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ADVANCE RELEASE Documents, In re F. Abir, (Feb. 8, 2010)
2010-1 ustc ¶50,201Code Sec. 6871
In re Fereydoon Abir and Flora Abir, Debtors.
Fereydoon Abir and Flora Abir, Plaintiffs v. United States of America, Department of Treasury, and Internal Revenue Service, Defendants.
UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK. Case No.: 08-70566-478. Chapter 7. Adv. Pro. No.: 08-8321-478.
The Debtors argue that their tax obligations for the years at issue should be discharged because the tax returns were due more than three years prior to the Petition Date and that there were no assessments of tax within 240 days of the Petition Date. The IRS argues that the Debtors' requests for a collection due process hearing with the IRS for the 2000 to 2003 tax years suspended the statute of limitations with regards to collection actions by the IRS for 700 days under 26 U.S.C. §6330(e) , plus an additional 90 days provided under 11 U.S.C. §507(a)(8) . When the 790 day suspension on collection is taken into account, the expiration dates for the collection statutes for the 2000 to 2003 tax years fall within three years of the Petition Date under 11 U.S.C. §507(a)(8)(A)(i) . With respect to the obligation for the 2004 tax year, the IRS argues that the Debtors' 2004 tax return was due within three years of the Petition Date and thus excepted from discharge under §507(a)(8)(A)(i) . Alternatively, the IRS argues that the Debtors' tax obligations at issue should be excepted from discharge under 11 U.S.C. §524(a)(1)(C) alleging that the Debtors willfully attempted to evade or defeat their tax obligations.
DISCUSSION
Under 11 U.S.C. §523(a)(1) , a discharge under 11 U.S.C. §727 does not discharge an individual debtor from any debt (1) for a tax of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of the Bankruptcy Code, whether or not a claim for such tax was filed or allowed. 11 U.S.C. §523(a)(1)(A) .
Under 11 U.S.C. §523(a)(1)(A) and §507(a)(8)(A) , allowed unsecured claims of governmental units are excepted from discharge to the extent such claims are for a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition:
(i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition;
(ii) assessed within 240 days before the date of the filing of the petition, exclusive of —
(I) any time during which an offer and compromise with respect to that tax was pending or in effect during that 240 day period plus 30 days; and
(II) any time during which a stay of proceedings against collections was in effect in a prior case under this title during that 240-day period, plus 90 days .

11 U.S.C. §507(a)(8)(A) .
An otherwise applicable time period in this paragraph [507(a)(8)] shall be suspended for any period during which a governmental unit is prohibited under applicable nonbankruptcy law from collecting a tax as a result of a request by the debtor for a hearing and an appeal of any collection action taken or proposed against the debtor, plus 90 days; plus any time during which the stay of proceedings was in effect in a prior case under this title or during which collection was precluded by the existence of 1 or more confirmed plans under this title, plus 90 days .
11 U.S.C. §507(a)(8) (emphasis added).
Section 6330(e) of the United States Internal Revenue Code provides in pertinent part, “if a hearing is requested under [26 U.S.C. §6330(a)(3)(B) ], the levy actions which are the subject of the requested hearing and the running of any period of limitations under section 6502 (relating to collection after assessment) … shall be suspended for the period during which hearing, and appeals therein, are pending.” 26 U.S.C. §6330(e) .
The argument by the IRS that the Debtors' tax liability for the 2000 to 2003 tax years is nondischargeable under section 507(a)(8)(A)(i) on the basis that the collection statutes expire within the three-year look-back period from the petition date is incorrect. Section 507(a)(8)(A)(i) excepts tax claims for which a tax return is last due within the three-year lookback period. 11 U.S.C. §507(a)(8)(A)(i) . See also Young v. United States , 535 U.S. 43, 46 (2002). It is the date the tax returns are due that controls whether a tax obligation is dischargeable and not whether the collection statute for such taxes expires within the three-year look-back period which determines dischargeability.
However, in spite of the IRS's misapplication of section 507(a)(8)(A)(i) , in determining the three-year look-back period from the Petition Date, section 507(a)(8) provides that any applicable time period under this paragraph shall exclude any time during which a stay of collection proceedings was in effect as a result of (a) a prior bankruptcy case filed within such period, or (b) any suspension arising under the Internal Revenue Code as a result of a request by the Debtors for a hearing of any collection action taken or proposed against the debtors, plus 90 days. 11 U.S.C. §507(a)(8) . Young v. United States , 535 U.S. 43 (holding that the three-year look-back period is subject to traditional principles of equitable tolling and is tolled during the pendency of a previous bankruptcy case). As discussed above, the IRS was stayed from any collection action from July 28, 2005 when requests for a collection due process hearing were filed with the IRS to June 28, 2007 when the withdrawal of such requests was made, plus the 90 day period following June 28, 2007 to September 26, 2007. While the Debtors argue that the IRS failed to resolve any issues with respect to the Debtors' tax liability for almost 2 years during the collection due process period, the Court notes that during this period, the Debtors' first bankruptcy case was filed and was pending for almost 8 months before being dismissed.
Prior to the end of the 90 day period after June 28, 2007, the IRS was again stayed from any collection action for the pre-petition taxes as a result of the Southern District Bankruptcy Case filed against Dr. Abir on September 12, 2007. Under 11 U.S.C. §362(a) , the filing of a bankruptcy petition, whether a voluntary petition under section 301 or 302, or an involuntary petition under section 303 , operates as a stay, applicable to all entities, of any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the bankruptcy case. 11 U.S.C. §362(a)(6) . Similarly, under 26 U.S.C. §6503(h) ,
[t]he running of the period of limitations provided in section 6501 or 6502 on the making of assessments or collection shall, in a case under title 11 of the United States Code, be suspended for the period during which the Secretary is prohibited by reason of such case from making the assessment or from collection and (1) for assessments, 60 days thereafter; and (2) for collection, 6 months thereafter.
26 U.S.C. §6503(h) .
The IRS was again stayed from any collection action from September 12, 2007 to December 20, 2007, when Dr. Abir's Southern District Bankruptcy Case was dismissed, plus at least another 90 days under 11 U.S.C. §507(a)(8)(A)(ii)(II) . However, less than 90 days after the dismissal of the Southern District Bankruptcy Case, the bankruptcy petition for this present case was filed on February 4, 2008. As a result of the requests for due process hearing and Dr. Abir's Southern District Bankruptcy Case, the IRS has been continuously stayed from any collection action since July 28, 2005 under either the United States Internal Revenue Code or the Bankruptcy Code.
Accordingly, with respect to Dr. Abir, the three-year look-back period has been continuously tolled since July 28, 2005. Therefore, the three-year look-back is essentially three years back from July 28, 2002 to July 28, 2005. As the 2000 to 2004 tax returns were filed within three years of July 28, 2005, Dr. Abir's tax liabilities to the IRS for the 2000 to 2004 tax years are excepted from discharge.
Moreover, with respect to the Debtors' federal income tax liability for the 2004 tax year, the Debtors concede that their 2004 tax return was due within three years of the Petition Date absent any suspension of IRS collection actions. Accordingly, the Debtors' federal tax liability for the 2000, 2001, 2003 and 2004 tax years are not dischargeable pursuant to 11 U.S.C. 507(a)(8)(A)(i).
In addition, the Court finds that the Debtors' federal income tax liabilities for the 2000 to 2004 tax years are also excepted from discharge pursuant to 11 U.S.C. §507(a)(8)(A)(ii) as the Debtors' income tax liabilities for those years were assessed within 240 days of the Petition Date. While the Debtors argue there were no assessments by the IRS for the tax years at issue within 240 calendar days of the Petition Date, section 507(a)(8) provides that any time during which a stay of collection proceedings was in effect as a result of (a) a prior bankruptcy case filed within such 240 day period, or (b) any suspension arising under the Internal Revenue Code as a result of a request by the Debtors for a hearing of any collection action taken or proposed against the debtors with the addition of 90 days, is also excluded from the calculation of the 240 day period. 11 U.S.C. §507(a)(8) .
Here, the IRS made assessments on (1) June 27, 2005 for the 2000 tax year, (2) January 10, 2005 for the 2001 tax year, (3) April 11, 2005 for the 2002 and 2003 tax years, and (4) September 19, 2005 for the 2004 tax year. As discussed above, the IRS has been continuously stayed from any collection action against Dr. Abir since July 28, 2005. From the earliest assessment date of January 10, 2005 to July 28, 2005, when the Debtors filed their request for a collection due process hearing, only 199 days had passed. Accordingly, with respect to Dr. Abir the IRS assessments for the 2000 to 2004 tax years are within 240 day look-back period and are non-dischargeable under 11 U.S.C. §§523(a)(1) and 507(a)(8)(A)(ii).
With respect to Mrs. Abir, the 240 day look-back period would only exclude the period from July 28, 2005 to September 26, 2007 as she was not a debtor in the Southern District Bankruptcy Case. Accordingly, the 240 day look-back period for Mrs. Abir would go back to April 10, 2005. Therefore, Mrs. Abir's federal tax obligations would also be nondischargeable with respect to the 2000, 2002, 2003 and 2004 tax years under 11 U.S.C. §§523(a)(1) and 507(a)(8)(A)(ii). With respect to the 2001 tax year, the Court has already determined that Mrs. Abir's liability is nondischargeable under 11 U.S.C. §§523(a)(1) and 507(a)(8)(A)(i).
As the Court has determined the Debtors' tax liability for the 2000 to 2004 tax years to be excepted from discharge, the Court need not make a determination as to whether the Debtors willfully attempted to evade or defeat such taxes so that the tax obligations would also be excepted from discharge under 11 U.S.C. §523(a)(1)(C) .
CONCLUSION
Based upon the foregoing, the Debtors' federal income tax liability for the 2000 to 2004 tax years are excepted from discharge under 11 U.S.C. §§523(a)(1) , 507(a)(8)(A)(i) and/or 507(a)(8)(A)(ii). The Debtors' request for a determination that their federal income tax liabilities for the 2000 to 2004 tax years are discharged is hereby denied.
So ordered.
Dated: Central Islip, New York February 1, 2010

