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Appeals Arguments Over Whether Government Brought Evasion and Tax Conspiracy Charges Within Statute of Limitations With No Mention of WSLA (9/19/21)

In United States v. Pursley (on appeal to CA 5, Dkt. No. 20-20454),
Pursley was convicted of 1 count of conspiracy related to tax and three counts
of tax evasion, two for Pursley’s taxes and one for the taxes of another.  See the judgment here.  Pursley was a lawyer in Houston who enabled
tax evasion by a client by moving untaxed monies from foreign accounts into the
U.S. without accounting to the IRS for the unpaid tax. 
Pursley’s client ultimately joined the OVDP, thus avoiding his own
criminal exposure.  As required under the
OVDP, the client had to disclose the enabler of the tax evasion scheme.

At the conclusion of trial after the guilty verdicts were
returned, the judge sentenced Pursley to 24 months incarceration, ordered
restitution of $2.5 million and imposed standard conditions.  I think the restitution was for Pursley’s
taxes rather than the client’s taxes, because the client’s taxes had been paid
in the OVDP.  So just from the
restitution of Pursley’s taxes for two years, one can infer that he made a lot
of money for his conduct.  But that need
not detain us here.

On the appeal, Pursley raises only statute of limitations
issues.  The parties’ briefs on appeal
are:  Pursley’s opening brief, here;
United States’ answering brief, here;
and Pursley’s reply brief here. Pursley’s arguments are:

1.     As to all counts, the indictment was brought outside the statute  of limitations.

2.     As to the conspiracy count, the trial court erred by failing to give a requested instruction that it must find one overt act within the statute of limitations.

3.     As to the tax evasion counts, the trial court erred by failing to give a requested instruction that it must find one affirmative act within the statute of limitations.

The first argument, if successful, would require complete
reversal and expungement of the conviction. 
The second two would require retrial where, if there is enough evidence
to get to the jury, the jury will almost certainly find at least one affirmative act
within the statute of limitations.

Pursley makes no argument that the jury verdict of guilt
should be overturned, except as required by the statute of limitations arguments.

The key statute of limitations argument (in # 1 above) is
that the indictment was not brought within the applicable statute of
limitations.  The judgment here
provides in relevant part:  

Title & Section

Nature of the Offense

Offense Ended

Count

18 U.S.C. § 371

Conspiracy to defraud the U.S.

05/31/2013

1

26 U.S.C. § 7201

Tax evasion

09/20/2018

2

26 U.S.C. § 7201

Tax evasion

12/31/2012

3

26 U.S.C. § 7201

Tax evasion

10/31/2011

4

The indictment, here, was filed on September 20, 2018.  Just on the face of the judgment, it would
appear that, without more, the six-year criminal statute of limitations would
have expired on Count 4 on 10/31/2017, but the other counts would have been
timely under the six-year statute.

The argument on appeal relates to what actions (overt acts
and affirmative acts) occurred within the statute of limitations.  Pursley argues that the overt acts and
affirmative acts proved charged and proved at trial were not within the
statute.  The argument turns upon the
application of 18 U.S.C. § 3292, here, which permits, upon court order, the
suspension of the statute of limitations during the period of outstanding treaty
requests to a foreign country for information. 
The fight is over whether a response by the Isle of Man was the final
response that would cause the suspension to cease or whether the final response
occurred later when the Isle of Man office supplied more information.  I don’t propose to get into the merits of the
arguments here.  I do note that it is odd
that, as noted above, based on the judgment, three of the counts were clearly
within the statute of limitations. 
Pursley claims that the last acts were in fact earlier than noted in the
judgment.

What interested me is what is not in the arguments that are made.  Rather it is in what is not said.  Neither side mentions the potential application
of the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287, here.  As I have noted before (see blog entries here), the WSLA
appears to apply on its face to tax evasion and would clearly make the
indictment timely here for the tax evasion counts. 

The conspiracy count is a little different.  As noted above, the Court treated the
conspiracy count as a defraud conspiracy count.  I’m not so sure.  The indictment, here,
could be read to include an offense conspiracy count.  Here are the pertinent paragraphs:

COUNT ONE 

(Conspiracy to Defraud the United States)

            45. The
allegations set forth in Paragraphs 1 through 44 of this Indictment are
re-alleged and expressly incorporated herein as if copied verbatim.

