Other 200412003: Criminal Tax Bulletin reviews federal court decisions

Plain-English summary

The IRS Criminal Tax Division's February 2002 bulletin collects summaries of federal court decisions for informational purposes. It covers tax evasion and false returns, searches, forfeiture, money laundering, grand jury proceedings, and sentencing. The tax cases include decisions about the elements of evasion, conspiracy to impede the IRS, and whether evasion and false-return convictions can both stand. The bulletin includes a table of cases and says it is not a directive; it does not decide a taxpayer's ruling request.

Ruling snapshot

• Question: What court decisions did the Criminal Tax Division report in this bulletin?
• Outcome: Informational bulletin; no taxpayer ruling.
• Key authorities: IRC §§ 7201 and 7206; cited federal court decisions.

Full text (IRS public release)

Number: 200412003
Release Date: 3/19/04
UIL: 9999.98-00

Criminal Tax Bulletin
Department of Treasury
Office of Chief Counsel
Internal Revenue Service
Criminal Tax Division
February This bulletin is for informational purposes. It is not a directive. 2002

SUPREME COURT CASES
applied the reasonableness test, stating, “the touchstone of
the Fourth Amendment is reasonableness,” which is determined by balancing the degree of intrusion on an
Warrantless Search Of Probationer’s
individual’s privacy with the necessity of promoting
Apartment
legitimate government interests. Id., *13-14. The Court
found the search condition reasonable, as it furthered the
In United States v. Knights, 122 S. Ct. 587 (2001), Knights two primary goals of probation: rehabilitation and the was placed on probation for a drug offense. The probation protection of society from future criminal violations. order included a condition requiring Knights to submit to Furthermore, the probation condition was clearly searches of his residence at anytime, with or without a communicated to and accepted by Knights, which search warrant. Knights, consenting to the probation significantly diminished his reasonable expectation of condition, signed the order. Three days after Knights was privacy. The warrantless search, therefore, was reasonable placed on probation, the local electric company’s property under the Fourth Amendment, because it was supported by was set on fire. Knights’ court dates for theft of the electric reasonable suspicion and authorized by a condition of company’s services coincided with other acts of vandalism probation.
to the electric company’s property.
A detective
investigating the arson and vandalism conducted Forfeiture Notice to Federal Prisoners surveillance on Knights’ apartment and saw Knights’ friend carry pipe bombs out of the apartment. Further, a truck In United States v. Dusenbery, 122 S. Ct. 694 (2002), the carrying explosives which Knights had previously been seen Supreme Court held notice to a federal prisoner of the right in, was parked in Knights’ driveway. Looking at the truck, to contest the administrative forfeiture of property requires the detective saw more explosive materials as well as brass the government’s effort to be reasonably calculated to padlocks belonging to the electric company. Based on these apprise the party of the pendency of the action. Dusenbery observations and suspicions as well as knowing about the was arrested for and convicted of cocaine distribution and probation condition, the detective searched Knights’ was sentenced to a term of imprisonment. While Dusenbery apartment. When Knights was indicted on arson, was in prison, the government initiated proceedings for explosives, and ammunition charges, he moved to suppress administrative forfeiture of property seized from evidence obtained during the warrantless search of his Dusenbery’s trailer on the day of his arrest, pursuant to apartment. The district court granted the motion on the 21 U.S.C. § 881 and 19 U.S.C. § 1607. The government grounds the search was for investigatory rather than published a notice in the newspaper and sent notice by probationary purposes. The Ninth Circuit affirmed. certified mail to Dusenbery at three locations, including to
the correctional facility where he was incarcerated. The
The Supreme Court reversed, upholding the warrantless agency received no response within the time allotted and search. First, the Court noted the probation order did not declared the items administratively forfeited. Five years confine the search to probationary purposes, nor did it limit later, Dusenbery filed a motion seeking return of the the searching officers to probation officers. The Court then property seized. A mail room officer who worked where Dusenbery was incarcerated testified in detail as to the deficiency but is not a specific element of tax evasion. procedures for accepting and delivering certified mail There is no need to list each potentially offsetting item in addressed to inmates. The district court ruled the the indictment." Id., at 546. In regard to Bishop's jury government’s notice sent to Dusenbery at the correctional instruction argument, the court stated the instructions were facility satisfied his due process rights, even though there adequate and the district court did not prevent the jury from was no proof the mail actually reached him. The Court of considering payments Bishop may have made to the Appeals affirmed and the Supreme Court granted certiorari Service. In fact, in their closing arguments, Bishop’s to resolve a circuit conflict concerning due process notice attorneys stressed to the jury that Bishop made substantial requirements in an administrative forfeiture case involving payments to the Service on several occasions. Finally, even
an incarcerated interested party.
if Bishop was entitled to all of the credits, refunds, or
payments he claimed, a substantial deficiency remained.
In affirming the Sixth Circuit’s decision, the Supreme Court The jury properly, and in accordance with the court's applied the “reasonably calculated” test from an earlier instructions, found Bishop had knowledge of the deficiency. decision, Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950), to determine the adequacy of the In addressing Bishop’s remaining arguments, the court held notice method used. The Court also noted the statute in this the district court did not err in allowing summary testimony, case indicated the government need only attempt to provide and the district court’s admittance of the agent’s notes into actual notice. Dusenbery misinterpreted the requirement of evidence was harmless error. Finally, the district court did actual notice to mean actual receipt of notice and argued the not err in denying Bishop’s motion for new trial, since he government could have ensured delivery of the notice. The failed to show how the juror, who admittedly should have Court held such heroic efforts are not required. Short of been disqualified, affected the outcome of the case. allowing the prisoner to go to the post office himself, the government had to depend on a system provided by the Conspiracy prison and staff, and the government’s use of that system in this case was reasonably calculated to apprise Dusenbery of In United States v. Gricco, 277 F. 3d 339 (3rd Cir. 2002), the
the action.
Third Circuit held, to sustain a conviction for conspiracy to
defraud the United States under 18 U.S.C. § 371, the
TITLE 26 AND TITLE 26
evidence must be sufficient to prove beyond a reasonable
doubt that impeding the Service was one of the conspiracy’s
RELATED CASES
objectives and not merely a foreseeable consequence or
collateral effect. Gricco and McCardell, the defendants,
Tax Evasion Deficiency Element
were convicted of conspiracy to defraud the United States,
tax evasion and making false tax returns. All of the charges related to Gricco and McCardell’s failure to report, on their In United States v. Bishop, III, 264 F.3d 535 (5th Cir. 2001), personal income tax returns, money stolen by cashiers Bishop, III ("Bishop"), a sole proprietor of a law firm was working at airport parking facilities. Gricco and McCardell convicted of attempted tax evasion and filing a false income managed the parking facility and were responsible for tax return. Bishop appealed his conviction and argued the devising the scheme and recruiting others to carry it out. indictment was defective because two counts omitted the tax Gricco and McCardell contended their convictions for deficiency and knowledge elements of tax evasion, since it conspiracy were not supported by sufficient evidence. failed to acknowledge certain items that would offset any tax deficiency. Bishop also contended the jury instructions The government relied on three categories of circumstantial were inadequate because they limited the jury's inquiry to proof to meet their burden. First, the government relied on the content of the returns he filed and prevented evidence the participants in the scheme did not report their consideration of credits, refunds, and payments he made or illicit income. The court held while this evidence of parallel qualified for but did not report on his returns. Finally, conduct had some probative value, it was not enough by Bishop argued the court erred in allowing a revenue agent itself to show an agreed upon object to impede the Service. to summarize the government’s evidence and erred in Second, the government pointed to evidence that Gricco and denying Bishop’s motion for a new trial based on a juror’s a real estate broker who assisted in purchasing property with dishonesty concerning her prior conviction. the illicit proceeds, structured various financial transactions to avoid filing currency transaction reports. The court again The Fifth Circuit affirmed Bishop’s conviction, finding the held the value of the evidence was limited because Gricco indictment counts explicitly charged the three elements of an McCardell were not convicted of conspiring to violate tax evasion. The court noted "the non-existence of credits, the anti-structuring statutes, but with conspiring to obstruct refunds, and other payments may affect the extent of any

