Pleas and Sentencing p3

5.09[2] Departure Based on Substantial Assistance to Authorities

      Title 18 U.S.C. § 3553(e) and 28 U.S.C. § 994(n) grant a court,

upon Government motion, limited authority to impose a sentence beneath the 

statutory minimum when that defendant  has provided substantial assistance to the

government.  The Sentencing Guidelines permit the government to request a

downward departure from the guidelines pursuant to Section 5K1.1 when the

defendant has rendered  substantial assistance. USSG §5K1.1. [FN19]  

      Title 18 U.S.C. § 3553(e) provides:

      (e) Limited authority to impose a sentence below a statutory 

      minimum.--Upon motion of the Government, the court shall have the 

      authority to impose a sentence below a level established by statute as 

      minimum sentence so as to reflect a defendant's substantial assistance 

      in the investigation and prosecution of another person who has 

      committed an offense.  Such sentence shall be imposed in accordance 

      with the guidelines and policy statements issued by the Sentencing 

      Commission pursuant to section 994 of title 28, United States Code.

18 U.S.C. § 3553(e).

      Title 28 U.S.C. § 994(n) provides:

      (n) The Commission shall assure that the guidelines reflect the 

      general appropriateness of imposing a lower sentence than would 

      otherwise be imposed, including a sentence that is lower than that 

      established by statute as a minimum sentence, to take into account a 

      defendant's substantial assistance in the investigation or prosecution 

      of another person who has committed an offense.

28 U.S.C. § 944(n).

      Finally, Section 5K1.1 of the guidelines provides:

      Upon motion of the government stating that the defendant has provided 

      substantial assistance in the investigation or prosecution of another 

      person who has committed an offense, the court may depart from the 

      guidelines.

USSG §5K1.1 p.s.  The commentary notes that:

      [u]nder circumstances set forth in 18 U.S.C. § 3553(e) and 28 

      U.S.C. § 994(n), as amended, substantial assistance in the 

      investigation or prosecution of another person who has committed an 

      offense may justify a sentence below a statutorily required minimum 

      sentence

USSG §5K1.1 comment. (n.1).  

      Analyzing the interplay between Code Sections 3553(e) and 944(n) and

Guideline Section 5K1.1, the Supreme Court addressed the issue of whether Section

5K1.1(a) authorizes a sentencing court to depart below the statutory minimum when

the government filed a  motion for departure from the guideline range based upon

substantial assistance.  Melendez v. 
United States
, 518 

U.S.

 120

(1996).  The Supreme Court held that  in order for the court to sentence a

defendant to a range below the statutory minimum, the government must have so

moved the court pursuant to 18 U.S.C. § 3553(e)   A motion pursuant to

Section 5K1.1 has the effect of "withhold[ing] from the district court the power

to depart below the statutory minimum."   See, generally, Melendez,

518 

U.S.

 at 129-131; In re Sealed Case (Sentencing Guidelines' "Substantial

Assistance"), 149 F.3d 1198, 1201 (D.C. Cir. 1998)(government motion

under section 5K1.1 for departure below sentencing guideline range does not also

permit departure below the statutory minimum under 18 U.S.C. § 3553(e))

(citation omitted); United States v. Coleman, 132 F.3d 440, 442

(8th Cir. 1998).  The District of Columbia Circuit, however, determined that a

sentencing court may depart downward for substantial assistance in the absence

of a motion by the government where the circumstances of the case place it beyond

the guidelines' "heartland."  In re Sealed Case ("Sentencing

Guidelines"), 149 F.3d at 1202. 

      Thus, within the parameters of USSG §5K1.1, upon motion by the

Government, the sentencing court may make a downward departure from the

guidelines range because the defendant substantially assisted the Government. 

The Government motion must state the defendant provided substantial assistance

in the investigation or prosecution of another person who committed an offense.

Section 5K1.1(a) sets forth a non-exhaustive list of considerations for the court

in determining the degree of departure:  

      The appropriate reduction shall be determined by the court for

      reasons stated,[FN20] that may include, but are not limited to, consideration of

      the following:

            (1)   the court's evaluation of the significance and

                  usefulness of the defendant's assistance, taking

                  into consideration the government's evaluation of

                  the assistance rendered; [FN21]

            (2)   the truthfulness, completeness, and reliability

                  of any information or testimony provided by the

                  defendant;

            (3)   the nature and extent of the defendant's

                  assistance;

            (4)   any injury suffered, or any danger or risk of

                  injury to the defendant or his family resulting

                  from his assistance;

            (5)   the timeliness of the defendant's assistance.

USSG §5K1.1.  Substantial assistance is directed to the investigation and

prosecution of persons other than the defendant, while acceptance of

responsibility is directed to the defendant's own affirmative recognition of

responsibility for his own conduct.  USSG §5K1.1, comment. (n.2).  

      In the event that the government elects not to file a motion for downward

departure and there is a plea agreement which contains language regarding the

availability of a Section 5K1.1 motion, the sentencing court applies settled

principles of contract law to a defendant's challenge. 

United States

 v.

Isaac, 141 F.3d 477, 482-83  (3d Cir. 1998).  In plea agreements, the

government regularly refers to the possibility of a Section 5K1.1 motion, but

reserves discretion to determine whether such a motion is appropriate.  

United States

 v. Benjamin, 138 F.3d 1069, 1063 (6th Cir. 1998);

United States v. Watson, 988 F.2d 544, 552 n.3 (5th Cir. 1993).  

The government is the appropriate party to assess whether the defendant has

performed the conditions of his plea agreement, even if the plea agreement is

silent as to the appropriate party.  

United States

 v. Snow, 234

F.3d 187, 190 (4th Cir. 2000).  In the event that the government elects not to

file the motion, the sentencing court may review the government's refusal to make

a motion for downward departure "if  that refusal was based on an

unconstitutional motive such as bias against the defendant's race or religion." 

