were in E & interested Y’s CDS Dougherty testified: (see 1081-86) strategy id. at to convert discussion, At point this we’re income, ordinary their have which would looking taxpay- at other reasons that the rate, been taxable at about a 40% into together purposes ers came for the long-term which capital gains, would be why they purchase foreign digital did (see 2149). taxable at generally 20% id. at contracts, why they together did do this However, Sullivan, along Wanner and partnership, why they in a did de- another Lake partner, WRB informed partnership cide to terminate that Dougherty they were interested in- any foreign currency not do more invest- stead in a strategy whereby taxes on their ing. just transaction would be not minimized (Id.) Dougherty possible advanced various (Id. 1087.) but at After E “eliminate[d].” explanations, including that Wanner had COBRA, & Y decided to market its tax business, prior experience, some (see had his 1088-89), strategy elimination at id. doing foreign currency trading, some partners sought WRB Lake “to enter “maybe something that was we could into COBRA transaction ... for the being throw out as supporting purpose eliminating tax on the transac- fact ” entering reason into this transaction they going through”; tion were the clients (id. added)), (emphasis although at 1182 they pursuing said interested in “w[ere] (id. Dougherty 1183), Wanner had indicated to for that at purpose” [COBRA] (see 1181-83). outset, any such motivation id. at they and in 1999 From the did so. Dougherty Wanner had “also talked about the fact that stated his “desire to enter partners] happened into the transaction for the three Lake purposes [WRB COBRA (Id. 1141.) creating joint newly a tax loss.” to be investors in formed [a] *50 reason” that was the “same why “they purpose” explain which could company,” dis- and Conlon had Dougherty, Coplan, willing partnership to form a would be in their purposes business partnership possible cussed carry and on some together they “to talk about would earlier call: needed Maybe activities. that investment reasons, reasons, plausible at 1182 other something {Id. be we could use” added).) ... it become al- could be discussed should Dougherty had (emphasis meeting at the important to discuss that “the real ready Coplan told and Conlon added).) clients; is, (emphases agent.” how with the history {Id. these behind and the they Young to Ernst & came ensuing that in the Dougherty testified 1736.) at transaction.” {Id. COBRA interview, IRS attended May the three “They knew those facts about Conlon, Dougher- Dougherty, Shapiro, and 1738.) talking at “We were clients.” {Id. agent why “about ty “lied” to the IRS pre- that could be plausible about reasons partners] got three Lake into [WRB sented”; with some up “we needed to come 1743.) (Tr. COBRA transactions.” took why reasons the transaction business plausible “the Dougherty gave agent place.” form it took at place {Id. in the during reasons that we had talked about added).) (emphases discussions, misleading were which at among Dough- agent pwpose.” {Id. After that conference call as to the real added).) Conlon, Dougherty erty, (emphases sent 1743-44 Coplan, and Conlon made an e-mail dated testified that the Dougherty Coplan “[statements [he] and 19, 2001, why the clients had stating they agent needed about April this, gone ... had Shapiro join thinking things [he] have GX 542 done were {see (“I Mr. during Coplan, think Richard.... I want to over the calls with Mr. we need Conlon, clearly correctly Shapiro.” from and Mr. at 1743 {Id. state our case and added).) (emphasis IRS would like to catch beginning.... hurt get cold and admissions that will us alone, events From this series of need to make sure that does our case. We that, with re- jury permissibly could find happen.”)). Accordingly, April COBRA, Shapiro knowingly spect Conlon, 2001, Coplan Dougherty, e-mailed conspiracy in the joined participated and “call Shapiro to schedule a conference impair the law- Coplan and others to go ... the facts of with all us over make ful functions of the IRS and to false approach will plan this case and how we the IRS. statements to (Tr. 1188.) agents on this matter.” Shapiro and CDS Add-On CDS call