Tennessee Federal Criminal Lawyer Blog

The federal government has multiple ways of punishing those who have lied or made misrepresentations to a court, grand jury, or federal agent. One of the more notable convictions for such a crime was the conviction of TV personality Martha Stewart for, among other things, making false statements to a federal agent, which violated 18 U.S.C. § 1001. This blog entry will provide an overview of one of the federal laws which addresses false statements (commonly referred to as "perjury") before a grand jury or court: 18 U.S.C. § 1623.

For the prosecution to succeed in convicting someone for a violation of 18 U.S.C. § 1623, they will have to prove the following 4 elements beyond a reasonable doubt:

1. That the defendant provided testimony (either verbally or via document) before a court or federal grand jury;
2. That the defendant's testimony was false;
3. That the defendant provided testimony which the defendant knew was false when he/she provided the testimony; and
4. That the false testimony was material.

As with all federal criminal cases, the Court will begin its analysis on punishment and sentencing based on the statute itself and the U.S. Sentencing Guidelines. 18 U.S.C. § 1623(a) provides that a defendant "shall be fined under this title or imprisoned not more than five years, or both." The Sentencing Guidelines, per § 2J1.3, provide for a base offense level of 14, which calls for a range of punishment of 15-21 months for someone with no or very little criminal history. While this Level 14 is the base offense level, there are factors that can increase this punishment. For instance, if the defendant threatens someone or causes physical injury to a person in connection with the perjury, the base level is enhanced by eight levels to a level 22; if the perjury interfered substantially with the "administration of justice," the base level is increased by 3 levels.

A common scenario for someone being indicted for a False Declarations charge would be when someone provides testimony at a grand jury proceeding. We strongly advise anyone who has received a grand jury subpoena to consult with an experienced criminal defense attorney prior to attending the grand jury.

Tennessee criminal defense attorneys will rarely participate in a murder case as gruesome as the case of David Climer, Jr. Climer, a Gibson County, Tennessee resident, was convicted by a jury of first degree premeditated murder and abuse of a corpse in relation to the 2007 murder of his mother Doris Deberry. He appealed his conviction to the Tennessee Supreme Court, which granted him a new trial earlier this month based on issues with the waiver of his Miranda rights [See Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966)]. The full opinion of the Climer decision can be found here.

This case begins with the disappearance of Doris Deberry, who was David Climer, Jr's. mother. Climer reported to family members that Deberry ran off with a Hispanic male named Ray. The family became suspicious and eventually made a missing persons report which prompted police to go the home that Deberry and Climer shared. Climer was drunk when police first made contact with him, and he was taken into custody and placed in a "drunk tank."

During a custodial interrogation prior to arrest, Climer was read his Miranda rights by a detective. He was then asked to sign a form stating that he had been advised of his rights; however, he refused to sign the document. The detective then proceeded to ask Climer questions regarding the disappearance of his mother. According to the court record, on one occasion Climer stated that he was scared to talk without an attorney. In another instance, Climer asked if he could "have...an appointed lawyer right now," to which the detective told him "...not at this time," and continued to question Climer. After three hours of interrogation, Climer finally confessed that he dismembered his mother's body and buried the body in Madison County, Tennessee.

Climer never confessed to murdering Deberry, and instead claimed that Deberry died from complications from an earlier fall. After an arrest warrant was executed, Climer was brought back in from the "drunk tank" to speak with the detective that conducted the prior interrogation. The detective repeated the Miranda rights to Climer, and Climer again refused to sign the acknowledgment form. During this second interrogation, Climer took the detective to the burial spot of Deberry's remains.

Climer's defense made a motion to suppress the confession, but the trial court denied the request stating there was no evidence of abuse of Climer during the investigation or subsequent incarceration. The trial court also ruled that the Defendant's remarks to the investigator did not amount to Climer invoking his right to counsel. Climer was convicted, and his defense appealed the decision. The Tennessee Court of Criminal Appeals affirmed the lower court's decision, and the case was ultimately appealed to the Tennessee Supreme Court.

