IRS bulletin 200026022: Criminal tax decisions and related case reports

Plain-English summary

This April 2000 Criminal Tax Bulletin reports recent court decisions rather than issuing a ruling to a taxpayer. Its tax cases discuss whether filing status is material to a false-return conviction, how the government may establish cash on hand in a tax-evasion case, and whether a plainly implausible refund scheme makes a false claim immaterial. It also summarizes decisions on searches, witness testimony, attorney-client privilege, forfeiture notice, sentencing, and restitution. The bulletin reports the courts' holdings and includes a table of cases.

Ruling snapshot

• Question: What recent criminal tax and related court decisions did Chief Counsel report?
• Outcome: Case reporting; no taxpayer-specific ruling.
• Key authorities: IRC §§ 7201 and 7206(1); cited federal criminal statutes and court decisions

Full text (IRS public release)

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SUPREME COURT CASES
used to assault him. Here, the officers’ suspicion that J. L.
was carrying a weapon arose not from their own observations but solely from a call made from an unknown Terry Stop Not Justified When Based Solely location by an unknown caller. The Court found the tip
On Anonymous Tip That A Person Is
clearly lacked sufficient indicia of reliability to provide
Carrying A Gun
reasonable suspicion to make a Terry stop. It provided no
predictive information and, therefore, left the police without
In Florida v. J. L., 120 S. Ct. 1375 (2000), an anonymous means to test the informant’s knowledge or credibility. See caller reported a young black male, standing at a particular Alabama v. White, 496 U.S. 325, 327 (1990). The Court bus stop and wearing a plaid shirt, was carrying a gun. explained reasonable suspicion requires a tip to be reliable Officers went to the bus stop and saw three black males. J. in its assertion of illegality, not just in its tendency to L. was wearing a plaid shirt but the officers did not observe identify a determinate person. a gun or any suspicious behavior. Apart from the tip, they had no reason to suspect any of the three of illegal conduct. The Court declined to adopt the argument that the standard One officer frisked J. L. and seized a gun from his pocket. Terry analysis should be modified to license a "firearm J. L. was charged with a firearms violation under state law. exception," under which a tip alleging an illegal gun would The trial court granted his motion to suppress the gun as the justify a stop and frisk even if the accusation would fail fruit of an unlawful search. The intermediate appellate standard pre-search reliability testing. The facts of this case court reversed, but the Supreme Court of Florida quashed did not require the Court to speculate about the that decision and held the search invalid under the Fourth circumstances under which the danger alleged in an
Amendment.
anonymous tip might be so great -- e.g., a report of a person
carrying a bomb -- as to justify a search even without a
Upon a grant of certiorari, the Supreme Court unanimously showing of reliability. held an anonymous tip that a person is carrying a gun is not, without more, sufficient to justify a police officer’s stop and frisk of that person. In its seminal "stop and frisk" decision, TITLE 26 AND TITLE 26 Terry v. Ohio, 392 U.S. 1 (1968), the Court held where a police officer observes unusual conduct which leads him RELATED CASES reasonably to conclude in light of his experience that criminal activity may be afoot and the persons with whom Retroactive Application Of Gaudin he is dealing may be armed and presently dangerous, where Barred On Collateral Review in the course of investigating this behavior he identifies himself as a policeman and makes reasonable inquiries, and In United States v. Mandanici, 205 F.3d 519 (2nd Cir. where nothing in the initial stages of the encounter serves to 2000), Mandanici was convicted in 1983 of making false dispel his reasonable fear for his own or others’ safety, he is statements when he applied for federal rent subsidy benefits entitled for the protection of himself and others to conduct from the Department of Housing and Urban Development, a carefully limited search of the outer clothing of such in violation of 18 U.S.C. § 1001. Pursuant to then current persons in an attempt to discover weapons which might be Second Circuit law, the trial judge made a finding of