April, In late a conference was held Conlon, addition, was E & Y’s “sub- among Dougherty, Coplan, Shapiro call, “SME”—on its Shapiro ject expert” raised matter Shapiro. During —or (Tr. 4555), which would con- strategy Tr. CDS question purpose of business {see 1741-42), ordinary long-term income into saying high need to discuss vert “[w]e (taxable gains at about half the rate purpose capital business on this transaction” {id. 1191). income), however, ordinary and on the Add- Dougherty, al- of such “[h]ad” which, 636), when ready point strategy at that the On GX Shapiro {see “told Mr. transac- year had used in the second of a CDS real about how these clients facts tion, liqui- would involve the creation and Young come Ernst & the COBRA even the (emphasis at 1741 add- dation of an LLC and eliminate transaction.” {Id. ed).) The SME had the “techni- Coplan, capital gains. Con- Dougherty, reason (Tr. i.e., 4876), lon, he “was the “discussing expertise” were business cal
101 (GX added).) that knew the transaction the best out.” person (emphases 66 Shapiro went to you ques- and that’s who for added that fact that “[t]he no materials are (id. 4555) (id). approval” at and “for tions” to left be behind at a call sales is not example, regional For a senior manager enough. my opinion, before anything is Shapiro forwarding sent an e-mail to a here, in ‘stone’ we should consider what presentation Power Point to “for are record [sic] look like.” will/should (GX 30, approval as the CDS SME.” dated (Id. added).) (emphasis And in an e-mail 1999.) 22, in October And to a response Vaughn models,” to about “cds copies presentation proposed by Power Point Nissenbaum, others, Coplan, to Shapi- and Add-On, Vaughn for Coplan stated that ro instructed that certain “deletions” from “the Add-On will all of strategy lose its “essential,” model documents were if it purpose’ steps ‘business is reduced to “ that the statements that ‘Calculations as- objective in a PowerPoint The slide. sume Early utilization of the Termination (GX will appear driving to be the force” ’ (GX ... Provision should be deleted.” 14, 2000, (Coplan 636 e-mail dated June to 2000.) dated April Vaughn, with copy Shapiro)); Coplan to using recommended not slides and recom- (“Bolton” Bolton Capital Planning or mended that all “materials like this” “BCP”) general partner was the in some should be reviewed in by Shapiro, advance (See, LLPs created for CDS shelters. e.g., (id.). as the Add-On “SME” 1231.) 2215-16, 2477; Tr. GX After Bol- Success of the involving CDS shelter — ton an inquiry received from the IRS with partnership that in engage swap was shelter, regard to a Coplan CDS revised purportedly having transactions a term of language the initial draft of the BCP 18 depended swap’s on the termi- months — response to the inquiry IRS to state that nation year after one but short of the 18- general partner, “[i]f based on market month stated termination year date. One fluctuations, swap terminates con- dividing was the line between short-term early, capital gain tracts would arise capital gains long-term capital gains; (GX (Coplan such termination” e-mail prior termination to the end of the stated added))). January (emphasis dated 18-month term required gains was for (Tr. 2321) Six testified that this “does not” be capital gains treated as rather than “accurately describe what ... clients” 2198-99.) (See, ordinary income. e.g., Tr. early were “told ... about termination and Shapiro repeatedly urged that the fact that how the decision early was made to termi- early pre-planned termination was not be (id. 2320). swaps nate” the CDS at 8, 2000, On February disclosed. he sent decision was not to be made based on Merk, an e-mail to with copies to Nissenb- ” fluctuations; “understanding market aum, Coplan, Vaughn, on “the [CDS] we assumed we would “[t]hat termi- plan”; action suggesting addition to nate, early terminate ... if the counter- he, Shapiro, along with Coplan Vaughn, (Id. party did not.” (emphases should be involved in any CDS sales con- added).) The revised language GX tact, Shapiro noted “the swap our fact day had been introduced the previous will be early terminated ”—and noted that Coplan Shapiro, e-mail from Nissenb- “[cjlearly this was ... necessary aum, others, with the statement “ques- transaction” —and he flow of acceptable “This one should be more ... seriously” whether there tioned] (GX 932, January “should ... be a Richard.” dated document existence 2318-22.) 