Tax fraud
not grouped
Tax and
wire frauds are not closely related
By
David Ziemer
david.ziemer@wislawjournal.com
Jan.
22, 2007
The
sentences for wire fraud and tax evasion are not to be grouped
under the U.S. Sentencing Guidelines, the Seventh Circuit held
on Jan. 12.
Susan
M. Vucko was employed by the Northwest Building Mat-erials and
Supply Company. In the mid-1990s, Vucko began stealing from the
company, eventually pilfering more than $700,000. She also failed
to pay taxes on the money she stole.
She
was ultimately charged in federal court, and pleaded guilty to
wire fraud in violation of 18 U.S.C. 1343 and making a false statement
in a tax return in violation of 26 U.S.C. 7206(1).
The
court imposed concurrent sentences of two years’ imprisonment
for each offense and three years of supervised release and ordered
restitution.
Vucko
appealed the sentence, claiming that the district court erred
by failing to group the charges under sec. 3D1.2(c) or (d) of
the U.S. Sentencing Guide-lines. The Seventh Circuit affirmed
in a decision by Judge Diane P. Wood.
The
court acknowledged that the criminal conduct covered by the wire
fraud was the same as the conduct that gave Vucko enough illegally
derived income to commit tax fraud.
|
What
the court held
Case:
U.S. v. Susan M. Vucko, No. 05-4182
Issue:
Should convictions for tax fraud and wire fraud be grouped
pursuant to U.S.S.G. 3D1.2?
Holding:
No. The convictions involve different victims, harms, and
conduct, and are thus, not closely related.
|
No
Grouping Charges
Nevertheless,
the court concluded that grouping was not appropriate, because
there was no “double counting” from not grouping.
Application
Note 5 to sec. 3D1.2 advises that, when conduct that represents
a separate count is also a specific offense characteristic in
or adjustment to another count, the counts are to be grouped to
prevent “double counting.”
The
note also states that, “this rule applies only if the offenses
are closely related.”
The
court acknowledged a split of authority among other circuits that
have considered the issue.
In
United States v. Haltom, 113 F.3d 43 (5th Cir. 1997), the Fifth
Circuit held that grouping was compelled by the Guidelines on
similar facts.
The
First Circuit, however, held that grouping was not appropriate,
because the crimes involve different harms, different victims,
and different conduct. U.S. v. Martin, 363 F.3d 25 (1st Cir. 2004).
In
Martin, the court observed that, if the offenses were grouped,
there would be no punishment consequences for the tax evasion,
because the fraud had a higher offense level. The Third, Tenth,
and Sixth Circuits have also rejected grouping.
Punishment
for Tax Evasion
The
Seventh Circuit adopted this majority rule, agreeing with the
First Circuit that the crimes involve different harms, victims,
and conduct.
The
court also concluded, “wire fraud is just one of countless
ways to obtain income from criminal activity. To suggest that
any criminal offense that produces income is subsumed into the
tax guideline calculation with a two-level enhancement is to create
a category without limits.”
The
court distinguished its holding in U.S. v. Wilson, 98 F.3d 281
(7th Cir. 1996), in which it held that fraud and money laundering
were closely related and subject to grouping, because, “without
the fraud there would have been no funds to launder.”
Although
the same is true in the case at bar — without the wire fraud,
there would be no taxes to avoid — the court held Wilson
distinguishable, because there was no common scheme in Vucko’s
case.
Finding
that the effect of grouping the offenses would be to eliminate
any marginal punishment for committing tax fraud on top of another
offense, the court affirmed.
Click here for
Case Analysis.
David
Ziemer can be reached by email.