materiality with respect to Mandanici’s statements, Netherland, 521 U.S. 151, 167 (1997). Unlike Gideon, employing a preponderance of the evidence standard. In which established the affirmative right to counsel in all June 1995, the Supreme Court ruled if materiality is an felony cases, Gaudin’s requirement that materiality be element of an offense under § 1001, a finding of materiality proved beyond a reasonable doubt for conviction under must be made beyond a reasonable doubt by a jury. See § 1001 is a "narrow right" that affects only a "limited class" United States v. Gaudin, 515 U.S. 506, 522-23 (1995). In of cases. Thus, "it has none of the primacy and centrality of United States v. Ali, 68 F.3d 1468 (2nd Cir. 1995), the the rule adopted in Gideon," nor does it measure up to the Second Circuit followed Gaudin, holding materiality is an "watershed" standard. Accordingly, the court held the rule element of any and all charges under § 1001. See id. at does not apply retroactively on collateral review and 1474-75. Arguing the holding of Gaudin should be applied Mandanici could not challenge his 1983 conviction on the retroactively, Mandanici filed a petition for a writ of error basis of any such error. coram nobis to vacate and expunge his conviction. The district court denied the petition, relying on the Second Filing Status Is a Material Matter Circuit’s prior decision in Bilzerian v. United States, For 26 U.S.C. § 7206(1) Convictions 127 F.3d 237 (2nd Cir. 1997), where it concluded Gaudin does not apply retroactively on collateral review. In United States v. Scarberry, No. 99-6234, 2000 U.S. App.
LEXIS 3239 (10th Cir. Mar. 2, 2000), Scarberry was the
On appeal, the Second Circuit pointed out that in Bilzerian, proprietor of a small return preparation business. She filed it had examined the retroactivity of Gaudin and Ali with a 1994 joint return with her husband claiming business respect to habeas corpus relief. There, the court held that losses associated with his part time employment for a carpet pursuant to the framework established by the Supreme installation business which he did not own. Additionally, Court in Teague v. Lane, 489 U.S. 288 (1989), the holding she filed a second 1994 joint return with another man and in Gaudin was a "new rule" of constitutional criminal she prepared a 1994 individual income tax return for a procedure which did not qualify for retroactive application, client falsely claiming a farm loss. On the basis of these for it did not fall within one of the two narrow exceptions returns, Scarberry was convicted, inter alia, of violating 26 annunciated by the Supreme Court in Teague. According U.S.C. § 7206(1). Scarberry appealed her conviction, to Teague, new rules of constitutional criminal procedure do arguing the "married filing jointly" filing status she falsely not apply retroactively unless they "(1) place an entire claimed, was not material as a matter of law. category of primary conduct beyond the reach of the criminal law, or . . . prohibit imposition of a certain type of Falsity as to a material matter is one of the elements of a punishment for a class of defendants because of their status § 7206(1) conviction. For information to be "material," or offense," or are "(2) new watershed rules of criminal United States v. Clifton, 127 F.3d 969 (10th Cir. 1997) procedure that are necessary to the fundamental fairness of requires the information to be necessary to the correct the criminal proceeding." Sawyer v. Smith, 497 U.S. 227, determination of tax liability. The Tenth Circuit found the 241-42 (1990). Conceding the first Teague exception was revenue agent had specifically testified filing status affects inapplicable to his case, Mandanici urged the court to find tax rates, dependency status of children and computation of the new Gaudin rule "necessary to the fundamental fairness the earned income credit. Since filing status is thus of criminal proceedings" and thus, falling within the second necessary to the correct determination of tax liability,
Teague exception.
Scarberry’s false claim of "married filing jointly" was
material.
Acknowledging that Teague applies to petitions for habeas
corpus, the court stated by analogy, it also applies to coram Cash On Hand Must Be Established nobis petitions. See United States v Swindall, 107 F.3d 831,
833-34 (11th Cir. 1997). Additionally, the court recognized With Reasonable Certainty the second Teague exception was arguably applicable in the present case, for the Gaudin rule promotes accuracy and In United States v. Mounkes, 204 F.3d 1024 (10th Cir. fairness, factors held sufficient in Sanders v. Sullivan, 900 2000), Mr. and Ms. Mounkes owned and operated a resale F.2d 601 (2nd Cir. 1990), to qualify as a "new rule" for the business incorporated under Subchapter C. To avoid bank second exception. More recently, however, the Supreme reporting requirements they requested purchasers of items Court "underscored the narrowness of the second Teague costing over $10,000 to pay them in several checks rather exception by invoking the sweeping rule of Gideon v. than one check. They then deposited some of the checks Wainwright, 372 U.S. 335 (1963), as an example of the type into their personal accounts and failed to report these checks of rule that fits within the exception." O’Dell v. on either their corporate or personal tax returns. Also, the
Mounkes made large cash expenditures. They were