2001; ... chapters has all and verses laid Tr. see *52 (See id. at those misstatements. repeated observation Shapiro’s with Consistent 3524-41.) necessary for “early” termination was strategy but should not of the CDS success that, E contrary to the Munro testified described, E & Y client Mun- former be so letters, representation “[w]e Y drafted & her that when she and husband ro testified as a partnership] not invest in [the did shelter, they were had invested a CDS invested financial investment. We sound 18 swap had a duration of not told that That pay less in taxes. in it so we could simply told it would They months. were the transaction.” purpose the basic (See 3548; at Tr. see also id. year. a last 3525.) (Tr. Contrary representation to the maturi- testifying that “the (Rydberg letters, coherent busi- wasn’t sound “[i]t in the used ty swap that[ was] date of the specific It was a transac- strategy. ness months; was 18 “[w]e transaction” CDS taxes”; nobody help our tion to us reduce it would last 12 months and told [clients] Young to talk[ed] [Munro] “from Ernst & date”); at early termination id. day to the philosophy a coherent business about (“all transactions ha[d] CDS transaction.” with the CDS connection “12 early ... termination date” of same (Id.) Contrary opinion to the letters— day”).) one months and representation on the which were based “purpose testified that the Munro also predeter- in fact “had a letters —the CDS was to de- Munros’ transaction CDS] [the ... the outcome was mined outcome liability [they] until sold” fer [their] income to ordinary capi- the conversion of had received from shares that her husband what tal income. And that’s gains options of stock “and could the exercise of the transaction was about.” purpose (Tr. 3539; see pay capital gains tax.” 3530-31.) (Id. Contrary opinion at to the 3530-32.) id. at In 1999 also letters, partnership formed Munro respect in 2001 with to respect to CDS and for the had no and her husband CDS Add-On, “repre- the Munros Rydberg sent plan of the plan”; “overall business “[t]he sign and return in sentation letter[s]” ordinary in- partnership was to convert from a law firm opinions order to receive by exercising your op- you come that had legitimacy of their investments capital gain. it So tions and convert (Id. 3519-24, at 4637- CDS and Add-On. primary purpose pay less taxes was 38.) Munro testified that these were let- (Id. 3531-32.) at partnership.” really” read before ters that she did “[n]ot informed Munro of the Rydberg (id. 3524), having “paid at a lot of signing amnesty and E & Y draft- program, IRS’s for tax money Young to Ernst & advice” and her amnesty letters for Munro ed (id. 3526; see, (Rydberg at e.g., at id. Add-On, respect husband with to CDS and testifying that he told clients “the fee[ ] signed by the Munros and which were percent ... was 4 transaction th[e CDS] (See the IRS. Tr. were submitted to being generated”); the loss that was id. 3550.) 3545-46, Munro testified that those (the Munros, for their CDS transac- on the amnesty letters —which were based tion, $400,000)). E Y Munro testi- paid & (a) business opinion letters and described letters were representation fied that (b) have, that the Munros did not purposes they in that misstated misleading false and purpose not mention the Munros’ did her for which she and hus- purpose (c) taxes, stated Add-On; reducing had invested in CDS and band (see facts any letters did not omit material letters received opinion and the pertain- GX 1231 as (describing id. at 3546 opin- with the Munros—who did not deal ing pertaining E and GX 1232 as through firm & Y— CDS ing except law Add-On)) (see situations,” misleading gain false and stated that “the 1999 —were 3544-50). Tr. and 2000 clients that have completed a transaction” shortly CDS would be “no- IRS, amnesty The Munros’ letters to the ... of opportunity tified] to partici- in March had been drafted submitted (GX pate in the trading program.” new by Rydberg. Rydberg testified that his 633.) Shapiro responded: “i remain [sic] for Add-On followed a re- template draft concerned of the formal pre-wired tie-in to *53 (See, Coplan. e.g., ceived from Tr. 4657- cobra, i think adversely impacts [sic] it 491.) 