SCHUMER, HATCH UNVEIL TARGETED JOB CREATION BILL
Senators Believe Payroll Tax Cut Most Effective, Affordable Way to Get America Back to
Work
WASHINGTON – U.S. Senators Chuck Schumer (D‐New York) and Orrin Hatch (R‐Utah) unveiled
targeted legislation today that they believe would be most effective at putting the American
people back to work. The Hire Now Tax Cut Act of 2010 would grant any private‐sector
employer that hires a worker who had been unemployed for at least 60 days to not have to pay
the employer’s 6.2 percent share of the Social Security payroll tax on that employee for the
remainder of 2010.
“This proposal shows how much we can do to help create jobs when politics is put aside. Our
payroll tax cut is a simple, cost‐effective and bipartisan solution. It will help put more Americans
to work right away,” Senator Schumer said.
“While Senator Schumer and I disagree on most issues, we’ve been able to come together on an
affordable, effective and targeted proposal to get the American people back to work,” said
Hatch. “As a conservative, this proposal isn’t about more and more government spending; it’s
about tax relief to get employers hiring again, which is exactly what millions of unemployed
Americans most desperately need.”
The Senators cite five reasons why the payroll tax holiday is the best means of spurring
job creation:
• Simple. This proposal is not only easy to explain, but easy to administer –
avoiding waste, fraud and abuse.
• Focused. It is exclusively focused on hiring unemployed workers.
• Front‐loaded. It provides an incentive for businesses to hire workers earlier in
the year.
• Immediate. It puts money into a business to start hiring immediately.
• Affordable. It will cost substantially less than other proposals.
Unlike various other tax credit proposals, this payroll tax holiday would go immediately
to a business’ bottom line – there would be no waiting until 2011 to receive a tax credit.
As an additional incentive, for any qualifying worker hired under this initiative that the
employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an
additional non‐refundable $1,000 tax credit after the 52‐week threshold is reached, to
be taken on their 2011 tax return. In order to be eligible, the employee’s pay in the
second 26‐week period must be at least 80 percent of the pay in the first 26‐week
period.
Workers hired after the date of introduction are eligible for the payroll tax forgiveness
and the retention bonus, but only wages paid after the date of enactment receive the
exemption from payroll taxes.
A document fully outlining the proposal is below.
###
Senators Charles E. Schumer and Orrin Hatch
“HIRE NOW TAX CUT ACT OF 2010”
February 3, 2010
BASIC CONCEPT: Starting immediately after enactment, any business that hires a
worker that had been without full‐time work for at least 60 days prior to employment
can avoid paying the employer’s share of Social Security taxes on that worker for the
duration of 2010. The more a business pays a worker (up to the maximum Social
Security wage of $106,800), and the longer a business has a worker on its payroll, the
greater the tax benefit – so there is an incentive to hire people sooner, and pay them
more.
Unlike various tax credit proposals, the benefits under the “Hire Now Tax Cut” go
immediately into a business’ bottom line – no waiting until 2011 to receive a tax credit.
And since the benefit starts immediately after enactment and does not have an
arbitrary cap, it will facilitate utilization because some of the past issues with payroll
software are avoided.
For any qualifying worker hired under this incentive that the employer keeps on payroll
for a continuous 52 weeks, that employer is eligible for an additional $1,000 tax credit
after the 52‐week threshold is reached, to be taken on their 2011 tax return. In order to
be eligible, the employee’s pay in the second 26‐week period must be at least 80
percent of the pay in the first 26‐week period.
Workers hired after the date of introduction (February 2) are eligible for the payroll tax
forgiveness and the retention bonus, but only wages paid after the date of enactment
receive the exemption from payroll taxes.
EXAMPLES OF TAX SAVINGS:
􀂾 Hire a $50,000 worker on March 1, save $2,583.
􀂾 Hire a $90,000 worker on April 1, save $4,185.
􀂾 Hire a $60,000 worker on May 1, save $2,480.
ADDITIONAL FEATURES:
The tax benefit applies only to private‐sector employment, including nonprofit
organizations – public sector jobs are not eligible for either benefit.
Employees who are immediate family members of the employer do not qualify.
There is no minimum weekly number of hours that the new employee must work for the
employer to be eligible, and there is no maximum on the dollar amount of payroll taxes
per employer that may be forgiven.
For workers that would otherwise be eligible for the Work Opportunity Tax Credit, the
employer must select one benefit or the other for 2010 – no double‐dipping.
A worker who replaces another employee who performed the same job for the
employer is not eligible for the benefit, unless the prior employee left the job voluntarily
or for cause.
For the retention bonus to be paid, the worker’s wages during the second 26‐week
period must be at least 80 percent of the wages during the first 26‐week period.
Lost Social Security Trust Fund revenues will be supplemented by the General Fund.
ADVANTAGES/BENEFITS:
• Simple. The Schumer‐Hatch idea is easy to explain and administer: “No
employer payroll taxes on unemployed workers hired in 2010.” Since the
proposal is for a complete elimination of the 6.2 percent payroll tax for eligible
workers, rather than a fixed or capped dollar amount, employers will know to
simply zero out the tax for eligible workers.
• Focused. Given our budgetary constraints and the nagging problem of long‐term
unemployment, any employment incentive should be focused on the hiring of
workers who are currently unemployed. Only by focusing on the unemployed
can we get people off the unemployment rolls at an affordable cost to
taxpayers. Plus, unlike some versions of a payroll tax holiday, this proposal is not
biased towards either low‐wage or high‐wage workers. Under the Schumer‐
Hatch plan, a business saves 6.2 percent on both a $40,000 worker and a
$90,000 worker.
• Front‐Loaded. The proposal provides an incentive for businesses to hire workers
earlier in the year, because the tax benefit will be greater. A $60,000 worker
hired on March 1 will save a business about $3,100 in taxes, while that same hire
delayed until May 1 will save about $2,500.
• Immediate. In the current environment, no business should have to wait until
2011 to receive tax relief for hiring. Our proposal puts money into a business'
cash flow immediately, since the tax is simply not collected in the first place.
• Affordable. Because this provision is targeted towards hiring the unemployed,
as opposed to providing a tax benefit for any increase in payroll, its cost should
be more affordable at a time of record budget deficits

Notice 2010-19, 2010-7 IRB, 02/02/2010, IRC Sec(s).

Headnote:


Reference(s):

Full Text:

Purpose And Background

This notice alerts taxpayers that the Internal Revenue Service (IRS) intends to issue Notice 2010-19, 2010-7 IRB, 02/02/2010, IRC Sec(s).

Headnote:


Reference(s):

Full Text:

Purpose And Background

This notice alerts taxpayers that the Internal Revenue Service (IRS) intends to issue guidance under section 2511(c) of the Internal Revenue Code. Congress enacted this section in section 511(e) of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and amended it in section 411(g)(1) of the Job Creation and Worker Assistance Act of 2002. Public Laws 107-16, 115 Stat. 71, and 107-147, 116 Stat. 46. Section 2511(c) is effective for transfers made after December 31, 2009, and before January 1, 2011.

Section 2511(a) generally provides that the gift tax shall apply to transfers in trust or otherwise, whether direct or indirect. Under § 25.2511-2(b) of the Gift Tax Regulations, a gift is complete when the donor parts with sufficient dominion and control as to leave in the donor no power to change its disposition. Section 2511(c) provides that, notwithstanding any other provision of section 2511 and except as provided in regulations, a transfer in trust shall be treated as a transfer of property by gift unless the trust is treated as wholly owned by the donor or the donor's spouse under subpart E of part I of subchapter J of chapter 1. The Joint Committee on Taxation's explanation of section 2511(c) provides that certain transfers in trust are treated as transfers of property by gift even though such transfers would have been regarded as incomplete gifts, or would not have been treated as transfers under the gift tax provisions in effect prior to 2010. Joint Committee on Taxation, Technical Explanation of the “Job Creation and Worker Assistance Act of 2002” (JCX-12-02), March 6, 2002.

Interim Provisions

Some taxpayers may have inaccurately interpreted section 2511(c) as excluding from the gift tax transfers to a trust treated as wholly owned by the donor or the donor's spouse under subpart E of part I of subchapter J of chapter 1, even though those transfers would otherwise be taxable under Chapter 12. The provisions of Chapter 12 regarding the substantive law applicable to the gift tax were not amended by EGTRRA, and those provisions continue to apply to all transfers made by donors during 2010. Section 2511(c) is an addition to those substantive law provisions and is applicable to transfers made in 2010. Section 2511(c) broadens the types of transfers subject to the transfer tax under Chapter 12 to include certain transfers to trusts that, before 2010, would have been considered incomplete and, thus, not subject to the gift tax. Accordingly, each transfer made in 2010 to a trust that is not treated as wholly owned by the donor or the donor's spouse under subpart E of part I of subchapter J of chapter 1 is considered to be a transfer by gift of the entire interest in the property under section 2511(c). The provisions of Chapter 12 as in effect on December 31, 2009, continue to apply (both before and during 2010) to all transfers made to any other trust to determine whether the transfer is subject to gift tax.

Effective Date

This notice is applicable to transfers made in trust after December 31, 2009. The Treasury Department and the IRS intend to issue regulations to confirm the conclusions set forth in this notice.

DRAFTING INFORMATION

The principal author of this notice is Laura Urich Daly of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Laura Urich Daly on (202) 622-3090 (not a toll-free call).. Congress enacted this section in section 511(e) of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and amended it in section 411(g)(1) of the Job Creation and Worker Assistance Act of 2002. Public Laws 107-16, 115 Stat. 71, and 107-147, 116 Stat. 46. Section 2511(c) is effective for transfers made after December 31, 2009, and before January 1, 2011.

Section 2511(a) generally provides that the gift tax shall apply to transfers in trust or otherwise, whether direct or indirect. Under § 25.2511-2(b) of the Gift Tax Regulations, a gift is complete when the donor parts with sufficient dominion and control as to leave in the donor no power to change its disposition. Section 2511(c) provides that, notwithstanding any other provision of section 2511 and except as provided in regulations, a transfer in trust shall be treated as a transfer of property by gift unless the trust is treated as wholly owned by the donor or the donor's spouse under subpart E of part I of subchapter J of chapter 1. The Joint Committee on Taxation's explanation of section 2511(c) provides that certain transfers in trust are treated as transfers of property by gift even though such transfers would have been regarded as incomplete gifts, or would not have been treated as transfers under the gift tax provisions in effect prior to 2010. Joint Committee on Taxation, Technical Explanation of the “Job Creation and Worker Assistance Act of 2002” (JCX-12-02), March 6, 2002.

Interim Provisions

Some taxpayers may have inaccurately interpreted section 2511(c) as excluding from the gift tax transfers to a trust treated as wholly owned by the donor or the donor's spouse under subpart E of part I of subchapter J of chapter 1, even though those transfers would otherwise be taxable under Chapter 12. The provisions of Chapter 12 regarding the substantive law applicable to the gift tax were not amended by EGTRRA, and those provisions continue to apply to all transfers made by donors during 2010. Section 2511(c) is an addition to those substantive law provisions and is applicable to transfers made in 2010. Section 2511(c) broadens the types of transfers subject to the transfer tax under Chapter 12 to include certain transfers to trusts that, before 2010, would have been considered incomplete and, thus, not subject to the gift tax. Accordingly, each transfer made in 2010 to a trust that is not treated as wholly owned by the donor or the donor's spouse under subpart E of part I of subchapter J of chapter 1 is considered to be a transfer by gift of the entire interest in the property under section 2511(c). The provisions of Chapter 12 as in effect on December 31, 2009, continue to apply (both before and during 2010) to all transfers made to any other trust to determine whether the transfer is subject to gift tax.

Effective Date

This notice is applicable to transfers made in trust after December 31, 2009. The Treasury Department and the IRS intend to issue regulations to confirm the conclusions set forth in this notice.

DRAFTING INFORMATION

The principal author of this notice is Laura Urich Daly of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Laura Urich Daly on (202) 622-3090 (not a toll-free call).

2010-1 ustc ¶50,190Code Sec. 7201, Code Sec. 7212
UNITED STATES OF AMERICA Plaintiff - Appellee v. JAMES RAY PHIPPS Defendant - Appellant.

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT. No. 08-10831. Appeal from the United States District Court for the Northern District of Texas.
Before KING, GARZA, and HAYNES, Circuit Judges.

