United States Conspiracy Law: Cases and Legal Principles, Study notes of Business

Download United States Conspiracy Law: Cases and Legal Principles and more Study notes Business in PDF only on Docsity! 19018755.1 Criminal Tax Manual prev ● next TABLE OF CONTENTS 23.00 CONSPIRACY TO COMMIT OFFENSE OR TO DEFRAUD THE UNITED STATES .............................................................................................................................. 1 23.01 STATUTORY LANGUAGE: 18 U.S.C. § 371 .................................................... 1 23.02 GENERALLY....................................................................................................... 1 23.03 ELEMENTS .......................................................................................................... 3 23.04 AGREEMENT ...................................................................................................... 3 23.04[1] Proof of Agreement ...................................................................................... 3 23.04[2] Two or More Persons ................................................................................... 5 23.04[2][a] Limitation on Naming Unindicted Coconspirators .............................. 5 23.04[2][b] Conspiring With Government Agents ................................................. 5 23.04[2][c] Corporations as Conspirators ............................................................... 6 23.04[3] Scope of the Agreement -- Single or Multiple Conspiracies ....................... 6 23.05 MEMBERSHIP..................................................................................................... 9 23.05[1] Intent Requirement ....................................................................................... 9 23.05[2] Proof of Membership ................................................................................. 10 23.05[3] Pinkerton Liability ..................................................................................... 12 23.06 OVERT ACT ...................................................................................................... 14 23.06[1] Definition ................................................................................................... 13 23.06[2] Acts of Concealment .................................................................................. 15 23.07 CONSPIRACY TO DEFRAUD THE UNITED STATES ................................. 16 23.07[1] Generally .................................................................................................... 16 23.07[1][a] Sec. 371: Two Forms of Conspiracy ................................................. 16 Revised September 2020 - ii - 19018755.1 23.07[1][b] Scope of Defraud Clause ................................................................... 17 23.07[1][c] Pleading Requirements ...................................................................... 19 23.07[2] Klein Conspiracy ........................................................................................ 20 23.07[2][a] Generally ............................................................................................ 20 23.07[2][b] Examples: Klein fact patterns ............................................................ 22 23.07[2][c] Overbreadth Concerns ....................................................................... 42 23.07[2][d] Precedent Governing Different Statutes ............................................ 41 23.07[3] Overlapping Conspiracies and the Sixth Circuit’s Decision in Minarik .... 43 23.07[4] Scope of Intent ........................................................................................... 45 23.07[4][a] Generally ............................................................................................ 45 23.07[4][b] Multiple Purposes .............................................................................. 45 23.07[4][c] Klein Conspiracy Coupled With a Narcotics or Money Laundering Prosecution ............................................................................................................ 47 23.08 STATUTE OF LIMITATIONS .......................................................................... 50 23.08[1] Generally .................................................................................................... 50 23.08[2] Beginning of Limitations Period ................................................................ 51 23.08[3] Withdrawal Defense ................................................................................... 51 23.09 CO-CONSPIRATOR STATEMENTS ............................................................... 53 23.10 VENUE ............................................................................................................... 55 23.11 SENTENCING GUIDELINES ........................................................................... 56 - 3 - 19018755.1 Goldstein, Conspiracy to Defraud the United States, 68 Yale L.J. 405 (1959). Accordingly, the following discussion is intended to highlight only those issues relevant to criminal tax prosecutions. 23.03 ELEMENTS Conspiracies under both the offense clause and the defraud clause of 18 U.S.C. § 371 require three elements to be proved beyond a reasonable doubt: 1. The existence of an agreement by two or more persons to commit an offense against the United States or to defraud the United States; 2. The defendant’s knowing and voluntary participation in the conspiracy; and 3. The commission of an overt act in furtherance of the conspiracy. United States v. Falcone, 311 U.S. 205, 210 (1940); United States v. Ngige, 780 F.3d 497, 503 (1st Cir. 2015); United States v. Svoboda, 347 F.3d 471, 476 (2d Cir. 2003); United States v. Whiteford, 676 F.3d 348, 357 (3d Cir. 2012); United States v. Fleschner, 98 F.3d 155, 159-60 (4th Cir. 1996); United States v. Njoku, 737 F.3d 55, 64 (5th Cir. 2013); United States v. Douglas, 398 F.3d 407, 413 (6th Cir. 2005); United States v. Mealy, 851 F.2d 890, 895-96 (7th Cir. 1988); United States v. Hayes, 574 F.3d 460, 472 (8th Cir. 2009); United States v. Montgomery, 384 F.3d 1050, 1062 (9th Cir. 2004); United States v. Hanzlicek, 187 F.3d 1228, 1232-33 (10th Cir. 1999) (adding a fourth element of “interdependence”); United States v. Hough, 803 F.3d 1181, 1187 (11th Cir. 2015); United States v. Treadwell, 760 F.2d 327, 333 (D.C. Cir. 1985). 23.04 AGREEMENT 23.04[1] Proof of Agreement The essence of the crime of conspiracy is the agreement. United States v. Falcone, 311 U.S. 205, 210 (1940); Iannelli v. United States, 420 U.S. 770, 785 n.17 (1975). Without an agreement, there can be no conspiracy. Ingram v. United States, 360 U.S. 672, 677-78 (1959). Because the agreement is the essence of a conspiracy, the - 4 - 19018755.1 success of the conspiracy is irrelevant. United States v. Jimenez Recio, 537 U.S. 270, 274-75 (2003); see also United States v. Nguyen, 246 F.3d 52, 54 (1st Cir. 2001); United States v. Labat, 905 F.2d 18, 21 (2d Cir. 1990); United States v. Jannotti, 673 F.2d 578, 591 (3d Cir. 1982) (en banc); United States v. Littlefield, 594 F.2d 682, 684 (8th Cir. 1979); United States v. Thompson, 493 F.2d 305, 310 (9th Cir. 1974). The agreement to commit an unlawful act is “a distinct evil, dangerous to the public,” which “may exist and be punished whether or not the substantive crime ensues.” Salinas v. United States, 522 U.S. 52, 65 (1997). A defendant may be charged with conspiracy as well as the substantive offense that served as the object of the conspiracy. See Iannelli, 420 U.S. at 777-78, 790-91; Pinkerton v. United States, 328 U.S. 640, 643 (1946). The agreement need not be expressly stated, be in writing, or cover all the details of how it is to be carried out. See, e.g., United States v. Aubin, 87 F.3d 141, 145 (5th Cir. 1996); United States v. Boone, 951 F.2d 1526, 1543 (9th Cir. 1992); United States v. DePew, 932 F.2d 324, 326 (4th Cir. 1991); United States v. Pearce, 912 F.2d 159, 161 (6th Cir. 1990); United States v. Powell, 853 F.2d 601, 604 (8th Cir. 1988); United States v. Elledge, 723 F.2d 864, 868 (11th Cir. 1984). The government is not required to prove that the members of the conspiracy directly stated to each other the purpose of the agreement or all of the details of the agreement. See United States v. Gonzalez, 940 F.2d 1413, 1426-27 (11th Cir. 1991); United States v. Schultz, 855 F.2d 1217, 1221 (6th Cir. 1988). The existence of an agreement may be proven inferentially, from the