Wade v. 
United States
, 504 

U.S.

 181, 185-86 (1992);  

United States

 v. Santoyo, 146 F.3d 519, 523 (7th Cir. 1998);

United States

 v. Carter, 122 F.3d 469, 476 (7th Cir. 1997). The

defendant bears the burden of making a substantial threshold showing of  an

unconstitutional motive before he is entitled to discovery or an evidentiary

hearing on the issue.  Wade, 504 

U.S.

 at 186; United States

v. Kelly, 14 F.3d 1169, 1177 (7th Cir. 1994).  Accord United 

States v. Isaac 141 F.3d at 484;  

United States

 v. Leonard,

50 F.3d 1152, 1157-58 (2d Cir. 1995). The court may also review whether the

government's refusal was in bad faith, and, accordingly, in violation of the plea

agreement.    Isaac, 141 F.3d at 483-84; 

United States

 v.

Rexach, 896 F.2d 710, 713 (2d Cir. 1990).  "The sole requirement is that

the government's position be based on an honest evaluation of the assistance

provided and not on considerations extraneous to that assistance."  Isaac

at 484.  There is a split of opinion as to whether the government

forfeits its discretion by failing to reserve it in a plea agreement.  See

Snow, 234 F.3d at 190; but see  

United States

 v. Courtois, 

131 F.3d 937, 938-39 (10th Cir. 1997) (contractual silence waives the 

government's discretion); United States v. Price, 95 F.3d 364, 368 

(5th Cir. 1996) (same).

      If  the plea agreement contains an unambiguous and unconditional promise

to file a downward departure motion and the promise was consideration for the

guilty plea, the defendant is entitled to either specific performance or

withdrawal of the guilty plea unless the government proves that the  defendant

breached the plea agreement. See, e.g., Benjamin, 138 F.3d at 1073- 

74; 

United States

 v. Mitchell, 136 F.3d 1192, 1194 (8th Cir. 1998). 

Where the Government alleges the defendant breached the plea agreement, it 

must prove the breach by a preponderance of  the evidence before the 

Government can be relieved of its obligations under the plea agreement.  

Benjamin, 138 F.3d at 1073; United States v. Crowell, 997 F.2d 

146, 148 (6th Cir. 1993); 

United States

 v. Tilley, 964 F.2d 66, 71 

(1st Cir. 1992).   

      Appellate review of a district court decision whether to depart downward

pursuant to a Section 5K1.1 motion is available only in limited situations. 

Review of a sentence is governed by 18 U.S.C. § 2742 and provides for four

situations:  the sentence  (1)  was imposed in violation of law; (2) was imposed

as a result of an incorrect application of the sentencing guidelines; (3) was not

within the applicable guideline range; and (4) was imposed for an offense for

which there is no sentencing guideline and is plainly unreasonable.  18 U.S.C.

§ 2742.  An appellate court "may not review the merits of a court's decision

not to downwardly depart, or probe the sufficiency of its consideration, so long

as the sentence imposed is not a violation of law or a misapplication of the

Guidelines."  

United States

 v. Campo, 140 F.3d 415, 418 (2d Cir.

1998).

      A sentencing court's refusal to consider a § 5K1.1 motion is

appealable.  Campo, 140 F.3d  at 418.  In Campo, the

district court refused to make a downward departure despite the filing of a

Section 5K1.1 motion because the government did not recommend a specific below-

guidelines range.  The court noted that, although the district court had

discretion whether to grant the motion, the district court's refusal to exercise

that discretion resulted in a sentence imposed "in violation of law." 

Campo, 140 F.3d at 418.   Likewise, it is legal error, and thus

appealable, when a court fails to recognize its authority to depart from the

guidelines; In re Sealed Case ("Sentencing Guidelines"), 149 F.3d

at 1199 (Although district court decisions not to depart are generally not

subject to appellate review,  appellate court has jurisdiction because appellant

argues district court misconstrued legal authority under the Guidelines);

United States

 v. Adeniyi, 912 F.2d 615, 619 (2d Cir. 1990). 

Accord 

United States

 v. Poff, 926 F.2d 588, 590-91 (7th Cir.

1991)(en banc) (court's failure to appreciate its authority to depart is

reviewable, while court's decision not  to depart is unreviewable).  

       Although a district court's decision not to depart is generally

unreviewable,  an appellate court will review a trial court's discretionary

refusal to grant a downward departure when the defendant argues that the district

court misconstrued the legal standards governing its authority to depart. 

Carter, 122 F.3d at 471, n.1.  In such a case, the court reviews for

abuse of discretion.  

Id.

 at 472.  A district court abuses its

discretion when it makes an error of law.  Koon v. 

United States

,

518 

U.S.

 81, 100 (1996).  When the issue is whether a given factor could ever be

a permissible basis for departure, the question is one of law subject to de novo

review.  In re Sealed Case ("Sentencing Guidelines"), 149 F.3d at

1198.

      5.10  WAIVER OF APPEAL OF SENTENCE IN PLEA AGREEMENTS

      In certain situations, a defendant may be entitled to appeal the sentence

imposed on him by the court. Title 18, 

United States

 Code, Section 3742 (a)

enumerates the grounds on which a defendant may file a notice of appeal in the

district court for review of an otherwise final sentence.   That section

provides:

      (a)  Appeal by a defendant.--A defendant may file a notice of appeal 

      in the district court for review of an otherwise final sentence if the 

      sentence--

            (1) was imposed in violation of  law;

            (2)  was imposed as a result of an incorrect application of the 

      sentencing guidelines; or

            (3)  is greater than the sentence specified in the applicable 

      guideline range to the extent that the sentence includes a greater 

      fine or term of imprisonment, probation, or supervised release than 

      the maximum established in the guideline range, or includes a more 

      limiting condition of probation or supervised release under section 

      3563(b)(6) or (b)(11) than the maximum established in the guideline 

      range; or

            (4) was imposed for an offense for which there is no sentencing 

      guideline and is plainly unreasonable.

18 U.S.C. § 3742.   A criminal defendant can waive the statutory right to

appeal a sentence pursuant to Section 3742.  

United States

 v.

Yemitan, 70 F.3d  746, 748 (2d Cir. 1995); 

United States

 v.

Marin,  961 F.2d 493, 496 (4th Cir. 1992), 

United States

 v.

Navarro-Botello, 912 F.2d 318, 320 (9th Cir. 1990).

      Generally, a plea agreement will contain language which constitutes a

defendant's waiver of appeal rights, particularly the right to appeal the

sentence which the court imposes.  A waiver-of appeal-rights provision in a valid

plea agreement is enforceable "as long as the waiver is the result of a knowing

and intelligent right to forgo the right to appeal."  

United States

 v.

Attar, 38 F.3d 727, 731 (4th Cir. 1994).  Accord 

United States

 v.

Teeter, 2001 WL 812097, *8 (1st Cir. 
July 23, 2001
) (plea-agreement

waivers of the right to appeal from imposed sentences are presumptively valid (if

knowing and voluntary)); United States v. Williams, 184 F.3d 666,

668 (7th Cir. 1999) ("if  the agreement is voluntary,  and taken in compliance

with Rule 11, then the waiver of appeal must be honored"); 

United States

v. Hernandez, 134 F.3d 1435, 1437 (10th Cir. 1998); 

United States

v. Zink, 107 F.3d 716, 717 (9th Cir. 1997) ("An express waiver of the

right to appeal in a negotiated plea of guilty is valid if knowingly and

voluntarily made."); United States v. Rutan, 956 F.2d 827, 829 (8th

Cir.1992).  (Note that an illegal sentence can still be challenged under

28 U.S.C. § 2255 for habeas corpus relief.  

United States

 v.

Rutan, 956 F.2d at 829).

      Plea agreements "are governed by ordinary contact principles." 

United States

 v. Barnes, 83 F.3d 934, 938 (7th Cir. 1996).  As such

"waivers of appeal must stand or fall with the agreements of which they are a

part."  

United States

 v. Wenger, 58 F.3d 280, 289 (7th Cir. 1995). 

 The language of  the waiver will determine the scope of the rights waived by the

defendant, and an ambiguity will be strictly construed against the government. 

United States

 v. Ready, 82 F.2d 551, 560 (2d Cir. 1996).  

      For example, the Second Circuit found that the language in a plea agreement 

regarding the defendant's waiver of his right to appeal his sentence was

ambiguous regarding whether he also waived his right to appeal a restitution

order.  Ready, 82 F.2d at 560.  The Ready court

strictly construed the waiver language to prohibit only an appeal of  the

Sentencing Guideline sentence.  Consequently, the court considered the merits of

the defendant's claim regarding the restitution order.  Likewise, the Ninth

Circuit found that language in a plea agreement waiving the defendant's right to

appeal his sentence did not preclude the defendant from appealing a restitution

order.  

United States

 v. Catherine, 55 F.3d 1462 (9th Cir. 1995). 

      Even in cases in which there is a valid waiver of appellate rights, the

defendant can appeal his sentence in the event that the district court considers 

an impermissible factor, such as race, or the sentence  exceeds the statutory

maximum.  

United States

 v. Kratz, 179 F.3d 1039, 1041 (7th Cir.

1999).  Also, "a defendant who waives his right to appeal does not subject

himself to being sentenced entirely at the whim of the district court. 

Kratz, 179 F.3d at 1043; Marin, 961 F.2d at 496.  See

also Yemitan, 70 F.3d at 748.     

      In cases where there has been no waiver, a district court's decision not

to depart from the applicable guideline range is generally unappealable.  

United States

 v. Lainez-Leiva, 129 F.3d 89, 93 (2d Cir. 1997). 

 The only exceptions occur where "a violation of law occurred, the

Guidelines were misapplied, or the refusal to depart was based on the sentencing

court's mistaken conclusion that it lacked the authority to do so."  United

States v. Garcia, 166 F.3d 519, 521 (2d Cir. 1999).

      Note that the 1999 Amendments to the Federal Rules of Criminal

Procedure (effective 
December 1, 1999
), changed Fed. R. Crim. P. 11(c) to require

the trial court to determine if the defendant understands any provision in the

plea agreement waiving the right to appeal or to collaterally attack the

sentence.  

      Also note that the issue of when the government may appeal a

sentence is addressed in Section 5.15[3] of this manual. 

                    5.11 TAX DIVISION POLICY

      It has long been a priority of the Tax Division to pursue vigorous

prosecution of a wide range of tax crimes to deter taxpayer fraud and to foster

voluntary compliance.  Consistent with this long-standing priority, the Tax

Division has issued a number of statements concerning policy and procedures

regarding pleas and sentencing, including the Sentencing Guidelines. These

statements of policy are incorporated into the U.S. Attorneys Manual. 

                      5.12  PLEA AGREEMENTS

5.12[1]  Plea Agreements and Major Count Policy for Offenses 

        Committed Before 
November 1, 1987

      Although most of the cases currently being prosecuted involve post-

guideline offenses, there continue to be a few cases which, because of tolling

provisions of the statute of limitations,  involve pre-guideline offenses.  In

cases involving offenses committed prior to 
November 1, 1987
, the overwhelming

percentage of all criminal tax prosecutions were disposed of by a plea of guilty. 

The transmittal letter forwarding the case from the Tax Division to the United

States Attorney specifies the count(s) deemed to be the major count(s).  In these

cases, only a few of which remain, the U.S. Attorney's office, without prior

approval of the Tax Division, is authorized to accept a plea of guilty with

respect to the major count(s).  U.S.A.M. 6-4.310 (Major Count Policy).