-2- the Service and structuring does not necessarily result in the court erred, the other prongs of the test under Rule 52(b)
evasion of taxes.
were not met. The sentences imposed on the defendants
under 26 U.S.C. § 7206(1) were concurrent to their
The government’s third category of evidence consisted of sentences for tax evasion, and thus the former sentences did testimony that Gricco told various participants not to not increase the length of their incarceration. But see, deposit their illicit income in a bank but rather to purchase United States v. Citron, 783 F.2d 307, 312-14 (2nd Cir. safes for their homes. The individuals testified they 1986) (court vacated § 7206(1) convictions since the factual followed this advice because they did not want to attract the elements of the § 7201 counts were substantially identical attention of the Service. The court held a rational jury could to those of the lessor included § 7206(1) counts). infer not only that Gricco foresaw the participants would pay no tax on their illicit income, but actually intended it to occur. Viewing all the evidence together, the Third Circuit
SEARCH AND SEIZURE held it was sufficient to support the conspiracy conviction.
Search Of Password Protected
Merger of Offenses
Files In A Shared Computer

In United States v. Gricco, 277 F.3d 339 (3rd Cir. 2002), as In Trulock v. Freeh, 275 F.3d 391 (4th Cir. 2001), the Fourth factually set forth above, the Third Circuit held even if the Circuit considered an appeal by Trulock seeking review of district court erred in entering judgements of conviction and a dismissed Bivens suit brought against the former director imposing sentences on both offenses of tax evasion and of the FBI alleging an unconstitutional search of Trulock’s subscribing false tax returns because both offenses merged, home and seizure of a computer. Trulock had served as the such error did not affect Gricco and McCardell’s substantial United States Department of Energy’s (“DOE”) Director of rights and would not warrant reversal. The Supreme Court Intelligence and Counterintelligence. After leaving DOE, in Blockberger v. United States, 284 U.S. 299, 304 (1932), Trulock wrote an article criticizing the White House, DOE, set forth a rule for determining whether two provisions the FBI, and the CIA for ignoring security breaches and proscribe the same offense. The rule asks whether each incompetence in their investigation of espionage at the Los offense requires proof of an element the other does not. If Alamos Nuclear Laboratory. Trulock believed the FBI each offense contains such an element, it is presumed conducted its search in retaliation for Trulock’s published multiple punishment is allowed. Since Gricco and criticism of the federal government. Trulock lived with his McCardell failed to raise the merger argument in the district former executive assistant, Linda Conrad. court, under Fed.R.Cr.P. 52(b), to reverse the decision of the trial court, the Third Circuit held the lower court’s error After the FBI falsely claimed to possess a search warrant must be plain and affect the parties’ substantial rights. and threatened to break down the front door in the presence
of the media, a crying and shaken Conrad reluctantly gave
The government argued the offenses of tax evasion and the FBI her consent for them to search the townhouse she making a false return each contain an element the other shared with Trulock. During the search, the FBI seized a lacks. The offense of tax evasion requires proof of an personal computer shared by Trulock and Conrad, each of attempt to evade the payment of a tax due and owing, whom used private passwords unknown to each other. A whereas the offense of making a false return does not FBI computer specialist searched the computer’s files, require proof of this element. Similarly, the offense of looking at Trulock’s password protected files on the shared making a false return requires proof of a false statement on computer’s hard drive. a return, whereas a violation of 26 U.S.C. § 7201 may be shown even if the taxpayer failed to file a tax return. The court first determined Conrad’s consent to the search Nevertheless, Gricco and McCardell argued the had been coerced and, therefore, was not voluntary. Blockberger test merely raises a presumption Congress Moreover, the court reasoned password protected files are meant to permit punishment under both provisions and analogous to a locked footlocker in a shared living situation. many other Circuits have held the offenses of tax evasion Since Trulock kept his password secret from Conrad, the and making a false return merge when they are based on the court concluded Trulock had intended to exclude Conrad as
same act.
well as outsiders from his personal computer files.
Consequently, the court ruled Trulock possessed a
Ultimately, the Third Circuit found it unnecessary to decide reasonable expectation of privacy in the password protected whether the district court erred by entering judgments of computer files and, therefore, Conrad’s authority to consent conviction and imposing sentences on both offenses. The to a search of the shared townhouse and shared personal court noted, assuming for the sake of argument, the district computer did not extend to Trulock’s computer files. Thus,