convicted of tax evasion in violation of 26 U.S.C. § 7201. statute which prohibits offering unlawful inducements to a witness by impermissibly paying Jerome for his testimony.
On appeal, the Mounkes argued evidence of cash on hand The district court allowed Jerome to testify but stated it used as a starting point to derive unreported taxable income would revisit the issue if Anty were convicted. Upon and ultimately to prove the tax liability element of § 7201 Anty’s conviction, the district court granted her motion for was insufficient to support a guilty verdict. The Tenth a mistrial ruling the payment to Jerome violated § 201(c)(2) Circuit relied on United States v. Conaway, 11 F.3d 40 (5th and his testimony must be suppressed. Cir. 1993) which required the government to establish a defendant’s pre-income cash on hand with reasonable On the government’s appeal, the Fourth Circuit concluded certainty, but not a "mathematical exactitude." Applying § 201(c)(2) does not prohibit the government from using the Conaway to the agent’s testimony she had explained "cash testimony of a paid informant. The court, in deciding an on-hand" to the Mounkes and they had submitted a written issue of first impression and following the holding in statement of cash on hand to her which matched the figures United States v. Richardson, 195 F.3d 192 (4th Cir. 1999), reported on their corporate tax returns, the Tenth Circuit held "[t]o interpret § 201(c)(2) to preclude the payment of held the court could determine the Mounkes’ cash on hand money to informants to assist in investigating and
with reasonable certainty.
prosecuting crimes, by giving truthful testimony, would not
only ‘rob the government of its long-standing
Obviousness Of Scheme Does
prerogative . . .’ to do so as established by statute and
Not Render Scheme Immaterial
recognized practice, it would also work an obvious
absurdity in implicitly repealing numerous statutes that authorize the payment of expenses, fees, and rewards to In United States v. Cordero, No. 99-1363, 2000 U.S. App. witnesses." 2000 U.S. App. LEXIS at *11 (quoting LEXIS 810 (2nd Cir. Jan. 21, 2000), Cordero filed false Richardson, 195 F.3d at 196). claims for tax refunds with attached tax protest brochures and he was convicted of violating 18 U.S.C. § 287.
Moreover, Anty did not argue Jerome’s testimony was Cordero appealed arguing the included tax protest brochures false, rather she argued his testimony should have been made his scheme obvious, hence his false claims for tax excluded solely because he received payment for his returns were immaterial. assistance, including his testimony at trial. Because the court failed to find a violation of § 201(c)(2), it did not The Second Circuit, relying on United States v. Nash, 175 reach the question of whether the appropriate sanction for F.3d 429 (6th Cir. 1999), held obviousness as a defense such a violation was the exclusion of the testimony at trial. against materiality "would render the taxpayer with an ill- gotten refund if his scheme worked, yet allow him to claim immateriality if he got caught." Rejecting obviousness as SEARCH AND SEIZURE a defense against materiality, the Second Circuit held, Cordero’s false claims for tax returns were material since Government Employer’s Warrantless Search failure to report substantial amounts of income is material
as a matter of law.
And Seizure Of Employee’s Computer Does
Not Violate The Fourth Amendment
The Second Circuit did note the question of whether United
States v. Gaudin, 515 U.S. 506 (1995) applies to In United States v. Simons, 206 F.3d 392 (4th Cir. 2000), prosecutions under 18 U.S.C. § 287 has yet to be decided in Simons was convicted for receiving and possessing the Second Circuit and other circuits are split on the issue. materials constituting and containing child pornography, in The Second Circuit, however, did not reach the issue of the violation of 18 U.S.C. §§ 2252A(a)(2)(A) and (a)(5)(B). applicability of Gaudin since the district court instructed the Simons was employed as an electronic engineer at the jury on materiality and left that issue for the jury to decide. Foreign Bureau of Information Sciences ("FBIS"), a
division of the Central Intelligence Agency. He was
Government Paid Informant Does Not
provided with a private office and a computer with Internet
Violate The Anti-Gratuity Statute
access. In June, 1998, FBIS instituted a policy regarding
Internet access by its employees, whereby use of the Internet was to be for official government business only.
In United States v. Anty, 203 F.3d 305 (4th Cir. 2000), Anty Additionally, FBIS placed all employees on notice that their moved prior to trial pursuant to 18 U.S.C. § 201(c)(2), the Internet access would be monitored and subject to periodic anti-gratuity statute, to suppress the testimony of Jerome, a audits and inspections. In July 1998, while conducting an paid informant. She argued the government violated the


