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From the desk of David M. Garvin, Esq.

U. S. v.  Midkiff U.S. App. LEXIS 14572 (8th Cir. 2010)

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David M. Garvin is an attorney who’s practice concentrates in the area of white collar crime defense. Mr. Garvin was admitted to the Florida Bar in 1982. He holds a Juris Doctor Degree from the University of Miami (1982) and a LLM in Taxation from the University of Miami (1987). Mr. Garvin is certified by the Florida Bar as a Tax Specialist (1990). Mr. Garvin is also a licensed Certified Public Accountant in Florida since 1982. Mr. Garvin is admitted to practice before the United States Supreme Court, the Eleventh Circuit Court of Appeals, the Eight Circuit Court of Appeals, the Sixth Circuit Court of Appeals, the United States District Courts for the Southern, Middle and Northern Districts of Florida, the Florida Supreme Court, and the United States Tax Court.      Mr. Garvin’s Martindale-Hubbel rating is “AV”. He is listed in the Pre-Eminent Bar Register as a criminal attorney and as a tax attorney. He is also listed in Super Lawyers.

Information on the author

David M. Garvin, Esq. 200 S. Biscayne Blvd. Suite 3150 Miami, FL. 33131 Tel: (305) 371-8101 E-mail: ontriaI2@aol.com Web: www.DavidMGarvin.com

From the desk of David M. Garvin, Esq.

From the desk of David M. Garvin, Esq.

U. S. v. CRUZ, et. al. (Continued)

U. S. v. CRUZ, et. al. U.S. App. LEXIS 14587 (11th Cir. 2010)

From the desk of David M. Garvin, Esq.

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U. S. v. WASHINGTON U.S. App. LEXIS 14303 (7th Cir. 2010)

U. S. v. KRUSE 606 F.3d 404 (7th Cir. 2010)

U.S. v. TANAKA (Haw. Ct. App.) 2010 U.S. App. LEXIS 13961

U.S. v. TANAKA (Continued)

Following a nineteen-day trial, Neulan Dae Midkiff was convicted of conspiracy, mail and wire fraud, and failure to file tax returns. He appealed, contending that the district court improperly joined the failure-to-file charges with the other charges and abused its discretion in denying his motion for relief from prejudicial joinder. Midkiff also challenges the admission of certain evidence and contends that his 180-month sentence is unreasonable.     In 2001, Travis Correll founded Horizon Establishment (Horizon), a purported investment company. He collected approximately $ 175,000 from his friends and family to invest with a New Zealand businessman who offered an opportunity to invest in a high-yield international banking program. The program allowed investors to pool funds, which were supposedly leveraged to make multiple loans and generate significant income.     Midkiff contended that the charges for failing to file tax returns were improperly joined with the fraud and conspiracy charges. The Court found that United States v. McCarther, 596 F.3d 438, 441 (8th Cir. 2010). Rule 8(a) allows a single indictment to charge a defendant with multiple offenses if the offenses "are of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan." Fed. R. Crim. P. 8(a). "The rule is broadly construed in favor of joinder to promote judicial efficiency." McCarther, 596 F.3d at 441-42.     Tax charges may be joined with fraud charges if the unreported income arises solely and directly out of the fraudulent scheme. United States v. Bibby, 752 F.2d 1116, 1121 (6th Cir. 1985); United States v. Kopituk, 690 F.2d 1289, 1313 (11th Cir. 1982);

United States v. Kenny, 645 F.2d 1323, 1344 (9th Cir. 1981). When the unreported income is derived from the charged conduct, the tax offense is based on the same act or transaction as the other offenses. See Bibby, 752 F.2d at 1121; Kopituk, 690 F.2d at 1313; Kenny, 645 F.2d at 1344. Moreover, failure to file tax returns may have a logical and temporal relationship with the other offenses charged in the indictment such that the tax offenses are connected with or constitute parts of a common scheme or plan. See United States v. Johnson, 462 F.3d 815, 822 (8th Cir. 2006) (no error in joining drug and firearm offenses that were temporally and logically connected).     Because his unreported income was derived from the charged conduct, the 2004 and 2005 tax counts were properly joined with the fraud counts.The 2002 and 2003 tax counts were connected to the remaining counts under a common scheme.     The Appellate Court found that if the district court had severed the charges, evidence of Midkiff's fraud crimes would have been probative and admissible at his tax trial, and evidence of his failure to file returns would have been probative and admissible in his fraud trial. To sustain a conviction of 26 U.S.C. § 7203, the government was required to prove that Midkiff willfully failed to file a tax return, despite an obligation to do so. See Cheek v. United States, 498 U.S. 192, 201, 111 S. Ct. 604, 112 L. Ed. 2d 617 (1991) ("Willfulness, as construed by our prior decisions in criminal tax cases, requires

the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty."); United States v. Gleason, 726 F.2d 385, 388 (8th Cir. 1984) (per curiam) ("The elements of violation of § 7203 are proof of failure to file the returns and willfulness in doing so.").     The Court held that the district court did not abuse its discretion in denying Midkiff's motion for severance. The evidence that Midkiff submitted tax protestor documents and engaged IMF Decoders to assist in dealing with his tax issues did not result in severe prejudice. Moreover, the district court instructed the jury that each crime should be considered separately and that its verdict of guilty on one count should not control its verdict on any other count. Accordingly, we affirm the district court's denial of relief from prejudicial joinder.