GARZA, Circuit Judge: James Ray Phipps appeals his conviction for mail and wire fraud, and aiding and abetting, in violation of 18 U.S.C. §§1341 , 1343, and 2; corrupt endeavoring to obstruct and impede the internal revenue laws, in violation of 26 U.S.C. §7212(a) ; and income tax evasion, in violation of 26 U.S.C. §7201 . For the reasons set forth below, we AFFIRM.
I
For over twenty years, Phipps has operated self-styled “educational programs dedicated to teaching others how to eliminate their debt and live within their means.” Despite notice from the United States Postal Service (“USPS”) that both of his prior, similarly structured endeavors were considered illegal pyramid schemes, Phipps created the instant program, Life Without Debt (“LWD”). Members were encouraged to contribute between $2,000 and $100,000; Phipps claimed that a larger contribution would engender larger returns. As with prior schemes, members were required to recruit two new members prior to receiving any payments; they also received educational literature and tapes with anti-income tax messages. Notably, Phipps told participants that the income received through LWD would not need to be reported to the IRS. Phipps himself did not report any of his LWD income to the IRS.
During his ten years of operating LWD, Phipps received notices from the states of Georgia, Oklahoma, and Maryland that LWD constituted a pyramid scheme, and he may be subject to civil or criminal enforcement actions as a result. Indeed, six LWD members were arrested in Florida for felony and misdemeanor promotion of and participation in an illegal lottery. Despite these warnings that his activities might be illegal, Phipps continued to recruit new members through mass mailings, teleconference calls, and seminars in major cities. Phipps sent periodic small payments to members to encourage them to remain in the program, recruit new members, or reinvest in larger payment plans. Though Phipps marketed LWD as a compound-leveraging investment program that would generate large sums of money for its investors, less than nine percent of LWD's approximately 31,000 participants made a net profit above their initial investment. Phipps “earned” $4,606,396 from LWD, $1,381,683 of which was “participation income,” and $3,224,782 of which he paid to himself under aliases within the scheme.
A jury found Phipps guilty of mail and wire fraud and aiding and abetting, corrupt endeavor to obstruct and impede the due administration of the internal revenue laws, and income tax evasion. 1 Phipps was sentenced to 210 months imprisonment, to be followed by three years of supervised release. Phipps was also ordered to pay $1,402,446 in restitution. Phipps now appeals the sufficiency of the evidence to support his convictions and whether his sentence was properly calculated.
II
Phipps challenges the sufficiency of the evidence to support his mail and wire fraud, corrupt impediment of the internal revenue laws, and income tax evasion convictions. In evaluating a defendant's argument regarding the sufficiency of the evidence supporting his conviction, we consider “whether a rational jury, viewing the evidence in the light most favorable to the prosecution, could have found the essential elements of the offense beyond a reasonable doubt.” United States v. Riviera , 295 F.3d 461, 466 (5th Cir. 2002).
A
Phipps contends that the Government failed to present sufficient evidence that he acted with the specific intent required for mail and wire fraud offenses under 18 U.S.C. §§1341 and 1343. Specifically, he argues that evidence of warnings he received regarding programs that preceded LWD did not constitute sufficient evidence of intent to commit fraud via LWD.
The elements of 18 U.S.C. §§1341 and 1343 are parallel, and therefore we apply the same analysis to both statutes. See United States v. Mills , 199 F.3d 184, 188 (5th Cir. 1999). Mail and wire fraud are both specific intent crimes that require the Government to prove that a defendant knew the scheme involved false representations. United States v. Brown , 459 F.3d 509, 518-19 (5th Cir. 2006) (wire fraud); United States v. Rochester , 898 F.2d 971, 976 (5th Cir. 1990) (mail fraud).
Phipps argues that the evidence demonstrates that he sincerely endeavored to educate members of LWD about financial planning and the methodologies of his program rather than to defraud them. However, he presents no support for this self-serving statement beyond diagrams of LWD's upline and downline payment programs, which he drafted. Furthermore, the jury heard testimony from a retired USPS Inspector who had investigated Phipps and who testified to the pyramid structure of all of Phipps' programs (his two prior programs))Fast Cash Financial Services and Marathon Marketing))and LWD).
The record also demonstrates that Phipps had been warned by various federal and state law enforcement authorities of the illegality and fraudulence of his basic scheme, both while operating prior programs and while operating LWD. A prior warning to cease and desist fraudulent activity can serve as evidence of specific intent to defraud in a subsequent, similar scheme. See United States v. Aubin , 87 F.3d 141, 147 (5th Cir. 1996). Despite receiving warnings that his activities were illegal, Phipps continued to operate these pyramid-style programs, merely changing their names to avoid detection. Given this evidence, the jury reasonably could have concluded that Phipps acted with the specific intent required for mail and wire fraud in making fraudulent and illegal representations to his potential LWD program members.
B
Phipps contends that the Government failed to present sufficient evidence of wire fraud because the “wire” at issue, a single fax sent by a program participant to Phipps notifying him of an address change, was only tangentially related to the alleged fraud. Phipps argues that to sustain a conviction for wire fraud, “the government must present evidence that shows a link between the fraudulent activity and the [wire] at issue which demonstrates that the [wire] either advanced or [was] integral to the fraud.” United States v. Strong , 371 F.3d 225, 230 (5th Cir. 2004) (internal quotation marks and citation omitted). Phipps claims that the fax sent by a program participant to Phipps neither advanced nor was integral to the alleged fraud, and therefore failed to establish the requisite connection between the wire and the fraud.
Phipps argues that because he did not send the fax, it could not “advance” the alleged fraud. However, there is no statutory requirement that a defendant generate a wire transmission or mailing. Phipps needed only to cause the use of wire communication facilities. See 18 U.S.C. §1343 . By providing the fax number to participants in LWD, it was reasonably foreseeable that participants would use the number for customer service inquiries, as the participant in question did when she faxed an update to her account information.
Phipps also argues that the fax was too tenuously connected to the fraud to be considered “integral,” as it merely provided a change of address after the alleged fraud, inducing entry into LWD, had been consummated. Though the federal fraud statute requires more than a tangential relationship between the wire communication and the fraud, “[i]t is sufficient for the mailing to be incident to an essential part of the scheme or a step in [the] plot.” Strong , 371 F.3d at 228. Communications that occur after initial purchase into the fraudulent scheme, “designed to lull the victim into a false sense of security, postpone inquiries or complaints, or make the transaction less suspect[,] are mailings in furtherance of the scheme.” United States v. Toney , 598 F.2d 1349, 1353 (5th Cir. 1979) (citation omitted). Accordingly, a rational jury could find that a participant's fax updating her contact information in anticipation of future LWD payments was an important part of “lulling” LWD participants into believing that Phipps' investment scheme was a legal, secure financial program, and therefore essential to the overall commission of wire fraud.
C
Phipps challenges the sufficiency of the evidence presented to support his conviction for corrupt impediment under 26 U.S.C. §7212(a) . Section 7212(a) criminalizes the actions of “[w]hoever corruptly … obstructs or impedes, or endeavors to obstruct or impede the due administration of this title.” A defendant acts “corruptly” for the purposes of §7212(a) when he or she acts “with the intention of securing improper benefits or advantages for one's self or others.” United States v. Reeves , 752 F.2d 995, 1001-02 (5th Cir. 1985).
Phipps alleges that his tax evasion advocacy was protected by the First Amendment. This allegation is without merit. Telling his adherents that he did not report his LWD income to the IRS and encouraging them to do the same place Phipps' speech within the sphere of proscribed speech likely to incite or produce “imminent lawless action.” Brandenburg v. Ohio , 395 U.S. 444, 447 (1969); see also United States v. Kelley , 864 F.2d 569, 577 (7th Cir. 1989) (rejecting First Amendment protection of “more than mere advocacy” where defendant told clients to keep tax shelter information secret from the IRS and received commissions from sales); United States v. Buttorff , 572 F.2d 619, 624 (8th Cir. 1978) (rejecting First Amendment protection of activity that went “beyond mere advocacy of tax reform” in explaining to others how to avoid income tax liability). Phipps has not shown that his behavior advising and advocating tax evasion to LWD participants should be entitled to First Amendment protection.
As his advocacy of tax-evasion strategies is unprotected speech, the jury was entitled to rely on it as evidence supporting his conviction for corrupt impediment of the internal revenue laws. Thus, given that Phipps directly advised and encouraged program participants to break federal law by failing to pay their income taxes, a reasonable jury could have found Phipps guilty on this charge.
D
Phipps contends that there was insufficient evidence to sustain a conviction based on income tax evasion pursuant to 26 U.S.C. §7201 . Specifically, Phipps contends that he was genuine in his belief that the cash receipts from LWD did not constitute income that needed to be reported to the IRS. Evasion of income tax requires “willfulness,” or a voluntary, intentional violation of a known legal duty. Cheek v. United States , 498 U.S. 192, 199-200 (1991). Phipps claims he sincerely believed his LWD income was not taxable. However, during several of the years that LWD was in business, the IRS prepared and filed substitute tax returns and gave Phipps notice of these returns as well as the taxes he owed. Therefore, Phipps was at the very least on notice that the IRS expected him to pay taxes on his LWD income.
Furthermore, part of the LWD program was to advise participants on how to plan a “reliance defense” against paying income tax. The key component of this defense is for a participant to rely on the advice of income tax professionals and other credible sources that could be used to convince a jury that the participant sincerely believed he or she was not liable for federal or state income tax. Given that he was advising others to employ calculated tactics to avoid paying income taxes, and his receipt of prior notice from the IRS regarding his tax liability, a rational jury reasonably could have found that Phipps willfully evaded paying income tax on his LWD income.
III
Phipps also challenges the district court's calculation of the amount of loss used for determining his sentence. Phipps did not specifically object to this calculation at sentencing; therefore, we review for plain error. United States v. Green , 324 F.3d 375, 381 (5th Cir. 2003). A showing of plain error requires (1) an error, (2) that is clear or obvious, and (3) that affected Phipps' substantial rights. United States v. Cotton , 535 U.S. 625, 631-32 (2002); United States v. Olano , 507 U.S. 725, 732-34 (1993).
Phipps contends that the district court erred in failing to reduce his loss amount by the value of the materials received by the program participants. The Guidelines state that the amount of “[l]oss shall be reduced by … the fair market value of … the services rendered, by the defendant … to the victim before the offense was detected.” U.S.S.G. §2B1.1 cmt. 3(E)(i). However, Phipps offered no evidence as to the value of the tapes and educational materials he suggests that the court should have considered. Without such evidence, the district court not only had no reason to consider such a reduction, but also had no basis on which to determine the amount of the reduction even if it had considered Phipps' claim.
Moreover, the district court heard testimony from Agent Lagos, the case agent in charge of Phipps' investigation, who stated that all of the information regarding pecuniary loss from members of Phipps' program came directly from Phipps' computer database where he recorded his financial activities. Based on those records, Lagos determined a loss value of $16,215,882, the amount which the district court adopted as its final loss determination. Accordingly, the district court raised Phipps' offense level by 20 levels based on Guideline §2B1.1(b)(1)(K) , which covers losses ranging from $7,000,000 to $20,000,000. Phipps would need to demonstrate that his dissemination of educational materials entitles him to a reduction of more than $9,215,882 before his loss amount would change his offense level. He has not done so. Thus, we find Phipps has not shown plain error in the district court's calculation of his loss amount.
IV
For the foregoing reasons, we AFFIRM.

Footnotes


1
Phipps was also indicted for twelve counts of money laundering and aiding and abetting, in violation of 18 U.S.C. §§1956(a)(1)(A)(i) and 2. Two of these counts were dismissed during trial, and the district court entered a judgment of acquittal on all of the other money laundering counts based on its reading of United States v. Santos , U.S. , 128 S. Ct. 2020 (2008).

News Release 2010-14, 01/29/2010, IRC Sec(s).


An expanded Earned Income Tax Credit (EITC) means larger families will qualify for a larger credit, offering greater relief for people who struggled through difficult financial times last year, the Internal Revenue Service said today.

The IRS and the Treasury Department marked EITC Awareness Day as their partners nationwide worked to highlight the availability of this important tax credit. EITC, which is in its thirty-fifth year, is one of the federal government's largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 Billion in benefits. The average credit was more than $2,000.

“As part of the economic recovery efforts, there have been important changes to expand EITC to benefit taxpayers,” said IRS Commissioner Doug Shulman. “Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier.”

Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children and expanded the maximum benefit for this category.