      In these cases, the designation by the Tax Division of a count as a major

count is premised on the following considerations:

            a.    Felony counts take priority over misdemeanor counts;

            b.    Tax evasion counts (26 U.S.C. § 7201)  take priority over

                  other substantive tax counts;

            c.    Where a conspiracy (e.g. 18 U.S.C. § 371) and

                  substantive tax counts are authorized, the circumstances of

                  the case will determine whether the conspiracy or a

                  substantive tax count is designated as the major count;

            d.    As between counts under the same statute, the count involving

                  the greatest financial detriment to the 

United States

                  (i.e., the greatest additional tax due and owing) will

                  be considered the major count; and

            e.    When there is little difference in financial detriment between

                  counts under the same statute, the determining factor will be

                  the relevant flagrancy of the offense.

U.S.A.M. 6-4.310.

5.12[2]     Plea Agreements and Major Count Policy for Offenses 

            Committed After 
November 1, 1987

      The advent of the Sentencing Guidelines in 1987 and the Department's

adoption of policies pursuant thereto necessitated certain minor conforming

changes to the Tax Division's Major Count Policy (U.S.A.M. 6-4.310).

   A.  Tax Offenses Which Are All Part of the Same Course of Conduct or Common

Scheme or Plan 

       Normally, no change in the application of the Major Count Policy will be

required by virtue of the Guidelines and the Department's plea policy for

Guideline cases.  In most cases, all of the tax charges in an indictment are

related.  Consequently, even if the defendant pleads to a single count and the

remaining counts are dismissed, the tax loss from all of the years should be

taken into account in determining the tax loss for the offense to which a

defendant pleads.  Thus, in the usual case, the Tax Division will continue to

designate a single count as the major count according to the principles

previously utilized in designating the major count.  See U.S.A.M. 6-4.310.

   B.  Tax Offenses Which Are Not All Part of the Same Course of Conduct or

Common Scheme or Plan  

      Where all of the tax charges are not part of the same course of conduct or

common scheme or plan, however, the Department's plea policy for Guideline cases

may require the Tax Division either to designate as major counts one count from

each group of unrelated counts or to designate one count from one of the groups

of unrelated counts as the major count and have the prosecutor obtain a

stipulation from the defendant establishing the commission of the offenses in the

other group (See  USSG Sec. 1B1.2(c)).  This will be the case where the

offense level of the group with the highest offense level must be increased under

USSG §3D1.4.  

   C.  Designating More Than One Count as a Major Count. 

      Designating more than a single year as a major count may also be required

where the computed guideline sentencing range exceeds the maximum sentence which

can be imposed under a single count. 

   D.  Tax Charges and Non-Tax Charges.  

      In cases in which there are both tax counts and non-tax charges, the

selection of which tax count to designate as the major count may not have any

effect on the applicable guideline range because the offense level of the group

or groups of non-tax offenses is 9 or more levels higher than the offense level

of the group containing the tax charges (See USSG §§ 3D1.2, 3D1.4). 

In such cases, the Tax Division will normally continue to designate the major

count by application of the usual rules for selecting the major count.  However,

the Tax Division may designate a less serious tax offense in the group as the

major count if it is supplied with sufficient information establishing that such

a selection will not affect the applicable guideline range and with adequate

justification for a deviation from the Major Count Policy.

5.12[3]  Nolo Contendere Pleas.

      Department of Justice policy requires all government attorneys to oppose

the acceptance of nolo contendere pleas.  When pleading

"nolo" the defendant may create the impression that the government has

only a technically adequate case which the defendant elects not to contest.  A

guilty plea is preferred because it strengthens the government position when the

defendant contests a civil fraud penalty in an ancillary proceeding, as a

nolo plea does not entitle the government to use the doctrine of

collateral estoppel.  Federal prosecutors may not consent to a plea of

nolo contendere except in the most unusual circumstances and only

after a recommendation for doing so has been approved by the Assistant Attorney

General, Tax Division.  See U.S.A.M. 9-16.010 and 9-27.500.   The

government attorney also will oppose dismissal of any charges to which the

defendant does not plead nolo contendere.  See U.S.A.M. 9-27.530.

5.12[4]  Alford Pleas

      In North Carolina v. Alford, 400 U.S. 25 (1970), the Supreme

Court upheld the validity of accepting a plea of guilty over the defendant's

claims of innocence.  United States Attorneys are instructed not to consent to

a so-called "Alford plea" except in the most unusual circumstances and then only

after a recommendation for so doing has been approved by the Assistant Attorney

General, Tax Division, or a higher departmental official.   See U.S.A.M.

9-16.015 and 9-27.440.  Apart from refusing to enter into Alford

plea agreements, however, the degree to which government attorneys can express

their opposition to such pleas is limited.  Prosecutors should discourage

Alford pleas by refusing to agree to terminate prosecutions where such a

plea is proffered to fewer than all of the charges pending.  If an Alford

plea to fewer than all charges is tendered and accepted over the government's

objection, the government attorney will proceed to trial on all of the remaining

counts not barred on double jeopardy grounds unless the Assistant Attorney

General, Tax Division, approves dismissal of the charges.

5.12[5] Statements by Government Counsel at Sentencing; Agreeing to

Probation 

      A.    Rule 32(a), Federal Rules of Criminal Procedure,  permits government

counsel to make a statement to the court at the time of sentencing.  Counsel for

the government should make a full statement of facts, including if applicable,

the amount of tax evaded in all of the years for which a defendant was indicted;

the means utilized to perpetrate and conceal any fraud; the past criminal record

of the taxpayer; and all other information that the court may consider important

in imposing an appropriate sentence.

      B.    When recommendations are made to the court on sentencing, the Tax

Division prefers that government counsel request the imposition of a jail

sentence in addition to the fine, together with costs of prosecution.  In the

usual situation, the payment of the civil tax liability, plus a fine, costs, and

probation, does not constitute a satisfactory disposition of a criminal tax case.