inspection for inappropriate use of computer resources, suspecting" Simons’ hard drive would yield evidence of FBIS discovered Simons had accessed a large number of misconduct. The search was permissible in scope, for the pornographic websites, downloading multiple pornographic measure adopted, entering Simons’ office, was "reasonably files onto his computer’s hard drive. From a neutral related to the objective of the search, retrieval of the hard workstation, FBIS then copied all of the files contained on drive." the hard drive of Simons’ computer. Next, after consultation with the CIA OIG, an FBIS employee entered Finally, the court rejected Simons’ challenge to the validity Simons’ office, removed the hard drive from his computer of the August search warrant on the basis that by failing to and replaced it with a copy. Subsequently, the government leave behind a copy of the warrant and an inventory of the executed two search warrants for Simons’ office. The first items seized, the government violated FED. R. CRIM. P. which occurred outside the presence of Simons in August 41(d), thus rendering the search constitutionally 1998, resulted in copies being made of all computer related unreasonable. The court, however, did remand the issue of items in his office; however, no copy of the warrant or list whether Rule 41(d) was intentionally or deliberately of items seized was left behind. The next search occurred disregarded. in September 1998, with Simons present. Original evidence was seized and removed from the office and a copy of the warrant and an inventory of the items seized was properly EVIDENCE left behind. Simons’ motion to suppress the evidence seized from his office was denied.
Expert Testimony Admissible
On appeal, the Fourth Circuit first concluded the remote To Show Witness Bias searches of Simons’ computer did not violate his Fourth Amendment rights. The court determined Simons lacked a In United States v. Hankey, 203 F.3d 1160 (9th Cir. 2000), legitimate expectation of privacy in the files he downloaded Hankey was convicted of distributing and conspiring to from the Internet, because FBIS’s Internet policy clearly possess with intent to distribute PCP. At trial, Hankey’s stated it would "audit, inspect, or monitor" employees’ use co-defendant testified Hankey was not involved in the of the Internet, including all file transfers, web-sites visited, transactions. To impeach the co-defendant’s testimony, the and e-mail messages. The court opined regardless of government presented the testimony of a police expert on "whether Simons subjectively believed that the files he street gangs. Over objection, the district court admitted this transferred from the Internet were private, such a belief was testimony. The police gang expert testified gang members not objectively reasonable after FBIS notified him that it who testify against one of their own are customarily beaten
would be overseeing his Internet use."
or killed by other members of their gang. Hankey appealed
his conviction on several grounds.
Next, the court determined Simons’ Fourth Amendment
rights were not violated by the warrantless entry into his With regard to the district court’s evidentiary ruling office by an FBIS employee and the subsequent seizure of admitting the expert testimony, Hankey contended the court his computer’s hard drive. Finding Simons to possess a failed to perform its gate keeping obligations under Daubert legitimate expectation of privacy in his office, the court was v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) compelled to consider whether one of the "specifically and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), established and well-delineated exceptions" to the warrant directing trial judges to consider such factors as peer review requirement was applicable. One exception to the warrant and error rates when making determinations as to the requirement arises when the requirement is rendered admissibility of expert scientific testimony under FED. R. impracticable by a "special needs, beyond the normal need EVID. 702. for law enforcement." Vernonia Sch. Dist. 47J v. Acton,
The Ninth Circuit explained the factors for evaluating 515 U.S. 646, 653 (1995). Moreover, the Supreme Court scientific evidence set out in Daubert are not exhaustive has held a government employer’s interest in "the efficient and that Kumho makes clear that trial judges are to be given and proper operation of the workplace" may justify wide discretion, not only in deciding whether to admit the warrantless work related searches. O’Connor v. Ortega, testimony but also as to how to test its reliability. The court
480 U.S. 709, 723 (1987). In particular, when a emphasized the trial judge in this case conducted extensive government employer conducts a search pursuant to an voir dire to assess the basis for the expert testimony and the investigation of work related misconduct, the Fourth relevance and reliability the expert’s testimony. Although Amendment will be satisfied if the search is reasonable in the expert relied on his street intelligence gained over a 21 its inception and its scope. Id. at 725-26. Here, at the year career to support his testimony, the court found this inception of the search, FBIS had "reasonable grounds for


