Friday, January 15, 2010

Downward Variance in Tax Evasion Case Requires More Explanation

US v. Engle: Engle pleaded guilty to tax evasion, having hidden assets from the IRS for more than a decade to the tune of more than $600,000 ($2 million with penalties and interest). His advisory Guideline range, after a departure for over representation of criminal history, was 24 to 30 months. The Government argued for a sentence within that range (shock!), but the district court imposed a sentence of probation, noting Engle's ability to make money and the district court's desire that he "settle up" with the IRS. The district court admitted that "[a]bsent . . . the apparent ability to generate the income, I would simply impose a Guideline sentence and be done with it." It imposed a sentence of probation, to include a period of time at a halfway house, during which Engle could travel, including internationally, for his job.

After being informed by BoP that Engle could not reside at a halfway house while being permitted to travel internationally, the district court vacated Engle's sentence. Time passed. Two years later, the district court held a second sentencing hearing. In the interim, Engle argued he had amassed $25,000 to pay towards his tax debt, in addition to another $100,000 he was about to receive from commissions. The Government pointed out that he had actually only paid $480 towards his debt, those payments being made only a couple of weeks in advance of the hearing. After the district court asked whether it wanted "blood or money," the Government reiterated its argument for a sentence within the Guideline range. The district court then imposed the same sentence as before, substituting home confinement for the halfway house term.

The Government appealed Engle's sentence of probation, which the Fourth Circuit vacated. The court found the sentence to be both procedurally and substantively unreasonable. Procedurally, the Fourth Circuit faulted the district court for not adequately considering (or discussing) the Guideline policy statements specifically related to tax offenses, noting that they emphasize the need for general deterrence in such cases. Although the district court is free to disregard their advice, in this case it did not provide enough evidence to show it properly considered them before doing so. That is particularly critical in a case that the Fourth Circuit says "is a 'mine-run' tax-evasion case only in the most generous (to Engle) understanding of that phrase." Substantively, the Fourth Circuit faulted the district court for its "near-exclusive focus on Engle's financial ability to pay restitution." Such a focus, the court noted, essentially allows wealthy tax evaders to escape incarceration, while dooming poor evaders to that fate.

No comments: