Concerns and Strategies in Parallel Investigations

One of the risks in eggshell civil audits -- where risk of criminal prosecution is material -- is the possibility of parallel investigations.  Parallel investigations are simultaneous civil investigations and criminal investigations.  These can involve the same agency and cooperating agencies (such as the SEC and the DOJ).  In the case of civil audits, they would typically involve different branches of the IRS -- the civil examination function and CI.  The risk is that the civil examination will further the criminal investigation, whether with malice aforethought or not.  And, certainly, if the taxpayer is the target of the CI investigation, the taxpayer may want to take a different approach in his or her cooperation in the civil investigation.

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JAT Comment:  As noted, the parallel investigation will usually be a CI investigation.  It could also be a grand jury investigation.  Although I believe that there is some type of computer flagging of a taxpayer's master file if the taxpayer is involved in a criminal investigation, the civil agent is not supposed to know about the grand jury investigation unless the civil agent were on the grand jury assistant list (which would be a no-no).

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

For additional insight, explore Tax Crimes, authored by Jack Townsend and available at the LexisNexis® Store.

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