actions and statements of the conspirators or from the circumstances surrounding the scheme. Glasser v. United States, 315 U.S. 60, 80 (1942), superseded on other grounds by statute, as recognized by Bourjaily v. United States, 483 U.S. 171, 177-78 (1987); United States v. McKee, 506 F.3d 225, 238 (3d Cir. 2007); United States v. Onyiego, 286 F.3d 249, 254- 55 (5th Cir. 2002); United States v. Collins, 78 F.3d 1021, 1037 (6th Cir. 1996); United States v. Cruz, 981 F.2d 613, 616 (1st Cir. 1992); United States v. Young, 954 F.2d 614, 618-19 (10th Cir. 1992); United States v. Penagos, 823 F.2d 346, 348 (9th Cir. 1987); United States v. Hoelscher, 764 F.2d 491, 494 (8th Cir. 1985); United States v. Mariani, 725 F.2d 862, 865-66 (2d Cir. 1984). - 5 - 19018755.1 23.04[2] Two or More Persons A defendant cannot conspire with himself or herself. Morrison v. California, 291 U.S. 82, 92 (1934). In order to establish the existence of a conspiratorial agreement under Section 371, the government must show that the defendant and at least one other person reached an understanding or agreement to carry out the objective of the conspiracy. See United States v. Rosenblatt, 554 F.2d 36, 38 & n.2 (2d Cir. 1977); United States v. Chase, 372 F.2d 453, 459 (4th Cir. 1967); Sears v. United States, 343 F.2d 139, 141-42 (5th Cir. 1965). It makes no difference whether the other person is another defendant or even named in the indictment. Rogers v. United States, 340 U.S. 367, 375 (1951) (“identity of the other members of the conspiracy is not needed, inasmuch as one person can be convicted of conspiring with persons whose names are unknown”); see also United States v. Lopez, 6 F.3d 1281, 1288 (7th Cir. 1993); United States v. Galvan, 961 F.2d 738, 742 (8th Cir. 1992); United States v. Rey, 923 F.2d 1217, 1222 (6th Cir. 1991); United States v. Lewis, 902 F.2d 1176, 1181 n.4 (5th Cir. 1990); United States v. Indorato, 628 F.2d 711, 717-18 (1st Cir. 1980); United States v. Allen, 613 F.2d 1248, 1253 (3d Cir. 1980); United States v. Anderson, 611 F.2d 504, 511 (4th Cir. 1979). 23.04[2][a] Limitation on Naming Unindicted Co-conspirators Prosecutors should be aware that it is the policy of the Department of Justice that, in the absence of some sound reason, unindicted co-conspirators should not be identified in conspiracy indictments. Justice Manual 9-11.130 (April 2018) (noting that the practice was severely criticized in United States v. Briggs, 514 F.2d 794 (5th Cir. 1975)). The recommended practice in such cases is to merely allege that the defendant “conspired with another person or persons known” and supply the identity, if requested, in a bill of particulars. This policy does not apply, however, where the person “has been officially charged with the misconduct at issue.” JM 9-27.760. 23.04[2][b] Conspiring with Government Agents Because the government must prove that at least two culpable parties reached an agreement, proof of an agreement solely between a defendant and a government agent or - 8 - 19018755.1 others.” Blumenthal v. United States, 332 U.S. 539, 557 (1947); United States v. Parnell, 581 F.2d 1374, 1382-83 (10th Cir. 1978) (explaining how a single conspiracy can involve different transactions and a changing membership). One circuit, the Tenth, has added “interdependence” as an element of conspiracy. See, e.g., United States v. Hammers, 942 F.3d 1001, 1013 (10th Cir. 2019); United States v. Quarrell, 310 F.3d 664, 678 (10th Cir. 2002); United States v. Edwards, 69 F.3d 419, 431 (10th Cir. 1995); United States v. Hanzlicek, 187 F.3d 1228, 1232-33 (10th Cir. 1999). “Interdependence requires that a defendant’s actions facilitate the endeavors of other alleged coconspirators or facilitate the venture as a whole . . . . [and] also requires proof that the conspirators intended to act together for their shared mutual benefit within the scope of the conspiracy charged.” United States v. Serrato, 742 F.3d 461, 467 (10th Cir. 2014) (cleaned up); accord Tenth Circuit Pattern Jury Instructions, § 2.19 (defining “interdependence” to require that “the members, in some way or manner, intended to act together for their shared mutual benefit within the scope of the conspiracy charged”). United States v. Carter, 130 F.3d 1432 (10th Cir. 1997), illustrates how the Tenth Circuit has applied the interdependence element in practice. There, Carter met Anthlia Craft at a bus station in Tulsa, after receiving a pager message from Craft. Id. at 1435-36. Craft was carrying a bag with bricks of cocaine, and, unbeknownst to Carter, was cooperating with DEA agents who had intercepted her in route to Tulsa. Ibid. The court rejected Carter’s challenge to the sufficiency of the evidence supporting his conspiracy conviction, reasoning that “the jury reasonably could have inferred that Craft was the courier for the cocaine and that Carter picked up Craft at the bus station to assist her in distributing the cocaine. Thus, the jury reasonably could have inferred that Carter was dependent on Craft to smuggle the cocaine to Tulsa, and Craft was dependent on Carter to assist her in the distribution process once she arrived in Tulsa.” Id. at 1440. See also United States v. Wardell, 591 F.3d 1279, 1289-91 (10th Cir. 2009) (finding evidence of interdependence sufficient to support conviction for conspiracy to retaliate against a witness who testified against the defendant in a criminal tax case because the evidence “established beyond a reasonable doubt that the success of the venture as a whole—[the witness’s] beating—depended upon the steps [the defendant] took to realize this common - 9 - 19018755.1 goal”; these steps included arranging with a co-conspirator to have the perpetrators of the assault transported to the jail where the witness was imprisoned). The Tenth Circuit appears to be alone in treating “interdependence” as a separate element, although some circuits, following Kotteakos, 328 U.S. at 755, use “interdependence” as a test for whether various sub-schemes are part of a single, overall criminal agreement instead of multiple agreements. United States v. Sanchez-Badillo, 540 F.3d 24, 29 (1st Cir. 2008); United States v. Gaskin, 364 F.3d 438, 452 n.4 (2d Cir. 2004); United States v. Mathis, 216 F.3d 18, 24 (D.C. Cir. 2000); United States v. Adkism, 180 F.3d 264 (Table), 1999 WL 301315, at *6-7 (5th Cir. 1999); United States v. Toler, 144 F.3d 1423, 1426 (11th Cir. 1998); cf. United States v. Farias, 469 F.3d 393, 398 (5th Cir. 2006) (“we do not explicitly require ‘interdependence’ in this circuit”).3 23.05 MEMBERSHIP 23.05[1] Intent Requirement To establish a defendant’s membership in a conspiracy, the government must prove that the defendant knew of the conspiracy and intended to join it with the purpose of accomplishing the object of the conspiracy. See United States v. Berger, 224 F.3d 107, 3 Earlier Tenth Circuit cases also treated interdependence exclusively as a test for whether there is a single conspiracy, primarily when the government alleged a “chain conspiracy” in which the co- conspirators did not all know one another. See, e.g., United States v. Petersen, 611 F.2d 1313, 1325-26 (10th Cir. 1979) (quoting United States v. Elliot, 571 F.2d 880, 901 (5th Cir. 1978), which described interdependence as “[t]he essential element of a chain conspiracy”); United States v. Dickey, 736 F.2d 571, 582 (10th Cir. 1984) (stating that “[t]o make a finding of a single conspiracy . . . the essential element of interdependence must be met”). Later cases, however, cited indirectly to these earlier cases for the proposition that interdependence is an element of a conspiracy offense. See United States v. Fox, 902 F.2d 1508, 1514 (10th Cir. 1990) (“the evidence must demonstrate ‘the essential element of interdependence’ among the co-conspirators” (quoting Dickey, 736 F.2d at 582)); United States v. Evans, 970 F.2d 663, 668 (10th Cir. 1992) (citing Fox for the proposition that the elements of conspiracy include “that the alleged coconspirators were interdependent”). But regardless of its origins, “[i]nterdependence[] as an essential element of § 371 conspiracy . . . now appears to be settled law” in the circuit. Tenth Circuit Pattern Jury Instructions, § 2.19, Comment (citing cases); see ibid. (listing “interdependence among members of the conspiracy” as one of the elements the jury should be instructed it must find to convict on a conspiracy charge). - 10 - 19018755.1 114-115 (2d Cir. 2000); United States v. Conley, 