      C.    Notwithstanding the foregoing, government counsel may agree to a

sentence of probation (preferably with alternative conditions of confinement)

when (I) the defendant pleads guilty, (ii) the sentencing guidelines range is 0-6

months (and within Criminal History Category I), and (iii) the United States

Attorney personally, by signature, must approve a written memorandum to the case

file setting forth the unusual and exceptional circumstances, warranting such

agreement (for example, the need to secure cooperation against a more culpable

party, or serious post-indictment degradation in the evidence available for trial

such as the death of a witness or the loss or suppression of evidence).  A copy

of the United States Attorney's written determination must be supplied to the Tax

Division at the same time the United States Attorney's office is required to

notify the Division that the case has been closed.

5.12[6]  Compromise of Criminal Liability/Civil Settlement.

      While statutory authority under 26 U.S.C. Sec. 7122(a) does exist for

the Attorney General, after referral of a case to the Department, to enter

into agreements to compromise criminal tax cases without prosecution, as a

matter of longstanding policy, such authority is very rarely exercised.  If it

is concluded that there is a reasonable probability of conviction and that

prosecution would advance the administration of the internal revenue laws, any

decision to forego prosecution on the ground that the taxpayer is willing to

pay a fixed sum to the United States, would be susceptible to the attack that

the taxpayer was given preferential treatment because of his ability to pay

whatever amount of money the government demanded. 

      Consequently, proposed criminal tax cases are reviewed without any

consideration being given to the matter of civil liability or the collection

of taxes, penalties, and interests.  In short, proposed criminal tax cases are

examined with the view to determining whether a violation has occurred to the

exclusion of any consideration of civil liability. 

      Absent extraordinary circumstances, such as permanent loss of tax

revenues unless immediate protective action is taken, settlement of the civil

liability is postponed until after sentence has been imposed in the criminal

case, except when the court chooses to defer sentencing pending the outcome of

such settlement.  In this event, the 
IRS
 should be notified so that it can

begin civil negotiations with the defendant. 

      However, the Tax Division strongly encourages, but does not require,

that a plea agreement include certain civil admissions by the defendant,

including: (1) admission of either receipt of enumerated amounts of unreported

income or claimed enumerated amounts of illegal deductions or improper credits

for years set forth in the plea agreement; (2) a stipulation that defendant is

liable for the fraud penalty imposed by the Internal Revenue Code (26 U.S.C.

Sec. 6663) on the understatements of liability for the years involved; and (3)

an agreement by the defendant to file, prior to sentencing, complete and

correct initial or amended personal returns for the years subject to the above

admissions and, if requested, to provide the 
IRS
 with information regarding

the years covered by the returns and to pay, at sentencing, all additional

taxes, penalties and interest which are due and owing and (4) an agreement by

the defendant not to file thereafter any claims for refund of taxes,

penalties, or interest for amounts attributable to the returns filed incident

to the plea.  See Memorandum, United States Department of Justice, Tax

Division, "Civil Settlements in Plea Agreement," 
June 3, 1993
, in the Tax

Resource Manual.

        5.13 TRANSFER FROM DISTRICT FOR PLEA 
AND
 SENTENCE       

      Rule 20 of the Federal Rules of Criminal Procedure provides a procedure

whereby a defendant who is arrested, held, or present in a district other than

the district in which a case is pending against him can waive trial and enter

a guilty plea or nolo plea in the district in which he is arrested, held, or

present.  Any proposed transfer must be approved by the United States Attorney

for each district.

      Some defendants have misused this provision as part of a plan to forum

shop and have their cases transferred to what they believe to be a more

lenient court.  For this reason, it is requested that prior to consenting to

any transfer under Rule 20 in a criminal tax case, United States Attorneys

secure authorization from the Tax Division, which may have information as to

the reason for the requested transfer that is not available to the United

States Attorneys involved.

             5.14  INTERSTATE AGREEMENT ON DETAINERS

      As a corollary to  Rule 20, attorneys should also be aware of The

Interstate Agreement on Detainers, 18 U.S.C. App.2.  This agreement addresses

the issue of prisoners who are  incarcerated on other charges in 

jurisdictions other than the jurisdiction in which charges are pending. Two

areas are worthy of note.  

      First, Article 
III
, Section (c) requires that the warden, commissioner

of corrections, or other official having custody of the defendant  "promptly

inform him of the source and contents of any detainer lodged against him and

shall also inform him of his right to make a request for final disposition of

the indictment, information, or complained on which the detainer is based." 

Therefore, it is critical that the prosecutor insure that the prisoner

receives a copy of the indictment and provide a form notifying the prisoner of

his right to make a request for final disposition. 

      In the event that the government  has the prisoner transferred pursuant

to a writ of habeas corpus, the prisoner must either be tried or must plead

guilty before he is returned to the sending jurisdiction or the court is

required to dismiss the outstanding charges.   Section (d) provides that 

      If trial is not had on any indictment, information, or complaint 

      contemplated hereby prior to the return of the prisoner to the 

      original place of imprisonment, such indictment, information, or 

      complaint shall not be of any further force or effect, and the court 

      shall enter an order dismissing the same with prejudice.

18 U.S.C. App.2, Article 
III
(d). 

      Section 9 provides two special provisions which apply when the United

States is a receiving State.  That section provides:

      (1)  any order of a court dismissing any indictment, information, or 

      complaint may be with or without prejudice.  In determining whether to 

      dismiss the case with or without prejudice, the court shall consider, 

      among others, each of the following factors:  The seriousness of the 

      offense; the facts and circumstances of the case which led to the 

      dismissal; and the impact of a reprosecution on the administration of 

      the agreement on detainers and on the administrations of justice; and 

      (2) it shall not be a violation of the agreement on detainers if prior 

      to trial the prisoner is returned to the custody of the sending State 

      pursuant to an order of the appropriate court issued after reasonable 

      notice to the prisoner and the United States and an opportunity for a 

      hearing.