The question of Climer's invocation of counsel was under de novo review by the Supreme Court. The Supreme Court applied Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), which states that a suspect "must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of any attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires." 384 U.S. at 479. In addition to the above protection, the Miranda case requires a suspect to "knowingly and intelligently" waive said rights. The Supreme Court also looked to McNeil v. Wisconsin, 501 U.S. 171, 176 111 S.Ct. 2204, 115 L.Ed.2d 158 (1991) which states that once a suspect invokes a right to counsel, any subsequent waiver at the authorities' request, and not at the suspect's request, is the product of "inherently compelling pressures" and not the purely voluntary choice of the suspect.

A primary issue which the Supreme Court had to address was whether Climer's statements were actually a stated desire to have an attorney present. The Court looked to Davis v. United States, 512 U.S. 452, 114 S.Ct. 2350, 129 L.Ed.2d 362 (1994) in which the Court declared "invocation of the Miranda right to counsel requires, at a minimum, some statement that can reasonably be construed to be an expression of a desire for the assistance of an attorney." Id., at 459.

In applying the aforementioned case law, the Supreme Court applied the Davis standard to determine if Climer effectively invoked his right to counsel. The Court examined the transcripts from Climer's interrogations to examine the three instances in which the defense claimed Climer invoked his right. The Supreme Court agreed with the trial court and Court of Criminal Appeals that Climer never unequivocally invoked his right to counsel. However, the Court found that Climer never expressly waived his Miranda rights. The Supreme Court pointed to several statements in the interrogation transcripts in which Climer talked about an appointed attorney. The Court concluded that Climer's comments regarding an appointed attorney clearly showed that Climer did not understand his Miranda rights and therefore could not intelligently waive said rights.

After determining that Climer did not unequivocally waive his Miranda rights, the Supreme Court had to determine if the error was harmless or would have impacted the verdict of the case. The Court wrote:

As the United States Supreme Court has observed: "A confession is like no other evidence." Fulminante, 499 U.S. at 296. "[T]he defendant's own confession is probably the most probative and damaging evidence that can be admitted against him." Id. (quoting Bruton v. United States, 391 U.S. 123, 139 (1968) (White, J., dissenting)). This is true because a defendant's admissions "come from the actor himself, the most knowledgeable and unimpeachable source of information about his past conduct." Id. (quoting Bruton, 391 U.S. at 140 (White, J., dissenting)).

The Supreme Court ruled that Climer's statements were not harmless error and reversed his conviction, and remanded the case to the lower court for a retrial consistent with its opinion. The Court also decided that the physical evidence used in Climer's trial (and discovered as a result of his custodial statements) was correctly admitted into evidence since Climer's statements were not coerced. Therefore, the prosecution may use the same physical evidence at Climer's new trial.

Earlier this month, Danielle Denson claimed she never knew she had to file income tax returns for her income as an adult "exotic" dancer. However, she filed 323 tax returns in other citizen's names claiming more than $1.6 million in refunds from tax years 2008 to 2011. Sentencing Judge Susan Bucklew presiding over the case, expressed disbelief over Denson's claim that she was unaware that she was supposed to file tax returns on her income as a stripper, and stated: "What did you think the IRS did? Just give money back? Yet you were filing hundreds of tax returns? I have a hard time believing that." Judge Bucklew then proceeded to issue a Judgment for Denson to serve 6 years and 4 months in federal prison for her tax crimes.

Denson's defense attorney's attempted to convince the Judge that Denson's hard life led her to engage in fraud as a way to simply survive. Denson's attorney stated Denson's mother died of AIDS and her father abused her. One of the victim's mothers was not persuaded by Denson's attorney's argument. Her daughter is a 27 year old autistic female that resides in a group home. On the false returns, Denson listed the victim as a student which resulted in a $9,046 tax return. The mother of the victim stated the she had also been severely abused as a child, yet she had maintained her job for 29 years. The mother of the autistic female asked the court to give Denson the maximum sentence possible.

The prosecution was also not persuaded by Denson's arguments.
The Government argued that Denson did not just participate in tax fraud to survive but rather to support her lavish lifestyle, which included a new Mercedes, spending over $300,000 at the Hard Rock Casino in 2007, and spending $14,000 at Gucci.

Sources
The Tampa Tribune - "Tampa Exotic Dancer Sentenced for Tax Fraud"

The Tampa Tribune - "Woman Set to Plead Guilty in Tax Fraud of $1 Million Plus"

Newspitter.com - "A Stripper, Danielle Denson Gets 6 Years for Tax Refund Fraud"

NOTE: The video clip references "2,500 investigations" performed by the IRS per year, but the reference should have been to approximately "2,500 convictions." The IRS last year performed 5,125 investigations.

As most Americans stressed yesterday for what is commonly known as "Tax Day," locally-based Pilot Flying J was swarmed on Tax Day by approximately 30 federal and local agents while executing a search warrant at its Knoxville headquarters as part of an "ongoing investigation." Pilot CEO Jimmy Haslam, father of Tennessee Governor Bill Haslam, stated that Pilot is "cooperating fully with authorities."

The IRS and the federal government have long been fans of moving forward with warrants, investigations, and indictments for higher profile individuals and companies near the dreaded April 15th tax filing deadline. Although this search warrant could have been executed on another day, April 15th is the most notable of tax dates, and it provides the IRS with an extra opportunity to remind the public at large that they are enforcing tax laws.

In a KnoxNews.com article, one Pilot worker commented on the IRS and FBI agents who were executing the search warrant by stating, "They didn't seem like they were on a witch hunt...They seemed like they knew what they were looking for." Oftentimes, when agents from the Criminal Investigation Division (CID) of the IRS show up, they have been investigating the case for a lengthy period of time. The Pilot worker was likely correct in that the IRS CID and FBI agents knew exactly what they wanted to obtain long before they entered the Pilot headquarters.

In fact, to obtain a search warrant, the federal government would have been required to present "probable cause" evidence to a judge that there had been a violation of federal law, which would allow for the issuance of a search warrant. However, the issuance and execution of a search warrant does not mean that Pilot Flying J and/or its officers have done anything wrong or illegal. Undoubtedly, Pilot will take swift action to have its attorneys begin (or possibly continue) their investigation and defense of the case.

UPDATE: Since the original posting of this blog, a second search warrant has been executed today, and federal agents are continuing their efforts at the Pilot Flying J headquarters in Knoxville, according to KnoxNews.com.

Sources and Additional Articles
KnoxNews.com
NBCSports.com
WBIR.com

Last month, Knoxville, Tennessee residents James and Beverly Beavers were found guilty by a jury of their peers of conspiring to defraud the federal government and for filing false claims for tax refunds in U.S. District Court for the Eastern District of Tennessee. The couple is scheduled to be sentenced on August 7, 2013.

According to a press release from the Department of Justice, James Beavers, a former director of an academic engineering center at the University of Tennessee, and Beverly Beavers, a former jewelry store owner, hired PMDD Services, LLC (PMDD) to prepare their tax refunds. PMDD aided its clients in claiming enormous tax refunds in order to pay off personal debt. In the Beavers' case, PMDD falsely reported their mortgage amount, credit card limits, and other personal debts as income in order to withhold federal income tax on the money via Forms 1099-OID. This led to the Beavers claiming a tax refund for 2008 of over $591,000. In addition, the Beavers requested, via amended returns prepared by PMDD, a tax refund of $193,056 for 2006 and $202,625 for 2007. The Beavers used the 2008 tax refund to pay off the mortgage on their home.

Penny Jones, of PMDD, prepared the returns for the Beavers based on information the Beavers submitted to her. She is currently serving a 144-month sentence in federal prison for her involvement in the scam. The "1099-OID" scam is routinely included among the IRS' Dirty Dozen Tax Scams.

On February 15, 2013, Knoxville, Tennessee resident Bernard Addison was sentenced to 46 months imprisonment for conspiring to counterfeit U.S. Postal Service money orders. Addison was a radio news broadcaster in Knoxville, Tennessee, for WIVK FM 107.7 in the 1990's. Coincidentally, he reported on criminal cases for the radio station. Addison had been receiving counterfeit money orders from the country of Ghana for several months.

