U.S. v. Tenzer

• Decision Date: 29 October 1999
• Docket Number: Docket No. 99-1123
• Citation: 213 F.3d 34
• Parties: (2nd Cir. 2000) UNITED STATES OF AMERICA, Appellee, v. JAMES L. TENZER, Defendant-Appellant. August Term 1999 Argued:
• Court: U.S. Court of Appeals — Second Circuit

Page 34

213 F.3d 34 (2nd Cir. 2000)

UNITED STATES OF AMERICA, Appellee, v. JAMES L. TENZER, Defendant-Appellant.

Docket No. 99-1123

August Term 1999

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: October 29, 1999

Decided: April 26, 2000

Appeal from conviction and sentence imposed by the United States District Court for the Southern District of New York (Charles L. Brieant, Judge). Defendant claims that we should reconsider our holding in a previous appeal in this case, and dismiss the information based on new evidence. Defendant also argues that the district court misunderstood its authority to downwardly depart at sentencing. We affirm the conviction and remand for reconsideration of the sentence. Judge Miner dissents with respect to the sentencing issue in a separate opinion. [Copyrighted Material Omitted] MARION BACHRACH, New York, NY (Depetris & Bachrach, of Counsel), for Defendant-Appellant.

CYNTHIA KEEFFE DUNNE, New York, NY, Assistant United States Attorney for the Southern District of New York (Mary Jo White, United States Attorney for the Southern District of New York, Peter G. Neiman, Ira M. Feinberg, Assistant United States Attorneys, of Counsel), for Appellee.

Before: FEINBERG, MINER and SACK, Circuit Judges.

FEINBERG, Circuit Judge:

James L. Tenzer appeals from a judgment of conviction entered in February 1999 in the United States District Court for the Southern District of New York (Charles L. Brieant, J.) on an information charging him with four misdemeanor counts of failure to file timely tax returns for the years 1987-1990 in violation of 26 U.S.C. 7203. The case comes before this court for the second time. In the first appeal, the government sought reversal of the district court's order dismissing the information because Tenzer's offer in compromise, submitted pursuant to the voluntary disclosure policy of the Internal Revenue Service (IRS), had been improperly turned down. We reversed, holding that Tenzer's offer did not meet the requirements of that policy. United States v. Tenzer, 127 F.3d 222 (2d Cir. 1997)("Tenzer I"). On remand, Tenzer again sought dismissal, based on allegedly new evidence produced by the government, but the district court held that the "mandate rule" precluded it. 4 F. Supp.2d 306, 310 (S.D.N.Y. 1998). Following a conditional guilty plea, Judge Brieant sentenced Tenzer to a year and a day incarceration, but declined to depart downward. Tenzer now appeals from his conviction and sentence. Tenzer argues that (1) the new evidence produced by the government on remand merits the reconsideration of our decision in Tenzer I; and (2) Judge Brieant did not fully understand his authority to downwardly depart. For the reasons set forth below, we affirm the conviction and remand for reconsideration of the sentence.

I. Background

A complete account of the events leading up to Tenzer's prosecution was set forth in Tenzer I, and the two district court opinions issued in this case, 950 F. Supp. 554 (S.D.N.Y. 1996) and 4 F. Supp.2d 306 (S.D.N.Y. 1998), familiarity with which is assumed. We summarize below the facts and proceedings germane to the present appeal.

A. The Civil Proceedings

Tenzer is an experienced tax attorney and one of the principals of Margolin, Winer and Evens (MW&E), a large accounting firm in Long Island, New York. It is uncontested that during the four years covered by the information, Tenzer earned substantial income but did not pay any tax. In October 1991, the IRS notified Tenzer that his account had been referred to the enforcement section and that he could still avoid enforcement action if he filed all his delinquent returns and paid all outstanding taxes within 10 days, or if he immediately contacted the IRS. Tenzer's attorney, Myron Weinberg, contacted the IRS and requested an extension of time for filing the returns, which the IRS granted. In February 1992, Tenzer filed complete and accurate returns for three of the years involved (1987-1989), but did not enclose any payments.

In October 1992, Tenzer began negotiating a payment plan with IRS revenue officer Elizabeth Kishlansky. At that time, Weinberg advised Kishlansky that Tenzer wanted to enter into an installment agreement with the IRS. Kishlansky notified Weinberg that the IRS would not consider any installment plan unless Tenzer immediately filed his delinquent 1990 and 1991 returns. Tenzer filed those returns in November 1992.