18 U.S.C. App. 2, Art. 
VII
 §9. 

                    5.15  SENTENCING POLICIES

5.15[1]  Departures from the Guidelines

      As noted above, the sentencing court is required to impose a sentence

within the range specified by the guidelines unless it finds an aggravating or

mitigating circumstance of a kind, or to a degree, not adequately taken into

account by the Sentencing Commission in formulating the guidelines.  Tax

Division attorneys may recommend, without further approval, a departure,

either upward or downward, based on any of the factors listed in section 5K2

of the guidelines.  However, within the Tax Division, approval of the

appropriate Section Chief is required for an attorney to seek either: (a) a

downward departure under section 5K1.1 for substantial assistance to

authorities; or (2) an upward or downward departure for any factor other than

one of those set out in section 5K2.  Prior to making such a recommendation,

the Tax Division attorney must consult with the local U.S. Attorney's office

to insure that the proposed departure is consistent with the policy of that

office.  

      Assistant United States Attorneys who are handling tax cases should

abide, of course, by the procedures established in their offices for complying

with the requirements of the 
February 7, 1993
, "bluesheet," affecting U.S.A.M.

9-27.451.  Normally, the government attorney in a tax case should not

recommend that there be no period of incarceration.  But see U.S.A.M.

6-4.340.

5.15[2]  Costs of Prosecution

      The principal substantive criminal tax offenses (i.e., 26 U.S.C.

§§ 7201, 7203, 7206(1) and (2)) provide for the mandatory imposition

of costs of prosecution upon conviction.  Courts increasingly recognize that

imposition of costs in criminal tax cases is mandatory and constitutional. 

See, e.g., United States v. Jungels, 910 F.2d

1501, 1504 (7th Cir. 1990);  United States v. Palmer, 809 F.2d

1504, 1506-07 (11th Cir. 1987); United States v. Saussy,

802 F.2d 849, 855  (6th Cir. 1986); United States v. Fowler,

794 F.2d 1446, 1449  (9th Cir. 1986); United States v. Wyman,

724 F.2d 684, 688 (8th Cir. 1984);  United States v. Chavez,

627 F.2d 953, 954-57 (9th Cir. 1980).

      The policy statement on costs of prosecution in §5E1.5 states that

"[c]osts of prosecution shall be imposed on a defendant as required by

statute."  The commentary to §5E1.5 states that "[v]arious statutes

require the court to impose the costs of prosecution" and identifies

26 U.S.C. §§ 7201, 7202, 7203, 7206, 7210, 7213, 7215,  7216, and

7232 as among the statutes requiring the imposition of costs.  USSG

§5E1.5, comment. (backg'd) (emphasis added). 

      For offenses individuals commit on or after 
April 24, 1996
, §5E1.3

mandates the following special statutory assessments vis-a-vis 18

U.S.C. § 3013:

            (A)   $100, if convicted of a felony;

            (B)   $25, if convicted of a Class A misdemeanor.

Section 8E1.3 authorizes the court to impose the costs of prosecution and

statutory assessments upon organizations which commit felonies and Class A

misdemeanors.  The Tax Division strongly recommends that Government attorneys

seek costs of prosecution in criminal tax cases.  U.S.A.M. 6-4.350.

5.15[3] Government Appeal of Sentences

      Title 18 U.S.C. § 3742 permits sentences imposed under the

Guidelines to be appealed by both the defendant and the government under

certain circumstances.  The Government may appeal a sentence in the following

four situations:

            a.    When the sentence is imposed in violation of law;[FN22]

            b.    When the sentence is imposed as a result of an incorrect

                  application of the guidelines;[FN23]

            c.    When the sentence is less than the sentence specified in the

                  applicable guidelines range; or

            d.    When the sentence is imposed for an offense for which there

                  is no Sentencing Guideline and the sentence is plainly

                  unreasonable.[FN24]

18 U.S.C. §§ 3742(b)(1)-(4); United States v.

Giddings, 37 F.3d 1091, 1093 (5th Cir. 1994).  Government appeal of a

sentence is not authorized for a sentence within the correct sentencing

Guideline or for a sentence above the Guidelines even when there is an honest

belief that the sentence is too low.

      The Government may file a notice of appeal in district court for review

of an otherwise final sentence.  United States v. Hernandez, 37

F.3d 998, 1000 (n.3) (11th Cir. 1994).  However, any further actions require

the approval of the Solicitor General.  U.S.A.M.  2-2.121

      Recommendations to the Solicitor General for government appeals of

sentences on tax counts must be processed through the Tax Division, which

should be notified immediately of any adverse sentencing decision.  To assure

consistent implementation of the guidelines, a government attorney in a tax

case should notify the Tax Division of any significant sentencing issue

raised on appeal by a defendant that could pose a problem for the Department.  

The designated person to contact is the chief of the Criminal Appeals and Tax

Enforcement Policy Section (CATEPS).  The current telephone number is (202)

514-3011
.  

      A notice of appeal must be filed within 30 days of the imposition of the

sentence.  Therefore, the Government attorney who wishes to appeal an adverse

sentencing decision should forward a recommendation to the Tax Division, 

along with accompanying documentation, promptly, preferably with two days of

imposition of sentence.  U.S.A.M. 2-2.111

  5.16  RESOLUTION OF CIVIL LIABILITY DURING THE CRIMINAL CASE

5.16[1] As Part of a Plea Agreement 

      Statutory authority exists for the Attorney General or his delegate to

enter into agreements to compromise civil tax liability in cases referred to

the Department of Justice.  26 U.S.C. § 7122(a).  As a matter of

longstanding policy, however, this authority is rarely exercised.  U.S.A.M.

4.360.  The reason for this policy is to avoid the appearance that the

criminal process is being used to aid in the collection of civil tax

liabilities.  