experience was the only way to obtain information about client’s purposes and motives for hiring him and, therefore, street gangs. Moreover, the Duabert factors raised by reveal confidential communications protected by the Hankey – peer review, publication, potential error rates – attorney-client privilege, Rochon moved to quash the simply were not applicable to this type of testimony because subpoena. He submitted a declaration in support of his the reliability of the testimony depends on the knowledge motion stating the client retained him in connection with and experience of the expert rather than on the methodology certain issues related to the property, the client requested his or theory behind it. The court also found the officer’s gang identity not be disclosed, and that Rochon had not revealed experiences were current and thus reliable and relevant. the client’s identity to any third parties. Adopting Rochon’s The court, therefore, concluded the district court did not arguments, the client moved to intervene and quash the abuse its discretion in admitting the testimony of the police grand jury subpoena as well. The district court granted the
gang expert.
client’s motion to intervene but denied the motions to
quash.

PRIVILEGES
In rejecting Rochon’s and the client’s arguments, the Fourth
Circuit stated “we have consistently held that a client’s identity is privileged only if disclosure would in essence Attorney-Client Privilege Does Not Protect reveal a confidential communication.” See, e.g, Chaudhry
Identity Of Client If Client Has Already
v. Gallerizzo, 174 F.3d 394, 403 (4th Cir. 1999); In re
Divulged Confidential Communications
Grand Jury Matter, 926 F.2d 348, 352 (4th Cir. 1991).
Ordinarily, “the identity of the client, the amount of the fee,
In In re Grand Jury Subpoena; United States v. Under the identification of payment by case file name, and the Seal, 204 F.3d 516 (4th Cir. 2000), the Fourth Circuit held, general purpose of the work performed are usually not compelling a lawyer to reveal the identity of a client during protected from disclosure by the attorney-client privilege,” a grand jury proceeding does not violate the attorney-client Chaudhry, 174 F.3d at 402, because such information does privilege even though disclosure might link the client to not reveal confidential communications between the confidential communications. The court based its attorney and the client. The court did acknowledged it had conclusion on the fact the communications at issue had recognized a narrow exception to the general rule in NLRB already been divulged by the client when he authorized his v. Henry, 349 F.2d 900 (4th Cir. 1990), where the court lawyer to reveal them in a letter written to prevent civil stated the privilege may extend to a client’s identity where
litigation.
so much of the actual communication has already been
disclosed that naming the client amounts to disclosure of a
A federal grand jury in the District of Maryland was confidential communication. However, in Henry, unlike the investigating allegations that 37 Forrester Street, S.W., a present situation, neither the client nor the attorney residential property located in Washington, D.C., was an voluntarily disclosed the client’s confidential interests; it open air drug market. In 1998, the D.C. Council enacted was a third party. Here, the court stressed the client’s laws which permit community groups to file civil lawsuits attorney made an authorized disclosure of the client’s against owners of properties used for drug dealing. The motives and purposes in seeking legal representation in the Bellview Improvement Council, Inc. (“BIC”) retained a law April 28, 1999, letter to BIC’s counsel. The firm to help stop drug activity at 37 Forrester Street. In communications ceased to be confidential when the letter September 1998, counsel for BIC wrote a letter to “Daniel was sent. “Simply put . . . we do not recognize an exception Quispehuman,” the owner of record for the property, that protects the client’s identity because the client has demanding all drug activity to stop. After receiving no authorized the disclosure of information that he could have response, BIC’s counsel wrote another letter on April 9, kept confidential.” 1999, threatening civil litigation. He received a letter on April 28, 1999, from Mark Rochon, an attorney claiming to represent an anonymous client who was in the process of re- FORFEITURE titling 37 Forrester Street and dealing with the concerns expressed in BIC’s letters. Rochon declined to disclose the identity of his client, but did state it was not Quispehuman.
Notice Of Forfeiture Must Be Addressed And
In July 1999, Rochon was served with a grand jury Sent Directly To Inmate At His Place Of subpoena seeking his testimony regarding 37 Forrester Confinement Street and his client’s interest in the property, as well as his
client’s identity.
In United States v. McGlory, 202 F.3d 664 (3rd Cir. 2000),
the Third Circuit held when a person is in the government’s Arguing disclosure of his client’s identity would reveal his
custody and detained at a place of its choosing, due process