58; template GX Drafts of that had story that we regarding can tell to, others, by Coplan among been e-mailed (Id. purpose of the transaction.” (empha- 27, Shapiro February and Nissenbaum on added).) sis Coplan then edited the letter (see 490), 5, GX and on March to be sent to announcing clients Add-On (see 491). e-mail, Coplan GX In the latter and, 1, 2000, July an e-mail dated to stated “Please look this over to see if there Six, Merk, Shapiro, Vaughn, and Nissenb- any changes you are would make either to aum, stated, “I softened the last reference unnecessary avoid facts or to make it easi- liquidation to the of the interest accurately. er to I want complete post to LLC so it an sounds less like event that I morning. this and distribute this will be we know happen will in the near future.” sending along template CDS later this (GX added).) However, (emphases (Id.) morning....” re- Nissenbaum liquidation part was eighth LLC of the sponded Coplan, copy Shapiro, to with a to specified that were steps necessary for that, believing other than to details as the success of an Add-On transaction. specific option unnecessary, trades to be (See 18, (Vaughn May GX 115 e-mail dated (id.; disclosure fine me” “[t]he looks to see Coplan Shapiro).) to and As Six 4663); Shapiro provided Tr. and some non- testified, “liquidation of the in the interest adopted substantive comments that were in fact “was one steps LLC” of the (see 4663-65; Tr. compare GX 491 with required was to obtain the tax benefits.” 492). “[tjhroughout GX But these various (Tr. 2410.) generic amnesty drafts of the add-on template, ... description basic of the Shapiro and PICO (id. transaction the same” remain[ed] at (or 4665); Personal Investment and those drafts omitted mention of PICO Cor- poration) tax-minimization or tax shelter was a tax deferral pur- tax-elimination (see 491). poses strategy GX and conversion that involved in- vestments in an S corporation, called Although the Add-On strategy CDS PICO, by taxpayer and another share- (see Vaughn was the brainchild of Tr. engage holder. The would in strad- PICO 2378-79), reality Add-On was in a combi- generated offsetting dle transactions that (see nation of and id. at CDS COBRA losses, gains only and with allo- losses 1378-81). Both of the latter were shelters taxpayer. capital cated to the These loss- (see E Y promoted by Shapiro to & id. at taxpayer es could be used to offset (CDS); (COBRA)), 2144-46 id. at 4588 gains his from sources. capital unrelated (see Shapiro was the SME for Add-On GX (See 3736.) Tr. 636). in a June Vaughn, 2000 e-mail to early numerous E & Y tax department employ- Cinquegrani, attor- ees, copies Shapiro, Coplan, with ney approached, opinion who was for an Nissenbaum, letter, by person noted the add-on who had conceived “[w]ith feature, applied capital Cinquegrani can now be and who instructed CDS PICO description”; in such lead not been set forth Shapiro, E & Y’s Richard
contact
3739^42.)
about
(See
samples
nothing
said
Shapiro’s
but
Tr.
contact for PICO.
(Id.)
tax ramifications.
the transaction’s
initial conversation
Cinquegrani’s
he
some
testified that
added
any Cinquegrani
there was no discussion
Shapiro,
Shapiro’s sample representations
non-tax reason for
purpose or
business
(see
3743-44.)
(See
opinion
ensuing version of
PICO
id.
PICO.
3777);
the substance of two
Tr.
legal
to have
is-
Cinquegrani proceeded
pur-
non-tax business
samples asserting
researched,
in-
kept Shapiro
he
sues
appeared
representations
as client
poses
(See,
Tr. 3748-
e.g.,
of the results.
formed
(see, e.g.,
letter
GX
Cinquegrani’s opinion
49.)
with Sha-
many
He had
conversations
663).
“discussing]
provisions
various
piro,
knew he
testified that he
may apply
Cinquegrani
Internal Revenue Code that
transaction,
that was mislead-
drafting
asked about was
document
[Shapiro]
*54
of the
ing
purpose
as to the true
PICO
being
were or were not
includ-
what issues
(id.
3773);
in
engaged
that he was
in the
at
and Cin-
transaction and
opinion”
ed
(See
3761.)
exam-
Tr.