To qualify for the EITC, earned income and adjusted gross income (AGI) for individuals must each be less than:

$43,279 ($48,279 married filing jointly) with three or more qualifying children
$40,295 ($45,295 married filing jointly) with two qualifying children
$35,463 ($40,463 married filing jointly) with one qualifying child
$13,440 ($18,440 married filing jointly) with no qualifying children
The maximum credit for tax year 2009 is:

$5,657 with three or more qualifying children
$5,028 with two qualifying children
$3,043 with one qualifying child
$457 with no qualifying children
The maximum amount of investment income is $3,100 for tax year 2009. For families, there are also certain requirements for child residency and relationship that must be met. Additional eligibility information is available in FS-2010-11 and on the Web at IRS.gov/EITC.

Another new provision adds to the definition of a “qualifying child:” The child must be younger than the person claiming the child unless the child is totally and permanently disabled any time during the year. The child cannot have filed a joint return other than to claim a refund. Also new for 2009, if a qualifying child can be claimed by either a parent or another person, the other person must have an AGI higher than the parent in order to claim the child for EITC purposes.

Historically, one in four eligible taxpayers fails to claim the EITC, which is why the IRS and its free tax preparation partners host an annual EITC Awareness Day. This year, there are 68 news conferences being held around the country. Community coalitions and IRS partners nationwide also are also issuing 128 news releases, writing letters to the editor and using social media tools to spread the word about EITC.

Typically, people who fail to claim the EITC include workers without qualifying children, people whose earned income falls below the threshold required to file a tax return, farmers, rural residents, people with disabilities and nontraditional families such as grandparents raising grandchildren. People must file a tax return to claim the EITC.

Free help is available to EITC-eligible taxpayers. There are nearly 12,000 free tax preparation sites nationwide. People who want to prepare their own tax returns can visit Free File on IRS.gov. This free tax software and free electronic filing program will walk taxpayers through a question and answer format and help them claim the tax credits and deductions for which they are eligible.

EITC-eligible taxpayers also can seek assistance at the 400 IRS Taxpayer Assistance Centers nationwide. To assist EITC taxpayers, 167 IRS assistance centers will offer Saturday service on Jan. 30, Feb. 6 and Feb. 20. A list is attached.

There is an online EITC Assistant also available on IRS.gov which can help taxpayers and tax preparers determine eligibility. And, for tax preparers and IRS partners, there is EITC Central which has links to toolkits that include marketing products.

More than 65 percent of EITC returns are prepared by a third party. The IRS urges taxpayers to choose a reputable tax preparer to avoid problems that come with an inaccurate tax return. The agency also urges tax preparers to follow due diligence requirements when preparing an EITC tax return. More information is available at www.irs.gov/eitc.

U.S. v. OHLE, Cite as 105 AFTR 2d 2010-XXXX, 01/12/2010

UNITED STATES of America, Plaintiff, v. John B. OHLE III and William E. Bradley, Defendants.
Case Information:

Code Sec(s):
Court Name: United States District Court, S.D. New York,
Docket No.: No. S2 08 Cr. 1109(LBS),
Date Decided: 01/12/2010.
Disposition:
HEADNOTE

.

Reference(s):

OPINION

United States District Court, S.D. New York,

MEMORANDUM & ORDER

Judge: SAND, District Judge.

On August 11, 2009, the Government filed the Second Superseding Indictment (“Indictment”) against Defendant JohnB. Ohle III (“Ohle”) and Defendant William E. Bradley (“Bradley”). The Indictment, which includes eight counts, charges Ohle and Bradley with various tax and fraud offenses. The Indictment alleges that between 2001 and 2004, Ohle and various co-conspirators engaged in a massive scheme to cheat the Government out of over $100 million by causing dozens of United States taxpayers to engage in fraudulent tax shelter transactions and fraudulently report the results of those shelters on their tax returns. Ohle is alleged to have formed two conspiracies, charged in Count One and Count Five. Bradley is only alleged to have been a member of the Count Five conspiracy.

The Count One conspiracy (the “HOMER conspiracy”) charges Ohle and others with conspiring to defraud the United States and to commit various tax crimes and mail and wire fraud. Ohle and his coconspirators are charged with developing and implementing an allegedly fraudulent tax shelter known as “Hedge Option Monetization of Economic Remainder” (“HOMER”). Ohle, a certified public accountant and attorney, is charged with helping to design, market, and implement HOMER while he was working for a national bank (“Bank A”), which maintained its principal offices in Chicago, Illinois. The scheme was allegedly designed to eliminate or reduce the amount of U.S. income taxes paid by wealthy clients of Bank A and law firm Jenkens & Gilchrist, P.C. (“J & G”). The scheme generated extraordinary fee income for Bank A, J & G, Ohle, and his co-conspirators. The Indictment also alleges that Ohle and other members of the Innovative Strategies Group (“ING”) at Bank A received bonuses based in part on the amount of fees each generated through their sale of the HOMER tax shelters. Ohle is charged with substantive tax evasion as to various clients in Count Two (Client D.W.), Count Three (Client C.P.), and Count 4 (Client D.D.).

The Count Five conspiracy, referred to in the Indictment as “The Mail and Wire Fraud and Personal Income Tax Fraud Conspiracy”, charges Ohle, Bradley, and co-conspirators Douglas Steger and Individual C with conspiracy to commit fraud. The conspiracy alleged in Count Five consists of two schemes: the referral fees and Carpe Diem. The Indictment alleges that as part of an effort to market, sell, and implement HOMER tax shelters, Ohle, other members of Bank A's ISG, and attorneys from J & G agreed to pay referral fees to third parties who referred a client who ultimately entered into a HOMER tax shelter. Third-party referral sources sent invoices to J & G, who would then pay referral fees to those third parties based on the amounts stated in the invoices. The Indictment alleges that J & G would issue IRS Forms 1099-MISC, when appropriate, to the third parties to reflect the payment of the referral fees as non-employee compensation to the third parties. As part of the referral scheme, Ohle is alleged, along with Steger and Bradley, to have prepared fraudulent invoices to obtain referral fees from Bank A, which they were not entitled to receive under the fee arrangement. Ohle is alleged to have contacted Bradley to prepare invoices for referral fees in connection with Client Group 1's HOMER tax shelter, despite the fact that Bradley performed no services in connection with that deal. Bradley is also alleged to have prepared fraudulent invoices related to two of Bank A's HOMER clients.

Second, the Carpe Diem scheme alleges that Ohle approached Client E, with whom Ohle had an established business relationship, to invest in Carpe Diem, a Bermuda-based hedge fund for whom Steger was an independent salesman. Client E invested $7 million in Carpe Diem. The Indictment alleges that Ohle also met with Client F and Client G, both of whom were HOMER clients of Bank A. Client F and Client G invested $1 million each in Carpe Diem. Ohle is alleged to have received a 5% commission on each of the Carpe Diem transactions, even though he told Client E that he would not receive any commission on her investments. The Indictment also alleges, related to the Carpe Diem fees, that Ohle unlawfully diverted funds from Client E's trust account to be used for Ohle's personal benefit. When Client E informed Ohle that she and her lawyer wished to discuss the finances of the trust, Ohle, with the assistance of Bradley, replaced a portion of the funds that had been unlawfully diverted from the trust bank account.

In Counts Six and Seven, Ohle is charged with personal tax evasion for the tax years 2001 and 2002, respectively. Count Eight of the Indictment alleges that Ohle obstructed and impeded the due administration of the internal revenue laws. With this background, the Court now addresses Defendant Ohle's and Defendant Bradley's various pretrial motions. For the purposes of these motions, all of the allegations in the Indictment are accepted as true.

I. Discussion

a. Use of the Mail Fraud Statute (Count One)

Ohle argues that Count One of the indictment impermissibly uses the wire fraud statute to reach an alleged criminal tax conspiracy, citing United States v. Henderson, 386 F.Supp. 1048 [34 AFTR 2d 74-6245] (S.D.N.Y.1974). Henderson held that the mail fraud statute (the scope of which is identical to the wire fraud statute, United States v. Schwartz, 924 F.2d 410, 417 (2d Cir.1991)), was not intended to reach cases of alleged tax evasion and was superseded by the comprehensive system of penalties Congress later enacted in the Internal Revenue Code. Henderson, 386 F.Supp. 1048 [34 AFTR 2d 74-6245]. Though it has never explicitly disapproved Henderson, the Court of Appeals for the Second Circuit has recently stated that “Henderson-which other circuits have rejected, ... provides weak authority for the proposition that schemes aimed at defrauding the government of taxes do not fall within the scope of the mail and wire fraud statutes.”Fountain v. United States , 357 F.3d 250, 258 [93 AFTR 2d 2004-615] (2d Cir.2004). 1. We agree with the many courts of appeals 2. and courts within this District 3. that have declined to follow Henderson. Ohle's motion to dismiss the wire fraud allegations is denied. 4.

b. Duplicity (Count Five)

Ohle and Bradley both move to dismiss Count Five as duplicitous. An indictment is duplicitous if it joins two or more distinct crimes in a single count. United States v. Aracri, 968 F.2d 1512, 1518 [70 AFTR 2d 92-6305] (2d Cir.1992). Duplicitous pleading is not presumptively invalid; rather, it is impermissible only if it prejudices the defendant.United States v. Olmeda , 461 F.3d 271, 281 (2d Cir.2006). Duplicity is only properly invoked when a challenged indictment affects one of the doctrine's underlying policy concerns: (1) avoiding the uncertainty of a general guilty verdict, which may conceal a finding of guilty as to one crime and not guilty as to other, (2) avoiding the risk that jurors may not have been unanimous as to any one of the crimes charged, (3) assuring the defendant has adequate notice of charged crimes, (4) providing the basis for appropriate sentencing, and (5) providing the adequate protection against double jeopardy in subsequent prosecution. Olmeda, 461 F.3d at 281 (citing United States v. Margiotta, 646 F.2d 729, 732–33 (2d Cir.1981)).

The Court of Appeals for the Second Circuit has recognized that application of the duplicity doctrine to conspiracy indictments presents “unique issues.” United States v. Murray, 618 F.2d 892, 896 (2d Cir.1980). In this Circuit, “it is well established that [t]he allegation in a single count of a conspiracy to commit several crimes is not duplicitous, for [t]he conspiracy is the crime and that is one, however diverse its objects.”Aracri , 968 F.2d at 1518 (internal citations and quotations omitted). “A single conspiracy may be found where there is mutual dependence among the participants, a common aim or purpose or a permissible inference from the nature and scope of the operation, that each actor was aware of his part in a larger organization where others performed similar roles equally important to the success of the venture.” United States v. Vanwort, 887 F.2d 375, 383 (2d Cir.1989). Each member of the conspiracy is not required to have conspired directly with every other member of the conspiracy; a member need only have “participated in the alleged enterprise with a consciousness of its general nature and extent.”United States v. Rooney , 866 F.2d 28, 32 [63 AFTR 2d 89-534] (2d Cir.1989). If the Indictment on its face sufficiently alleges a single conspiracy, the question of whether a single conspiracy or multiple conspiracies exists is a question of fact for the jury.Vanwort , 887 F.2d at 383; see also United States v. Szur, No. S5 97 CR 108(JGK), 1998 WL 132942, at 11 (S.D.N.Y. Mar. 20, 1998). Accordingly, courts in this Circuit have repeatedly denied motions to dismiss a count as duplicitous.See United States v. Nachamie , 101 F.Supp.2d 134, 153 (S.D.N.Y.2000) (collecting cases).