Appeal from United States v. Cruz, 618 F. Supp. 2d 1372, (S.D. Fla., 2008) Opinion by retired United States Supreme Court Justice Sandra Day O’Connor. Court for the Southern District of Florida enjoined defendant tax return preparers (TRP) form continuing to intentionally overstate clients deductions and credits and misrepresenting eligibility to practice before the IRS, but refused to bar them from operating as TRPs, and denied plaintiff U.S.'s post judgment motion to require notifying clients of the injunction. The U.S. appealed. The injunction was precisely the relief § 7407(b)(2) called for to prevent the recurrence of the overstatements. In denying the complete bar, the district court stressed the TRPs good faith efforts to reform their practice, as

evidenced by the notable decline in evidenced by the notable decline in the number and rate of errors in the problem areas. The relevant inquiry was whether the violations had abated, not whether the average tax loss declined. Section § 7407(b)(1)(A) only proscribed understatements based on unreasonable or knowingly wrong positions. So while there was evidence understatements continued after the investigation began, they were not tied to unreasonable positions as prohibited by the statute. It was not illogical to find that educational programs could curb negligent misconduct, and the IRS was authorized to monitor the TRPs. The decision to issue the injunction was governed by the traditional factors shaping equitable remedies. The postjudgment motion was denied without comment, thus it was not possible to know if the district court properly or improperly exercised its discretion. That denial was vacated and on remand, finding and an explanation were needed.      The district court's judgment was affirmed as to denying the complete bar, but because the district court failed to give any reasons for rejecting the request to compel the TRPs to notify their clients of the injunction, that order was vacated and remanded for consideration of that proposal.     Section 7407 of Title 26 of the United States Code permits the United States to seek, and a district court to issue, an injunction prohibiting tax preparers from engaging in certain deceptive or fraudulent practices. 26 U.S.C. § 7407. The district court may specifically enjoin a tax preparer from engaging in a variety of deceptive practices, including misrepresenting his eligibility to practice before the Internal Revenue Service ("IRS"). If the district court finds that the tax preparer has continuously engaged in offensive conduct, and that an injunction specifically prohibiting such conduct

would not be effective at preventing further abuses, "the court may enjoin such person from acting as a tax return preparer" altogether.     In this case, the Government brought a suit against defendants seeking to enjoin them from operating as tax return preparers. The complaint alleged that the defendants engaged in a fraudulent tax preparation scheme in which they would intentionally overstate deductions and credits on their clients tax returns in an effort to reduce their clients tax liabilities and increase their refunds. It further alleged that the defendants made various misrepresentations regarding their eligibility to practice before the IRS.     The District Court found that the defendants had engaged in deceptive practices in preparing tax returns and issued an injunction specifically prohibiting them from further engaging in any such conduct. It declined to completely bar them from operating as tax return preparers, as the Government requested, finding such an extreme measure was unwarranted under the circumstances of the case.     The District Court also denied a post-judgment motion filed by the Government seeking to require the defendants to notify their clients of the Court's injunction. The Government now brings this appeal. It argues that the District Court abused its discretion when (1) it did not completely enjoin defendants from acting as tax return preparers, and (2) it refused to require defendants to notify their customers of the injunction. We find that the District Court was within its discretion in finding that such a broad injunction was not warranted under the facts of this case. But because the District Court failed to give any reasons for rejecting the

request to compel defendants to notify their customers of the Court's injunction, we remand for consideration of that proposal.     The District Court correctly relied upon the fact that each of the eleven errors outlined in the chart above decreased dramatically from 2003 to 2006, after the defendants realized the IRS was investigating them and after NTS implemented new quality control measures. The only errors that the District Court determined were based on unreasonable positions, in violation of § 6694(a), were occurring with decreasing frequency. The District Court appropriately concluded from this evidence that the defendants had significantly reformed their deceptive practices.     The court "may enjoin" persons from acting as tax return preparers if the statutory prerequisites are satisfied, not that it "shall" or "must" issue such an injunction. The Government’s argument has also been squarely rejected by several of this Court's cases addressing parallel statutory provisions. See United States v. Ernst and Whinney, 735 F.2d 1296, 1301 (11th Cir. 1984) [*18] ("[T]he decision to issue an injunction under § 7402(a) is governed by the traditional factors shaping the district court's use of the equitable remedy."); Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1098 (11th Cir. 2004) ("[W]hen Congress authorizes injunctive relief, it implicitly requires that the traditional requirements for an injunction be met in addition to any elements explicitly specified in the statute.").     The District Court acted within its discretion when, based on its conclusion that its limited injunction will be effective at preventing future violations, it declined to issue the broader injunction requested by the Government. It did not rely on any clearly erroneous factual finding in exercising that discretion.