37 F.3d 970, 976-77 (3d Cir. 1994); United States v. Rogers, 982 F.2d 1241, 1244 (8th Cir. 1993); United States v. Evans, 970 F.2d 663, 668 (10th Cir. 1992); United States v. Lynch, 934 F.2d 1226, 1231 (11th Cir. 1991); United States v. Brown, 934 F.2d 886, 889 (7th Cir. 1991); United States v. Sanchez, 928 F.2d 1450, 1457 (6th Cir. 1991); United States v. Esparza, 876 F.2d 1390, 1392 (9th Cir. 1989); United States v. Yanin, 868 F.2d 130, 133 (5th Cir. 1989); United States v. Christian, 786 F.2d 203, 211 (6th Cir. 1986); United States v. Norris, 749 F.2d 1116, 1121 (4th Cir. 1984); United States v. Flaherty, 668 F.2d 566, 580 (1st Cir. 1981). A defendant may become a member of a conspiracy without knowing all of the details of the unlawful scheme and without knowing all of the members. Blumenthal v. United States, 332 U.S. 539, 557 (1947); United States v. Horn, 946 F.2d 738, 741 (10th Cir. 1991); United States v. Noble, 754 F.2d 1324, 1329 (7th Cir. 1985); United States v. Lemm, 680 F.2d 1193, 1204 (8th Cir. 1982); United States v. Diecidue, 603 F.2d 535, 548 (5th Cir. 1979); United States v. Camacho, 528 F.2d 464, 469-70 (9th Cir. 1976). Similarly, a defendant may become a member of a conspiracy even if that person agrees to play only a minor role in the conspiracy, so long as he or she understands the essential nature of the scheme and intentionally joins in it. United States v. Lopez, 443 F.3d 1026, 1030 (8th Cir. 2006) (en banc); United States v. Andrews, 953 F.2d 1312, 1318 (11th Cir. 1992); United States v. Roberts, 881 F.2d 95, 101 (4th Cir. 1989); United States v. Alvarez, 625 F.2d 1196, 1198 (5th Cir. 1980). “Although conspirators must pursue the same criminal objective, a conspirator need not agree to commit or facilitate each and every part of the substantive offense. A defendant must merely reach an agreement with the specific intent that the underlying crime be committed by some member of the conspiracy.” Ocasio v. United States, 136 S. Ct. 1423, 1429 (2016) (cleaned up) (emphasis in original). When a conspiracy involves “conduct . . . intended to encourage persons other than or in addition to co-conspirators to violate the internal revenue laws or impede, impair, obstruct, or defeat the ascertainment, computation, assessment, or collection of revenue,” the enhancement in Sentencing Guidelines Section 2T1.9(b)(2) may apply. See ¶ 23.11, infra, for further discussion. - 13 - 19018755.1 (emphasis in original)). Other circuits, concerned about this potential for confusion, have rejected or disapproved the use of the “slight connection” formulation in jury instructions or as a standard for assessing the sufficiency of evidence of membership in a conspiracy. See United States v. Durrive, 902 F.2d 1221, 1225-29 (7th Cir. 1990) (concluding that “when the sufficiency of the evidence to connect a particular defendant to a conspiracy is challenged on appeal, ‘substantial evidence’ should be the test rather than ‘slight evidence’ or ‘slight connection’”); United States v. Huezo, 546 F.3d 174, 180 n.2, 184- 89 (2d Cir. 2008) (“[t]he ‘not overwhelming evidence’ or ‘slight evidence’ formulation risks misleading not only jurors but district and appellate courts reviewing post-verdict challenges as to the sufficiency of the evidence”); see id. at 184-89 (Newman, J., concurring, joined by Walker, J., and Sotomayor, J.) (arguing that “the quantitative adjectives “slight” or “not overwhelming” or other variations [should] not be repeated either in appellate opinions or in jury instructions with reference to the evidence sufficient to prove beyond a reasonable doubt a defendant’s participation in a conspiracy”); see also United States v. Malatesta, 590 F.2d 1379, 1381-82 (5th Cir. 1979) (en banc) (“The ‘slight evidence’ rule . . . is . . . [b]anished as to all appeals hereafter to be decided by this Court”). Prosecutors should take care not to rely on a version of the “slight connection” formulation that is inconsistent with applicable circuit law. 23.05[3] Pinkerton Liability A conspirator is criminally responsible for the “substantive offenses” committed by a co-conspirator if the conspirator was a member of the conspiracy when the co- conspirator committed the offense and the offense was committed in furtherance of, or as a foreseeable consequence of, the conspiracy. Pinkerton v. United States, 328 U.S. 640, 645-47 (1946). The government is not required to prove that each defendant specifically agreed to commit the substantive offense or knew that the offense would be committed. E.g., United States v. Bennett, 665 F.2d 16, 20 n.4 (2d Cir. 1981); United States v. Sanjar, 876 F.3d 725, 743 (5th Cir. 2017); United States v. Etheridge, 424 F.2d 951, 965 (6th Cir. 1970). It is sufficient that the government establish the offense was in furtherance of the conspiracy or was reasonably foreseeable as a necessary or natural consequence of the conspiracy. United States v. Fonseca-Caro, 114 F.3d 906, 908 (9th Cir. 1997); United States v. Myers, 102 F.3d 227, 237 (6th Cir. 1996); United States v. - 14 - 19018755.1 Eyster, 948 F.2d 1196, 1206 n.13 (11th Cir. 1991); United States v. Cummings, 937 F.2d 941, 944 (4th Cir. 1991); United States v. Ciambrone, 787 F.2d 799, 809 (2d Cir. 1986); United States v. Redwine, 715 F.2d 315, 322 (7th Cir. 1983); United States v. Tilton, 610 F.2d 302, 309 (5th Cir. 1980). Although a conspirator “may join a conspiracy already in existence and become criminally liable for acts committed thereafter in furtherance of the scheme,” United States v. Hamlin, 986 F.2d 384, 387 (10th Cir. 1993), the Supreme Court held that a defendant “cannot be held criminally liable for substantive offenses committed by members of the conspiracy before that individual had joined or after he had withdrawn from the conspiracy,” Levine v. United States, 383 U.S. 265, 266 (1966) (per curiam) (accepting the government’s concession on this point). Some cases state, without express qualification, that a person who joins a conspiracy adopts the prior acts of the other conspirators and may be held responsible for conduct committed before he or she joined the conspiracy. See United States v. Rea, 958 F.2d 1206, 1214 (2d Cir. 1992); United States v. Covelli, 738 F.2d 847, 859 n.16 (7th Cir. 1984); United States v. Bridgeman, 523 F.2d 1099, 1107-08 (D.C. Cir. 1975); United States v. Cimini, 427 F.2d 129, 130-31 (6th Cir. 1970). These statements are properly understood as referring to liability for the conspiracy itself, not to liability under Pinkerton for the substantive offenses of co- conspirators. As one court explained, a defendant who joins an ongoing conspiracy may be held liable for “acts or statements of coconspirators that occurred prior to his entry into the conspiracy” for purposes of determining the scope and objects of the conspiracy and for satisfying the overt-act element and venue, even though “such a defendant cannot be held liable for substantive crimes committed by coconspirators prior to his entry in the conspiracy.” United States v. Hamilton, 587 F.3d 1199, 1207 & n.5 (10th Cir. 2009) (emphasis in original); see also United States v. Carrascal-Olivera, 755 F.2d 1446, 1452 & n.8 (11th Cir. 1985). 23.06 OVERT ACT 23.06[1] Definition In order to establish criminal liability for a conspiracy under Section 371, the government must prove that a member of the conspiracy committed an overt act in - 15 - 19018755.1 furtherance of the conspiracy — in the words of the statute, that “one or more of such persons d[id] any act to effect the object of the conspiracy.” 