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even if Conrad had truly consented to a search, without a OTHER CONSTITUTIONAL warrant the FBI could not have searched Trulock’s computer files. Accordingly, the Fourth Circuit ruled the ISSUES FBI’s search of Trulock’s password protected computer files was unconstitutional since the search violated No Fifth Amendment Privilege For Failure
Trulock’s Fourth Amendment rights.
To File Federal Income Tax Returns

In United States v. Sabino, 274 F.3d 1053 (6th Cir. 2001), Sabino and co-defendants, Daniel and Donna Stewart, were convicted of conspiracy to defraud the United States by
Evidence Suppressed Because Portions Of
obstructing the functions of the Service, in violation of 18
U.S.C. § 371. The Stewarts were also convicted of tax
Pre-Warrant Search Violated
evasion under 26 U.S.C. § 7201. Through the execution of
The Fourth Amendment
a search warrant, Criminal Investigation discovered the
Stewarts’ names on a list of people affiliated with the Pilot
In United States v. Runyan, 275 F.3d 449 (5th Cir. 2001), Connection Society (PCS), an anti-tax organization. The Runyan had been convicted of sexual exploitation of Stewarts owned and operated Danco, Inc., a transmission children and of possession, receipt, and distribution of child business. Following PCS’ “untax instructions,” the pornography. While searching for her belongings on Stewarts first closed their bank accounts and dissolved Runyan’s ranch, Runyan’s estranged wife Judith discovered Danco, then created and funded a series of abusive trusts and removed pornographic pictures, CDs and computer with the proceeds. Sabino served as the trustee for several discs belonging to Runyan, as well as her own computer. of the trusts and his signature or signature stamp appeared After Judith and some friends viewed a sampling, she on many of the documents underlying transactions turned the computer and pornographic material over to law undertaken by the trusts. enforcement officers, who unlike the private searchers examined all of the materials and computer files. Based on During the investigation, a special agent advised the their examination of the materials and computer files, the Stewarts of their Miranda rights. Thereafter, an attorney police obtained a search warrant for Runyan’s ranch. A allegedly advised them not to file income tax returns search of the premises uncovered more pornography. because filing returns would constitute making self-
incriminating statements. The Stewarts contended their
Runyan appealed his conviction to the Fifth Circuit rights under the Fifth Amendment were violated because asserting the pornographic material found on his ranch their failure to file returns was charged as an over act and should be suppressed because the private and police search was introduced at trial as evidence of willfulness to evade of his belongings before the issuance of the search warrant taxes. violated his Fourth Amendment rights. The Fifth Circuit ruled portions of the pre-warrant search of Runyan’s The Sixth Circuit noted a taxpayer raising the Fifth belongings were unlawful because the police examined all Amendment as a privilege against filing a tax return must of the pornographic material and computer files turned over, specifically claim the privilege “in response to particular rather than just the selections viewed by the private questions, not merely in a blanket refusal to furnish any searchers. Thus, the police exceeded the scope of the information.” United States v. Saussy, 802 F.2d 849, 855 private searchers. The court determined the critical inquiry (6th Cir. 1986) (quoting United States v. Johnson, 577 F.2d under the Fourth Amendment was whether prior to the 1304, 1311 (5th Cir. 1978)). Further, the court reasoned the issuance of the search warrant, the police gathered material requirement to file tax returns was not directed at the with respect to which Runyan’s “expectation of privacy” Stewarts because they were suspected of criminal activities. had not already been frustrated. Since the police exceeded Moreover, the court observed the Stewarts failed to file the scope of the private search, they viewed material in federal income tax returns and consequently did not raise which Runyan still enjoyed an expectation of privacy. any particular objections to filing the requested information. Consequently, all of the pornographic material and Accordingly, the Sixth Circuit rejected the Stewarts’ claim computer files as well as any evidence obtained as a result and ruled their Fifth Amendment rights are not violated by of the information was subject to suppression. Accordingly, the fact they are required to file returns. the Fifth Circuit remanded the case to the district court for further consideration whether the search warrant would GRAND JURY have been sought and issued in the absence of the evidence obtained in violation of the Fourth Amendment.