Bradley, pointing to United States v. Muñoz-Franco, 986 F.Supp. 70 (D.P.R.1997), argues that Count Five is duplicitous on its face. We find Judge Rakoff's decision in United States v. Gabriel, 920 F.Supp. 498 (S.D.N.Y.1996), to be more instructive in this case. 5. InGabriel , Judge Rakoff found that, although the count at issue contained boilerplate allegations of a single conspiracy, the subsequent paragraphs in the count were more consistent with two conspiracies than a single conspiracy.Gabriel , 920 F.Supp. at 503. As inMuñoz-Franco, the paragraphs describing the overt acts in the Gabriel Indictment were divided into two distinct sets. Id. at 503; Muñoz-Franco, 986 F.Supp. at 71. Finding that “on any but a superficial reading, [the Government] appears to actually allege two distinct conspiracies[,]” Judge Rakoff stated that if it were within his power he would dismiss the count at issue as duplicative. Gabriel, 920 F.Supp. at 504–05. “But the Court of Appeals has repeatedly cautioned that the determination of whether a conspiracy is single or multiple is an issue of fact “singularly” well suited to determination by a jury.” Id. Therefore, Judge Rakoff held that “[g]iven Count Six's boilerplate allegations of a single conspiracy, the Court cannot conclude on the basis of the pleadings alone that there is no set of facts falling within the scope of Count Six that could warrant a reasonable jury in finding a single conspiracy.”Id.

Similarly, in the case at bar, Count Five contains “boilerplate allegations” of a single conspiracy. The Indictment alleges, “From in or about 2001 until at least in or about February 15, 2004, in the Southern District of New York and elsewhere, JOHNB. OHLE III, and WILLIAM BRADLEY, the defendants, together with Douglas Steger and Individual C, co-conspirators not named as defendants herein, and others known and unknown, unlawfully, willfully, and knowingly did combine, conspire, confederate, and agree together and with others to defraud the United States and an agency thereof, to wit, the IRS of the United States Department of Treasury, and to commit offenses against the United States, to wit, violation of Title 18, United States Code, Section 1341 and 1343, and Title 26, United States Code, Section 7201.” Indictment ¶ 80. Count Five then describes the two schemes involved: the referral fee fraud and Carpe Diem.

The Indictment's subsequent description of the overt acts indicates that Count Five may consist of multiple conspiracies. But, as in Gabriel, Count Five survives the facial test. The Government alleges that Bradley and Ohle, along with co-conspirators, are accused of participating in a conspiracy to “steal money by fraud, [and] pay no taxes.” (Gov't Opp. 47.) The Indictment alleges that both schemes sought to obtain money through fraud, and, thereafter, defrauded the IRS by concealing those ill-gotten gains. Both schemes occurred at the same time-between mid-November 2001 and February 2002. 6. (Gov't Opp. 44.) Ohle is alleged to have participated in all the Count Five schemes. But, contrary to Defendants' argument, Ohle was not the only member of the conspiracy alleged to have participated in multiple frauds. Steger and Bradley are both alleged to have submitted false invoices to J & G as part of the referral fee fraud. Indictment ¶¶ 84, 85. Bradley is alleged to have shared his proceeds with Individual C, who was owed legitimate referral fees. Ohle urged Individual C “to take care of” Bradley; Individual C then gave Bradley a check for $4,000. Indictment ¶ 92. Ohle and Steger are also alleged to have obtained funds from three different clients through investments in the Carpe Diem hedge fund. Indictment ¶¶ 95–102. One of these clients was Client E. Ohle is alleged to have misappropriated almost $350,000 of Client E's funds, which had been run through Carpe Diem. After Client E began to make inquiries regarding his investment, Ohle enlisted Bradley to replace a portion of the funds that had been misappropriated. Indictment ¶ 104.

Bradley's role in aiding Ohle to replace a portion of Client E's funds, which had been unlawfully diverted, alleges a “mutual dependence and assistance” across the schemes.See Vanwort , 887 F.2d at 383. Individual C's payment to Bradley shows that each individual submitting invoices was not acting in a vacuum. Given that the two frauds occurred at the same time and had common participants, and that compensation was paid amongst the co-conspirators (not just between co-conspirators and Ohle) and across the two frauds, we find that the Indictment alleges a single conspiracy on its face. Furthermore, proceeding on the current Count Five would not undermine any of the policies underlying the duplicity doctrine. 7. See Margiotta, 646 F.2d at 732–33. Defendants' motion to dismiss Count Five as duplicative is denied.

c. Severance

Federal Rule of Criminal Procedure 8(a) permits joinder of offenses if the offenses charged are “of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan.” Fed.R.Crim.P. 8(a). Rule 8(b) permits joinder of defendants “if they are alleged to have participated in the same act or transaction, or in the same series of acts or transactions, constituting an offense or offenses. The defendant may be charged in one or more counts together or separately. All defendants need not be charged in each count.” Fed.R.Crim.P. 8(b). Even if joinder is proper under Rule 8, a court may still sever pursuant to Rule 14(a) if it appears joinder would prejudice a defendant or the government. Fed.R.Crim.P. 14(a). “For reasons of economy, convenience and avoidance of delay, there is a preference in the federal system for providing defendants who are indicted together with joint trials.”United States v. Feyrer , 333 F.3d 110, 114 (2d Cir.2003).

i. Count Five

Bradley and Ohle both move to sever Count Five of the Indictment. “Though Rule 8(a) addresses joinder of offenses and Rule 8(b) concerns joinder of defendants, when a defendant in a multi-defendant action challenges joinder, whether of offenses or defendants, the motion is construed as arising under Rule 8(b).” 8. United States v. Stein, 428 F.Supp.2d. 138, 141 (S.D.N.Y.2006); see United States v. Turoff, 853 F.2d 1037, 1043 [62 AFTR 2d 88-5236] (2d Cir.1988). The Court of Appeals for the Second Circuit has explained that a ““series” exists if there is a logical nexus between the transactions.” United States v. Joyner, 201 F.3d 61, 75 (2d Cir.2001). Unlike Rule 8(a), “Rule 8(b) does not permit joinder of defendants solely on the ground that the offenses charged are of “the same or similar character.”” Turoff, 853 F.2d at 1042. Joinder is proper only when the charged offenses are either (1) “unified by some substantial identity of facts or participants,” or (2) “arise out of a common plan or scheme.” United States v. Attanasio, 870 F.2d 809, 815 (2d Cir.1989); see also Feyrer, 333 F.3d at 114; Lech, 161 F.R.D. at 256. We take “a common sense approach when considering the propriety of joinder under Rule 8(b),” Feyrer, 333 F.3d at 114, and ask whether “a reasonable person would easily recognize the common factual elements that permit joinder.”Turoff , 853 F.2d at 1044. Determining whether joinder of two conspiracies is permitted often requires a fact specific analysis. See United States v. Reinhold, 994 F.Supp. 194, 199 (S.D.N.Y.1998) (collecting cases).

The Government's most persuasive argument that the two conspiracies have a common purpose is found in its Surreply: “A significant aspect of implementation [of the HOMER conspiracy] involved Ohle's recruitment and funding of a nominee, or puppet, in the form of Individual A, whose third-party role Ohle needed to fund in order to make the HOMER tax shelter work. Ohle generated that funding through his scheme to obtain HOMER client referral fees, and other client fees, by fraud-the core aspects of Count Five.” (Gov't Surreply 7.) The problem, though, is that these facts are not alleged in the Indictment. The Indictment alleges that “OHLE embezzled funds from a client, “Client E,” and used some of the money to fund Individual A's participation in the HOMER tax shelter. In addition, OHLE obtained by fraud from Bank A referral fees related to the HOMER tax shelter, the majority of which OHLE kept.” Indictment ¶ 74. Based on the Indictment, Count Five is only alleged to have had a minor role in financing the HOMER conspiracy. Additionally, the money allegedly transferred to Individual A was related to Carpe Diem not to the referral fee scheme. Therefore, based on the language of the Indictment, we read Count Five to allege a conspiracy to commit fraud in order to obtain money-some of which was diverted to Individual A in order to fund his role in the HOMER conspiracy.

Courts have upheld joinder in situations where the criminal acts of one offense helped to finance the criminal acts of another offense. See Turoff, 853 F.2d at 1037 [62 AFTR 2d 88-5236];United States v. Catapono , 05 Cr. 229, 2008 WL 3992303 (E.D.N.Y. Aug. 28, 2008). In Turoff, the Court found that a “quid pro quo was exchanged between [the] participants,” and that “these financial benefits were part and parcel of the tax fraud.”Turoff , 853 F.2d at 1044. The court emphasized that “there is a key link between the two offenses-one scheme stemmed from the other-and that link provides a sound basis for joinder under Rule 8(b).” Turoff, 853 F.2d at 1044. Ohle is alleged to have used only a portion of the funds embezzled from Client E to finance Individual A's role in the HOMER conspiracy. The transfer of funds to Individual A's account does not provide a “key link” between the two conspiracies; rather, it appears to be an ancillary aspect of the Count Five conspiracy.

In United States v. Lech, then Judge Sotomayor found that “Turoff stands for the proposition that [defendants] may be tried together because they had specific knowledge of each other's activities, jointly participated in many of the acts alleged in the Indictment, and used that knowledge and participation as a springboard for the [other alleged offenses].” Lech, 161 F.R.D. at 257. The Indictment does not allege that Bradley had any knowledge of the HOMER conspiracy or the transfer of funds to Individual A. 9. Knowledge of the other conspiracy is not required, but it is an indicator of whether or not there is a common scheme or purpose. See United States v. Menashe, 741 F.Supp. 1135, 1139 (S.D.N.Y.1990) (“O'Toole's plan cannot be called “common”, since he is the only one alleged to be aware of it.....”)

Furthermore, the referral fees scheme's object-to fraudulently obtain fees from Bank A, a co-conspirator in the HOMER conspiracy-demonstrates that it did not have a common purpose with the HOMER conspiracy. In United States v. Rojas, S4 01 Cr. 251(AGS), 2001 WL 1568786 (S.D.N.Y. Dec. 7, 2001), the court found that a common scheme could not exist where the goals of the conspiracy were antagonistic. InRojas , the Count One conspiracy, known as the LRO, sought to sell narcotics for financial gain, and the Count Two conspiracy sought to rob the Count One conspiracy of its narcotics and sell the stolen drugs for their own financial gain. The two conspiracies had at least one defendant in common. The court concluded that the conspiracies did not have a common goal and the similarity of facts did not support joinder.Rojas , 2001 WL 1568786, at 5 (“[T]heir goals were antagonistic: for the Count Two Conspiracy to succeed, it would have to harm the LRO by stealing the LRO's drugs.”).

Although the instant case only involves defrauding a single co-conspirator, as opposed to the conspiracy as a whole, the referral fee scheme undermined the HOMER conspiracy by defrauding one of its co-conspirators. In United States v. Kouzmine, 921 F.Supp. 1131 (S.D.N.Y.1996), Judge Kaplan noted that because the two defendants had a falling out prior to the second conspiracy, “there is no colorable argument” that the two conspiracies were part of one single overarching scheme.Id. at 1133. In the instant case, the referral scheme's object of defrauding a HOMER co-conspirator of its financial gain from that conspiracy, demonstrates an animosity between the two schemes, analogous to the falling out inKouzmine.

Nor do we find that the conspiracies are unified by a “substantial identity of facts or participants.”Attanasio , 870 F.2d at 815. “It is well settled ... that two separate transactions do not constitute a series within the meaning of Rule 8(b) merely because they are of a similar character or involve one or more common participants.”Lech , 161 F.R.D. at 256; see also United States v. Van Berry, No. 04 Cr. 269(JBS), 2005 WL 1168398, at 5 (D.N.J. May 18, 2005) (“That the same participants were involved in crimes of a separate nature, however, (or at the very least that the defendants believed the same participants were involved in separate crimes) is not sufficient to connect otherwise distinct crimes.”); United States v. Giraldo, 859 F.Supp. 52, 55 (E.D.N.Y.1994) (“[D]efendants charged with two separate-albeit similar-conspiracies having one common participant are not, without more, properly joined.”).