18 U.S.C. § 371. The function of this statutory overt-act requirement is to show that the conspiracy “is at work” and is not simply an agreement existing solely in the minds of the conspirators. Yates v. United States, 354 U.S. 298, 334 (1957), overruled on other grounds by Burks v. United States, 437 U.S. 1, 12 (1978); United States v. Arboleda, 929 F.2d 858, 865 (1st Cir. 1991); Carlson v. United States, 187 F.2d 366, 370 (10th Cir. 1951). Because it is a statutory element, the overt-act requirement does not apply to other conspiracy statutes that, unlike Section 371, do not expressly require an overt act. United States v. Shabani, 513 U.S. 10, 15-17 (1994). Conspiracy statutes that do not contain an overt-act requirement include 18 U.S.C. § 286, which proscribes conspiring to defraud the United States with respect to false, fictitious, or fraudulent claims. See supra, Chapter 22.05. An overt act is any act done by a member of the conspiracy for the purpose of carrying out or accomplishing the object of the conspiracy. United States v. Falcone, 311 U.S. 205, 210 (1940); United States v. McKee, 506 F.3d 225, 243 (3d Cir. 2007); United States v. Ross, 190 F.3d 446, 450 (6th Cir. 1999); United States v. Davis, 965 F.2d 804, 811-12 (10th Cir. 1992). Because the purpose of the overt-act requirement is merely to show that the conspiracy is at work, the overt act need not be criminal in character. Yates v. United States, 354 U.S. 298, 334 (1957), overruled on other grounds by Burks v. United States, 437 U.S. 1, 12 (1978); Braverman v. United States, 317 U.S. 49, 53-54 (1942); United States v. Touhey, 867 F.2d 534, 537 (9th Cir. 1989); Carlson v. United States, 187 F.2d 366, 370 (10th Cir. 1951). Indeed, the act may be totally legal in itself. See, e.g., United States v. Hermes, 847 F.2d 493, 495-96 (8th Cir. 1988). The government is not required to prove all of the overt acts alleged in an indictment. Proof of at least one overt act committed in furtherance of the conspiracy is sufficient. See, e.g., United States v. Lewis, 759 F.2d 1316, 1344 (8th Cir. 1985); United States v. Anderson, 611 F.2d 504, 510 (4th Cir. 1979); United States v. Adamo, 534 F.2d 31, 38 (3d Cir. 1976). The government is not required to disclose during pre-trial discovery all of the overt acts it intends to establish at trial. United States v. Murray, 527 F.2d 401, 411 (5th Cir. 1976); United States v. Armocida, 515 F.2d 49, 54 (3d Cir. 1975); United States v. Carroll, 510 F.2d 507, 509 (2d Cir. 1975); Cook v. United States, 354 F.2d 529, 531 - 18 - 19018755.1 United States v. Haga, 821 F.2d 1036, 1039 (5th Cir. 1987) (“Cases construing section 371 have made it plain that the ‘commit any offense’ clause and the ‘defraud the United States’ clause describe different criminal offenses.”). The first part of the statute, the “offense clause,” prohibits conspiring to commit offenses that are specifically defined in other federal statutes; the second part of the statute, the “defraud clause,” prohibits conspiring to defraud the United States. United States v. Hurley, 957 F.2d 1, 3 (1st Cir. 1992); United States v. Touhey, 867 F.2d 534, 536 (9th Cir. 1989); United States v. Cure, 804 F.2d 625, 628 (11th Cir. 1986); see also Dennis v. United States, 384 U.S. 855, 862-63 (1966) (referring to these as “alternative clause[s]”). The offense clause requires that the indictment refer to another criminal statute that defines the object of the conspiracy. The defraud clause, however, stands on its own, and an indictment charging a conspiracy to defraud does not need to refer to another statute to define the crime. United States v. Minarik, 875 F.2d 1186, 1187 (6th Cir. 1989); see also United States v. Bilzerian, 926 F.2d 1285, 1301 (2d Cir. 1991). In criminal tax prosecutions, Section 371 can be used to charge conspiracies to commit specific substantive tax offenses or to defraud the IRS. United States v. Jerkins, 871 F.2d 598, 602 (6th Cir. 1989); United States v. Little, 753 F.2d 1420, 1442 (9th Cir. 1984); United States v. Shermetaro, 625 F.2d 104, 109 (6th Cir. 1980). 23.07[1][b] Scope of Defraud Clause The Supreme Court has held that “[t]o conspire to defraud the United States” means (1) “to cheat the government out of money or property” or (2) “to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest.” Hammerschmidt v. United States, 265 U.S. 182, 188 (1924). The defraud clause of Section 371 encompasses a wide array of conduct, including acts that do not constitute a crime under a separate federal statute. United States v. Tuohey, 867 F.2d 534, 536-67 (9th Cir. 1989). In a 1910 case involving the Department of Agriculture, the Supreme Court rejected the argument that in order to prove a conspiracy “to defraud the United States” under Section 371 the government must “charge or prove an actual financial or property loss.” Haas v. Henckel, 216 U.S. 462, 479-80 (1910) (construing Rev. Stat. § 5440 - 19 - 19018755.1 (1878), the predecessor of the modern Section 371, which, like the current statute, prohibited conspiracies to “defraud the United States in any manner or for any purpose”). The indictment at issue in Haas charged that the defendants had conspired to obtain a government crop report “in advance of general publicity” and to “use such information in speculating upon the cotton market, and thereby defraud the United States by defeating, obstructing and impairing it in the exercise of its governmental function in the regular and official duty of publicly promulgating fair, impartial and accurate reports concerning the cotton crop.” Haas, 216 U.S. at 478. The Court explained that “it is not essential that such a conspiracy shall contemplate a financial loss or that one shall result.” Id. at 479. Rather, the statute was “broad enough in its terms to include any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of Government.” Id. Fourteen years later, in 1924, the Supreme Court clarified that the defraud clause — although it reaches conspiracies to interfere with the government’s lawful functions in ways that do not result in direct financial loss — still requires “fraud” and that Haas did not eliminate the traditional requirement that a fraudulent scheme be deceitful. Hammerschmidt, 265 U.S. at 187-88. “To conspire to defraud the United States,” the Court stated in Hammerschmidt, “means primarily to cheat the Government out of property or money, but it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest.” Id. at 188. Thus, although the defraud clause does not require a contemplated “property or pecuniary loss by the fraud,” it still requires that the conspiracy involve some form of “misrepresentation” or “chicane.” Ibid. In the century since Hammerschmidt was decided, the Supreme Court has repeatedly recognized and re-affirmed its construction of the defraud clause. See, e.g., United States v. Scharton, 285 U.S. 518, 520-21 (1932); Glasser v. United States, 315 U.S. 60, 66 (1942); Dennis, 384 U.S. at 861; McNally v. United States, 483 U.S. 350, 359 n.8. And courts have applied the clause to conspiracies to defraud various federal agencies, including, but not limited to, the Internal Revenue Service. See, e.g., United - 20 - 19018755.1 States v. Ballistrea, 101 F.3d 827, 832 (2d Cir. 1996) (Food and Drug Administration); United States v. Klein, 247 F.2d 908, 915 (2d Cir. 1957) (IRS);4 United States v. Pintar, 630 F.2d 1270 (8th Cir. 1980) (Upper Great Lakes Regional Commission); United States v. Tuohey, 867 F.2d 534, 537 (9th Cir. 1989) (Federal Deposit Insurance Corporation); United States v. Lane, 765 F.2d 1376, 1379 (9th Cir. 1985) (Social Security Administration); United States v. Elbeblawy, 899 F.3d 925 (11th Cir. 2018) (Department of Health and Human Services); United States v. Puerto, 730 F.2d 627 (11th Cir. 1984) (Treasury Department); United States v. Dean, 55 F.3d 640, 647 (D.C. Cir. 1995) (Department of Housing and Urban Development); United States v. Madeoy, 912 F.2d 1486 (D.C. Cir. 1990) (Federal Housing Administration and Veterans Administration); cf. United States v. Johnson, 383 U.S. 169, 172 (1966) (Department of Justice). Moreover, because a conspiracy to defraud the United States is a type of conspiracy, it is the unlawful agreement that constitutes the crime: it is not necessary to show that the scheme to defraud was a success or that the government was actually harmed. United States v. Rosengarten, 857 F.2d 76, 79 (2d Cir. 1988); United States v. Everett, 692 F.2d 596, 599 (9th Cir. 1982); Pintar, 630 F.2d at 1277-78. Nor is it necessary to show that the “fraud” contemplated by the conspiracy was a crime on its own. United States v. Jerkins, 871 F.2d 598, 603 (6th Cir. 1989). This means, in a tax case, that a prosecutor who charges a conspiracy to defraud the United States is not burdened with having to establish all of the elements of an underlying offense (e.g., tax evasion) and each member’s intent to commit that offense (e.g., willfulness).5 Rather, all the prosecutor must show is that the members agreed to interfere with or obstruct one of the government’s lawful functions “by deceit, craft or trickery, or at least by means that are dishonest.” Hammerschmidt, 265 U.S. at 188; see also United States v. Hurley, 957 F.2d 1, 4-5 (1st Cir. 1992); Jerkins, 871 F.2d at 603; United States v. Nersesian, 4 Conspiracies to defraud the IRS, commonly called “Klein conspiracies” after the case cited here, are discussed at length at ¶ 23.07[2], infra. 