Defendant was 64 years old when a jury found her guilty on 17 counts of wire fraud, 18 U.S.C.S. § 1343, and 7 counts of presenting false claims to the Internal Revenue Service, 18 U.S.C.S. § 287. The United States District Court for the Northern District of Illinois, Eastern Division, sentenced her to a total of 41 months imprisonment and ordered restitution. She appealed.     Defendant argued that the district court's explanation for her prison sentence was inadequate to demonstrate that the district court gave adequate consideration to her advanced age and medical history. She worked for a tax-preparation service and had stolen the identities of 11 clients, filed false federal income tax returns in their names. She likewise filed false returns for herself and her husband. She also defrauded the Social Security Administration (SSA). She was the representative payee for an elderly man with schizophrenia. After he died, she deposited his benefit checks directly into her bank account for 14 years until she was confronted by an SSA agent. There was no reason for the district court to mention defendant's age because it was never an issue. Defendant's contention that her health was a relevant factor was never developed in the district court and thus was so weak that no response by the district court was necessary.     Further, she never contended that her maladies were themselves imprisoning, i.e., that she was bedridden or that her conditions required a level of care that the Bureau of Prison could not have provided. The judgment was affirmed.

991 (9th Cir. 2008). The record does not support a conclusion that the district court exceedingly relied on the Guidelines simply because Tanaka's sentence is only slightly below the Guidelines range. The district court need not tick off each of the 18 U.S.C. § 3553(a) factors to show that it has considered them. Id. at 992. Nor need the district court articulate in a vacuum how each § 3553(a) factor influenced its determination of an appropriate sentence.     Tanaka's sentence reflects the district court's consideration of the § 3553(a) factors. It was not an abuse of discretion for the district court to decide that Tanaka's case was not so atypical as to require a larger variance from the recommended Guidelines range. The district court's already below-Guidelines sentencing decision was not unreasonable.     A district court enjoys wide discretion to impose conditions of supervised release as long as the conditions imposed are "reasonably related to the goal of deterrence, protection of the public, or the rehabilitation of the offender." United States v. T.M., 330 F.3d 1235, 1240 (9th Cir. 2003). The two challenged conditions of supervised release are not vague, nor are they particularly demanding, even if the requirements are read in their most severe interpretations. Furthermore, supervised release provisions are generally read to exclude [*5] inadvertent violations. United States v. Soltero, 510 F.3d 858, 867 (9th Cir. 2007). There is not a wide range of reasonable interpretations for the conditions in question. The conditions are no more vague than the other unchallenged standard conditions imposed, and people of common intelligence who interpret the terms in accordance with their common meaning should not fail to understand what is required. Affirmed.

Following defendant’s conviction for conspiracy to defraud the Government in violation of 18 U.S.C.S. § 371 and filing false income tax returns in violation of 26 U.S.C.S. § 7206(1) in the United States District Court for the Eastern District of Wisconsin, he challenged the sufficiency of the evidence supporting his conviction.     The evidence at trial was sufficient to justify defendant’s conviction for filing false tax returns. The contradictions in his testimony allowed the district court, as fact-finder, to infer that defendant was altering his story because he knew the returns were false. Personal draws made by defendant from his business allowed the trier to infer that defendant knew that the business was taking in at least as much money as he took out, and his unreported gambling winnings allowed the fact-finder to infer defendant’s lack of respect for the tax laws. The evidence also allowed the district court to convict defendant of conspiracy. The circumstantial evidence of his complicity in the understatement of his income was sufficient to support his conspiracy conviction and was, moreover, substantial.     The district court was entitled to conclude that a paid tax preparer would

have little motivation to falsify a client's business expense and provide the client with notes about the falsification without the client's complicity. The district court was entitled to infer that the notes made by the tax preparer were intended for defendant and that he saw them. The court affirmed the district court's judgment.

Bihno M. Tanaka pled guilty to aiding and assisting in the filing of false and fraudulent federal income tax returns in violation of 26 U.S.C. § 7206(2). He [*2] appeals his 15-month sentence, arguing that the district court committed several significant procedural errors in sentencing and that the sentence was procedurally and substantively unreasonable. He also argues that the district court erred in imposing two overbroad conditions of supervised release. As the parties are familiar with the facts, procedural history, and arguments, we will not recount them here. We affirm.     The district court did not fail to adequately explain its sentence, treat the Sentencing Guidelines as presumptively reasonable, fail to properly weigh relevant statutory factors, or base its sentence on an erroneous fact. A district court need not explain its reasons in detail where context and the record make clear what reasoning underlies the judge's conclusion, as in Tanaka's case. United States v. Treadwell, 593 F.3d 990, 1010 (9th Cir. 2010).     The Guidelines are the "starting point and the initial benchmark" in sentencing proceedings and are to be kept in mind by the court throughout the process. United States v. Carty, 520 F.3d 984,

The United States reports a conviction rate in excess of 90% in federal white collar crime cases and over 92% in federal criminal tax cases. It is estimated that less than 1% of all attorneys have successfully tried a federal criminal tax case. (Not guilty verdicts on all counts.)