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Disclosure From One Assistant United
The Sixth Circuit concluded in the instant case, the jury
States Attorney To Another
instructions given by the district court were proper,
complete, and included the appropriate limitations, such as
In Impounded, 277 F.3d 407 (3rd Cri. 2002), an attorney the witness was appearing as an opinion witness and not as appealed to the Third Circuit a district court’s decision an expert witness. Further, the court determined the use of denying the attorney’s motion for a protective order under the Service employee as a summary witness was not Fed. R. Crim. P. 6(e)(2) to prevent an Assistant United improper because the defendants cross-examined her States Attorney (“AUSA”) from disclosing grand jury extensively. Accordingly, the Sixth Circuit concluded the information to another AUSA, without first obtaining a court order.
district court had not committed error by allowing the
During a grand jury investigation involving the attorney as testimony of the government’s summary witness and upheld a subject, one AUSA disclosed information to an AUSA in the lower court’s ruling. a different judicial district regarding a potential conflict of interest between the attorney and his client in a pending FORFEITURE criminal case. The Third Circuit reasoned the text of Fed. R. Crim. P. 6(e)(3)(A)(i) authorizes an AUSA to disclose Use Of Seized Assets To Fund grand jury material to another AUSA for use in the Criminal Defense performance of the AUSA’s law enforcement duties, without regard to geographic limitations. In reaching its In United States v. Farmer, 274 F.3d 800 (4th Cir. 2001), holding, the Third Circuit noted subsection (C)(iii) reflects United States Customs special agents executed search Congressional intent to expedite and facilitate the use of one warrants at Farmer’s residence, seeking evidence Farmer grand jury’s information by other grand juries investigating was engaged in the counterfeiting of trademarked clothing.
other crimes.
Agents seized more than $500,000 in currency and
property. When Farmer was indicted two years later for
Accordingly, the Third Circuit upheld the district court’s trafficking in counterfeited clothing and for money order denying the attorney’s motion for a protective order laundering, he filed a motion for a hearing to determine relating to the disclosure of grand jury information. whether a portion of the seized funds should be released to
fund his criminal defense. Farmer alleged the government
EVIDENCE
seized essentially all of his assets, including legitimate
assets, during the execution of the search warrant, which put
Summary Witness Testimony Allowed With
him out of business and prevented him from hiring counsel.
Appropriate Jury Instructions
As a result, Farmer argued, he had been deprived of his
Sixth Amendment and Due Process rights to be heard on the In United States v. Sabino, 274 F.3d 1053 (6th Cir. 2001), as use of his legitimate property to hire the attorney of his choice. The district court summarily denied Farmer’s factually set forth on page four of this Bulletin, the Sixth motion.
Circuit upheld the district court’s jury instructions regarding
a summary witness. During trial, the government called a Farmer appealed the denial of the motion, asserting he had Service employee to testify as a summary witness. On a right to demonstrate some of the seized assets were appeal to the Sixth Circuit, the Stewarts contended the untainted and necessary to be released to him so he could witness offered impermissible credibility determinations as hire counsel for his criminal defense. The Fourth Circuit well as legal conclusions and, consequently, the district agreed, concluding due process required holding a hearing court committed plain error by allowing the witness’ for Farmer for the limited purpose of determining how the testimony as evidence. Testimony summarizing evidence in civil seizures affected Farmer’s right to select counsel of his income tax prosecutions is admissible provided the judge choice in the related criminal case. In so holding, the court properly instructs the jury. United States v. Sturman, 951 cited the three factors from Mathews v. Eldridge, 424 U.S.
F.2d 1466, 1480 (6th Cir. 1991) (quoting United States v.
319 (1976), to be considered when identifying the specific Lattus, 512 F.2d 352, 353 (6th Cir. 1975)). Moreover, the dictates of due process. Addressing the three factors, the testimony of a summary witness “should be accompanied by court found: (1) Farmer had advanced a private interest in a limiting instruction which informs the jury of the obtaining a pretrial hearing; (2) there existed a risk of summary’s purpose and that [the summary itself] does not erroneous deprivation of Farmer’s interest in the absence of constitute evidence.” United States v. Paulino, 935 F.2d a hearing; and, (3) the government would not be unduly 739, 753 (6th Cir. 1991). burdened by the hearing. The Fourth Circuit remanded the

