2nd Circuit decision provides slight hope for defendants accused of conspiracy to evade taxes

In the United States v. Coplan, the 2nd Circuit affirmed the convictions of six defendants for tax evasion and making false statements to the IRS.  The convictions of two defendants for conspiracy to defraud the government were overturned based on insufficient evidence.  The defendants were tax attorneys who were found guilty of creating and distributing five tax shelter schemes to clients.

The conspiracy convictions were overturned after a highly fact specific inquiry because the court found that all of the activity of the two defendants was lawful activity that could be equally likely to have a legal objective.  The court also ruled that merely being aware of an IRS investigation was insufficient to prove that the defendant’s objective was to break the law and evade income taxes.  If the defendant’s conduct was just as likely to have a legal objective, the mere fact of an IRS investigation was not sufficient to support a charge of obstruction or evasion.

The defendants also objected to the admission of the testimony of a tax attorney who provided advice to members of the conspiracy, advising them on how to evade taxes and obstruct the IRS.  The advice was not given to every defendant, but the court ruled that it could be used against all of the defendants in the conspiracy.  The court ruled that a statement made to members of a conspiracy need not be made to every member in order to be admissible against the entire conspiracy.

The 2nd Circuit also upheld the trial court’s jury instruction which the appeals court acknowledged did not fully convey to the jury the duty of a lawyer to zealously represent his client’s interest.  The defendants had sought an instruction that would have included examples of what the defense claimed was legal conduct that obstructed the IRS.  The District Court refused to read the instruction, and the 2nd Circuit upheld this decision.  The examples used by the defendants included some acts that the 2nd Circuit decided could potentially be considered illegal as well as legal.  The court made this ruling based upon a broad conspiracy theory that the court previously had criticized while acknowledging their obligation to follow settled precedent.  The court also rejected the defendant’s proposed jury instruction, finding that it was not a completely accurate statement of the law.  Ultimately, it appears that the defendant’s failure to propose a suitable alternative instruction doomed their challenges to the jury instruction given.

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