U.S. v. Jenkins

• Decision Date: 04 October 2010
• Docket Number: Case No. 1:10cr277.
• Citation: 745 F.Supp.2d 692
• Parties: UNITED STATES of Americav.Charles A. JENKINS, Jr., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

745 F.Supp.2d 692

UNITED STATES of America

v.Charles A. JENKINS, Jr., Defendant.

Case No. 1:10cr277.

United States District Court, E.D. Virginia,Alexandria Division.

Oct. 4, 2010.

Timothy D. Belevetz, United States Attorney's Office, Alexandria, VA, for United States of America.Todd M. Richman, Office of the Federal Public Defender, Alexandria, VA, for Defendant.

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

In this 26 U.S.C. § 7201 tax evasion prosecution, the conduct alleged in the Indictment fits within both § 7201, the general tax evasion statute which carries a five-year maximum sentence, and 26 U.S.C. § 7206(5), the statute expressly prohibiting false statements in connection with offers-in-compromise which carries a three-year maximum sentence. The defendant seeks the Indictment's dismissal on the ground that the government is precluded from charging the defendant for tax evasion under § 7201 where the alleged conduct fits also within the lesser offense of making false statements in connection with an offer-in-compromise under § 7206(5).

For the reasons that follow, the defendant's motion fails; in the circumstances of this case, the Title 26 statutory scheme reflects Congress's intent to confer discretion on the government to choose to indict under either § 7201 or § 7206(5).

I.

Defendant, Charles A. Jenkins, Jr., is a resident of Fairfax Station, Virginia. Indictment ¶ 1. During the pertinent time period, Jenkins was either the owner and operator of an electrical contracting business called Jenkins Electrical Contracting, Inc. (“Jenkins Electrical”), or a self-employed general contractor involved in the renovation of real property. Id.

On July 27, 2010, Jenkins was indicted on one count of tax evasion, in violation of § 7201, for making false statements and concealing assets. Id. ¶ 2. Specifically, the Indictment alleges that Jenkins was obligated to pay a tax penalty, known as the Trust Fund Recovery Penalty, because Jenkins Electrical failed to pay payroll taxes for the second quarter of 1998 through the first quarter of 2000. Id. Rather than pay the tax penalty, the Indictment alleges that Jenkins committed three acts of evasion between February 6, 2002 and July 29, 2004. First, on February 6, 2002, Jenkins incorporated a general contracting business known as JDI, Inc. in the name of a nominee. Id. ¶ 2a. Second, on February 8, 2002, Jenkins submitted an offer-in-compromise to the Internal Revenue Service (“IRS”).¹ In his Form 433–A, submitted with his offer-in-compromise, he failed to disclose that he owned a residence in Fairfax Station and two rental properties in Fairfax and Alexandria, Virginia. Id. ¶ 2b. Jenkins also falsely claimed that he had no personal assets. Id. Third, on July 29, 2004, Jenkins submitted another offer-in-compromise to the IRS. On this occasion, in his Form 433–A, Jenkins failed to disclose that in February 2002 he transferred ownership of his Fairfax Station residence and his two rental properties for less than their actual value. Id. ¶ 2c. He also failed to disclose ownership of a 2004 Dodge Ram truck. Id. Finally, he falsely claimed that he had no income, employment or otherwise, and no personal assets. Id.

II.

At issue is whether making false statements in connection with an offer-in-compromise is cognizable under § 7201, or whether that conduct is chargeable only under § 7206(5). This is essentially a question of statutory interpretation. And because this issue is not explicitly addressed in the two statutory provisions, or indeed anywhere else in Title 26, the task becomes one of divining Congressional intent based on the statute's structure and purpose, and reliable legislative history, if any exists. Accordingly, proper analysis of this issue begins with an examination of the two statutes in issue to determine whether: (i) the conduct encompassed by the two statutes is coterminous; (ii) the conduct encompassed by § 7206(5) is a complete subset of the conduct covered by § 7201; or (iii) the two statutes cover some common conduct, but each also covers some conduct not covered by the other. This task requires a comparison of the elements of the offenses defined by each statute.

