Chapter 13

What Happens at a Tax Crime Pre-Trial?

The IRS has a “Tax Crimes Handbook,” and although you may not find this surprising, within its pages is a long list of what people and businesses have done to willfully avoid paying taxes.

One such scheme is “maintaining a cash lifestyle by conducting all personal and professional business in cash, possessing no credit cards, bank accounts, or accounting records and never acquiring any attachable assets.” 

I think maintaining an all cash lifestyle these days must be far more difficult, with most financial transactions now being conducted digitally. The handling of cash since the advent of COVID-19 is much less desirable as well. 

Whether this is your tax offense or one of many others described in the “Tax Crimes Handbook,” I’ve written about some facts here that should we ever go to trial, you might like to know beforehand, starting with the pre-trial.

The Pre-Trial

Many important events can occur during the pre-trial phase of the criminal tax process from working out evidentiary issues, to setting a timeline, to discovering evidence and negotiating a plea.

Before the trial, both parties may have some issues regarding the evidence or the charges that they want to address. Either party can do this by making a pre-trial motion. See  Fed. R. Crim P. 12(b). See also Fed. R. Crim P. 47

We’ve already discussed the Motion for Pre-Trial Detention, which the Government can make if they believe a defendant should not be released on bond awaiting trial. 

Other pre-trial motions include motions to dismiss, motions to suppress evidence, motions in limine, and severance motions. See generally, Department of Justice, Justice 101, Pre-trial Motions https://www.justice.gov/usao/justice-101/pretrial-motions

A motion to suppress is one of the more commonly utilized pre-trial motions, and can have a major impact on the strength and outcome of a case. 

While a motion to suppress is a tool which can be used by either party, it is often used by defense counsel to keep evidence from being presented at trial. This evidence can be testimonial, such as a defendant’s statements, or physical evidence, such as documents or photographs that may have been improperly obtained. 

We have discussed in previous sections some of the important rights that the defendant has at different stages of a criminal proceeding. If these rights are not afforded to the defendant, and evidence was obtained as a result, a motion to suppress this evidence is one important remedy. 

For example, John Doe is arrested but is not told that he has the right to remain silent. When questioned about his tax return, John Doe admits that he under reported his income to avoid paying taxes in a higher bracket. John Does admission would likely be suppressed.

Pre-trial conferences are another useful tool in efficiently moving the case along and ironing out any unresolved issues prior to trial. See Fed. R. Crim P. 17.1. 

Pre-trial conferences are generally formal meetings in court with the AUSA, defense counsel, and presiding judge present. 

Some districts have mandatory pre-trial conference proceedings, which set timelines for actions such as discovery, pre-trial motions, and filing witness or exhibit lists. If a pre-trial conference is required, the defendant may be able to waive their appearance, as long as their defense counsel is present.

How do I Find Out the Evidence Against Me?

Prior to trial, the Government and defense counsel will conduct a sharing of evidence known as a discovery period. See Fed. R. Crim P 16. This includes a sharing of documents, photos, and other physical evidence or the sharing of testimony prior to trial, called a deposition. See Fed. R. Crim P 15. 

Depositions are an important tool for both sides, and can be used not only to build a case, but also at trial to impeach a witness who makes a statement at trial that is inconsistent with their sworn deposition testimony. See Fed. R. Evid. 801(d)(1).

With the exception of limited privileged documents, the Government will generally turn over what evidence they have to defense counsel. In order to ensure a fair trial, the Government must automatically (even if the defense does not request this discovery) turn over all evidence they have that may exonerate the defendant, as well as any statements that the defendant made. Brady v. Maryland, 373 U.S. 83, 87 (1963); Giglio v. United States, 405 U.S. 150, 154 (1972)

If the court determines that there was a violation of the discovery rules it can impose strict penalties, including a mistrial or exclusion of the evidence.

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Plea Agreements

Many federal criminal cases are resolved through plea bargaining rather than at trial. See Lafler v. Cooper, ___ U.S. ___, ___, 132 S. Ct. 1376, 1388 (U.S. 2012). A plea is when the defendant admits to the crime, and agrees that they may be sentenced by the presiding judge. Plea bargaining is an important part of the criminal justice system because it allows the case to be settled outside of the courtroom prior to trial and helps to keep the criminal justice system from getting bogged down. 

The plus side of the plea agreement for the Government is appropriate punishment with less time and resources, while the plus side for defense is the ability to know what you’re getting and the opportunity for a more lenient sentence.

The Government is authorized to offer the defendant a deal where in exchange for the defendant’s plea, the prosecutor will recommend a specific sentence or sentence range to which the defendant agrees. See Fed. R. Crim. P. 11

In criminal tax cases, the AUSA handling the case is permitted to enter into a plea agreement with the defendant even prior to the indictment, and pursuant to the Tax Division’s Major Count Policy, they do not have to get tax division approval before entering a plea to the major counts on a tax case indictment. See USAM 6-4.310. The major counts are determined by the Tax Division on a case by case basis, but are generally the most serious charges with the most severe possible punishments. See id. 

If the major count is a felony tax crime, the AUSA is not permitted to plea the defendant out to a lesser included charge (a secondary offense underlying a more serious offense) or misdemeanor offense. See id. 

For example, if the charge is felony tax evasion, the Government can’t accept a plea to the misdemeanor offense of failure to pay a tax. However, the Government is permitted to dismiss lesser counts of the indictment in exchange for the defendant’s plea to one or more of the major counts. See id.

Plea discussions occur between the prosecutor and the defendant’s counsel. The judge should not have a hand in any plea discussions, but will ultimately be the person who accepts the plea. See Fed. R. Crim. P. 11(c)(1).

While the Government can recommend the sentence negotiated in the plea, if the judge feels as if the plea is not in the “best interest of justice” he or she may reject the plea agreed on between the Government and the defendant. See H.R. Rep. No. 94-247, 94th Cong., 1st Sess., 6 (1975). See also United States v. Reasor, 418 F.3d 466 (5th Cir. 2005)

While this is not the norm, it is a possibility that the defendant should be aware of. If the defendant’s plea is accepted, there will be no trial, and the defendant will be punished in accordance with the law. 

What Are the Types of Pleas?

The defendant may plead guilty, not guilty, or nolo contedendre (no contest). See Fed. R. Crim. P. 11 (a)(1). The defendant can also enter into a negotiated plea agreement or a plea to the bench. See Fed. R. Crim. P. 11 (c).

Anyone who has watched a crime television show has probably heard of a negotiated plea. This is an agreed plea between the Government and the defendant, which we discussed above in What is a Plea Agreement supra. 

If, however, the defendant does not like the offer made by the government, but would still prefer to plead guilty to the offense charged rather than go to trial, the defendant has the option to plead to the bench, sometimes referred to as an open plea. 

This generally occurs if the defendant is guilty of the crime charged, but does not believe the Government is being fair and they have a weak case. Open pleas can sometimes be like rolling the dice. Some judges will inform the defendant of the sentence before the defendant enters a plea, but some judges will require that the defendant plead guilty without prior knowledge of the sentence that the judge will impose.

For a defendant to plead guilty, they must admit that they have actually committed the crime for which they are charged. If the defendant does not want to admit guilt, but agrees that the Government has sufficient evidence against him or her, they may be allowed to enter a plea of nolo contendere or no contest. See Fed. R. Crim. P. 11 (a)(3). 

This has the same immediate effect of resolving the case without trial and moving to sentencing, but can have different future consequences. For example, a plea of nolo contendre may not be utilized in civil proceedings. Fed. R. Evid. 410(2)

However, the defendant does not have the right to a no contest plea. See Fed. R. Crim. P. 11 (a)(3). Some judges do not accept no contest pleas, or will accept them with certain conditions. 

In fact, it is the Government’s policy to strongly object to no contest pleas, and they may not accept them unless it is an extreme circumstance and only after formal written approval by the Assistant Attorney General of the Tax Division. See U.S.A.M. 9-16.010 and 9-27.500

How Is a Plea Accepted?

Once a defendant pleads guilty, the presiding judge will go through a series of questions called a plea colloquy to ensure that the plea is made in the best interests of justice, and to preserve the record for appeals. (We will discuss the appeal process in another article.)

The plea colloquy is different from judge to judge, but they will all have the same basic concepts. The judge will ensure that there are proper facts to support the guilty plea, ensure that the defendant is aware of their rights and the consequences of pleading guilty, and ensure that the defendant is voluntarily pleading guilty and is mentally able to enter a plea. See Fed. R. Crim. P. 11(b)(1).

If the prosecutor has recommended a sentence or sentence range, the judge will also decide if the sentence is fair and in accordance with the sentencing guidelines. If all of these criteria are met the presiding judge will accept the defendant’s plea and either proceed to the sentencing phase. Once the court sentences the defendant the plea can’t be withdrawn unless it is by motion or appeal. See Fed. R. Crim. P. 11(b)(e).

Conclusion

Plea bargaining “is not some adjunct to the criminal justice system; it is the criminal justice system,” a quote Justice Anthony Kennedy made famous during Missouri v. Frye, 2012.

Guilty pleas can often open the door to reducing punishments to a less severe level than if convicted at trial. In addition, plea agreements shield defendants from a public display of potentially negative information, and from things they might not want the public to know, which could surface during a trial. 

In most of my criminal tax cases I’ve succeeded in avoiding trial. My client’s best interests are always mine and I know how important it is to make a plea and then get the punishment lessened, sometimes a lot. Working together with the evidence during pre-trial often helps me to stop a trial from proceeding altogether.

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