In United States v. Pursley, ___ F.4th ___, 2022 U.S. App.
LEXIS ___ (5th Cir. 1/13/22), CA5 here
and GS here [to come], the Court reversed Pursley’s judgment of conviction on
conspiracy and tax evasion counts because
- the district court had not calculated the statute of limitations
suspension period for foreign evidence requests under 18 U.S.C. § 3292; and
- the district had not instructed the jury that it must find an
overt act/affirmative act within the applicable statute of limitations period
as extended by § 3292.
The Court remanded to have the district court (i) calculate
the suspension period under § 3292 and (ii) if after that calculation, there
are acts that a jury could find were committed in the applicable statute of limitations
(calculated with the suspension), to retry the case and submit the issue to the
jury as to whether there were such acts.
For an introduction to § 3292, I offer the following from my
2013 Tax Crimes book which was the last time I considered it in detail (John A.
Townsend, Federal Tax Crimes, 2013 pp. 463-466 ( 2013 SSRN: https://ssrn.com/abstract=2212771)
(note I copy and paste the text without the footnotes, so those wanting the
footnotes should download the pdf file; I think this remains a fair summary of the law even today):
b. Foreign Country Evidence.
In a world
where international commerce, often of the illegal sort and often assisting tax
fraud, is increasing exponentially, key evidence may be overseas. Because long delays may be encountered in
gathering foreign evidence, 18 U.S.C. § 3292 in some cases permits the statute
of limitations to be suspended during the period between the U.S. request for
foreign evidence and the production of that evidence by the foreign
authority. The key elements for this
• There must be a grand jury
• Incident to the investigation, a
request for information must be made to a foreign jurisdiction before the
return of an indictment. The request
must be an official request, defined as “a letter rogatory, a request under a
treaty or convention, or any other request for evidence made by a court of the
United States or an authority of the United States having criminal law
enforcement responsibility, to a court or other authority of a foreign
country.” I cover below in the text
various of these methods for making a request to a foreign country. In the tax context, perhaps the principal
form of the request would be under the double tax treaty, which was one of the
devices used in the UBS grand jury investigation to flush out information about
UBS depositors. Effectively, what I call
a “John Doe” request was submitted to the Swiss tax administrators for
information and documents related to U.S. taxpayers meeting certain criteria.
• That request to the foreign authority
must be made within the otherwise applicable statute of limitations.
• The Government must apply to the
district court. There is conflict in the
circuits as to whether this application must be filed before the normal statute
of limitations expires.
• The tolling period is from the date of
the request until the foreign government takes final action on the request.
• There is conflict among the circuits
as to whether the application to the district court must be filed before the
foreign authority’s final action on the request.
• The tolling period cannot exceed the
lesser of (i) three years or (ii) if the final action from the foreign
authority is during the otherwise applicable statute of limitations, for more
than six months.
above that there are two conflicts as to when the application to the district
court must be made. The Government has a
solution to avoid prejudice to the Government as to these conflicts in
interpretation. The Government can
simply make the application to the district contemporaneously or soon after the
request is made within the otherwise applicable statute of limitations. Why wait?
application to toll the statute of limitations under § 3292 is filed ex parte,
and the consideration of the application and order granting the application are
filed under seal. So the target of the
investigation has no notice that Government is seeking to unilaterally extend
the statute of limitations or, if the Government is successful, that the
statute has been extended. In the
proceeding on the application, the Government must prove by a preponderance of
the evidence that “an official request has been made for such evidence and that
it reasonably appears, or reasonably appeared at the time the request was made,
that such evidence is, or was, in such foreign country.” What does preponderance of the evidence mean
in this context? Do the Federal Rules of
Evidence (FRE) apply in the proceeding, so that the Government must introduce
admissible evidence? Since the request
is inextricably tied to the grand jury which may consider hearsay testimony
which would likely not be admissible under FRE, may hearsay evidence be used to
meet the Government’s burden in the ex parte proceeding? One court addressed related issues in holding
that (1) the Government’s application must contain affirmative evidence other
than bare allegations in the application and (2) the Government cannot later
after an indictment in the extended limitations period correct deficient
evidence in the original application.
The Court declined to address the issue of whether FRE applied in the
application proceedings (which would have resolved the issue of the types of
uses to which hearsay testimony can be put).
noted, no one outside the grand jury team may know that the statute has been
extended, you as a practitioner will be a considerable disadvantage in advising
the client as to the criminal statute of limitations for misconduct. Perhaps, the better part of wisdom is to
caveat the advice with a statement that the advice may be subject to any
action, known or unknown, that would cause the statute of limitations to be
extended. Thus, the client may be lulled
into a false sense of security.
indicted, the defendant will have the opportunity to test the validity of any §
3292 order extending the statute of limitations. Recent cases indicate that the courts will be
attentive to proper objections.