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case with an order to hold a hearing, but noted Farmer Rodriguez was convicted of illegal transportation of aliens would have the burden of showing, by a preponderance of and money laundering. Rodriguez was involved in an the evidence, that the government seized untainted assets operation of smuggling undocumented aliens from Mexico without probable cause and he (Farmer) needs those same into North Texas. Rodriguez charged each alien between
assets to hire counsel.
$1,000.00 and $1,200.00 to illegally transport them into the
United States. Eventually Rodriguez was stopped at a border checkpoint and seven undocumented aliens were found concealed beneath clothing in the rear of Rodriguez’ van. Subsequently, a search warrant was executed at Rodriguez’ home, where agents found cash and financial
Federal Preemption Over State
documents as well as multiple vehicles and personal luxury
Homestead Exemption
items. The van in which Rodriguez was stopped had been
selected and purchased by Rodriguez with cash and was the
In United States v. Wagoner County Real Estate, 278 F.3d subject of the money laundering counts. Bank records 1091 (10th Cir. 2002), the Tenth Circuit held Oklahoma’s revealed the van was purchased during a period in which statutory and constitutional provisions protecting Rodriguez was depositing and withdrawing large sums of homesteads did not prevent the federal government from money into and out of his bank account, which included an obtaining forfeiture of a home used to facilitate federal drug insurance settlement check for $10,884.25. law violations under 18 U.S.C. § 881. After arresting an individual on drug charges, the police obtained a search On appeal, Rodriguez argued there was insufficient warrant to search the residence where the drugs were evidence to prove the money he used to purchase the van purchased. The search produced additional drugs and involved proceeds of the specified unlawful activity of firearms. The government then initiated a forfeiture action transporting and harboring aliens. Rodriguez further against the residence, which the trial court granted. On argued he had deposited the $10,884.25 settlement check appeal, the homeowner contended the residence was not into his bank account, withdrew nearly all of it three days subject to forfeiture because it was subject to the state’s later and could have used the money he withdrew to homestead exemption and because the forfeiture was purchase a cashier’s check for $10,209.42, which was excessive, given the property’s appraised value of ultimately used to purchase the van. Rodriguez claimed
$136,000.
there was no proof the cashier’s check was purchased
using proceeds from a specified unlawful activity.
The homeowner claimed, as a resident of Oklahoma and a
Native American Indian, her property may not be forfeited In affirming Rodriguez’ money laundering convictions, because it is protected by the general Oklahoma homestead the Fifth Circuit cited its previous decision in United exemption and by the Oklahoma constitutional provision States v. Willey, 57 F.3d 1374, 1386 (5th Cir. 1995), in relating to Indian homesteads. The Tenth Circuit, holding which it held “[i]t is not necessary to prove with regard to federal preemption of the state homestead exemption was any single transaction that the defendant removed all trace necessary, noted Congress has the power to preempt state of his involvement with the money or that the particular law under Article VI of the Supremacy Clause of the United transaction charged is itself highly unusual.” The court States Constitution. Section 881(a)(7) provides for further noted although Rodriguez offered an alternate forfeiture of “all real property” used to commit a federal source for the funds used to purchase the van, Rodriguez drug violation. Thus, the statute’s broad, unambiguous ignored the fact the jury was free to discredit his theory language is in direct conflict with Oklahoma law allowing the funds were from a legitimate source. forfeiture of all property except homestead property. Furthermore, all the other federal circuits which have Robber Also Convicted Of considered the conflict between § 881(a)(7) and state Money Laundering
homestead protections, have determined
residential
property is subject to forfeiture despite state exemptions. In United States v. Carcione, 272 F.3d 1297 (11th Cir.
2001), Carcione was convicted under the Hobbs Act, 18
MONEY LAUNDERING
U.S.C. § 1951, based on his participation in the planning
and execution of the violent robbery of expensive jewelry belonging to a wealthy, elderly woman. After the robbery,
Proof of Proceeds
Carcione and a co-conspirator crossed state lines, later
selling a seven and one-half carat diamond stolen during the In United States v. Rodriguez, 278 F.3d 486 (5th Cir. 2002), robbery and dividing the proceeds among all the co-