For
wrongdoing.
memoranda and drafts to
quegrani sent
by stating
ple,
description began
the fact
Shapiro,
Coplan
who forwarded them to
(see
3751-54,
qualified inves-
offering
3769-
that the
“is
and Nissenbaum
id. at
LLC
investors’)
(‘the
70).
opportunity
summaries of the
tors
Cinquegrani sent
man-
special purpose
in
create a
investment
requested
to be included
conclusions
letter,
on
proposed
agement company
capitalize
fact
opinion
[the
and drafts
facts,
foreign exchange
in the
expertise
as LLC’s]
sections—based on “assumed”
(id.
general
manage-
investment
were no
clients at the time
markets and
there
PICO
3752-53)
services”;
that
already-
Cinquegrani
ment
testified
support
at
—to
(see
that
not an accurate statement be-
legal
reached
conclusions
id. at 3750-
54;
offering this
(“by
[Cinquegrani]
cause “the real reason for
id. at 3761
the time
section,”
vehicle,
PICO,
provide
is to
drafted
facts
the PICO
which is the
[this]
(Id.
3754-56.)
at
largely in its final
tax losses for investors.”
opinion letter “was
form”).)
description
contained other false or
(see id. at
misleading statements as well
receiving Cinquegrani’s
After
draft of
3756-61),
de-
although
because
PICO was
section, Shapiro
Cinquegrani
the fact
sent
to the investor
signed
make available
“[t]o
repre-
listing
an e-mail
economic-substance
(id.
3758), Cinquegra-
at
significant losses”
that
been made in connec-
sentations
had
the transac-
ni’s “intention was
describe
transaction, stating
tion with
different
ordinary
possible
tion as much as
sending
that he was
them for discussion
all the tax
downplay
business deal and to
tone, etc.,
purposes
specifically
“as to
(id.
3756), “deemphasizing
at
aspects”
(GX
e-mail dat-
(Shapiro
for content.”
(id.
tax benefits”
at
possible
wherever
(bold
7,
original)).)
August
ed
3760).
any
E
expressed
No one at & Y
Shapiro’s
sample representations
first four
the letter.
language
concerns about the
referred to “substantial non-tax” business
(See
3761.)
id. at
transaction;
the last
purposes for the
sum,
testified that there
Cinquegrani
reviewed the
stated
has
“[i]nvestor
story
begin-
element
contained in was a “cover
description of
transactions
about
description
ning
opinion
the Letter and
is accurate
misleads
such
(Tr.
what
the transaction is all about”
complete,
pertinent
and there are no
4015)
opinion
and that the
letter contained
relating
facts
to the Transactions that have
—
8,
false
misleading
Shapiro’s
statements
were
February
2000 e-mail
(see
3754-81), indeed, “wildly
CDS,
id. at
mis-
GX
“seriously” “ques-
(id.
3779).
at
leading”
Cinquegrani was
tionfing]” whether the
...
“[c]learly
nec-
why
asked
he
not tell “Shapiro”
did
essary” “fact that
swap
our
will be ter-
opinion
others that the
letter contained a
minated early” should be
included
“a
(Id.
4021.)
story.
false cover
Cinqueg-
document”;
rani
that he
testified
“didn’t feel a need to —
Shapiro’s April
2000 e-mail on
oh,
say,
way,
the stuff we are
CDS,
GX
terming it “essential” that
“
writing
really
really
doesn’t
reflect what’s
the statements that
‘Calculations as-
on,”
going
key players,
because “the
sume
Early
utilization of the
Termi-
”
mentioned,
you
others],
Mr.
[and
nation Provision’ “be deleted” from the
they all
participated
creating
story.”
documents;
model
(Tr. 4021-22.)
—
e-mail,
Coplan’s July
GX
144, stating despite the fact that liqui-
—
4. Nissenbaum
dation of the interest in the
LLC was
Nissenbaum too
awas
core member of
fact a step
required
that was
in order to
(See
the SISG
headed
Group
Coplan.
planned
achieve the
tax benefits —that
2236.)
2135-37,
Tr.
I disagree with the
Coplan had “softened the” Add-On an-
Majority’s view that the evidence was in-
nouncement
letters’ “reference to the
*55
sufficient
a
permit
to
reasonable inference
liquidation of the
in
interest
the LLC so
that Nissenbaum knew of
participated
it sounds less like an event that we know
in the conspiracy
impede
to
the IRS in the
happen
will
in the near future.”
performance of its lawful functions.
