In United States v. Floyd, ___ F.3d ___, 2014 U.S. App. LEXIS 253 (1st Cir. 2014), here, the First Circuit panel affirmed the defendants' convictions and sentencings arising from their tax evading payroll tax scheme and warehouse banking scheme [enhanced version available to lexis.com subscribers]. Judge Selya (Wikipedia here) wrote the decision for the panel. (More on Judge Selya at the bottom of this blog.)
The defendants were convicted of two counts of the defraud / Klein conspiracy under 18 USC 371, here -- one count for the payroll tax scheme and the second count for the warehouse banking scheme [enhanced version available to lexis.com subscribers]. The Klein conspiracy is a conspiracy to impair or impede the lawful functioning of the IRS. The defendants were also convicted of tax obstruction under Section 7212(a), here, which criminalizes impairing or impeding the lawful functioning of the IRS [enhanced version available to lexis.com subscribers].
Klein Conspiracy and Tax Obstruction
The Court's affirmance of the conspiracy convictions seem fairly routine -- at least I don't think they are worthy of discussing here. Moreover, the affirmance of the tax obstruction convictions is also routine and not otherwise noteworthy. What is noteworthy, is the reminder that the conspiracy and the substantive counts were so closely related in the conduct involved, with the key difference that conspiracy is not the same crime as the substantive counts. Ianelli v. United States, 420 U.S. 770, 781-2 (1974) [enhanced version available to lexis.com subscribers], citing Pinkerton v. United States, 328 U.S. 640, 643 n. 11 (1946) [enhanced version available to lexis.com subscribers]. In other words, the conspiracy is based on the agreement to obstruct rather than the obstruction itself, except of course the pesky overt act requirement. Indeed, in this regard, some persons (including me) have referred to tax obstruction as a one-person conspiracy. See also David F. Axelrod, Larry A. Campagna, James A. Bruton III, The “New” Tax Laws - 26 U.S.C. Section 7212(a) and the One-Person Conspiracy (Paper prepared for ABA National Institute on Criminal Tax Fraud in 1999). The notion of a one-person Klein conspiracy is an oxymoron, of course, but the oxymoron conveys some truth.
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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