requires that notice of a pending administrative forfeiture prisoner’s last known address. The Third Circuit proceeding must be mailed to the detainee at his or her place interpreted this to mean notice to a person whose name and of confinement. In September 1989, the Drug Enforcement address are known or easily ascertainable, such as in the Administration (DEA) arrested McGlory for, inter alia, case of McGlory, must be provided in a manner which has conspiracy to possess heroin with the intent to distribute. “practical use” to the person. The court stated “[o]ne who Incident to his arrest, the DEA seized various items of was ‘desirous of actually informing’ McGlory would have McGlory’s property, including cash, cellular phones and taken the time to ascertain the easily ascertainable fact of his luggage. A jury convicted McGlory on all charges and he whereabouts and would, at the least, have directed the was subsequently sentenced in to life imprisonment. From notices to him at that address.” Finally, the court rejected the time of his arrest until sentencing, McGlory remained in the government’s argument that because pretrial detainees the custody of the United States Marshals Service, housed are frequently moved between detention facilities, the most in various pretrial detention facilities. Before McGlory’s efficient and reasonable manner to send notice to McGlory criminal trial began, the DEA initiated administrative was via the Marshals Service. The court opined this only forfeiture proceedings with respect to the property it had duplicated the number of agencies handling the mail, seized when McGlory was arrested. The DEA provided increased the possibility of error, and doubled the time until notice of the administrative proceedings by three methods: McGlory’s receipt of the notice. The district court’s 1) publishing notice in a newspaper of general circulation; holding was reversed and the matter was remanded. 2) sending notice by certified mail to McGlory’s last known address; and 3) sending notice by certified mail, return receipt requested, addressed to McGlory to or in the care of SENTENCING the United States Marshals Service, Pittsburgh, Pennsylvania. After his property was forfeited, McGlory filed a motion for return of property pursuant to FED. R. Consideration Of Criminal Conduct CRIM. P. 41(e) claiming he failed to receive adequate notice Unrelated To Offense Of Conviction Is of the forfeiture proceedings. The district court denied the Permissible In Determining Whether To motion.
Apply Acceptance Of Responsibility
On appeal, McGlory argued in order to satisfy constitutional Adjustment requirements, the DEA was required to address the certified mail containing the notice of forfeiture directly to him at the In United States v. Prince, 204 F.3d 1021 (10th Cir. 2000), detention facility where the government was confining him. Prince was indicted on one count of bank robbery in In contrast, the government argued due process was violation of 18 U.S.C. § 2113(a). He entered into an satisfied by sending the notices to the Marshals Service agreement with the government to plead guilty in return for because under the Service’s standard policy, any the government’s agreement not to oppose a three level correspondence addressed to a person in custody was sentence reduction for acceptance of responsibility and to forwarded to the intended recipient at his place of take no position on the sentence to be imposed. While in confinement, by first class mail, postage prepaid. custody awaiting sentencing, the government received an
F.B.I. report indicating Prince had stabbed another prisoner.
The statute governing administrative forfeitures requires, in The government forwarded this report to the probation addition to notice by publication, “written notice . . . to each officer, who included the information in his pre-sentence party who appears to have an interest in the seized article.” investigation report. The district court declined to apply the Evaluating this standard in light of the Supreme Court’s three level reduction for acceptance of responsibility. rulings in Robinson v. Hanrahan, 409 U.S. 38 (1972) and Mullane v. Central Hanover Bank & Trust Co., 339 U.S. On appeal, Prince argued the government violated the plea 306 (1950), the Third Circuit determined “in order to give agreement by forwarding the F.B.I. report to the probation notice that meets the requirement of due process, the agency officer. The Tenth Circuit, relying on United States v. responsible for sending notice must, at least in the first Jimenez, 928 F.2d 356 (10th Cir. 1991), rejected Prince’s instance, address and direct notice to the detainee at his argument. The Tenth Circuit found prosecutors have an place of confinement.” In Mullane, the Supreme Court
ethical duty to inform the court of conduct relevant to declared the means employed to provide notice “must be sentencing. The Tenth Circuit held the government did not such as one desirous of actually informing the absentee violate the plea agreement by informing the probation might reasonable adopt to accomplish it.” 339 U.S. at 315. officer of post-plea agreement criminal conduct.
Moreover, Robinson stands for the proposition that a state
cannot satisfy its due process obligation to a prisoner in its Prince also argued even if the government did not violate own custody by sending notice of forfeiture to the