The Government argues that the two conspiracies share a substantial identity of similar facts because both conspiracies involve the HOMER tax shelter. The Government further argues that if Count Five is severed, it will be forced to prove the HOMER tax shelter twice. We do not agree. Severance of Count Five will not force the Government to prove “essentially the same facts” more than once. See Shellef, 507 F.2d at 99–100. The HOMER tax shelter plays an important role in both conspiracies but in different capacities. The Government will need to provide evidence of HOMER to contextualize Count Five but it will not have to prove HOMER's illegality. In trying the HOMER conspiracy, the Government will likely devote a substantial amount of time to the issue of the legality of the tax shelter, dissecting how HOMER worked and the role Ohle played in developing and operating it. In contrast, the Government could prove its entire burden in Count Five-the fraud perpetrated through the referral fee scheme, the Carpe Diem scheme, and the embezzlement of Client E's funds-without ever proving or alleging the illegality of the HOMER tax shelter.

In the instant case, the similarity between the two conspiracies is marginal. The courts in this Circuit have consistently required a far more substantial connection.See United States v. Butler , No. S1 04 Cr. 340(GEL), 2004 WL 2274751, at 4 (S.D.N.Y. Oct. 7, 2004) (finding the facts involved in the two counts to be “so closely connected that proof of the very same facts is necessary to establish each of the joined offenses”); United States v. Ferrarini, 9 F.Supp.2d 284, 292 (S.D.N.Y.1998) (finding a substantial connection because “evidence of those activities-and their unlawful nature-would be necessary at a separate trial on the false statement charges to prove the falsity of the defendants' statements that they were not engaged in fraudulent activity”). The most significant common factor is the HOMER tax shelter, but the fact that the Count Five conspiracy sought to steal proceeds from the HOMER conspiracy significantly decreases the relevance of this factor.See Rojas , 2001 WL 1568786, at 5 (finding that the antagonistic nature of the two conspiracies negated the significance of the fact that they involved the same narcotics). We find that the two conspiracies do not have a common scheme or plan, nor do they share a substantial identity of facts and participants; Defendants' motion to sever Count Five 10. is granted. 11.

ii. Severance of Counts Six through Eight

Ohle also seeks to sever Counts Six through Eight. Counts Six and Seven charge Ohle with personal tax evasion in 2001 and 2002, respectively. Count Eight charges Ohle with obstructing and impeding the due administration of the Internal Revenue laws pursuant to 26 U.S.C. § 7212(a). As we have already severed Count Five, Ohle is the only defendant remaining in the Indictment. Therefore, Rule 8(a) governs the question of whether Counts Six through Eight are properly joined with Counts One through Four. Rule 8(a), unlike Rule 8(b), permits joinder solely on the ground that the offenses charged are “of the same or similar character.” Fed.R.Crim.P. 8(a); see Turoff, 853 F.2d at 1042.

Ohle's challenge to the joinder of Count Eight is without merit. Ohle is charged with obstructing and impeding the administration of the Internal Revenue laws through the design and implementation of the HOMER tax shelter. Without question Count Eight is “based on the same act or transaction” as Counts One through Four. Fed.R.Crim.P. 8(a). Therefore, Count Eight is properly joined.

With regard to severing Counts Six and Seven, we find this to be a close question. “[T]ax counts can properly be joined with non-tax counts where it is shown that the tax offenses arose directly from the other offenses charged.”Turoff , 853 F.2d at 1043; see also Shellef, 507 F.3d at 87–88. “The most direct link possible between non-tax crimes and tax fraud is that funds derived from non-tax violations either are or produce the unreported income.” Turoff, 853 F.2d at 1043. “However, if the character of the funds derived do not convince us of the benefit of joining these two schemes in one indictment, other overlapping facts or issues may.”Id. at 1043–44.

The Government has alleged a relationship between the unreported income in Counts Six and Seven and the HOMER conspiracy proceeds. However, the Government relies on allegations outside of the Indictment. Although the Court of Appeals for the Second Circuit has not directly confronted the question of whether joinder must be decided on the face of the Indictment, the Court recently “caution[ed] that the plain language of Rule 8(b) does not appear to allow for consideration of pre-trial representations not contained in the indictment, just as the language of the Rule does not allow for the consideration of evidence at trial.” United States v. Rittweger, 524 F.3d 171, 178 n. 3 (2d Cir.1998). Accordingly, we find that the Government's allegations regarding the relationship between the unreported income and the HOMER conspiracy proceeds cannot justify joinder.

Counts Six and Seven are alleged to be objects of the Count Five conspiracy. The unreported income includes money Ohle received from the referral fee fraud and Carpe Diem. (Gov't Mem. 72.) Thus, there is a “direct link” between the unreported income in Counts Six and Seven and the proceeds of the Count Five conspiracy. See Turoff, 853 F.2d at 1043. Given the close nexus between Counts Five, Six, and Seven, we conclude that Counts Six and Seven should also be severed.

Defendants' motion to sever is granted as to Counts Five, Six, and Seven and denied as to Count Eight.

d. Statute of Limitations

i. Count One

The applicable limitations period for a wire fraud conspiracy charge is generally five years. 18 U.S.C. § 3282;see United States v. Scop , 846 F.2d 135, 138 (2d Cir.1988). However, “if the offense affects a financial institution,” then a ten-year statute of limitations applies. 18 U.S.C. § 3293(2); see United States v. Bouyea, 152 F.3d 192, 195 (2d Cir.1998). Ohle does not contest that Bank A is a financial institution within the meaning of the statute. Rather, Ohle argues that § 3293(2) does not apply because Bank A was an active participant in the fraud, not the object of the fraud, and not directly affected by the fraud.

In United States v. Serpico, 320 F.3d 691, (7th Cir.2003), the Seventh Circuit specifically rejected the defendant's argument that a financial institution is not “affected” if it is an active participant in the offense.Serpico , 320 F.3d at 695. The Court concluded that the financial institution's active participation in the scheme did not negate the effect on the institution. Id. (“[W]e find it hard to understand how a bank that was put out of business as a direct result of the scheme was not “affected,” even if it played an active part in the scheme.”). Ohle attempts to distinguish Serpico, by limiting the holding to apply only when the financial institution is both the object of the scheme to defraud and a participant in the scheme. (Ohle Reply Memo. 6–7, n. 1.)

The statute applies a ten year period of limitations if the offense “affects” a financial institution. 18 U.S.C. § 3293(2). This Circuit has found that this language is to be read broadly. See Bouyea, 152 F.3d 192, 195 (2d Cir.1998) (“[T]he statute is clear: it broadly applies to any act of wire fraud “that affects a financial institution.””). In United States v. Bouyea, the Court of Appeals for the Second Circuit found that the statute was applicable to a wholly owned subsidiary where the parent company, but not the subsidiary, was a financial institution. Bouyea, 152 F.3d at 195. The Second Circuit rejected the defendant's argument that “the defrauding of a financial institution's subsidiary-leading to a reduction of the financial institution's assets-is insufficient as a matter of law to meet the “affect[ing] a financial institution” requirement of § 3293(2).”Id. In reaching this conclusion, the Court extensively quoted the Third Circuit's reasoning inUnited States v. Pellulo , 964 F.3d 193 (3d Cir.1992). Id. Notably, Bouyea quotes the Third Circuit's conclusion that “[the defendant's] argument would have more force if the statute provided for an extended limitations period where the financial institution is the object of fraud. Clearly, however, Congress chose to extend the statute of limitations to a broader class of crimes.” Id. (quoting Pellulo, 964 F.2d at 216).

Bouyea “easily reject[s]” the argument that the financial institution must be the object of fraud, requiring, instead, that the effect on the financial institution be “sufficiently direct.” Bouyea, 152 F.3d at 195. The effect on Bank A was direct. Ohle and his co-conspirators are alleged to have used Bank A to perpetrate the HOMER tax shelter “through the Bank's ostensible backing of the transaction, the use of its subsidiary as the “trustee” in each HOMER shelter, and the use of Bank funds.” (Gov't Opp. 16.) As Ohle argues himself, Bank A was an active participant in the fraud. As a result of this participation, Bank A was not only exposed to substantial risk but experienced actual losses.Id. Bank A paid over $24,000,000 in settlements to HOMER clients and over $4,200,000 in attorneys' fees defending the suits. Id. Ohle's argument that this effect is too remote is unpersuasive. In using Bank A as a central player in the HOMER conspiracy, Ohle and his co-conspirator's knew they were exposing it to risk if their fraud was uncovered. “[T]he whole purpose of § 3293(2) is to protect financial institutions, a goal it tries to accomplish in large part by deterring would-be criminals from including financial institutions in their schemes.” Serpico, 329 F.3d at 694–95. Through his alleged use of Bank A in the HOMER conspiracy, Ohle put Bank A at substantial risk. This risk resulted in millions of dollars of losses for the financial institution, and the losses were a direct and foreseeable result of the HOMER conspiracy. We find the ten year statute of limitations applies, 12. and Ohle's motion to dismiss Count One as time-barred is denied. 13.

ii. Counts Two, Four, and Six

Ohle contends that Counts Two, Four and Six are also time-barred. Pursuant to Section 6531(2), a six year statute of limitations period is applicable to tax evasion offenses. 26 U.S.C. § 6531(2). The period begins to run upon the filing of the tax returns that underlie those counts. See United States v. Habig, 390 U.S. 222, 223 [21 AFTR 2d 803] (1968). The initial indictment in this case was returned on November 13, 2008. The returns at issue were filed approximately six years and one month prior to the Indictment: October 17, 2002 (Count Two), October 21, 2002 (Count Four) and October 16, 2002 (Count Six).See Indictment ¶¶ 38, 70, 107. Section 6531 provides for a tolling of the limitations period for the time “during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States or is a fugitive from justice.” 26 U.S.C. § 6531. The tolling provision is applicable even if the defendant is outside of the country for business or pleasure trips.United States v. Myerson , 368 F.2d 393, 395 [18 AFTR 2d 5997] (2d Cir.1966); see also United States v. Marchant, 774 F.2d 888, 892 [57 AFTR 2d 86-451] (8th Cir.1985). The Government states that it will prove at trial that Ohle spent at least two months outside of the country, which would result in the counts at issue being timely. Ohle's motion to dismiss Counts Two, Four and Six as time-barred is denied.

iii. Count Eight

Title 26, United States Code, Section 6531 sets forth the periods of limitation for criminal tax prosecutions.See 26 U.S.C. § 6531. The statute provides that, in general, criminal tax proceedings must be initiated within three years of the offense, but it carves out eight exceptions for which the statute of limitations is six years.Id. Section 6531(6) provides a six year statute of limitations “for the offense described in section 7212(a) (relating to intimidation of officers and employees).” 26 U.S.C. § 6531(6). Ohle urges a literal reading of the statute, which would apply the six year statute of limitations to violations of Section 7212(a) related to intimidation of officers and employees but not to omnibus clause violations of 7212(a).

