La congregación y la cuestión del voto de sangre

These cases may be unsettling to aspiring criminals, to whom it seems that law

enforcement has an unfair advantage. The Capone, Agnew and Tafoya prosecutions were based on a simple notion: illegal earnings - “dirty money” - qualify as income.

Consider why somebody takes such steps to conceal their income-generating activities. Saving taxes is merely one of many possible motives. The hidden income may derive from some illegal activity, such as drug trafficking or extortion. If the person who makes a living this way reports the proceeds and pays his proper taxes on it, he will likely suffer from the fear that the IRS, if it decides to audit him, will discover the true source of the funds, and report him to the DEA or the FBI. Criminal tax cases are occasionally premised on more than just the bottom line – whether the defendants have concealed the true source of their income even when they

accurately report the amount. When someone does this, they can generally be prosecuted for tax fraud, money laundering, and any crime that generated the dirty money. When law enforcement needs to move quickly before the investigation is complete, tax fraud may be the only immediate option available.

Is this surprising? Is it fair? Has it always been this way?

In Chapter 2, we imagined an argument by a defense attorney who finds that his client is charged not only with illegal activity, but also with tax fraud for failing to report illegal

income on her tax return. The slightly bellicose argument went like this:

Your honor, this case is absurd. It reflects government overreaching at its worst. If my client was dealing marijuana – a fact we plan to vigorously contest at trial – we cannot actually expect her to report this fact on her tax return. To charge her with tax fraud in addition to the drug counts is unfair. We move to dismiss the tax charges. The government is simply piling on, and we as a people should not tolerate it.

This argument did not work for Al Capone or for Eugene Tafoya. It was not attempted by Spiro Agnew because he preferred to plead to the tax count. It is unavailing because it does not give the court a legal reason to dismiss the tax charge. It is a naked appeal to fairness, by a self-interested defendant who finds herself in the criminal docket. It does not cite any legal authority or constitutional rule. It should fail.

The reasons for this can be explained by some basic assumptions. First, the United States Constitution, as interpreted by the Supreme Court, establishes certain inviolable rights that are neither negotiable nor subject to electoral whim. From this follows the next logical

corollary: that those things not guaranteed by the Constitution are subject to the give-and-take of a vibrant democracy. In America, this means not only the political process of enacting

legislation, but also efforts to strike a proper balance between individual liberty and collective security through the establishment and enforcement of certain crimes. Just because something does not seem fair does not mean that it is legally cognizable.

In criminal law, defense lawyers sometimes assert something that sounds like an

assertion of a right guaranteed by the Constitution. On occasion, these assertions are found to be not constitutionally-based at all, but essentially complaints about the efficiency of the

prosecutorial function. They are really appeals to fairness, as if crime is merely the excuse for a sporting event pitting two lawyers against each other, with the court playing a boxing referee tasked with the responsibility of making sure neither fighter gets knocked out. This, however, is not the proper role for a boxing referee, nor for judges. Courts are bound by Constitution, which sets the basic rules of the adversarial context.

If the government could incapacitate Al Capone or Eugene Tafoya through criminal tax charges without proving the full range of their illegal conduct, the constitution does not stand in the way. It is, after all, not unconstitutional for the government to opt for those charges that have no viable offense. If it is constitutional, it is by definition fair.

Defense counsel would be better advised to refine his argument so that it least has the trappings of a legal argument in a motion to dismiss. Consider Scenario 9 from Chapter 2 relating to Moni SenGupta, the Los Angeles flower shop owner.

does not report her marijuana sales, nor the fact of this illegal business, on her tax returns.

Play this forward and assume that Moni is indicted for signing a tax return which omitted her marijuana business and the $45,000 she earned from its sales. The indictment would look like this.

The Grand Jury charges:

On or about April 15, 2004, in the Central District of California and elsewhere, the defendant,

MONI SENGUPTA,

did willfully subscribe a 2003 individual federal income tax return IRS Form 1040 under penalties of perjury, which return was materially false in that, as the defendant well knew and believed, it omitted $45,000 in income received from the sale of marijuana as well as the source of this income; all in violation of Title 26, United States Code, Section 7206(1)

In another count of the indictment, Moni is charged with drug dealing. Her lawyer contemplates a number of defenses to exonerate her of the tax charges:

• This is tax fraud? Who in their right mind would report drug sale

proceeds on their tax returns?

• My client did not know that illegal income was taxable, and her failure to include

these funds on her tax returns was not “willfull.”

• My client was at no time motivated by a desire to evade taxes. Her concealment

instead was solely designed to cover her criminal conduct. Taxes never crossed her mind.

• The tax charges make reference to other illegal activity – marijuana dealing –

which the prejudice the jury against my client and make a fair judgment on the tax charges impossible.

• My client has a Fifth Amendment right not to incriminate herself, which

he exercised by not including a description of her alleged marijuana business on her tax return.

Now consider Scenario 10 from Chapter 2, involving Kevin Downing, the New Jersey motorboat mechanic.

Scenario 9: Kevin realizes that, in the course of his work at ShoreCraft, he can secretly

pocket some of the customer payments for his services. Meanwhile, he can prepare paperwork reflecting that the customer has paid only that amount that ShoreCraft receives, which is recorded as gross business receipts by the company bookkeepers, and which omit the monies he pockets. ShoreCraft, which is oblivious to Kevin’s theft, does not include the pocketed customer payments on Kevin’s Form W-2. On his tax return, Kevin reports only his salary and withholdings and does not include the portion of the customer payments he secretly pocketed.

Because the embezzlement is a state crime, Kevin is never charged with the theft. An enterprising federal prosecutor takes a look at the facts and presents the following indictment to the grand jury.

The Grand Jury charges:

On or about April 15, 2004, in the District of New Jersey and elsewhere, the defendant,

KEVIN DOWNING

did willfully subscribe a 2003 individual federal income tax return IRS Form 1040 under penalties of perjury, which return was materially false in that, as the defendant well knew and believed, it omitted $13,000 in income he received through embezzlement of his employer, all in violation of Title 26, United States Code, Section 7206(1)

In addition to some of the arguments considered by Moni’s lawyers, Kevin’ counsel contemplates this one:

• The funds my client allegedly received from alleged embezzlement are not income

to him, because he would have been required to pay them back if caught.

These arguments, which are a great improvement from the initial one, are not

unrealistic, nor are they hypothetical. They are made regularly by actual accused criminals, and have generated case law. How U.S. courts have dealt with these arguments is considered in the succeeding chapters, which deal with embezzlers, crooked accountants, unscrupulous doctors, drug dealers, dirty lawyers, and corrupt public servants who found themselves charged with tax crimes.