After an investigation performed by the U.S. Postal Inspection Service and U.S. Secret Service, Addison was charged with a violation of 18 U.S.C. § 500. Robert Wagner, an inspector for the U.S. Postal Service, retrieved several packages addressed to Addison that contained over 3,000 fake money orders that totaled more than $2.5 million. Addison was receiving a weekly MoneyGram payment of $250.00 a week for his involvement in the scheme.

Pursuant to 18 U.S.C. § 500, federal law makes it a crime for anyone "with intent to defraud" to falsely make, forge, counterfeit, or print any order "purporting to be a blank money order or a money order issued by or under the direction of the Post Office Department or Postal Service." The punishment according to the statute is a maximum prison sentence of 5 years and/or a fine. The sentencing judge will also take into consideration United States Sentencing Guidelines §2B5.1, which sets forth the guidelines for "Offenses Involving Counterfeit Bearer Obligations of the United States."

William Beavers (pictured below), a former Chicago police officer and 7th Ward alderman, has been charged with tax evasion. Prosecutors allege that Beavers spent $226,000 of campaign money for his personal expenses over a three year period and never paid taxes on the funds. It is also alleged that in 2006 Beavers contributed $69,000 of campaign money to a city retirement fund which more than doubled his monthly pension. There are some grumblings that the prosecutors intend to show that Beavers gambled with a portion of the $226,000 at a casino in Hammond, Indiana.

Beavers stated that the FBI is targeting him because he refused to wear a wire to help its investigation of Commissioner John Daley (brother of former Chicago Mayor Richard Daley). Beavers' defense maintains that the money from the campaign fund was a loan, and that some repayment has been made. Since the investigation started, Beavers amended his tax returns to reflect the income.

Judge James Zagel is presiding over the case. He advised Beavers that he can tell the jury that he amended his returns and repaid the campaign funds after learning that he was being investigated so long as he takes the stand to do so. Beavers has repeatedly stated that he will take the stand in his defense, and that he is not guilty of the charges levied against him.

Jury selection for Beavers' trial began on March 12, 2013 with controversy. Out of the fifty prospective jurors, none were African American. Because Beavers is African American, the defense has requested the pool be dismissed. The case is set to go to trial the week of March 18th, 2013. Should Beavers be convicted, he is facing a maximum penalty of three years in prison and a $250,000 fine for each count against him.

SOURCES
http://www.nbcchicago.com/blogs/ward-room/W-196782271.html
http://articles.chicagotribune.com/2013-03-12/news/ct-met-william-beavers-trial-0310-20130311_1_jury-selection-selection-process-jurors

On December 7, 2012, President Barack Obama signed the Child Protection Act, which doubles the potential sentences for those convicted of certain sex and child pornography crimes. The Child Protection Act (CPA) also provides more resources for investigating online crime and a more efficient way to issue subpoenas. As an additional weapon in the fight against online child crime, the CPA creates a civil action and new offenses for harassing or intimidating a child victim or witness.

This new law amends the federal criminal code to impose a fine and/or prison term from 10 years up to 20 years for transporting, receiving, distributing, selling, or possessing pornographic images of a child under the age of 12, provided in 18 U.S.C. § 2252(b)(2). In 18 U.S.C. 1514(b)(2), the new law allows a U.S. district court to issue a protective order prohibiting harassment or intimidation of a minor victim or witness as long as the court finds evidence that the conduct could adversely affect the willingness of the minor to participate in a federal criminal case. If an offender is to violate this protective order, then he or she can be imprisoned for up to 5 years and/or be fined. The U.S. Marshals Service can now issue an administrative subpoena for the investigation of unregistered sex offenders by the U.S. Marshals Service.

Finally, the Child Protection Act of 2012 further amends the PROTECT Our Children Act of 2008 in the following ways:
(1) Doubles the amount from $2,000,000 to $4,000,000 annually that the Attorney General can award a non-law enforcement agency to establish and conduct training courses for the National Internet Crimes Against Children Task Force Program.
(2) Requires that the Attorney general designate a senior official at the Department of Justice with experience in child exploitation cases as the National Coordinator for Child exploitation Prevention and Interdiction, and he or she will be responsible for coordinating the development of the new system.
(3) Requires the Attorney General to report within 90 days after the enactment of this Act on the status of the establishment of the system.

The Nashville Business Journal reports that Tennessee-based Wayne Medical Center has entered into an agreement with the Federal Government to settle False Claims Act allegations, which were actually self-reported by Wayne Medical Center. Wayne Medical Center has agreed to pay $883,451 as part of the settlement. The improper claims relate to ambulance services of the hospital, and include providing medically unnecessary services, improperly documented services, and lack of the requisite signatures.

As I have written about previously, the False Claims Act [FCA] (31 U.S.C § 3729 et seq.) penalizes those who defraud the government. For example, the FCA imposes civil penalties for making false claims for payments to the government, using false records to support a false claim, or receiving compensation from the government but delivering less than the proper amount to the intended recipient.

The penalties under the FCA are severe, and a civil penalty up to $11,000 may be assessed for each false claim. The government may also seek treble damages for each violation. The Justice Department has increasingly used the FCA to recover large sums of money. In Nashville, which is part of the Middle District of Tennessee, the the Middle Tennessee office for the U.S. Attorney secured more than $100 million in recoveries or settlements from health care fraud actions in 2011.

As an added punishment, violators of the FCA may be excluded altogether from federal health care programs such as Medicare and Medicaid. (42 U.S.C. § 1320a-7(b)).

On December 21, 2012, Director of U.S. Immigration and Customs Enforcement (ICE) John Morton issued a memorandum to provide additional guidance on the use of ICE detainers. I have previously written about ICE detainers here. This memorandum re-emphasizes ICE's focus on removing those individuals whose "removal promotes public safety, national security, border security, and the integrity of the immigration system." A copy of the memorandum can be found here.

The memorandum promises that ICE will be revising its current detainer form (Form I-247) in an effort to ensure compliance with removing persons who are in the United States without authorization AND who meet one or more of the following 8 conditions:

1. Prior felony conviction
2. 3 or more prior misdemeanor convictions
3. A prior misdemeanor conviction or has simply been charged with a misdemeanor offense if the charge involves any of the following:
* Violence, threats, or assault * Sexual abuse or exploitation * DUI or controlled substance * Fleeing the scene of an accident * Unlawful possession of firearm or other deadly weapon * Distribution of controlled substances * "Other significant threat to public safety"
4. Prior conviction for illegal entry per 8 USC § 1325
5. Illegal re-entry after a previous removal or return
6. Pending or current order of removal
7. Committed immigration fraud
8. Poses a significant risk to national or border security or to public safety

While there are many ambiguous and troubling terms used in the 8 conditions above, it is nice to see ICE continue its focus on dedicating its resources to pursuing the so-called "bad immigrants," as opposed to those persons who do not have the 8 referenced conditions.

As a criminal defense and tax attorney, I often deal with the intersection of those two areas of practice when handling tax evasion and tax fraud cases. Even though the number of tax prosecutions by the federal government has increased in recent years, the total number of criminal tax prosecutions are relatively few. For example, in 2010, there were approximately 1,250 tax fraud charges brought by the Department of Justice.

With so few tax prosecutions each year, the types of criminal tax prosecutions usually focus on a few groups of people: celebrities or high profile people, tax protesters, and lately, those who have attempted to evade taxes by hiding assets outside the country. Of course, there are cases which don't fit into of the aforementioned categories, but two recent tax fraud cases show how tax authorities have targeted a few higher profile individuals. While the IRS and the Department of Justice are usually the lead agencies in the pursuit of tax fraud prosecutions, other agencies can also get involved.