Numerous circuits have applied the six year statute of limitations to the omnibus clause of Section 7212(a).See United States v. Kassouf , 144 F.3d 952, 959 [81 AFTR 2d 98-2066] (6th Cir.1998) (“There is nothing to indicate that Congress intended the parenthetical to be limiting rather than merely descriptive of § 7212(a). Similar parentheticals in other statutes have also been found to be descriptive rather than limiting.”); United States v. Wilson, 118 F.3d 228, 236 [80 AFTR 2d 97-5281] (4th Cir.1997) (applying, without discussion, the six year period of limitations to the alleged violation of the omnibus clause of § 7212(a)); United States v. Workinger, 90 F.3d 1409, 1414 [78 AFTR 2d 96-5710] (9th Cir.1996) (“In short, the structure of § 6531 makes it apparent that the parenthetical language in § 6531(6) is descriptive, not limiting.”). In United States v. Kelly, this Circuit found that the district court's application of the six year period of limitations to an omnibus clause violation of Section 7212(a) was not plain error. Kelly, 147 F.3d 172, 177 [82 AFTR 2d 98-5030] (2d Cir.1998). We find no reason to diverge from the persuasive reasoning of the courts that have previously addressed this issue. 14. Accordingly, we find that the six year period of limitations should be applied to the alleged violation of the omnibus clause of Section 7212(a). Ohle's motion to dismiss Count Eight as time-barred is denied.

e. Venue

Defendants Ohle and Bradley allege that venue is not proper in the Southern District of New York and move to dismiss Count Five. Ohle also moves to dismiss the substantive tax offenses-Counts Two, Three, Four, Six and Seven-for lack of venue. The United State Constitution provides that a defendant has the right to trial in “the district wherein the crime shall have been committed.” U.S. Const., Amend. VI.; see also United States v. Beech-Nut Nutrition Corp., 871 F.2d 1181, 1188 (2d Cir.1989). Where “the acts constituting the crime and the nature of the crime charged implicate more than one location, venue is properly laid in any of the districts where an essential conduct element of the crime took place.” United States v. Ramirez, 420 F.3d 134, 139 (2d Cir.2005). The Government bears the burden at trial of proving venue by a preponderance of the evidence. United States v. Potamitis, 739 F.2d 784, 791 (2d Cir.1989). When the defendant is charged with more than one count, venue must be proper to each count. Beech-Nut Nutrition Corp., 871 F.2d at 1188.

The Government need only allege that criminal conduct occurred within the venue, “even if phrased broadly and without a specific address or other information,” in order to satisfy its burden with regard to pleading venue. United States v. Bronson, No. 05 Cr. 714(NGG), 2007 WL 2455138, at 4 (E.D.N.Y. Aug. 23, 2007); see also United States v. Szur, 97 Cr. 108(JGK), 1998 WL 132942, at 9 (S.D.N.Y. Mar. 20, 1998). In each count of the Indictment, the Government alleges that the offenses occurred “in the Southern District of New York and elsewhere.” See Indictment ¶¶ 40, 55, 72, 80, 107, 109. These allegations alone are sufficient to survive a pretrial motion to dismiss. 15. The question of whether there is sufficient evidence to support venue is appropriately left for trial. 16.Chalmers, 474 F.Supp.2d at 575. Defendants' motions to dismiss based on venue are denied without prejudice to renewing those motions at the close of the Government's case. 17.

f. Sufficiency of Pleading (Count Eight)

In Count Eight, Ohle is charged with obstructing and impeding the due administration of the Internal Revenue laws pursuant to 26 U.S.C. § 7212(a). Ohle alleges that Count Eight is insufficiently pled and applying Section 7212(a) in the instant case would render the statute unconstitutionally vague. Count Eight, which tracks the language of the statute and incorporates specific allegations from previous paragraphs in the Indictment, is sufficiently pled and provides Ohle with fair notice of the charges against him. See United States v. Walsh, 914 F.3d 37, 44 (2d Cir.1999) (“[W]e have consistently upheld indictments that do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime.”) (internal citations and quotations omitted); United States v. Tramunti, 513 F.2d 1087, 1113 (2d Cir.1975) (“[A]n indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime.”).

Ohle argues that under United States v. Kassouf, 144 F.3d 952 [81 AFTR 2d 98-2066] (6th Cir.1998), Section 7212(a) requires proof of a pending IRS action that the defendant corruptly endeavored to obstruct; and, therefore, the Government has failed to allege a violation of Section 7212(a). (Ohle Mem. 25.) At the outset we note that Kassouf was immediately limited in its own circuit. 18. The Court of Appeals for the Second Circuit, along with many other circuits, has repeatedly affirmed convictions for violations of § 7212(a), or otherwise failed to raise objections to § 7212(a) indictments, in which no IRS proceeding or investigation was pending. See United States v. Wilner, No. 07 Cr. 183(GEL), 2007 WL 2963711 [100 AFTR 2d 2007-6349], at 3 (S.D.N.Y. Oct. 11, 2007) (collecting cases). Furthermore,Kassouf is fundamentally at odds with this Circuit's broad interpretation of the omnibus clause. In United States v. Kelly, the Second Circuit held that the language of the omnibus clause is extremely broad and “renders criminal “any other” action which serves to obstruct or impede the due administration of the revenue laws.” Kelly, 147 F.3d at 175.

Count Eight, which incorporates prior paragraphs of the Indictment, alleges numerous specific acts of obstruction, including but not limited to undermining the ability of the IRS to ascertain HOMER clients' true tax liabilities and determine whether penalties should be obtained through the drafting of fraudulent opinion letters. Indictment ¶ 110 (incorporating ¶ 17). These allegations, which allege that Ohle participated in a scheme to conceal his own income and the income of others from the IRS, charge a violation of Section 7212(a) with sufficient specificity. See Wilner, 2007 WL 2963711 [100 AFTR 2d 2007-6349], at 6 (denying the motion to dismiss an indictment, which charged the defendant “with scheming to create a false paper trail of checks and divert income to a corporation in order to avoid taxes properly owing on income he himself earned as an individual (or similarly owed by other taxpayers)”).

Ohle also argues that the statute is unconstitutionally vague as applied. The Second Circuit rejected a similar argument inKelly. In Kelly, the court relied on the “well-reasoned opinion” of Judge Gertner inUnited States v. Brennick, 908 F.Supp. 1004 [79 AFTR 2d 97-1210] (D.Mass.1995), to conclude that the court's broad interpretation of the statute did not run afoul of the constitutional doctrines of overbreadth and vagueness. Id. We similarly find that application of Section 7212(a) in the instant case does not render the statute unconstitutionally vague. Ohle's motion to dismiss Count Eight is denied.

g. Lack of Pre-Indictment Administrative Conferences

Ohle argues that the failure of the IRS and the DOJ to offer Ohle a pre-indictment conference merits dismissal of the Indictment. However, IRS guidelines do not provide for a pre-indictment conference “if the taxpayer is the subject of a grand jury investigation,” as was the case here. IRM 9.5.12.3.1 (July 25, 2007). The United States Attorneys' Manual (“USAM”) provides that, “If time and circumstances permit, the Tax Division generally grants a taxpayer's written request for a conference with the Division in Washington, D.C.” USAM 6-4.214 (Sept.2007). However, the Second Circuit has held that the provisions of the USAM “reflect executive branch policy judgments” and “do not confer substantive rights on any party.” United States v. Piervinanzi, 23 F.3d 670, 682–83 (2d Cir.1994);see also United States v. Kelly, 147 F.3d 172, 176 [82 AFTR 2d 98-5030] (2d Cir.1998) (stating that “[internal department] guidelines provide no substantive rights to criminal defendants” in discussing DOJ Criminal Tax Manual). The Government claims it decided not to offer Ohle a pre-indictment conference in order to prevent Ohle from dissipating assets subject to forfeiture before he was indicted and arrested. This decision does not provide a basis for dismissal of the indictment. See United States v. Goldstein, 342 F.Supp. 661, 666 [30 AFTR 2d 72-5475] (E.D.N.Y.1972) (failure to offer preindictment conference in criminal tax case not grounds for dismissal of indictment because “such a conference is clearly not a matter of right”).

h. Request for Evidentiary Hearings

Ohle seeks a hearing on two issues: (1) whether grand jury subpoenas subsequent to the return of the initial Indictment were issued for the improper purpose of gathering evidence at trial; and (2) whether the Government improperly utilized two civil tax investigations to gather proof for the pending criminal trial.

Turning first to the issue of Grand Jury subpoenas, we find that there is no credible claim of improper use. The law is settled in this Circuit that “[i]t is improper to utilize a Grand Jury for the sole or dominating purpose of preparing an already pending indictment for trial.” In reGrand Jury Subpoena Duces Tecum Dated January 2, 1985 (Simels), 767 F.2d 26, 29 (2d Cir.1985); see also United States v. Dardi, 330 F.2d 316, 336 (2d Cir.1964). But “absent some indicative sequence of events demonstrating an irregularity, a court has to take at face value the Government's word that the dominant purpose of the Grand Jury proceedings is proper.” United States v. Raphael, 786 F.Supp. 355, 358 (S.D.N.Y.1992).

Ohle relies principally on In re Grand Jury Subpoena Duces Tecum Dated January 2, 1985 (Simels), 767 F.2d 26 (2d Cir.1985). In Simels, the Government first issued a trial subpoena for certain evidence. The trial subpoena was challenged, and the Government, instead of responding to that challenge, issued a Grand Jury subpoena for the exact same evidence. Id. at 29–30. In quashing the subpoena, the Second Circuit noted that the timing of the subpoena “casts significant light on its purposes.”Id. at 29. Ohle argues that the timing in the instant case is suspicious because Grand Jury subpoenas were issued after the initial Indictment. But what Ohle fails to acknowledge is that subsequent superseding indictments were filed. Since the filing of the Second Superseding Indictment on August 11, 2009, not a single Grand Jury subpoena has been issued. Ohle has simply failed to point to any aspect of the Government's actions that is questionable, and, thus, we find that there is no reason to hold an evidentiary hearing with regard to the Grand Jury subpoenas.

Next, Ohle argues an evidentiary hearing is necessary to determine whether the evidence obtained through tax audits of Ohle should be suppressed. The Government may use evidence acquired in a civil action in a subsequent criminal proceeding, unless the defendant demonstrates that the use of such evidence would violate his or her constitutional rights or depart from the proper administration of criminal justice. United States v. Kordel, 397 U.S. 1, 11–13 (1970). InKordel, the Supreme Court set forth certain circumstances where a defendant's right to due process may be violated, including when the Government brings a civil action solely for the purpose of obtaining evidence in a criminal prosecution. Id. at 12; see also United States v. Teyibo, 877 F. Supp 846, 856 (S.D.N.Y.1995).

Although Ohle cites a number of legal propositions, he alleges no acts of bad faith on the part of the Government to support the contention that the Government conducted the civil tax proceedings in order to obtain evidence for the pending criminal trial. He argues only that the timing of the two civil audits conducted in the midst of the criminal tax investigation is “suspicious” without alleging relevant dates or information obtained. Notably, Ohle does not contest the Government's statement that he had counsel during both of the audits, and that one of the audits was commenced prior to the criminal investigation (Gov't Opp. 77 n. 45.) Ohle has not raised any issues or pointed to any potential infringement of his rights that would warrant an evidentiary hearing. Ohle's motion for an evidentiary hearing is denied.

II. Conclusion

Defendants' motions to sever Count Five, Count Six, and Count Seven are granted; Defendant Ohle's motion to sever Count Eight is denied. All remaining motions are also denied.

SO ORDERED.