The elements of § 7201 ² and § 7206(5) ³ are readily discernable from the statutory language. To establish a violation of § 7201, the government must prove that the defendant (1) willfully (2) committed an affirmative act constituting an attempted evasion of tax payments, and (3) a substantial tax deficiency existed. See 26 U.S.C. § 7201; United States v. Wilson, 118 F.3d 228, 236 (4th Cir.1997). By contrast, to establish a violation of § 7206(5), the government must prove that the defendant (1) willfully (2) in connection with any compromise or offer of such compromise (3) either concealed from the United States property belonging to a taxpayer's estate or withheld, destroyed, mutilated, or falsified any book, document, or record (or made a false statement) relating to the estate or financial condition of the taxpayer. See 26 U.S.C. § 7206(5).

A comparison of the offense elements of the statutory provisions reveals that the conduct covered by the two is not coterminous, nor is the range of conduct covered by § 7206(5) a complete subset of the range of conduct covered by § 7201. Rather, it is clear that although the two statutory provisions cover some conduct common to both, each covers some conduct not covered by the other.⁴ For example, on one hand, both statutes cover situations where a taxpayer willfully fails to list assets ( e.g., rental home) or falsely states the amount of assets ( e.g., account balance) on Form 433–A for the purpose of creating the false impression that the amount offered in compromise is reasonable. On the other hand, only § 7201 covers acts of tax evasion unrelated to an offer-in-compromise. Similarly, only § 7206(5) covers false statements made in connection with an offer-in-compromise that do not reduce the amount of the compromise settlement. For example, a taxpayer may submit an offer-in-compromise to the IRS by completing Form 656 and Form 433–A. ⁵ Form 433–A requires the taxpayer to provide his or her name, address, social security number, and employment information. It also requires the taxpayer to identify whether he or she has lived outside of the United States for a period of six months or longer during the past ten years. Form 656 requires the taxpayer to provide personal information and to identify the source of the funds used to pay the tax settlement. A false statement with respect to any of this information would violate § 7206(5) because it would constitute falsifying a document relating to the estate or financial condition of the taxpayer. Yet, the same conduct is not cognizable under § 7201 because providing false personal or employment information to the IRS, or falsely describing the source of the funds used to pay the IRS, is not an affirmative act of evasion.⁶

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The fact that § 7201 and § 7206(5) cover different types of conduct, but partially overlap, indicates that Congress intended to provide the government with the discretion to prosecute under either statutory provision where the conduct in issue falls within both provisions. This is so because Congress is appropriately presumed to know that it has enacted provisions proscribing overlapping conduct and where, as here, Congress has said nothing to the contrary, Congress is also appropriately presumed to have intended in these circumstances to confer discretion on prosecutors to choose which of the two provisions should be used to charge the conduct in question. Any other conclusion or presumption would fail to accord the statutory language its plain meaning and, indeed, contradict that language.

Settled federal authority supports this conclusion, holding that overlapping criminal statutes do not necessarily raise constitutional concerns or require courts to interpret the statutes so that any overlapping conduct is cognizable under only one statute. To the contrary, the well-settled rule is that where two criminal statutes overlap, the government retains the discretion to prosecute under either statute, unless Congress manifests a clear intent otherwise.⁷ In other words, unless there is evidence to the contrary, the case law reflects that the default rule is that Congress intends to give the government discretion to prosecute under either of two overlapping statutes. This default rule applies even in circumstances where one statute is more narrowly tailored than the other.⁸

Instructive in this regard is United States v. Noveck, 273 U.S. 202, 47 S.Ct. 341, 71 L.Ed. 610 (1927), where the Supreme Court addressed whether a defendant could be charged for submitting a false income tax return under either the tax evasion statute or the perjury statute. The defendant there argued that his conduct was not cognizable under the perjury statute because the tax evasion statute repealed the perjury statute with respect to false tax returns. Id. at 206, 47 S.Ct. 341. The Supreme Court disagreed. Analyzing the elements of the two statutes, the Supreme Court concluded that the defendant could be prosecuted under either statute because they were distinct offenses; each statute contained an element not found in the other. Id. Importantly, the Supreme Court noted that its conclusion was not undermined by the fact that perjury was a felony, whereas the tax evasion offense there in issue was only a misdemeanor. Id. at 207, 47 S.Ct. 341. Also significant, as the Supreme Court noted, was that there was nothing in the legislative history of the tax evasion statute that warranted a different conclusion. Id.

Similarly, in United States v. Hughes, 626 F.2d 619 (9th Cir.1980), the Ninth Circuit addressed whether a defendant could be prosecuted for converting wild horses to private use under either the general conversion statute, 18 U.S.C. §...