5 However, when the government charges a conspiracy to commit a substantive tax offense, “it must prove that “the intended future conduct [the conspirators] agreed upon include all the elements of the substantive crime.” United States v. Pinckney, 85 F.3d 4, 8 (2d Cir. 1996) (cleaned up). - 23 - 19018755.1 and collection of taxes, regardless of whether the government could prove “direct tax evasion” of an actual tax due and owing. 247 F.2d at 916. The court summarized twenty acts of concealment that qualified as efforts to impede the functions of the IRS, including the following (247 F.2d at 915): 1. Alteration of the books to make liquidating dividends appear as commissions; 2. Alteration of the books to make a gratuitous payment of $1,500,000 appear as repayment of a loan; 3. A false entry in the books disguising as commissions what was actually a dividend, which in turn was diverted to corporate nominees; 4. A false statement in Klein’s personal income tax return regarding the payment for a stock purchase; 5. Klein’s false answer to Treasury interrogatories seeking to identify the owners of various corporations; 6. A return falsely reporting that stock was sold for an immense profit; 7. The evasive affidavit of Klein’s secretary denying that he remembered altering certain books; and 8. Income tax returns that falsely claimed sales of stock. 19018755.1 Criminal Tax Manual prev ● next TABLE OF CONTENTS 23.00 CONSPIRACY TO COMMIT OFFENSE OR TO DEFRAUD THE UNITED STATES .............................................................................................................................. 1 23.01 STATUTORY LANGUAGE: 18 U.S.C. § 371 .................................................... 1 23.02 GENERALLY....................................................................................................... 1 23.03 ELEMENTS .......................................................................................................... 3 23.04 AGREEMENT ...................................................................................................... 3 23.04[1] Proof of Agreement ...................................................................................... 3 23.04[2] Two or More Persons ................................................................................... 5 23.04[2][a] Limitation on Naming Unindicted Coconspirators .............................. 5 23.04[2][b] Conspiring With Government Agents ................................................. 5 23.04[2][c] Corporations as Conspirators ............................................................... 6 23.04[3] Scope of the Agreement -- Single or Multiple Conspiracies ....................... 6 23.05 MEMBERSHIP..................................................................................................... 9 23.05[1] Intent Requirement ....................................................................................... 9 23.05[2] Proof of Membership ................................................................................. 10 23.05[3] Pinkerton Liability ..................................................................................... 12 23.06 OVERT ACT ...................................................................................................... 14 23.06[1] Definition ................................................................................................... 13 23.06[2] Acts of Concealment .................................................................................. 15 23.07 CONSPIRACY TO DEFRAUD THE UNITED STATES ................................. 16 23.07[1] Generally .................................................................................................... 16 23.07[1][a] Sec. 371: Two Forms of Conspiracy ................................................. 16 Revised September 2020 - ii - 19018755.1 23.07[1][b] Scope of Defraud Clause ................................................................... 17 23.07[1][c] Pleading Requirements ...................................................................... 19 23.07[2] Klein Conspiracy ........................................................................................ 20 23.07[2][a] Generally ............................................................................................ 20 23.07[2][b] Examples: Klein fact patterns ............................................................ 22 23.07[2][c] Overbreadth Concerns ....................................................................... 42 23.07[2][d] Precedent Governing Different Statutes ............................................ 41 23.07[3] Overlapping Conspiracies and the Sixth Circuit’s Decision in Minarik .... 43 23.07[4] Scope of Intent ........................................................................................... 45 23.07[4][a] Generally ............................................................................................ 45 23.07[4][b] Multiple Purposes .............................................................................. 45 23.07[4][c] Klein Conspiracy Coupled With a Narcotics or Money Laundering Prosecution ............................................................................................................ 47 23.08 STATUTE OF LIMITATIONS .......................................................................... 50 23.08[1] Generally .................................................................................................... 50 23.08[2] Beginning of Limitations Period ................................................................ 51 23.08[3] Withdrawal Defense ................................................................................... 51 23.09 CO-CONSPIRATOR STATEMENTS ............................................................... 53 23.10 VENUE ............................................................................................................... 55 23.11 SENTENCING GUIDELINES ........................................................................... 56 - 3 - 19018755.1 Goldstein, Conspiracy to Defraud the United States, 68 Yale L.J. 405 (1959). Accordingly, the following discussion is intended to highlight only those issues relevant to criminal tax prosecutions. 23.03 ELEMENTS Conspiracies under both the offense clause and the defraud clause of 18 U.S.C. § 371 require three elements to be proved beyond a reasonable doubt: 1. The existence of an agreement by two or more persons to commit an offense against the United States or to defraud the United States; 2. The defendant’s knowing and voluntary participation in the conspiracy; and 3. The commission of an overt act in furtherance of the conspiracy. United States v. Falcone, 311 U.S. 205, 210 (1940); United States v. Ngige, 780 F.3d 497, 503 (1st Cir. 2015); United States v. Svoboda, 347 F.3d 471, 476 (2d Cir. 2003); United States v. Whiteford, 676 F.3d 348, 357 (3d Cir. 2012); United States v. Fleschner, 98 F.3d 155, 159-60 (4th Cir. 1996); United States v. Njoku, 737 F.3d 55, 64 (5th Cir. 2013); United States v. Douglas, 398 F.3d 407, 413 (6th Cir. 2005); United States v. Mealy, 851 F.2d 890, 895-96 (7th Cir. 1988); United States v. Hayes, 574 F.3d 460, 472 (8th Cir. 2009); United States v. Montgomery, 384 F.3d 1050, 1062 (9th Cir. 2004); United States v. Hanzlicek, 187 F.3d 1228, 1232-33 (10th Cir. 1999) (adding a fourth element of “interdependence”); United States v. Hough, 803 F.3d 1181, 1187 (11th Cir. 2015); United States v. Treadwell, 760 F.2d 327, 333 (D.C. Cir. 1985). 