Chapter 8
Conferencing with Criminal Tax Authorities
There are many stories about people, both rich and famous and not – trying to outwit the IRS. One such story involves former businessman William Berroyer.
He owed the IRS $60,000 in back taxes and they were trying to collect. Consenting to meet with the IRS in their Hauppage, NY office, Berroyer tripped over a phone cord and spent the next couple of weeks in the hospital.
After his medical release, Berroyer sued the IRS for $10 million. In the 2014 trial, the judge ruled in his favor (for a lesser amount), and waived Berroyer's tax bill. Strange things can happen, but even if you’re being charged for a tax crime, I still wouldn’t encourage you to try a stunt like this.
Since there are many levels of review before the prosecution stage, and most tax crimes can’t be prosecuted by the USAO prior to Tax Division approval, the ability to conference can be a major benefit, and possibly even resolve a case altogether.
Prior to indictment there are two major times when a conference can and should be had. After the conclusion of the administrative investigation and prior to a Tax Division referral to the USAO.
IRS Conference
Once CI completes their administrative investigation and prepared a special agent report, the taxpayer will be afforded a conference with the special agent in charge (“SAC”), or designated assistant special agent in charge (“ASAC”), and the IRS’ criminal tax attorney as a matter of course unless the case is being handled by grand jury investigation. IRM 9.5.12.3.1
If the conference occurs, the SAC will determine where the conference is held. IRM 9.5.12.3.2. Defense counsel may appear at the conference on behalf of the taxpayer without the taxpayer present. IRM 9.5.12.3.4. However, the taxpayer can attend as well as CPAS, enrolled agents, or anyone who has important knowledge of the case.
If any of these parties is deemed disruptive, the SAC may end the conference or ask the disruptive party to leave. See id. The conference may also be recorded if the SAC requests. See id.
Before the conference occurs, the taxpayer will be read their Fifth Amendment Right to remain silent. See id. Counsel for the taxpayer will still be read these rights even if they are attending alone. See id. During the conference itself, the IRS will give the taxpayer and their attorney basic information about the case against them and the proposed charges, so that they have an understanding of why the IRS intends to refer them to prosecution. 26 CFR 601.107(b(2).
However, the information given will be very limited as the IRS Manual specifically requires. After the conference, the taxpayer will be told whether the case will or will not be referred to the Tax Division. IRM 9.5.12.3.5 .
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Tax Division Conference
The Tax Division will generally grant a written request for a pre-indictment conference if the Government thinks it will be beneficial in assisting with the prosecution decision. See USAM 6-4.214.
However, there is no absolute right to this conference, and the Tax Division may deny the request. See id. According to the Tax Division, the official purpose of the conference is to provide “an opportunity to present any explanation or evidence which [the taxpayer] desires the Tax Division to consider.” See id.
The conference is not meant as a way for you to determine what evidence the government has against you. Generally, the only information provided will be the proposed charges, the income and tax computations recommended by the IRS, and the tax years involved.
The taxpayer or counsel is permitted to present their explanations of what occurred or any evidence they want the Tax Division to consider in making their decision. See id. Plea negotiations may also be conducted during conferences in non-grand jury cases. See id. However, the plea has to be consistent with Tax Division policy and the policies of the USAO which would prosecute the case. See Tax Division Directive No. 86-58 (May 14, 1986), supplemented by Memorandum dated October 1, 2013, available at Criminal Tax Manual, Chapter 3.
Early pleas can be beneficial because the taxpayer will know the recommended sentence, and can generally negotiate for a lower sentence in exchange for the efficiency. While these conferences may sound only good at this point, it is important to note that the government can use information obtained at the conference in court proceedings. See Fed. R. Evid. 801(d)(2).
USAO Conference
If the Tax Division has already sent the case to the USAO, the request will be denied. However, the taxpayer may also request a conference with the USAO. USAM 6-4.214. Like the Tax Division, the USAO gets to choose whether they want to grant or deny the conference. Each USAO is distinct, but the idea of the conferences is generally the same as with the Tax Division.
Immunity
In certain circumstances (generally relating to a larger scheme to defraud or where an individual representative of a company who has a lesser role in the offense is charged), the Government may decide that the taxpayer would be a more valuable witness than a defendant in line with their prosecution priorities.
In this instance if the taxpayer is willing to cooperate and testify on behalf of the Government, they could be offered immunity from prosecution. See USAM 9-23.000.
However, this isn’t a risk-free practice, even if the taxpayer is granted immunity in exchange for their cooperation, they could still be charged on conduct unrelated to their testimony in the immunized case, and the witness can’t refuse to testify under the Fifth Amendment right against self-incrimination.
Conclusion
I have said this before, but it bears repeating: because there are many levels of review before the prosecution stage, and most tax crimes can’t be prosecuted prior to Tax Division approval. This means that the ability to conference can be a major benefit, and we could possibly even resolve your case altogether.
If you have serious tax problems that lend themselves to the level of setting up conferences with the CI, DOJ and/or USAO, I urge you to give me a call and let’s have a no frills, just-the-facts conversation. Depending on your scenario, I can help you find shelter from most of the fallout and negotiate for a lesser punishment before your case goes through prosecution – all without an extended stay at a hospital being involved.