      It is the Department's view that, in a criminal tax case, collection of

the related civil liabilities, including fraud penalties, is a matter entirely

separate from the criminal aspects of the case.  The U.S. Attorney's Manual

directs that "settlement of the civil liability [be] postponed until after the

sentence has been imposed in the criminal case, except where the court chooses

to defer sentence pending the outcome of such settlement."  In this event, the

IRS
 should be notified so that it can begin civil negotiations with the

defendant.  U.S.A.M. 6-4.360.  

      The Tax Division may accept a plea agreement which includes certain

civil admissions by the defendant: [FN25]

            1.    An admission by the defendant that he received enumerated

                  amounts of unreported income or claimed enumerated amounts

                  of illegal deductions or improper credits for years set

                  forth in the plea agreement. 

            2.    A stipulation by the defendant that he is liable for the

                  fraud penalty imposed by the Code (formerly section 6653 and

                  now section 6663) on the understatements of liability for

                  the years involved. [FN26]

            3.    An agreement by the defendant that he or she will file,

                  prior to the time of sentencing, initial or amended personal

                  returns for the years subject to the above admissions,

                  correctly reporting all previously unreported income and

                  correcting all improper deductions and credits previously

                  claimed, and, if requested, will provide the Internal

                  Revenue Service information regarding the years covered by

                  the returns, and will pay at sentencing all additional

                  taxes, penalties and interest which are due and owing.  Such

                  an agreement should also include a provision that the

                  defendant agrees promptly to pay any additional amounts

                  determined to be owing which result from computational

                  errors.  Finally, the agreement should include a provision

                  that nothing in the agreement should be construed to

                  foreclose the Internal Revenue Service from examining and

                  making adjustments to the returns involved after they are

                  filed.

            4.    An agreement by the defendant that he will not thereafter

                  file any claims for refund of taxes, penalties, or interest

                  for amounts attributable to the returns filed incident to

                  the plea.

U.S.A.M. 6-4.360

5.16[2] Payment of Taxes as Acceptance of Responsibility

      The Tax Division recognizes that the Federal Sentencing Guidelines

encourage a defendant to initiate payment of his taxes during the criminal

case.  The guidelines provide for a two-level reduction of the base offense

level if the defendant shows "acceptance of personal responsibility" for his

conduct.  USSG §3E1.1.

      The Tax Division considers the defendant's payment of tax liability to

be one factor in determining whether to recommend a reduction in offense level

based upon the defendant's acceptance of responsibility.  Other factors may

include: (1) voluntary termination or withdrawal from criminal conduct or

associations; (2) voluntary and truthful admissions to authorities;

(3) voluntary surrender to authorities; (4) voluntary assistance to

authorities in recovering the fruits of the offense; and (5) the timeliness of

defendant's conduct in manifesting acceptance of responsibility.  See

USSG §3E1.1, comment. (n.1).

      The defendant should initiate the process of resolving his tax liability

during the pendency of the criminal case.  The Tax Division will consider

favorably the filing of a truthful and complete amended tax return accompanied

by the payment of the tax due in determining whether to recommend the

"acceptance of responsibility" sentence reduction.  J. Bruton, Federal Tax

Enforcement, Tax Division Policies and Priorities, American Bar Association

National Institute, White Collar Crime, (1993).

FN 1. To determine which version of a particular guideline was effective on 

a specific date, refer to the "Historical Note" at the end of the applicable 

guideline.  It will state the effective date of that guideline and give 

reference to earlier versions which are reprinted in Appendix C of the 

Sentencing Guidelines.

FN 2. See Section 5.11[2], infra.

FN 3. In order to "provide increased deterrence for tax offenses," USSG App. 

C, Amend. 491, p. 338, an amendment to §2T4.1, effective November 1, 

1993, essentially increased the tax table by two levels throughout.  This 

amendment has had the effect of (1) increasing the average period of 

incarceration by six months, and (2) reducing the likelihood that a tax 

crime defendant will receive an alternative type of incarceration.  For 

example, under the tax table in effect prior to 
November 1, 1993
, a tax loss 

of more than $10,000 provided an offense level of 9, with a sentencing range 

of 4-10 months.  Under the current tax table, however, a tax loss of over 

$8,000 but less than $13,500 provides an offense level of 10, with a 

sentencing range of 6-12 months.

      The amended tax table applies to offenses committed on or after November

1, 1993, and to offenses beginning before and continuing after that date. 

Because the penalties under the current tax table are harsher than in prior

years, the ex post facto clause likely prevents use of

the current tax table for sentencing for conduct which occurred before

November 1, 1993
.

FN 4. N.B.  The Sentencing Commission, in response to the concerns 

expressed in the Hunerlach, Hopper, and Pollen cases, 

has enacted an amendment providing for the inclusion of interest and 

penalties in willful evasion of payment and willful failure to pay cases 

pursuant to 26 U.S.C. 7201 and 7203, respectively.  Absent prior contrary 

congressional action, this new amendment will become effective on November 

1, 2001.

FN 5. N.B.  In an amendment scheduled to take effect on 

November 1, 2001
, the Sentencing Comission has now resolved the circuit 

split described in the text in favor of the Cseplo approach. 

FN 6. This application note most likely represents a clarification of 

existing law, rather than a substantive change.  See United States 

v. Harvey, 996 F.2d 919, 920 (7th Cir. 1993).

FN 7. The pre-November 1, 1993 version of §2T1.4, however, directs the 

sentencing court to employ the tax loss definition provided in now- deleted 

§2T1.3.

FN 8. As indicated to the introductory material to this chapter, the theft, 

property destruction and fraud guidelines are being consolidated into a new 

guideline, USSG § 2B1.1, as of 
November 1, 2001
, as part of the 

Sentencing Commission's Economic Crime Package.  