23.04 AGREEMENT 23.04[1] Proof of Agreement The essence of the crime of conspiracy is the agreement. United States v. Falcone, 311 U.S. 205, 210 (1940); Iannelli v. United States, 420 U.S. 770, 785 n.17 (1975). Without an agreement, there can be no conspiracy. Ingram v. United States, 360 U.S. 672, 677-78 (1959). Because the agreement is the essence of a conspiracy, the - 4 - 19018755.1 success of the conspiracy is irrelevant. United States v. Jimenez Recio, 537 U.S. 270, 274-75 (2003); see also United States v. Nguyen, 246 F.3d 52, 54 (1st Cir. 2001); United States v. Labat, 905 F.2d 18, 21 (2d Cir. 1990); United States v. Jannotti, 673 F.2d 578, 591 (3d Cir. 1982) (en banc); United States v. Littlefield, 594 F.2d 682, 684 (8th Cir. 1979); United States v. Thompson, 493 F.2d 305, 310 (9th Cir. 1974). The agreement to commit an unlawful act is “a distinct evil, dangerous to the public,” which “may exist and be punished whether or not the substantive crime ensues.” Salinas v. United States, 522 U.S. 52, 65 (1997). A defendant may be charged with conspiracy as well as the substantive offense that served as the object of the conspiracy. See Iannelli, 420 U.S. at 777-78, 790-91; Pinkerton v. United States, 328 U.S. 640, 643 (1946). The agreement need not be expressly stated, be in writing, or cover all the details of how it is to be carried out. See, e.g., United States v. Aubin, 87 F.3d 141, 145 (5th Cir. 1996); United States v. Boone, 951 F.2d 1526, 1543 (9th Cir. 1992); United States v. DePew, 932 F.2d 324, 326 (4th Cir. 1991); United States v. Pearce, 912 F.2d 159, 161 (6th Cir. 1990); United States v. Powell, 853 F.2d 601, 604 (8th Cir. 1988); United States v. Elledge, 723 F.2d 864, 868 (11th Cir. 1984). The government is not required to prove that the members of the conspiracy directly stated to each other the purpose of the agreement or all of the details of the agreement. See United States v. Gonzalez, 940 F.2d 1413, 1426-27 (11th Cir. 1991); United States v. Schultz, 855 F.2d 1217, 1221 (6th Cir. 1988). The existence of an agreement may be proven inferentially, from the actions and statements of the conspirators or from the circumstances surrounding the scheme. Glasser v. United States, 315 U.S. 60, 80 (1942), superseded on other grounds by statute, as recognized by Bourjaily v. United States, 483 U.S. 171, 177-78 (1987); United States v. McKee, 506 F.3d 225, 238 (3d Cir. 2007); United States v. Onyiego, 286 F.3d 249, 254- 55 (5th Cir. 2002); United States v. Collins, 78 F.3d 1021, 1037 (6th Cir. 1996); United States v. Cruz, 981 F.2d 613, 616 (1st Cir. 1992); United States v. Young, 954 F.2d 614, 618-19 (10th Cir. 1992); United States v. Penagos, 823 F.2d 346, 348 (9th Cir. 1987); United States v. Hoelscher, 764 F.2d 491, 494 (8th Cir. 1985); United States v. Mariani, 725 F.2d 862, 865-66 (2d Cir. 1984). - 5 - 19018755.1 23.04[2] Two or More Persons A defendant cannot conspire with himself or herself. Morrison v. California, 291 U.S. 82, 92 (1934). In order to establish the existence of a conspiratorial agreement under Section 371, the government must show that the defendant and at least one other person reached an understanding or agreement to carry out the objective of the conspiracy. See United States v. Rosenblatt, 554 F.2d 36, 38 & n.2 (2d Cir. 1977); United States v. Chase, 372 F.2d 453, 459 (4th Cir. 1967); Sears v. United States, 343 F.2d 139, 141-42 (5th Cir. 1965). It makes no difference whether the other person is another defendant or even named in the indictment. Rogers v. United States, 340 U.S. 367, 375 (1951) (“identity of the other members of the conspiracy is not needed, inasmuch as one person can be convicted of conspiring with persons whose names are unknown”); see also United States v. Lopez, 6 F.3d 1281, 1288 (7th Cir. 1993); United States v. Galvan, 961 F.2d 738, 742 (8th Cir. 1992); United States v. Rey, 923 F.2d 1217, 1222 (6th Cir. 1991); United States v. Lewis, 902 F.2d 1176, 1181 n.4 (5th Cir. 1990); United States v. Indorato, 628 F.2d 711, 717-18 (1st Cir. 1980); United States v. Allen, 613 F.2d 1248, 1253 (3d Cir. 1980); United States v. Anderson, 611 F.2d 504, 511 (4th Cir. 1979). 23.04[2][a] Limitation on Naming Unindicted Co-conspirators Prosecutors should be aware that it is the policy of the Department of Justice that, in the absence of some sound reason, unindicted co-conspirators should not be identified in conspiracy indictments. Justice Manual 9-11.130 (April 2018) (noting that the practice was severely criticized in United States v. Briggs, 514 F.2d 794 (5th Cir. 1975)). The recommended practice in such cases is to merely allege that the defendant “conspired with another person or persons known” and supply the identity, if requested, in a bill of particulars. This policy does not apply, however, where the person “has been officially charged with the misconduct at issue.” JM 9-27.760. 23.04[2][b] Conspiring with Government Agents Because the government must prove that at least two culpable parties reached an agreement, proof of an agreement solely between a defendant and a government agent or - 8 - 19018755.1 others.” Blumenthal v. United States, 332 U.S. 539, 557 (1947); United States v. Parnell, 581 F.2d 1374, 1382-83 (10th Cir. 1978) (explaining how a single conspiracy can involve different transactions and a changing membership). One circuit, the Tenth, has added “interdependence” as an element of conspiracy. See, e.g., United States v. Hammers, 942 F.3d 1001, 1013 (10th Cir. 2019); United States v. Quarrell, 310 F.3d 664, 678 (10th Cir. 2002); United States v. Edwards, 69 F.3d 419, 431 (10th Cir. 1995); United States v. Hanzlicek, 187 F.3d 1228, 1232-33 (10th Cir. 1999). “Interdependence requires that a defendant’s actions facilitate the endeavors of other alleged coconspirators or facilitate the venture as a whole . . . . [and] also requires proof that the conspirators intended to act together for their shared mutual benefit within the scope of the conspiracy charged.” United States v. Serrato, 742 F.3d 461, 467 (10th Cir. 2014) (cleaned up); accord Tenth Circuit Pattern Jury Instructions, § 2.19 (defining “interdependence” to require that “the members, in some way or manner, intended to act together for their shared mutual benefit within the scope of the conspiracy charged”). United States v. Carter, 130 F.3d 1432 (10th Cir. 1997), illustrates how the Tenth Circuit has applied the interdependence element in practice. There, Carter met Anthlia Craft at a bus station in Tulsa, after receiving a pager message from Craft. Id. at 1435-36. Craft was carrying a bag with bricks of cocaine, and, unbeknownst to Carter, was cooperating with DEA agents who had intercepted her in route to Tulsa. Ibid. The court rejected Carter’s challenge to the sufficiency of the evidence supporting his conspiracy conviction, reasoning that “the jury reasonably could have inferred that Craft was the courier for the cocaine and that Carter picked up Craft at the bus station to assist her in distributing the cocaine. Thus, the jury reasonably could have inferred that Carter was dependent on Craft to smuggle the cocaine to Tulsa, and Craft was dependent on Carter to assist her in the distribution process once she arrived in Tulsa.” Id. at 1440. See also United States v. Wardell, 591 F.3d 1279, 1289-91 (10th Cir. 2009) (finding evidence of interdependence sufficient to support conviction for conspiracy to retaliate against a witness who testified against the defendant in a criminal tax case because the evidence “established beyond a reasonable doubt that the success of the venture as a whole—[the witness’s] beating—depended upon the steps [the defendant] took to realize this common - 9 - 19018755.1 goal”; these steps included arranging with a co-conspirator to have the perpetrators of the assault transported to the jail where the witness was imprisoned). The Tenth Circuit appears to be alone in treating “interdependence” as a separate element, although some circuits, following Kotteakos, 328 U.S. at 755, use “interdependence” as a test for whether various sub-schemes are part of a single, overall criminal agreement instead of multiple agreements. United States v. Sanchez-Badillo, 540 F.3d 24, 29 (1st Cir. 2008); United States v. Gaskin, 364 F.3d 438, 452 n.4 (2d Cir. 2004); United States v. Mathis, 216 F.3d 18, 24 (D.C. Cir. 2000); United States v. Adkism, 180 F.3d 264 (Table), 1999 WL 301315, at *6-7 (5th Cir. 1999); United States v. Toler, 144 F.3d 1423, 1426 (11th Cir. 1998); cf. United States v. Farias, 469 F.3d 393, 398 (5th Cir. 2006) (“we do not explicitly require ‘interdependence’ in this circuit”).3 23.05 MEMBERSHIP 23.05[1] Intent Requirement To establish a defendant’s membership in a conspiracy, the government must prove that the defendant knew of the conspiracy and intended to join it with the purpose of accomplishing the object of the conspiracy. See United States v. Berger, 224 F.3d 107, 3 Earlier Tenth Circuit cases also treated interdependence exclusively as a test for whether there is a single conspiracy, primarily when the government alleged a “chain conspiracy” in which the co- conspirators did not all know one another. See, e.g., United States v. Petersen, 611 F.2d 1313, 1325-26 (10th Cir. 1979) (quoting United States v. Elliot, 571 F.2d 880, 901 (5th Cir. 1978), which described