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conspirators. Carcione was also convicted of money The court then purged the Blackmon wiretap application of laundering under 18 U.S.C. § 1956 (a)(1)(A)(i) because of the material misstatements. The remainder of the his involvement in the sale of the diamond ring for cash. application contained only “boilerplate” assertions true of Carcione appealed his convictions to the Eleventh Circuit. any drug investigation, and failed “to contain sufficiently
specific facts to satisfy the requirements of 18
For Carcione to be convicted of money laundering, the U.S.C. § 2518(1)(c).” Id., at *17. government must prove the elements required under 18 U.S.C. § 1956 (a)(1)(A)(i). After reviewing Carcione’s case, the Eleventh Circuit was satisfied all of the requirements for conviction had been met. Carcione clearly SENTENCING conducted a financial transaction, knowing the diamond ring to be the proceeds of a specified unlawful activity (“SUA”), to promote the furtherance of the SUA (Hobbs
Acceptance Of Responsibility
Act). In reaching its conclusion, the court noted the sale of
the diamond ring was “simply one further step in the In United States v. Leal-Mendoza, No. 00-50737, 2002 U.S. ongoing Hobbs Act conspiracy” because by transforming App. LEXIS 1213 (5th Cir. Jan. 29, 2002), the court vacated stolen property into cash, the financial transaction promoted the district court’s finding that Leal-Mendoza and Galindo “the ultimate objective of the conspiracy.” Accordingly, the did not qualify for a three level reduction for “acceptance of Eleventh Circuit affirmed Carcione’s convictions. responsibility” under U.S.S.G. § 3E1.1(b). Leal-Mendoza
and Galindo were convicted of transporting a large quantity of drugs in a nonjury trial. At sentencing, the district court
INVESTIGATIVE TECHNIQUES
reluctantly granted a two level reduction for “acceptance of
responsibility” under § 3E1.1(a), finding the policy of the
Statements Of Necessity In Spin
court was to grant it. The district court, however, declined
Off Wiretap Applications
to grant an additional reduction of one level under U.S.S.G.
§ 3E1.1(b) “. . . because of its reluctance on whether even
In United States v. Blackmon, 273 F.3d 1204 (9th Cir. 2001), the two level decrease was justified.” Blackmon appealed his conviction for controlled substance- related offenses, arguing the district court erred in denying On appeal, the Fifth Circuit analyzed whether Leal- his motion to suppress wiretap evidence. The Blackmon Mendoza and Galindo qualified for a three level reduction wiretap application was a spin off application from the under § 3E1.1(b) based on whether they qualified for a two initial wiretap application, which targeted an alleged drug level reduction under § 3E1.1(a). To qualify for a three dealer who lived in Blackmon’s housing project. Blackmon level reduction under § 3E1.1(b), a defendant must meet argued the application was a duplicate of the initial wiretap three criteria: (1) he/she must qualify for the two level and, therefore, the government's application for the wiretap reduction under § 3E1.1(a); (2) the offense level prior to the failed to make the statutorily required showing of necessity operation of § 3E1.1(a) must be a level 16 or higher; and, pertaining to him. The Ninth Circuit agreed, holding the (3) he/she must either “timely provide complete information wiretap evidence should have been suppressed because the to the government concerning his own involvement in the application contained material misstatements and omissions, offense” or timely enter a guilty plea. Here, the court found and because the application did not otherwise make a once the district court granted Leal-Mendoza and Galindo
particularized showing of necessity.
a two level reduction under § 3E1.1(a), the district court
was not entitled to revisit whether they merited an
In reversing the conviction, the Ninth Circuit found the acceptance of responsibility reduction under § 3E1.1(b). statements of necessity in the wiretap application for Having found Leal-Mendoza and Galindo met the first Blackmon were a carbon copy of those in the application for prong of § 3E1.1(b), the court limited its determination to the initial suspect and, therefore, did not pertain to whether Leal-Mendoza and Galindo met the two remaining Blackmon. Thus, the statements of necessity in the wiretap prongs under § 3E1.1(b). Thus the court, upon concluding application concerning the use of surveillance and Leal-Mendoza and Galindo met the two remaining prongs informants in the investigation of the initial suspect were under § 3E1.1(b), vacated their sentences and remanded for material misstatements when it came to the Blackmon re-sentencing. investigation. Furthermore, the Blackmon wiretap application failed to include any statement of investigative Minor Participant, Sophisticated efforts expended on Blackmon specifically, other than trap Concealment, Obstruction Of and trace devices and pen registers, as required by the Justice and Departure necessity provision in 18 U.S.C. § 2518(1)(c) and (3)(c).

