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The federal sentencing guidelines help the courts set criminal sentences. These guidelines have to be considered when deciding whether to accept a plea agreement and how to handle the trial. The recent United States v. Kushimo, No. 18-3222 (3d. Cir. 2019), case provides an opportunity to consider two of the sentencing enhancements that often apply in tax cases.

Facts & Procedural History

The defendant participated in a fraudulent tax return scheme. The scheme involved obtaining social security and bank information and using the information to file false tax returns. The tax returns reported refunds, which went to the defendant. The defendant would also obtain credit cards using the fake identities.

When his house was raided, the FBI discovered stolen identifications, a shoebox containing printouts of over 50,000 stolen identities, and additional paperwork regarding the fraudulently opened bank accounts.

The defendant participated in this scheme with others. According to the FBI, the defendant served as the central hub for the coordination of the co-conspirators’ various needs in orchestrating the scheme and he acted as the central repository for the sources of information and assistance.

The defendant was charged with wire fraud and aggravated identity theft. He entered into a plea agreement and was sentenced to 72 months for wire fraud and a consecutive 24-month sentence for the identity theft counts.

The tax refund scheme in this case is not new. There have been a lot of these cases over the years. In this article, we’ll consider the sentencing enhancements the court applied.

About the Sentencing Guidelines

The sentencing guidelines provide a range for the court to consider in imposing criminal sentences. They set out various factors the court is to consider in imposing criminal sentences.

To apply the guidelines, the court looks to the U.S. Probation Office to investigate the facts. The probation office will issue a pre-sentence investigation report that identifies the facts and applies them using the sentencing guidelienes.

The guidelines themselves set out a base offense amount and then provide for enhancements that are added if certain enumerated facts are met in the case. The enhancements allow the court to consider the defendants aggravating or mitigating role in the offense.

The Intended Loss Amount Enhancement

The trial court applied an 18-level increase in the sentence based on the intended loss amount. For financial crimes, the sentencing guidelines allow an offense-level enhancement based on the size of the loss. For fraud cases, as with fraudulent tax returns,  the “loss is the greater of actual loss or intended loss.” 

Here are the definitions that are used in for the actual and intended loss:

(i) Actual Loss.—Actual loss” means the reasonably foreseeable pecuniary harm that resulted from the offense.

(ii) Intended Loss.—Intended loss” (I) means the pecuniary harm that the defendant purposely sought to inflict; and (II) includes intended pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value).

(iii) Pecuniary Harm.—Pecuniary harm” means harm that is monetary or that otherwise is readily measurable in money. Accordingly, pecuniary harm does not include emotional distress, harm to reputation, or other non-economic harm.

(iv) Reasonably Foreseeable Pecuniary Harm.—For purposes of this guideline, “reasonably foreseeable pecuniary harm” means pecuniary harm that the defendant knew or, under the circumstances, reasonably should have known, was a potential result of the offense.

In this case, the actual loss was $450,000.00. The intended loss was determined to be $7,461,713.97. The defendant appealed the trial courts decision to use the higher number.

The defendant noted that the FBI had an intern review the file and prepare a spreadsheet. The spreadsheet showed that the defendant was only involved in 16 percent of the accounts.

The FBI took a sampling of 10 percent of the bank accounts and determined that 18 percent of the accounts were associated with the defendant.

The trial court stated that the FBI’s 18 percent estimate was a “grossly-accurate assessment” of the loss. The appeals court agreed, as the FBI agent’s testimony showed that the 18 percent was a reasonable estimate.

The Organizer or Leader Enhancement

The trial court also applied a four-level organizer or leader sentencing enhancement. This enhancement applies if the defendant was an organizer or leader of a criminal activity that involved five or more participants. It also applies if the involvement was “otherwise extensive.”

In this case, the defendant argued that he was merely a participate and not a leader. He noted that another co-conspirator was not found to be the leader when the other co-conspirator was convicted and sentenced using the same evidence.

The appeals court noted that the defendant only had to exercise some degree of control over others involved in the commission of the offense to be the leader. It also noted that there can be more than one leader. Given the FBI agent’s testimony, the appeals court upheld the leader sentencing enhancement.

 Why the Facts Matter

This case shows that one has to be careful in presenting the facts in criminal cases. Aggravating and mitigating factors have to be carefully managed during the investigation and prosecution. This can go a long way in reducing the criminal sentence.

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