interdependence as “[t]he essential element of a chain conspiracy”); United States v. Dickey, 736 F.2d 571, 582 (10th Cir. 1984) (stating that “[t]o make a finding of a single conspiracy . . . the essential element of interdependence must be met”). Later cases, however, cited indirectly to these earlier cases for the proposition that interdependence is an element of a conspiracy offense. See United States v. Fox, 902 F.2d 1508, 1514 (10th Cir. 1990) (“the evidence must demonstrate ‘the essential element of interdependence’ among the co-conspirators” (quoting Dickey, 736 F.2d at 582)); United States v. Evans, 970 F.2d 663, 668 (10th Cir. 1992) (citing Fox for the proposition that the elements of conspiracy include “that the alleged coconspirators were interdependent”). But regardless of its origins, “[i]nterdependence[] as an essential element of § 371 conspiracy . . . now appears to be settled law” in the circuit. Tenth Circuit Pattern Jury Instructions, § 2.19, Comment (citing cases); see ibid. (listing “interdependence among members of the conspiracy” as one of the elements the jury should be instructed it must find to convict on a conspiracy charge). - 10 - 19018755.1 114-115 (2d Cir. 2000); United States v. Conley, 37 F.3d 970, 976-77 (3d Cir. 1994); United States v. Rogers, 982 F.2d 1241, 1244 (8th Cir. 1993); United States v. Evans, 970 F.2d 663, 668 (10th Cir. 1992); United States v. Lynch, 934 F.2d 1226, 1231 (11th Cir. 1991); United States v. Brown, 934 F.2d 886, 889 (7th Cir. 1991); United States v. Sanchez, 928 F.2d 1450, 1457 (6th Cir. 1991); United States v. Esparza, 876 F.2d 1390, 1392 (9th Cir. 1989); United States v. Yanin, 868 F.2d 130, 133 (5th Cir. 1989); United States v. Christian, 786 F.2d 203, 211 (6th Cir. 1986); United States v. Norris, 749 F.2d 1116, 1121 (4th Cir. 1984); United States v. Flaherty, 668 F.2d 566, 580 (1st Cir. 1981). A defendant may become a member of a conspiracy without knowing all of the details of the unlawful scheme and without knowing all of the members. Blumenthal v. United States, 332 U.S. 539, 557 (1947); United States v. Horn, 946 F.2d 738, 741 (10th Cir. 1991); United States v. Noble, 754 F.2d 1324, 1329 (7th Cir. 1985); United States v. Lemm, 680 F.2d 1193, 1204 (8th Cir. 1982); United States v. Diecidue, 603 F.2d 535, 548 (5th Cir. 1979); United States v. Camacho, 528 F.2d 464, 469-70 (9th Cir. 1976). Similarly, a defendant may become a member of a conspiracy even if that person agrees to play only a minor role in the conspiracy, so long as he or she understands the essential nature of the scheme and intentionally joins in it. United States v. Lopez, 443 F.3d 1026, 1030 (8th Cir. 2006) (en banc); United States v. Andrews, 953 F.2d 1312, 1318 (11th Cir. 1992); United States v. Roberts, 881 F.2d 95, 101 (4th Cir. 1989); United States v. Alvarez, 625 F.2d 1196, 1198 (5th Cir. 1980). “Although conspirators must pursue the same criminal objective, a conspirator need not agree to commit or facilitate each and every part of the substantive offense. A defendant must merely reach an agreement with the specific intent that the underlying crime be committed by some member of the conspiracy.” Ocasio v. United States, 136 S. Ct. 1423, 1429 (2016) (cleaned up) (emphasis in original). When a conspiracy involves “conduct . . . intended to encourage persons other than or in addition to co-conspirators to violate the internal revenue laws or impede, impair, obstruct, or defeat the ascertainment, computation, assessment, or collection of revenue,” the enhancement in Sentencing Guidelines Section 2T1.9(b)(2) may apply. See ¶ 23.11, infra, for further discussion. - 13 - 19018755.1 (emphasis in original)). Other circuits, concerned about this potential for confusion, have rejected or disapproved the use of the “slight connection” formulation in jury instructions or as a standard for assessing the sufficiency of evidence of membership in a conspiracy. See United States v. Durrive, 902 F.2d 1221, 1225-29 (7th Cir. 1990) (concluding that “when the sufficiency of the evidence to connect a particular defendant to a conspiracy is challenged on appeal, ‘substantial evidence’ should be the test rather than ‘slight evidence’ or ‘slight connection’”); United States v. Huezo, 546 F.3d 174, 180 n.2, 184- 89 (2d Cir. 2008) (“[t]he ‘not overwhelming evidence’ or ‘slight evidence’ formulation risks misleading not only jurors but district and appellate courts reviewing post-verdict challenges as to the sufficiency of the evidence”); see id. at 184-89 (Newman, J., concurring, joined by Walker, J., and Sotomayor, J.) (arguing that “the quantitative adjectives “slight” or “not overwhelming” or other variations [should] not be repeated either in appellate opinions or in jury instructions with reference to the evidence sufficient to prove beyond a reasonable doubt a defendant’s participation in a conspiracy”); see also United States v. Malatesta, 590 F.2d 1379, 1381-82 (5th Cir. 1979) (en banc) (“The ‘slight evidence’ rule . . . is . . . [b]anished as to all appeals hereafter to be decided by this Court”). Prosecutors should take care not to rely on a version of the “slight connection” formulation that is inconsistent with applicable circuit law. 23.05[3] Pinkerton Liability A conspirator is criminally responsible for the “substantive offenses” committed by a co-conspirator if the conspirator was a member of the conspiracy when the co- conspirator committed the offense and the offense was committed in furtherance of, or as a foreseeable consequence of, the conspiracy. Pinkerton v. United States, 328 U.S. 640, 645-47 (1946). The government is not required to prove that each defendant specifically agreed to commit the substantive offense or knew that the offense would be committed. E.g., United States v. Bennett, 665 F.2d 16, 20 n.4 (2d Cir. 1981); United States v. Sanjar, 876 F.3d 725, 743 (5th Cir. 2017); United States v. Etheridge, 424 F.2d 951, 965 (6th Cir. 1970). It is sufficient that the government establish the offense was in furtherance of the conspiracy or was reasonably foreseeable as a necessary or natural consequence of the conspiracy. United States v. Fonseca-Caro, 114 F.3d 906, 908 (9th Cir. 1997); United States v. Myers, 102 F.3d 227, 237 (6th Cir. 1996); United States v. - 14 - 19018755.1 Eyster, 948 F.2d 1196, 1206 n.13 (11th Cir. 1991); United States v. Cummings, 937 F.2d 941, 944 (4th Cir. 1991); United States v. Ciambrone, 787 F.2d 799, 809 (2d Cir. 1986); United States v. Redwine, 715 F.2d 315, 322 (7th Cir. 1983); United States v. Tilton, 610 F.2d 302, 309 (5th Cir. 1980). Although a conspirator “may join a conspiracy already in existence and become criminally liable for acts committed thereafter in furtherance of the scheme,” United States v. Hamlin, 986 F.2d 384, 387 (10th Cir. 1993), the Supreme Court held that a defendant “cannot be held criminally liable for substantive offenses committed by members of the conspiracy before that individual had joined or after he had withdrawn from the conspiracy,” Levine v. United States, 383 U.S. 265, 266 (1966) (per curiam) (accepting the government’s concession on this point). Some cases state, without express qualification, that a person who joins a conspiracy adopts the prior acts of the other conspirators and may be held responsible for conduct committed before he or she joined the conspiracy. See United States v. Rea, 958 F.2d 1206, 1214 (2d Cir. 1992); United States v. Covelli, 738 F.2d 847, 859 n.16 (7th Cir. 1984); United States v. Bridgeman, 523 F.2d 1099, 1107-08 (D.C. Cir. 1975); United States v. Cimini, 427 F.2d 129, 130-31 (6th Cir. 1970). These statements are properly understood as referring to liability for the conspiracy itself, not to liability under Pinkerton for the substantive offenses of co- conspirators. As one court explained, a defendant who joins an ongoing conspiracy may be held liable for “acts or statements of coconspirators that occurred prior to his entry into the conspiracy” for purposes of determining the scope and objects of the conspiracy and for satisfying the overt-act element and venue, even though “such a defendant cannot be held liable for substantive crimes committed by coconspirators prior to his entry in the conspiracy.” United States v. Hamilton, 587 F.3d 1199, 1207 & n.5 (10th Cir. 2009) (emphasis in original); see also United States v. Carrascal-Olivera, 755 F.2d 1446, 1452 & n.8 (11th Cir. 1985). 