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 for a downward departure. The government responded by In United States v. Sabino 274 F.3d 1053 (6th Cir. 2001), as arguing: 1) filing a motion for a downward departure was factually set forth on page four of this Bulletin, the Sixth within the government’s discretion; 2) absent Circuit held Sabino was not entitled to a reduction in his unconstitutional motives, the government could not be offense level for serving as a minor participant in the compelled to file the motion; and, 3) Hawkins was not conspiracy. While Sabino contributed no special entitled to a reduction because he had not been required to knowledge or skills to the completion of the conspiracy, the plead guilty to two associated firearms offenses. Sixth Circuit ruled Sabino’s actions as trustee were indispensable to the conspiracy and thus the district court’s reduction in his offense level was clearly erroneous. As articulated in its decision in United States v. Moore, 225 Because of the complexity of the case, coupled with the use F.3d 637 (6th Cir. 2000), the Sixth Circuit’s rule is the of seven trusts and other sham financial transactions to government’s refusal to move for a downward departure, complete the tax evasion conspiracy and conceal the where a plea agreement gives complete discretion to the Stewarts’ ownership interests, the Sixth Circuit also ruled government in regard to a § 5K1.1 departure, is subject to the district court abused its discretion by failing to apply the review by the court only to ascertain whether it was sophisticated concealment enhancement to Sabino and the grounded on unconstitutional motives, such as race or
Stewarts.
religion. Hawkins has made no allegation the government’s
action was precipitated by unconstitutional motives; rather,
The government contended the district court erred in failing Hawkins claims the government’s refusal to request a to enhance Sabino’s and Donna Stewart’s sentences for downward departure in his sentencing violates his obstruction of justice as a result of false testimony they gave constitutional rights to due process and equal protection, in grand jury proceedings. The Sixth Circuit, however, and was “not rationally related to any legitimate government determined since the false statements were overt acts in purpose.” Accordingly, the Sixth Circuit affirmed the furtherance of the conspiracy, to impose an enhancement decision of the district court. Nevertheless, the panel for obstruction of justice “would constitute double- hearing Hawkins’ case opined the rule followed by the counting.” Accordingly, the Sixth Circuit upheld the Sixth Circuit may create an unduly restrictive interpretation district court’s failure to enhance Sabino’s and Donna of the Supreme Court’s decision in Wade v. United States, Stewart’s sentences for obstruction of justice. Finally, the 504 U.S. 181 (1992), and recommended an en banc review government contended the district court erred in granting of their decision in this case to possibly modify or clarify Sabino a downward departure based on the recent death of the Circuit’s interpretation of Wade, especially when, as Sabino’s wife, his age (72), his poor health, absence of any here, the government conceded a defendant had done physical risk to others, absence of a risk of flight, and the everything expected of him. court’s conclusion Sabino played a minor role in the conspiracy. Because of the relatively small departure, the Government’s Failure To Adhere To Terms Sixth Circuit opined the district court did not abuse its Of Plea Agreement Violates A Defendant’s discretion by departing downward three levels in Sabino’s offense level.
Substantial Rights
In United States v. Barnes, 278 F.3d 644 (6th Cir. 2002), the
Government Not Compelled To
Sixth Circuit vacated the district court sentence and
Seek Downward Departure
remanded the case for re-sentencing because the
government failed to make an express sentence
In United States v. Hawkins, 274 F.3d 420 (6th Cir. 2001), recommendation agreed to in the plea agreement. Barnes Hawkins pled guilty to two counts of aiding and abetting in pleaded guilty to using a communication device to facilitate two armed bank robberies. As part of his plea agreement, a drug felony. As part of the plea agreement, the Hawkins agreed to cooperate with authorities. Hawkins did government agreed to recommend the district court impose everything expected of him, giving federal agents helpful a sentence at the low end of the guideline range. Even information regarding the involvement, identity and though the terms of the plea were read aloud by the court at whereabouts of other individuals involved in the bank the plea hearing, including the government’s specific robberies. When Hawkins was sentenced, the government sentence recommendation, the government failed to state on failed to move for a downward departure based on the record, its recommendation at the sentencing hearing. Hawkins’s substantial assistance to the government At the sentencing hearing, the guideline range was pursuant to U.S.S.G. § 5K1.1. Consequently, Hawkins determined to be 12 to 18 months, and the court sentenced appealed to the Sixth Circuit claiming the district court Barnes to eighteen months’ imprisonment. Barnes appealed erred by failing to compel the government to file a motion the sentence.

