Criminal Law and Procedure

Eighth Circuit Affirms Offshore Account Related Conviction

In United States v. Picardi, ___ F.3d )___, 2014 U.S. App.LEXIS 502 (8th Cir. 2014), here, the Eight Circuit affirmed conviction on counts of tax evasion (5 counts), tax perjury (5 counts) and FBAR violations (3 counts). The Court of Appeals states the background succinctly as follows [enhanced version available to subscribers]:

Picardi was a surgeon in western South Dakota. In the mid-1990s, Picardi became a client of Anthony Kritt, an attorney and a certified public accountant. From 1997 until 2003, Picardi participated in an "employee leasing program" promoted and run by Kritt that required Picardi to enter a contract with Montrain Services, Ltd., an Irish corporation, to lease his services as a physician. Montrain Services contracted with Professional Leasing Services, Inc., a Nevada corporation that was operated by Kritt, to provide Picardi's services to Professional Leasing Services. In turn, Professional Leasing Services contracted with Picardi's medical group to "lease" Picardi's services to it.

Picardi's income from this program was distributed in a manner designed to avoid taxes. Picardi's medical group paid Professional Leasing Services a "leasing fee" for Picardi's medical services. Professional Leasing Services then paid Picardi a small portion of this "leasing fee" as wages, which Picardi reported as income on his tax returns. In a series of complex transactions, the other, larger portion of the "leasing fee" was transferred into foreign financial accounts set up for Picardi. Picardi did not report this portion as income on his federal income tax returns from 1999 until 2003. On paper, the unreported portion of Picardi's income was "deferred compensation" inasmuch as he was supposed to be unable to access it until he retired or turned seventy years old. Picardi did, however, access and use the funds through another series of complex transactions made to look like loans. Picardi further reduced his taxes by categorizing the portion of his income sent overseas as "professional leasing services" expenses on his medical practice's corporate income tax returns. In April 2003, Picardi withdrew from the "employee leasing program," but he continued to maintain his interest in the foreign accounts containing his "deferred compensation." For the 2004 to 2008 tax years, Picardi failed to disclose to the Internal Revenue Service ("IRS") his financial interest in the foreign accounts.

 A federal grand jury returned a superseding indictment charging Picardi with five counts of income tax evasion, in violation of 26 U.S.C. § 7201 [enhanced version available to subscribers]; five counts of filing a false return, in violation of 26 U.S.C. § 7206(1) [enhanced version available to subscribers]; and three counts of failing to file with the IRS a required form regarding his interests in foreign accounts, in violation of 31 U.S.C. §§ 5314 [enhanced version available to subscribers], and 5322 [enhanced version available to subscribers], and 31 C.F.R. §§ 103.24 [enhanced version available to subscribers], and [*4] 103.27(c) [enhanced version available to subscribers]. Picardi proceeded to a jury trial. At trial, Picardi claimed that he had a good faith belief that the "deferred compensation" component of the "employee leasing program" was legal and that he relied upon the expert and legal advice of Kritt. The jury found Picardi guilty of all thirteen counts, and he was sentenced to 60 months' imprisonment. Picardi then timely filed this appeal.

Picardi raised several issues on appeal. I address only three (bold face in quotes supplied by JAT).


Exclusion of Exhibit


Limitation on Scope of Witness' Testimony.


Theory of Defense Instruction

View Jack Townsend's opinion in its entirety on the Federal Tax Crimes blog site.

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