I
nothing
see
that required
jury
to
As the
Shapiro
above discussion of
re-
regard Nissenbaum as a disinterested re-
veals, Nissenbaum too received numerous
cipient of random e-mails. These were
e-mails from Coplan, as well as several
communications sent
to him as a core
from Shapiro, urging concealment of facts
member of the SISG group,
pre-
which
that were material to the tax-minimization
pared presentations, prepared templates
COBRA,
goals
tax-elimination
of the
clients,
for
prepared
letters to and for
CDS, Add-On, and PICO shelters.
templates
responses
to IRS inquiries.
These included:
Plainly Nissenbaum did review e-mails
—
17,
e-mail,
Coplan’s July
2001
GX
regard
sent to him with
to letters to be
555, ordering retention of documents
seeking amnesty.
sent to the IRS in
With
“supporting the economic purpose and
PICO,
regard
Dougherty
testified that
bona fide nature of the investment in the
prepared
he
a disclosure
using
letter
(emphasis
transaction”
add-
[COBRA]
“amnesty
...
template
coming from Mr.
ed), along
legal opinions
and docu-
(Tr. 1761;
Nissenbaum”
see id. at 1317-
trades,
ments relating
currency
18); and that template did not “disclos[e]
but ordering the immediate deletion and
[taxpayer’s]
all the
entering
motives” for
disposition
any
of
other
relat-
materials
(id.
1762)
into the transaction
at
and did
COBRA;
ed to
primary
not “mention the
motivation of
—
23,
(id.
1761).
e-mail,
Coplan’s July
2001
GX deferring
reducing
taxes”
at
602,
Leak,”
about a “PICO Materials
Nissenbaum approved
(prepared
the letter
stressing that leaking “of the materials
from his template) without substantive
(GX
(Nissenb-
...
government
change
go”
WOULD have
as “Good to
results”;
18, 2002);
calamitous
aum
April
e-mail dated
see also
499,
States,
492,
63 S.Ct.
1641).
Add-On,
317 U.S.
Co- United
regard to
Tr.
With
(1943).
The
jury
L.Ed. 418
solicited—and received—comments
plan
instructed,
alia,
find
that
it
inter
could
amnes-
proposed
on the
Nissenbaum
from
of these
of-
guilty
substantive
defendants
(which adopted misstatements
ty template
principle
estab-
fenses on the basis
by E & Y
letters
opinion
in the
received
States, 328
in
v. United
lished
Pinkerton
letters,
turn, having
clients,
opinion
in
90 L.Ed.
66 S.Ct.
U.S.
representa-
from the form
prepared
been
(1946),
when the evidence
establishes
(see,
GX 786
e.g.,
the clients
tion letters for
existed, member of the
conspiracy
(e-mail
30, 2001, from Brent
March
dated
held liable for all
of
conspiracy may be
acts
Clifton,
opin-
attorney who wrote Add-On
coconspir-
performed by other
wrongdoing
letters,
and Nis-
Shapiro, Coplan,
ion
during the course of and
further-
ators
2486-88)).
senbaum);
amnesty
Tr.
646-47,
conspiracy,
of
see id.
ance
tax-
not disclose the
templates did
letter
ence that and Nissenbaum and Nis- Shapiro B. The Convictions in con- the Count One participated of and Three senbaum Counts Two ie., they in fact mem- that were spiracy, conspiracy. bers of the supersed- Two and Three of the Counts view, in In the evidence my and Nis- discussed charged Shapiro indictment ing offenses, wit, ample jury permit Part A was to with substantive to above senbaum Shapiro and Nissenbaum in of 26 to infer tax evasion violation attempted in the participated proven §-7201 in the Add- knew of and connection with U.S.C. Each was a core member prohibits conspiracy. tax shelter. Section 7201 On SISG, E tax-shelter-marketing arm of conduct, of which “any likely effect e-mails, conceal,” Y; they received numerous Spies v. & be to mislead or would Coplan, cautioning against proffer could to the IRS in connection with principally from marketing E & Y materials those allowing the audit of the Lake partners WRB but to fall into the hands of “the IRS.” shelters also attended the IRS interview at which warnings explicitly similar were is- And Dougherty told such And both “lie[s].” them- by Shapiro and Nissenbaum sued Shapiro ap- and Nissenbaum reviewed and warnings and selves. The numerous stat- proved form letters to be submitted E maintain files need not goal ed sanitized IRS, Y in support & clients to the themselves have been unlawful order amnesty, proffered business purposes, show, did, they Shapiro as and Nis- not did disclose tax-reduction tax- fully were aware of the efforts to senbaum motivation, elimination and stated that no purposes conceal the tax of these shelters sum, pertinent facts were undisclosed. from the IRS. And the evidence was suffi- I conclude that the evidence was sufficient permit jury cient to to infer that Sha- support the convictions of piro engaged and Nissenbaum mislead- Nissenbaum of conspiracy charged plainly conduct unlawful. ing Count One and of the substantive offenses Shapiro, example, only discussed Dougherty they charged false statements that Two Three. Counts APPENDIX A *57 B