1.
See also United States v. DeFiore, 720 F.2d 757 (2d Cir.1983) (distinguishingHenderson in prosecution for wire fraud where state tax laws were violated, and noting that the Court of Appeals for the Ninth Circuit had rejected Henderson),cert. denied, 466 U.S. 906 (1984); United States v. Mangan, 575 F.2d 32, 49 [41 AFTR 2d 78-1174] (2d Cir.) (distinguishingHenderson in prosecution for wire fraud and federal tax evasion), cert. denied, 439 U.S. 931 (1978).
2.
See, e.g., United States v. Dale, 991 F.2d 819, 849 [76 AFTR 2d 95-7649] (D.C.Cir.1993) (rejectingHenderson in prosecution for wire fraud and federal tax evasion); United States v. Computer Sciences Corp., 689 F.2d 1181, 1187 n. 13 (4th Cir.1982) (rejectingHenderson in prosecution for mail and wire fraud and making false claims to the government), cert. denied, 459 U.S. 1105 (1983), overruled in nonrelevant part by Busby v. Crown Supply, Inc., 896 F.2d 833, 841 (4th Cir.1990); United States v. Shermetaro, 625 F.2d 104, 110–11 [46 AFTR 2d 80-5303] (6th Cir.1980) (rejecting Henderson in prosecution for conspiracy to defraud the United States and federal tax evasion);United States v. Weatherspoon , 581 F.2d 595, 599–600 (7th Cir.1978) (distinguishingHenderson in prosecution for mail fraud and making false statements to the government); United States v. Miller, 545 F.2d 1204, 1216 [39 AFTR 2d 77-364] n. 17 (9th Cir.1975) (rejectingHenderson in prosecution for mail fraud and federal tax evasion), cert. denied, 430 U.S. 930 (1977),overruled on other ground by, Boulware v. United States , 552 U.S. 421 [101 AFTR 2d 2008-1065] (2008); see also United States v. LaBar, 506 F.Supp. 1267, 1274 (M.D.Pa.1981) (distinguishing Henderson in prosecution for mail fraud and making false statements to the government),aff'd mem. , 688 F.2d 826 (3d Cir.), cert. denied, 459 U.S. 945 (1982).
3.
See United States v. Regan, 713 F.Supp. 629 (S.D.N.Y.1989) (upholding inclusion of mail fraud allegations charging tax fraud as RICO predicates);United States v. Standard Drywall Corp. , 617 F.Supp. 1283, 1295–96 (S.D.N.Y.1985) (noting that “[a]lthough never rejected by the Second Circuit,Henderson has not carried the day in that court either”); United States v. Abrahams, 493 F.Supp. 296 (S.D.N.Y.1980) (noting Henderson's rejection by other courts and refusing to hold that the Commodity Futures Trading Commission Act had implicitly repealed in part the mail and wire fraud statutes). But see United States v. Gallant, 570 F.Supp. 303, 309 (S.D.N.Y.1983) (followingHenderson in disallowing dual prosecution for mail and wire fraud and copyright violations), abrogated on other grounds by Dowling v. United States, 473 U.S. 207 (1985).
4.
Ohle also argues that, even if the conspiracy to commit wire fraud allegations are upheld, the Government is not authorized to seek criminal forfeiture based on the proceeds of a conspiracy to commit wire fraud. However, this argument is based on a misreading of the complex statutory scheme at issue. 28 U.S.C. § 2461(c) allows the Government to seek criminal forfeiture when a defendant is charged with an offense for which any form of forfeiture is authorized. 18 U.S.C. § 981(a)(1)(c) authorizes civil forfeiture for “any offense constituting “specified unlawful activity” (as defined in 18 U.S.C. § 1957(c)(7) of this title), or a conspiracy to commit such offense.” “Specified unlawful activity” is defined by § 1957(c)(7) to include offenses listed in the federal RICO statute, 18 U.S.C. § 1961(1). Lastly, § 1961(1)(b) includes wire fraud within the definition of “racketeering activity.” Ohle's argument fails to consider the phrase “or a conspiracy to commit such offense” in § 981(a)(1)(c), which has the effect of allowing criminal forfeiture of the proceeds of a conspiracy to commit wire fraud.See United States. v. Evanson , No. 05 Cr. 00805(TC), 2008 WL 3107332, at 1 (D.Utah Aug. 8, 2008) (“[P]ursuant to Section 2461(c), the government may seek the criminal forfeiture of the proceeds of conspiracy to commit mail fraud and wire fraud if the indictment alleges those offenses.”). The Government, therefore, is authorized to seek criminal forfeiture of the proceeds of a conspiracy to commit wire fraud, and Ohle's motion to dismiss the forfeiture allegations is denied.
5.
The Second Circuit has repeatedly emphasized that the determination of whether a single conspiracy or multiple conspiracies exists is a question of fact for the jury. See United States v. Johansen, 56 F.3d 347, 350 (2d Cir.1995); United States v. Maldonado-Rivera, 922 F.2d 934, 962 (2d Cir.1990);United States v. Vanwort , 887 F.2d 375, 383 (2d Cir.1989). Not only is Gabriel from this Circuit, but unlike the court inMuñoz-Franco , Judge Rakoff discusses the strong preference for juries to determine the question of whether multiple or single conspiracies exist and how this preference affects the pleading requirements. See Gabriel, 920 F.Supp. at 504–05.
6.
The only act alleged to have occurred prior to November 2001 is the embezzlement of Client E's trust, which the Indictment alleges began as early as 2000 and continued through 2003. Indictment ¶¶ 103–04. The fact that the embezzlement occurred over a significantly broader period of time than the referral fee fraud and the Carpe Diem fraud does not render it a distinct conspiracy. In Gabriel, the two conspiracies did not overlap in time at all, as the second set of criminal acts sought to cover up the first set.Gabriel , 920 F.Supp. at 503–04.
7.
Courts have noted that much of the risk of prejudice created by a potentially duplicative charge can be cured through proper instructions at trial. See Szur, 1998 WL 132942, at 11 (Defendants “may properly request a multiple conspiracies jury instruction depending upon the evidence presented at trial.”); Murray, 618 F.2d at 898 (“As we have stated in a related context, “(i)t is assumed that a general instruction on the requirement of unanimity suffices to instruct the jury that they must be unanimous on whatever specifications they find to be the predicate of the guilty verdict.””).
8.
This Circuit is currently divided on whether Rule 8(a) or Rule 8(b) governs when a defendant in a multi-defendant case seeks to sever a count in which only he or she is charged. See United States v. Shellef, 507 F.2d 82, 97 n. 12 (2d Cir.2007). But what is clear is that when a defendant, such as Bradley, seeks to sever a count in which he and another defendant are charged, we apply Rule 8(b).See United States v. Turoff , 853 F.2d 1037, 1043 [62 AFTR 2d 88-5236] (2d Cir.1988).
9.
In oral argument, the Government stated that “Mr. Bradley's own words in a deposition, which we will seek to have admitted at trial, show that he had knowledge of aspects of the Count One conspiracy, that he knew about the transaction, that he knew about the trust aspect of it, and that he knew that he was required to profess that he had done legal services in connection with that transaction in order to get referral fees.” (Tr. at 51.) Although the Court of Appeals for the Second Circuit has not directly addressed the question of whether joinder must be decided on the face of the Indictment, the Court recently “caution[ed] that the plain language of Rule 8(b) does not appear to allow for consideration of pre-trial representations not contained in the indictment.”United States v. Rittweger , 524 F.3d 171, 178 n. 3 (2d Cir.2008). Regardless, the proffered evidence would not alter our conclusion. At most, this evidence suggests that Bradley might have had some knowledge of the illegality of HOMER. InLech , the court found that the defendant had “very little, if any, knowledge of the other schemes, and did not participate in them.” Id. at 257. Similarly, even if Bradley's deposition testimony would show some knowledge of HOMER, his knowledge of its purpose appears to be marginal, if it existed at all, and there are no allegations that he had any role in that conspiracy.
10.
Ohle moves the Court to order a severance of Defendants pursuant to Rule 14. Ohle argues under Bruton v. United States, 391 U.S. 123 (1968), that he will be prejudiced by the admission of Bradley's proffer agreement. The Government has stated that it would redact the proffer agreement in order to ensure that it would not prejudice Ohle, including redacting any mentions of Ohle's name. Ohle protests that no such proposed redacted version of the agreement has been supplied. Prior to admission, the Court will inspect any proposed proffer agreement. If the proffer agreement cannot be adequately redacted in order to ensure that it does not unfairly prejudice Ohle, than the Court will exclude it. Ohle's motion to sever Defendants is denied.
11.
Ohle and Bradley both argue that the wire fraud allegations in Count Five should be dismissed because they fail to state a legally cognizable claim. These arguments rely heavily on the issue of repugnance, which is moot as the Court has severed Count Five. To the extent that issues remain as to whether Bank A had a property right in the referral fees, we need not reach that issue at this point. To find in Defendants' favor on this issue, the Court would have to determine that the HOMER tax shelter is illegal; and, therefore, any right Bank A had to the referral fees was based on an illegal agreement. This determination is not one the Court can or should make at this juncture. Defendants' motion to dismiss the mail and wire fraud allegations in Count Five is denied.
12.
We need not address the Government's additional arguments that Count One is timely, having concluded that the ten-year statute of limitations applies.
13.
Defendants also challenge Count Five as time-barred. The ten year statute of limitations also applies to Count Five. Bank A was the object of the referral fee scheme. (Gov't Opp. 48.) This scheme is alleged to have defrauded Bank A of over a million dollars. Id. Therefore, the Count Five conspiracy, which in part sought to defraud Bank A of money through the fraudulent referral fee scheme and did, in fact, defraud the bank of over a million dollars, affects a financial institution within the meaning of Section 3293(2). See Bouyea, 152 F.3d at 195;Serpico , 320 F.3d at 695.
14.
Ohle cites only one case where a court has declined to apply 6531(6) to omnibus violations of Section 7212(a). (Ohle Mem. 23–4); see United States v. Connell, No. CR-F 94-5052(REC) (E.D.Cal., Feb. 6, 1995). Ohle does not cite specifically to Connell, an unreported decision from the Eastern District of California, nor the court's reasoning, but rather to the discussion of Connell in United States v. Brennick, 908 F.Supp. 1004 [79 AFTR 2d 97-1210] (D.Mass.1995). Brennick declined to followConnell, saying that the court “appeared to assume” that 6531(6) applied only to intimidation offenses.Brennick , 908 F.Supp. at 1017. Connell predates the Ninth Circuit decision in Workinger, where the Court found that the six year period of limitations did, in fact, apply to omnibus violations of Section 7212(a).Workinger , 90 F.3d at 1414.
15.
See Bronson, 2007 WL 2455138, at 4 (“The Superseding Indictment alleges facts sufficient to support venue because it alleges that the criminal activity occurred “within the Eastern District of New York and elsewhere.””); United States v. Chalmers, 474 F.Supp.2d 555, 574–75 (S.D.N.Y.2007) (rejecting defendant's argument that the “allegation that the charged conduct took place “in the Southern District of New York and elsewhere” is insufficient to support venue because it fails to indicate which specific criminal acts were committed in this District”); Szur, 1998 WL 132942, at 9 (“[O]n its face, the Indictment alleges that the offense occurred “in the Southern District of New York and elsewhere,” which is sufficient to resist a motion to dismiss.”).
16.
Bradley contends that he will suffer substantial hardship and prejudice as a result of a trial in New York because his family, including his daughter who has a congenital brain formation, lives in Louisiana. (Bradley Mem. 17–18.) As Bradley is currently incarcerated in Georgia, these hardships are no longer relevant.
17.
Ohle also asserts that upholding venue would violate Ohle's Sixth Amendment right to be tried in “the district wherein the crime shall have been committed.” (Ohle Mem. 15.) We deny the motion on this basis as well.
18.
In United States v. Bowman, 173 F.3d 595 [83 AFTR 2d 99-2219] (6th Cir.1999), after limiting the applicability ofKassouf to its specific facts, Bowman held that Section 7212(a) was properly applied to the defendant, who provided false information to the IRS in an effort to stimulate an IRS investigation of other tax payers, despite the fact that there was no pending IRS action. Bowman, 173 F.3d at 600.
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