In January 1993, Kishlansky again met with Tenzer's lawyers, including Ernest Honecker, formerly a high-ranking attorney for the IRS, to discuss Tenzer's payment plan. At that meeting, Tenzer's lawyers sought assurances from Kishlansky that Tenzer's case was being handled as a civil matter. Tenzer's attorneys also informed Kishlansky that rather than enter into an installment plan with the IRS, whereby all delinquent payments would be made, Tenzer intended to make an "offer in compromise," that is, a partial payment in settlement of his tax liabilities. Kishlansky responded that such an offer would only be considered if Tenzer became current on his taxes due for 1992, and if the offer reasonably reflected his assets and potential earnings. Tenzer's lawyers then proposed $250,000 in compromise of his tax liability. Kishlansky indicated that she thought this amount would be unsatisfactory and that a more reasonable offer would be around $600,000. Nevertheless, when Tenzer submitted his $250,000 offer in a letter dated February 5, 1993, along with a $5000 payment, Kishlansky did not reject it but forwarded it to the IRS service center in Maine for review.

In early April 1993, the IRS returned Tenzer's offer in compromise letter, as well as the $5000 payment, as "unprocessable." The letter returning the offer explained that "for offers based on inability to pay, you must generally offer an amount equal to or in excess of the amount shown as 'equity in assets' on your financial statement(s)." The letter also invited Tenzer to amend his offer. On April 14, 1993, Honecker wrote a letter to the IRS disclosing his intention to resubmit the same offer in compromise, and explaining that $250,000 was a reasonable amount in light of the "forced sale" value of Tenzer's non-liquid assets. Later that month, Kishlansky notified Honecker that Tenzer's file was being transferred to the IRS office in Brooklyn, which covered the region where most of Tenzer's assets were located. Kishlansky also advised Honecker not to resubmit the offer until he was contacted by that office. At this point, all communication between Tenzer and the IRS regarding civil collection of his taxes ceased.

B. The Criminal Proceedings

In late June 1993, a "freeze" was placed on Tenzer's file halting any further collection efforts. The freeze was ordered by the IRS criminal investigation division, as a result of a separate investigation into criminal tax evasion by JRD, a corporate client of Tenzer's accounting firm.¹ It was not until several weeks later that Tenzer's attorneys learned of the freeze and that Tenzer was now a subject of an IRS criminal investigation. The collection freeze on Tenzer's file was not lifted until February 25, 1999, shortly after Tenzer was sentenced by the district court.²

In November 1994, consultation between agents of the IRS and the tax division of the Department of Justice led to a recommendation that Tenzer be prosecuted for his failure to timely file his tax returns. The recommendation reflected the IRS's conclusion that Tenzer did not meet the criteria of the voluntary disclosure policy. That policy provides that where a delinquent taxpayer comes forward and either pays or makes a bona fide arrangement to pay the applicable taxes, the IRS will not recommend prosecution. As a result of this policy, non-filers are seldom prosecuted. Nevertheless, in November 1995, the Justice Department charged Tenzer in the four-count information that led to this appeal.

Subsequently, Tenzer moved to dismiss the information. Tenzer argued that he had satisfied the requirements of the voluntary disclosure policy, and that by initiating criminal proceedings against him, the IRS failed to follow its own policy, thereby violating his due process rights. Following a four-day evidentiary hearing, the district court agreed and dismissed the information. The court reasoned that although Tenzer's initial offer in compromise was "laughable," he had intended in good faith to reach an acceptable compromise agreement with the IRS and thus complied with the voluntary disclosure program. 950 F. Supp. at 562. The district court further concluded that the policy, which was widely publicized, afforded Tenzer due process rights, and that those rights were violated when the government decided, without affording Tenzer any advance notice, to freeze the civil collection effort and to prosecute him. Id. at 563. The district court also noted that Tenzer's prosecution was "unique in the regular day to day administration of the [voluntary disclosure] Policy." Id.

C. Tenzer I

In September 1997, we reversed the dismissal of the information, holding that prosecution was not barred because Tenzer did not comply with the voluntary disclosure policy. 127 F.3d at 226. Because we held that Tenzer did not comply with the policy, we found it unnecessary to decide whether the policy afforded Tenzer any due process rights and whether those rights were violated by the IRS. Id. at 222 n.1. The panel held that an "arrangement to pay" under the voluntary disclosure policy "may be a great variety of things, e.g., an installation payment agreement, a promise to pay on a specific date, or an offer of a lump-sum payment in compromise." Id. at 227. We also concluded that "under the express language of the policy, the 'bona fide arrangement' must have been 'made' for the policy to apply." Id. Because Tenzer's offer had not been accepted by the IRS at the time he became the subject of a criminal investigation, his...