the plea agreement when it disclosed the information in the
F.B.I. report, the district court should not have considered Court Ordered Restitution Not Offset this information since it was unrelated to the criminal For Assets Forfeited To Government conduct for which he was convicted. The Tenth Circuit rejected Prince’s argument, finding the notes explaining the adjustment for acceptance of responsibility pursuant to In United States v. Alalade, 204 F.3d 536 (4th Cir. 2000), U.S.S.G. § 3E1.1(a) do not qualify application to permit the Fourth Circuit affirmed the criminal judgment against consideration only of criminal conduct of the same nature Alalade ordering him to pay restitution in the amount of as the offense of conviction. Further, the majority of circuit $667,858.18, the full amount of the victims’ losses. courts which have addressed the issue have held sentencing Alalade plead guilty to fraudulently obtaining $667,858.18 courts are entitled to consider all criminal conduct, from financial institutions in a credit card fraud scheme. As regardless of relation to the offense of conviction. Since the part of his plea bargain, he agreed not to contest the district court was correct in considering the information in forfeiture of approximately $80,000 worth of fraudulently the F.B.I. report and since Prince offered no evidence obtained property seized by the government. Alalade against the accuracy of the report, the district court’s appealed the district court’s restitution order challenging the decision not to grant the adjustment was affirmed. court’s refusal to reduce the total amount of restitution by
the value of the items the government seized from him and retained in administrative forfeiture.
Obstruction Adjustment Affirmed Based On
Court’s Express Dunnigan Findings
The Fourth Circuit held the district court lacked discretion,
under the plain language of the Mandatory Victims
In United States v. Mounkes, 204 F.3d 1024 (10th Cir. Restitution Act (MVRA), to order restitution in an amount 2000), as factually set forth on page 3 of this Bulletin, less than the full amount of each Victim Financial Mr. and Ms. Mounkes were convicted of violating Institution’s loss by allowing an offset for the value of 26 U.S.C. § 7201. The sentencing court applied the fraudulently obtained property the government seized from adjustment for obstruction of justice predicated on perjury Alalade and retained for forfeiture. The court reasoned if provided by U.S.S.G. § 3C1.1 to enhance Mr. Mounkes’ the MVRA prohibits district courts from reducing the
sentence.
amount of restitution by the amount of third party
compensation received by a victim prior to entry of the