            46.      From in or around March 2007 through in or
around May 2013, in the Southern District of Texas and elsewhere, the
defendant,

JACK STEPHEN PURSLEY,

did knowingly and willfully conspire and agree with
Co-Conspirator 1 and others, both known and unknown to the grand jury, to
defraud the United States by impeding, impairing, obstructing, and defeating
the lawful government functions of the Internal Revenue Service of the United
States Department of Treasury in the ascertainment, compilation, assessment,
and collection of the revenue, that is, federal income taxes of PURSLEY and
Co-Conspirator 1.

OBJECT OF THE CONSPIRACY

            47.      It was the purpose and object of the
conspiracy for PURSLEY and his co-conspirators, including Co-Conspirator 1, to
unjustly enrich PURSLEY and Co-Conspirator 1 by evading the assessment and
payment of federal income taxes to the IRS, namely, taxes due on more than $18
million in income from Southeastern Shipping, which was parked offshore in the
Isle of Man.

Paragraph 46 is worded as a defraud conspiracy, but
paragraph 47 is worded as an offense conspiracy to commit tax evasion—evasion
of assessment.  What difference does that
make?  Tax evasion is easily within the
scope of the WSLA which requires fraud and an offense conspiracy to commit tax
evasion would be within the scope of the WSLA. 
The defraud conspiracy, however, does not require fraud in the normal
meaning of the word defraud.  In Hammerschmidt
v. United States
, 265 U.S. 182 (1924), the Court held that the defraud
conspiracy contained an atypical meaning for defraud – an object to commit
fraud with respect to property was not required.  In criminal lawyer lingo, despite the use of
the word “defraud,” fraudulent conduct with respect to property is
not an essential element of the offense; any conduct to impair or impeded the
agency can suffice.  See e.g., More on
the Wartime Suspension of Limitations Act (WSLA)
(Federal Tax Crimes Blog 2/20/21),
here.  Notwithstanding all of that, if any of the
counts of conviction were within the statute of limitations, the others would
be included in the Sentencing Guidelines calculations as relevant conduct and just one sustained count of conviction would
support the sentence Pursley received—24 months.

JAT Comments:

1. The big question, though, is why the Government did not argue
the WSLA and did not even advise the court of the WSLA?  Further, why did Pursley not advise the Court
of the WSLA and argue that it was not applicable?

2. Can the Government waive a statute of limitations basis for
sustaining an indictment otherwise outside applicable statutes of limitations?

3. It is common-place that a defendant may waive a statute of
limitations defense.  The following is
from a recent case (United States v. Wooding, 2021 U.S. App. LEXIS 27546  (11th Cir. 9/14/21) (Unpublished), CA 11 here):

            Regardless
of which limitations period applies, however, Wooding waived this issue by
failing to raise it in the district court. In criminal cases, the statute of
limitations is a nonjurisdictional affirmative defense that can be waived if
not asserted by the defendant at trial. United States v. Najjar, 283 F.3d 1306,
1308–09 (11th Cir. 2002). Consequently, a limitations defense that was not
raised at or before trial is essentially unreviewable on appeal, even for plain
error. Musacchio v. United States, 577 U.S. 237, 248 (2016) (discussing the
general five-year limitations period for noncapital offenses). This is because
the government’s burden of proving that it filed a timely indictment does not
arise until the defendant raises the issue. Id. “When a defendant does not
press the defense, then, there is no error for an appellate court to correct —
and certainly no plain error.” Id. We therefore reject Wooding’s
statute-of-limitations challenge to his conviction.

The pertinent question is whether the Government can waive an otherwise applicable statute of limitations argument in its favor by not arguing it in its briefs?  I don’t know the answer to that question.  But I am surprised that neither party would advise the Court of the WSLA.  See ABA Tax Section Recommendation to IRS for Priority Guidance to Disavow Application of WSLA and Further Comments Re Same (Federal Tax Crimes Blog 7/23/21), here.

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