FN 9. The pre-November 1, 1993 version of §2T1.9 directs the sentencing 

court to use the base offense level dictated by either §2T1.1 or 

now-deleted §2T1.3, whichever is applicable to the underlying conduct, 

if that offense level is greater than 10.

FN 10. This commentary was amended on 
November 1, 1993
 in order to include a 

reference to offenses under foreign law.  USSG App. C, Amend. 491.  

Presumably, this amendment was responding to the opinion of the Ninth 

Circuit in United States v. Ford, 989 F.2d 347, 350- 51 (9th Cir. 

1993), which held that a sentencing court could not increase the base 

offense level of a defendant for a failure to report income derived from 

criminal activity in Canada.

FN 11. The opinion contains an apparent error, stating that the income 

figure "was derived by subtracting sales price from cost of goods sold," 141 

F.3d at 1343, thereby reversing the calculation.

FN 12. N.B.  By amendment effective 
November 1, 2001
, this 

enhancement once again will be called "sophisticated means" and will carry a 

floor offense level of 12.  These changes are designed to conform the 

sophistication offense characteristic in the tax guidelines to the 

"sophisticated means" enhancement in the fraud guidelines. 

FN 13. In United States v. Kraig, 99 F.3d 1361, 1371 (6th Cir. 1996), 

the Sixth Circuit held that, if several persons  were involved in the scheme 

at issue, this enhancement requires a court to focus only upon the 

individual actions of the defendant.  In contrast, the Second Circuit ruled 

in United States v. Lewis, 93 F.3d 1075, 1083-84 (2d Cir. 1996), that 

this enhancement focuses upon the complexity of the overall scheme, rather 

than the particular actions of an individual defendant. See also United 

States v. Richman, 93 F.3d 1085, 1088 (2d Cir. 1996)(enhancement is an 

offense characteristic, not specific offender characteristic).  The November 

1, 1998 amendment to this enhancement indicates that the Sentencing 

Commission rejects the holding in Kraig.

FN 14. United States v. Gunby, 112 F.3d 1493 (11th Cir. 1997);  

United States v. Horton, 98 F.3d 313 (1996); United States v. 

Heckman, 30 F.3d 738 (6th Cir. 1994) (upward departure justified on this 

basis where defendant filed at least 79 false 
IRS
 Form 1099's); United 

States v. Flinn, 18 F.3d 826 (10th Cir. 1994) (one-point enhancement 

under this provision does not preclude another one-point increase for 

financial loss to Government); United States v. Kikumura, 918 F.2d 

1084 (3d Cir. 1990).

FN 15. As amended effective 
November 1, 1998
, "'Significantly reduced mental 

capacity' means the defendant, although convicted, has a significantly 

impaired ability to (A) understand the wrongfulness of the behavior 

comprising the offense or to exercise the power of reason; or (B) control 

behavior that the defendant knows is wrongful."  USSG §5K2.13, 

comment., n.1.

FN 16. United States v. Aerts, 121 F.3d 277, 279 (7th Cir. 1997); 

United States v. Besler, 86 F.3d 745 (7th Cir. 1997).

FN 17. In making this determination, a court may include relevant conduct.  

A sentencing court may upwardly depart on the basis of conduct in dismissed 

counts.  United States v. Baird, 109 F.3d 856, 862 (3d Cir. 1997).  

The  sentencing court may also enhance a tax evader's sentence because of 

uncharged criminal conduct against a company, when the evader occupied a 

position of trust, even though the company was not his victim.  United 

States v. Cianci, 154 F.3d 106, 112 (3d Cir. 1998).  

FN 18. But see United States v. Lipman, 133 F.3d 726, 730 (9th 

Cir. 1998) (holding "cultural assimilation" a basis for downward departure).

FN 19. Conversely, however, a defendant's refusal to assist authorities may 

not be considered an aggravating sentencing factor.  USSG §5K1.2.

FN 20. See 18 U.S.C. § 3553(c).

FN 21. In making any evaluation on whether to make a downward departure, the 

court considers "the significance and usefulness of the defendant's 

assistance, taking into consideration the government's evaluation of the 

assistance rendered."  USSG § 5K1.1.  Thus, when the defendant's 

assistance in an investigation became almost useless when the target of the 

investigation died, the court was within its discretion to consider that 

fact in determining the extent of any departure.  United States v. 

Spiropoulos, 976 F.2d 155, 162 (3d Cir. 1992).  

FN 22. 

United States

 v. Hardy, 101 F.3d 1201 (7th Cir. 1996); 

United States

 v. Underwood, 61 F.3d 306, 308 (5th Cir. 1995); 

United States
 v. Nnanna, 7 F.3d 420 (5th Cir. 1993); 

United States

 

v. Piche, 981 F.2d 706 (4th Cir. 1992); 

United States

 v. Lopez, 

974 F.2d 50 (7th Cir. 1992).

FN 23. Williams v. 
United States
, 503 

U.S.

 1193 (1992); United 

States v. Burnett, 66 F.3d 137 (7th Cir. 1995); 

United States

 v. 

Soltero-Lopez, 11 F.3d 18 (1st Cir. 1993).

FN 24. 

United States

 v. Giddings, 37 F.3d at 1093. 40.   FN 25. 

Although it is not mandatory, the Tax Division strongly urges that any plea 

agreement in a tax case include these admissions and agreements.

FN 26. Normally, this stipulation should be required in any case in which 

the charges are for attempted evasion of tax, as well as in any case in 

which the charges are for filing false tax returns which understate tax 

liability.  It may be more difficult to justify the inclusion of such a 

stipulation in a failure to file case (26 U.S.C. § 7203), since proof 

of a tax liability is not an element of the government's proof and a 

conviction, therefore, would not collaterally estop the defendant from 

contesting the fraud penalty.  Nevertheless, it is within the discretion of 

the prosecutor to insist upon such a stipulation in a failure to file case