Last week, actor Stephen Baldwin (who is looking very "Baldwin-esque" in the mugshot above) was arrested in New York for failure to file state income taxes for $350,000 in earnings from 2008-2010. Baldwin denies that he committed any crime, but acknowledges that his personal bankruptcy and other financial factors contributed to his inability to pay his taxes. Baldwin is scheduled to return to court on February 5, 2013.

Apparently, the U.S. is not the only government which pursues higher profile individuals, as Germany arrested Fabian Thylmann last week on suspicion of tax evasion. Although Thylmann may not be a household name to many, he is the owner of 2 of the world's top 110 websites, YouPorn and Pornhub. Thylmann was arrested in Belgium and will likely be extradited to Germany in the near future.

As I have written about previously, tax return preparers can face both civil and criminal penalties for preparing false or fraudulent tax returns. One such tax return preparer company, Mo' Money Taxes, is now dealing with a civil injunction lawsuit, which was filed earlier this week against them in Nashville by the U.S. Attorney's Office in Middle Tennessee, according to published reports.

The Justice Department's lawsuit claims that defendants Toney Fields and Trumekia Shaw did "intentionally prepare and file fraudulent federal income tax returns to obtain improper tax refunds for customers." Claimed tax losses by the Government could exceed $5 million in tax year 2011. Some of the alleged errors committed by employees of Mo' Money Taxes include: using taxpayers' end-of-the-year pay stubs (instead of W-2 forms) to assist in preparing tax returns; manufacturing fake W-2 forms; and claiming false tax credits for child tax credits, incorrect number of dependents, and false charitable donations.

This civil injunction in Nashville is the latest legal battle against Mo' Money Taxes, and follows the arrest of franchise owner Jimi Clark and four Mo' Money employees in October, 2012, for conspiracy to commit tax fraud by falsely claiming educational tax credits on 47 returns filed in 2009. Additionally, the Memphis-based company has hundreds of people claiming that they never received their tax refund checks.

As a Tennessee tax attorney, I often represent small business owners who are delinquent in paying their payroll taxes, which are commonly referred to as an owner's "941 taxes." While the majority of these types of clients are seeking to resolve their tax debts with the Internal Revenue Service by civil means, a few of these cases are criminal in nature. Simply put, the Government views failure to pay provide payment for payroll taxes as theft, as the employer has taken money from an employee's check and failed to pay the withheld amounts to the IRS.

According to a press release from the Department of Justice, James and Theresa DeMuro of New Jersey each received 44-month prison sentences for conspiracy to defraud the Government and twenty-one counts of failing to pay payroll/employment taxes. The couple was also ordered to pay restitution of $1,337,952.12 to the IRS.

The couple's sentence came after a jury trial, where evidence was introduced that the couple withheld over a half-million dollars from their employees, but failed to pay any of this money to the IRS. The convicted couple also withheld money from employees' checks for health insurance, retirement accounts, and child support, but they also failed to provide these funds to the appropriate agencies or accounts. Instead, evidence was introduced showing that the DeMuros spent nearly $300,000 for purchases from Home Shopping Network, QVC, and Jewelry Television.

One of the fastest growing areas of prosecution is what is commonly referred to as drug diversion. If a medical care provider either issues medication outside of accepted medical standards or if the provider diverts the medication away from the proper recipient, the provider may be charged with violating federal drug laws pursuant to 21 U.S.C. § 841, and the penalties can be severe, including the possibility of life imprisonment.

Jonesborough, Tennessee resident Sharon Minns Kyker, who previously worked as a registered nurse at the James H. Quillen Department of Veterans Affairs Medical Center, pled guilty earlier this year to obtaining controlled substances by fraud, deception, and subterfuge by means of falsely documenting having provided a dose to a patient. According to a press release from the United States Attorney's Office for the Eastern District of Tennessee, Kyker admitted to diverting a quantity of hydromorphone (aka Dilaudid) by falsely claiming that he had provided the medication to a patient.

Earlier this month, Kyker was fortunate to receive a sentence of three years of probation, during which time she must participate in mental health and substance abuse treatment, may not possess occupations with access to patient medications, and must complete 50 hours of community service.