Mr. Mounkes appealed his sentence arguing the court did district court’s order of restitution, it would be nonsensical not comply with United States v. Dunnigan, 507 U.S. 87 for the district court to have discretion to reduce the amount (1993), which requires a finding the defendant has given of restitution by the value of property seized from Alalade false testimony concerning a material matter with willful and retained by the government in administrative forfeiture. intent to provide false testimony, or with United States v. Anderson, 189 F.3d 1201 (10th Cir. 1999), which qualified The court also noted Congress deleted the language of the Dunnigan by requiring the court to make a specific finding predecessor to the MVRA, the Victim and Witness the defendant perjured himself, identifying the testimony at Protection Act of 1982, which afforded the district court
issue.
discretion in cases such as this to consider any factor it
deemed appropriate in determining the amount of restitution
The Tenth Circuit, examining the record, found the to be ordered and replaced it with language requiring the sentencing court had cited two examples of Mr. Mounkes’ district court to order restitution in the full amount of the testimony which contradicted the testimony of other loss to each victim as determined by the district court. witnesses. The sentencing court also found this cited testimony material, since it concerned affirmative acts of evasion. Though the sentencing court was not explicit as to the reasons it found the testimony willful, the Tenth Circuit deferred to its express finding of wilfulness. Since the sentencing court was in the best position to observe Mr. Mounkes’ testimony and since the record revealed it did not misunderstand the Dunnigan requirements, the Tenth Circuit affirmed the sentencing court’s enhancement of Mr. Mounkes’ sentence.


 CRIMINAL TAX BULLETIN
TABLE OF CASES
APRIL 2000

SUPREME COURT CASES

Florida v. J. L., 120 S. Ct. 1375 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

TITLE 26 AND TITLE 26 RELATED CASES

United States v. Mandanici, 205 F.3d 519 (2nd Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

United States v. Scarberry, No. 99-6234, 2000 U.S. App. LEXIS 3239 (10th Cir. Mar. 2, 2000) . . . . . . . . . . . . . . . . . . . . . . . 2

United States v. Mounkes, 204 F.3d 1024 (10th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

United States v. Cordero, No. 99-1363, 2000 U.S. App. LEXIS 810 (2nd Cir. Jan. 21, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . 3

United States v. Anty, 203 F.3d 305 (4th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SEARCH AND SEIZURE

United States v. Simons, 206 F.3d 392 (4th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

EVIDENCE

United States v. Hankey, 203 F.3d 1160 (9th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

PRIVILEGES

In re Grand Jury Subpoena; United States v. Under Seal, 204 F.3d 516 (4th Cir. 2000), . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FORFEITURE

United States v. McGlory, 202 F.3d 664 (3rd Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SENTENCING

United States v. Prince, 204 F.3d 1021 (10th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

United States v. Mounkes, 204 F.3d 1024 (10th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

United States v. Alalade, 204 F.3d (4th Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Department of the Treasury
Internal Revenue Service
Document 10023 (Rev. 4-2000)
Catalog Number 24304B