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On appeal, the Sixth Circuit applied a plain error standard be said that there is nothing for the defendant to withdraw.” of review to Barnes’ claim because he failed to object to the sentence at the sentencing hearing. Under this standard of The Seventh Circuit ruled Rule 32(e) is “triggered only review, the court could only reverse if it found plain error when the district court completes the plea process by had affected the Barnes’ substantial rights and had seriously accepting the plea.” Accordingly, in Shaker’s case the affected the fairness, integrity or public reputation of the Seventh Circuit reversed the decision of the district court, judicial proceedings. The Sixth Circuit followed previous holding the district court should have permitted Shaker to decisions in which it held it was irrelevant whether the withdraw his plea at any time before the plea was accepted sentencing judge would or would not have been influenced by the court. Furthermore, the Seventh Circuit stated the had the details of the negotiations for the plea been known. district court should have allowed Shaker to withdraw his Thus, even though the court may have read and had the plea without any inquiry into his reasons for seeking to set Barnes’ plea agreement before it, that alone was insufficient the plea aside. to establish the government had upheld its part of the plea agreement. By failing to expressly request that Barnes be Upon Remand For Re-sentencing, sentenced at the low end of the guideline range at the A District Court Is Not Limited sentencing hearing, the government breached the plea agreement. This failure to adhere to the letter of the plea
To The Existing Record agreement affected Barnes’ substantial rights as well as the
integrity of the judicial proceeding. The court vacated the In United States v. Matthews, 278 F.3d 880 (9th Cir. 2002), sentence, remanded the case and ordered Barnes to be re- Matthews was convicted in district court of being a felon in sentenced before a different district court judge. possession of a firearm and sentenced as an Armed Career
Criminal to 280 months of incarceration. Matthews appealed both the underlying conviction as well as his
A Guilty Plea Can Be Withdrawn At Any
sentence. A three judge panel of the Ninth Circuit affirmed
Time Before The Plea Agreement
Matthews’ conviction, reversed his sentence, and remanded
Is Accepted By The Court
the case to the district court for re-sentencing on the
existing record. The Ninth Circuit agreed to rehear
In United States v. Shaker, 279 F.3d 494 (7th Cir. 2002), the Matthews’ case en banc to determine when remanding for Seventh Circuit considered an appeal by Shaker, who had re-sentencing, whether it should limit the district court’s pleaded guilty to a charge of possession of a firearm by a discretion to consider additional evidence. felon as a condition of a plea agreement. Before the district court had accepted the plea, however, Shaker changed his The Ninth Circuit held, if a district court errs in sentencing mind and sought to withdraw his plea. The government and the case is remanded for re-sentencing without placing argued Federal Rule of Criminal Procedure 32(e) prevented limitations on the evidence, the district court can consider the withdrawal of a plea without a “fair and just reason” and all matters relevant to sentencing even though they may not Shaker had proffered no such reason. The district court have been raised at the first sentencing hearing. See, Witte sided with the government and denied Shaker’s motion to v. United States, 515 U.S. 389 (1995). However, under
withdraw his guilty plea
certain circumstances, the Ninth Circuit limits the discretion
of the district court to repentance de novo. Such cases
On appeal the government maintained the district court did “involve circumstances in which either additional evidence not abuse its discretion by denying Shaker’s motion to would not have changed the outcome. . . or where there was withdraw his guilty plea because Shaker failed to comply a failure of proof after a full inquiry into the factual with Rule 32(e). The Seventh Circuit articulated its view question at issue . . . .” United States v. Rivera-Sanchez, that a guilty plea arrangement is a process involving both 247 F.3d 905, 909 (9th Cir. 2001) (en banc). In Matthews’ the defendant and the court, culminating in the court’s case, the Ninth Circuit opined the circumstances of the case acceptance of the plea. A crucial component of the process did not warrant a departure from its general practice of is the court’s ultimate acceptance of the guilty plea. See, remanding without limiting the district court’s sentencing United States v. Hyde, 520 U.S. 670 (1997). Indeed, the discretion and remanded accordingly. Seventh Circuit opined “until the plea is accepted it might

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 CRIMINAL TAX BULLETIN

FEBRUARY 2002

TABLE OF CASES

SUPREME COURT CASES
United States v. Knights, 122 S. Ct. 587 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

United States v. Dusenbery, 122 S. Ct. 694 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

TITLE 26 AND TITLE 26 RELATED CASES

United States v. Bishop, III, 264 F.3d 535 (5th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

United States v. Gricco, 277 F. 3d 339 (3rd Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

United States v. Gricco, 277 F.3d 339 (3rd Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SEARCH AND SEIZURE

Trulock v. Freeh, 275 F.3d 391 (4th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

United States v. Runyan, 275 F.3d 449 (5th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

OTHER CONSTITUTIONAL ISSUES

United States v. Sabino, 274 F.3d 1053 (6th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

GRAND JURY

Impounded, 277 F.3d 407 (3rd Cri. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

EVIDENCE

United States v. Sabino, 274 F.3d 1053 (6th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FORFEITURE

United States v. Farmer, 274 F.3d 800 (4th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

United States v. Wagoner County Real Estate, 278 F.3d 1091 (10th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

MONEY LAUNDERING

United States v. Rodriguez, 278 F.3d 486 (5th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

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  United States v. Carcione, 272 F.3d 1297 (11th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

INVESTIGATIVE TECHNIQUES

United States v. Blackmon, 273 F.3d 1204 (9th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SENTENCING

United States v. Leal-Mendoza, No. 00-50737, 2002 U.S. App. LEXIS 1213 (5th Cir. Jan. 29, 2002) . . . . . . . . . . . . . . . . . . . 7

United States v. Sabino 274 F.3d 1053 (6th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

United States v. Hawkins, 274 F.3d 420 (6th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

United States v. Barnes, 278 F.3d 644 (6th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

United States v. Shaker, 279 F.3d 494 (7th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

United States v. Matthews, 278 F.3d 880 (9th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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  Department of the Treasury
  Internal Revenue Service
  Document 10023 (02-2002)
  Catalog Number 24304B

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