APPENDIX by or force or threats of way corruptly RELEVANT STATUTORY any threatening letter or (including force PROVISIONS communication) impedes, or or obstructs impede, or the due endeavors to obstruct Conspiracy § to Commit 18 U.S.C. 371— shall, title, upon con- administration of this Offense or to Defraud United States thereof, be fined not more than viction persons conspire either If two or more $5,000, not more than 3 imprisoned or any against commit offense United both, if the offense is years, except or States, States, or or to defraud United force, only threats of committed any thereof in manner or for any agency fined not convicted thereof shall be person of any and one or more such purpose, $3,000, not more imprisoned more than or object of persons any do act to effect The term “threats of year, than 1 or both. conspiracy, each shall be fined under subsection, force”, as in this means used more than five imprisoned this title or not bodily of harm to the officer or threats years, or both. or to a employee of the States United family. member of his If, however, offense, the commission object conspiracy, of which is the is (b) property Forcible rescue seized only, punishment
a misdemeanor for of the maxi- conspiracy such shall not exceed forcibly Any person who rescues or punishment provided mum for such misde- any property to be after it causes rescued meanor. title, or shall have been seized under this do, shall, attempt shall or endeavor so to Attempt § to Evade or U.S.C. 7201— for, provided excepting cases otherwise Defeat Tax offense, every such be fined not more Any person willfully attempts in who $500, than double the than or not more any any manner to evade or defeat rescued, property value of the so whichev- there- imposed by payment this title or the greater, imprisoned er or be not is shall, penalties pro- of in addition to other 2 years. more than law, and, felony guilty vided be thereof, shall be upon conviction fined § or Entries 18 U.S.C. 1001—Statements $100,000($500,000in the more than case Generally not more corporation), imprisoned or (a) Except provided as otherwise this both, years, together than 5 or with the section, whoever, any matter within the prosecution. costs executive, legislative, jurisdiction of the Attempts § to Interfere U.S.C. 7212— judicial branch of the Government of the with Administration Internal Reve- States, willfully— knowingly and *58 nue Laws (1) falsifies, conceals, up by or covers (a) Corrupt trick, scheme, or a material any or device forcible interference fact; or force or corruptly Whoever (2) fictitious, false, any materially makes (including any threatening threats of force representa- fraudulent statement or or communication) letter or endeavors to in- tion; or any employee timidate or officer or impede or acting any writing in an official makes or uses false of the United States title, any knowing the same to contain capacity under this or other document false, fictitious, any materially matters, or fraudu- administrative including a entry; lent statement or claim payment, for a matter related procurement of property or title, imprisoned shall be fined under this services, personnel employment or or, years not more than 5 if the offense services, practices, support or or a international involves or domestic terror- law, rule, document required by or (as 2331), impris- ism defined in section regulation to be submitted to the years, oned not more than 8 or If both. Congress or any office or officer the matter relates to an offense under branch; within legislative or 109A, 109B, 110, chapter or or section (2) any review, investigation or conduct- 1591, then the term im- imprisonment pursuant ed authority any posed under this shall be not more section committee, subcommittee, commis- years. than 8 sion or Congress, office of the con- (b) (a) apply par- Subsection does not to a sistent with applicable rules of the ty a judicial proceeding, party’s or that House or Senate. counsel, statements, representations, writings or documents submitted such
party or to a judge magistrate counsel
in that proceeding.
(c) respect any With matter within the branch,
jurisdiction of the legislative sub- (a)
section shall apply only to—