23.06 OVERT ACT 23.06[1] Definition In order to establish criminal liability for a conspiracy under Section 371, the government must prove that a member of the conspiracy committed an overt act in - 15 - 19018755.1 furtherance of the conspiracy — in the words of the statute, that “one or more of such persons d[id] any act to effect the object of the conspiracy.” 18 U.S.C. § 371. The function of this statutory overt-act requirement is to show that the conspiracy “is at work” and is not simply an agreement existing solely in the minds of the conspirators. Yates v. United States, 354 U.S. 298, 334 (1957), overruled on other grounds by Burks v. United States, 437 U.S. 1, 12 (1978); United States v. Arboleda, 929 F.2d 858, 865 (1st Cir. 1991); Carlson v. United States, 187 F.2d 366, 370 (10th Cir. 1951). Because it is a statutory element, the overt-act requirement does not apply to other conspiracy statutes that, unlike Section 371, do not expressly require an overt act. United States v. Shabani, 513 U.S. 10, 15-17 (1994). Conspiracy statutes that do not contain an overt-act requirement include 18 U.S.C. § 286, which proscribes conspiring to defraud the United States with respect to false, fictitious, or fraudulent claims. See supra, Chapter 22.05. An overt act is any act done by a member of the conspiracy for the purpose of carrying out or accomplishing the object of the conspiracy. United States v. Falcone, 311 U.S. 205, 210 (1940); United States v. McKee, 506 F.3d 225, 243 (3d Cir. 2007); United States v. Ross, 190 F.3d 446, 450 (6th Cir. 1999); United States v. Davis, 965 F.2d 804, 811-12 (10th Cir. 1992). Because the purpose of the overt-act requirement is merely to show that the conspiracy is at work, the overt act need not be criminal in character. Yates v. United States, 354 U.S. 298, 334 (1957), overruled on other grounds by Burks v. United States, 437 U.S. 1, 12 (1978); Braverman v. United States, 317 U.S. 49, 53-54 (1942); United States v. Touhey, 867 F.2d 534, 537 (9th Cir. 1989); Carlson v. United States, 187 F.2d 366, 370 (10th Cir. 1951). Indeed, the act may be totally legal in itself. See, e.g., United States v. Hermes, 847 F.2d 493, 495-96 (8th Cir. 1988). The government is not required to prove all of the overt acts alleged in an indictment. Proof of at least one overt act committed in furtherance of the conspiracy is sufficient. See, e.g., United States v. Lewis, 759 F.2d 1316, 1344 (8th Cir. 1985); United States v. Anderson, 611 F.2d 504, 510 (4th Cir. 1979); United States v. Adamo, 534 F.2d 31, 38 (3d Cir. 1976). The government is not required to disclose during pre-trial discovery all of the overt acts it intends to establish at trial. United States v. Murray, 527 F.2d 401, 411 (5th Cir. 1976); United States v. Armocida, 515 F.2d 49, 54 (3d Cir. 1975); United States v. Carroll, 510 F.2d 507, 509 (2d Cir. 1975); Cook v. United States, 354 F.2d 529, 531 - 18 - 19018755.1 United States v. Haga, 821 F.2d 1036, 1039 (5th Cir. 1987) (“Cases construing section 371 have made it plain that the ‘commit any offense’ clause and the ‘defraud the United States’ clause describe different criminal offenses.”). The first part of the statute, the “offense clause,” prohibits conspiring to commit offenses that are specifically defined in other federal statutes; the second part of the statute, the “defraud clause,” prohibits conspiring to defraud the United States. United States v. Hurley, 957 F.2d 1, 3 (1st Cir. 1992); United States v. Touhey, 867 F.2d 534, 536 (9th Cir. 1989); United States v. Cure, 804 F.2d 625, 628 (11th Cir. 1986); see also Dennis v. United States, 384 U.S. 855, 862-63 (1966) (referring to these as “alternative clause[s]”). The offense clause requires that the indictment refer to another criminal statute that defines the object of the conspiracy. The defraud clause, however, stands on its own, and an indictment charging a conspiracy to defraud does not need to refer to another statute to define the crime. United States v. Minarik, 875 F.2d 1186, 1187 (6th Cir. 1989); see also United States v. Bilzerian, 926 F.2d 1285, 1301 (2d Cir. 1991). In criminal tax prosecutions, Section 371 can be used to charge conspiracies to commit specific substantive tax offenses or to defraud the IRS. United States v. Jerkins, 871 F.2d 598, 602 (6th Cir. 1989); United States v. Little, 753 F.2d 1420, 1442 (9th Cir. 1984); United States v. Shermetaro, 625 F.2d 104, 109 (6th Cir. 1980). 23.07[1][b] Scope of Defraud Clause The Supreme Court has held that “[t]o conspire to defraud the United States” means (1) “to cheat the government out of money or property” or (2) “to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest.” Hammerschmidt v. United States, 265 U.S. 182, 188 (1924). The defraud clause of Section 371 encompasses a wide array of conduct, including acts that do not constitute a crime under a separate federal statute. United States v. Tuohey, 867 F.2d 534, 536-67 (9th Cir. 1989). In a 1910 case involving the Department of Agriculture, the Supreme Court rejected the argument that in order to prove a conspiracy “to defraud the United States” under Section 371 the government must “charge or prove an actual financial or property loss.” Haas v. Henckel, 216 U.S. 462, 479-80 (1910) (construing Rev. Stat. § 5440 - 19 - 19018755.1 (1878), the predecessor of the modern Section 371, which, like the current statute, prohibited conspiracies to “defraud the United States in any manner or for any purpose”). The indictment at issue in Haas charged that the defendants had conspired to obtain a government crop report “in advance of general publicity” and to “use such information in speculating upon the cotton market, and thereby defraud the United States by defeating, obstructing and impairing it in the exercise of its governmental function in the regular and official duty of publicly promulgating fair, impartial and accurate reports concerning the cotton crop.” Haas, 216 U.S. at 478. The Court explained that “it is not essential that such a conspiracy shall contemplate a financial loss or that one shall result.” Id. at 479. Rather, the statute was “broad enough in its terms to include any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of Government.” Id. Fourteen years later, in 1924, the Supreme Court clarified that the defraud clause — although it reaches conspiracies to interfere with the government’s lawful functions in ways that do not result in direct financial loss — still requires “fraud” and that Haas did not eliminate the traditional requirement that a fraudulent scheme be deceitful. Hammerschmidt, 265 U.S. at 187-88. “To conspire to defraud the United States,” the Court stated in Hammerschmidt, “means primarily to cheat the Government out of property or money, but it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest.” Id. at 188. Thus, although the defraud clause does not require a contemplated “property or pecuniary loss by the fraud,” it still requires that the conspiracy involve some form of “misrepresentation” or “chicane.” Ibid. In the century since Hammerschmidt was decided, the Supreme Court has repeatedly recognized and re-affirmed its construction of the defraud clause. See, e.g., United States v. Scharton, 285 U.S. 518, 520-21 (1932); Glasser v. United States, 315 U.S. 60, 66 (1942); Dennis, 384 U.S. at 861; McNally v. United States, 483 U.S. 350, 359 n.8. And courts have applied the clause to conspiracies to defraud various federal agencies, including, but not limited to, the Internal Revenue Service. See, e.g., United - 20 - 19018755.1 States v. Ballistrea, 101 F.3d 827, 832 (2d Cir. 1996) (Food and Drug Administration); United States v. Klein, 247 F.2d 908, 915 (2d Cir. 1957) (IRS);4 United States v. Pintar, 630 F.2d 1270 (8th Cir. 1980) (Upper Great Lakes Regional Commission); United States v. Tuohey, 867 F.2d 534, 537 (9th Cir. 1989) (Federal Deposit Insurance Corporation); United States v. Lane, 765 F.2d 1376, 1379 (9th Cir. 1985) (Social Security Administration); United States v. Elbeblawy, 899 F.3d 925 (11th Cir. 2018) (Department of Health and Human Services); United States v. Puerto, 730 F.2d 627 (11th Cir. 1984) (Treasury Department); United States v. Dean, 55 F.3d 640, 647 (D.C. Cir. 1995) (Department of Housing and Urban Development); United States v. Madeoy, 912 F.2d 1486 (D.C. Cir. 1990) (Federal Housing Administration and Veterans Administration); cf. United States v. Johnson, 383 U.S. 169, 172 (1966) (Department of Justice). Moreover, because a conspiracy to defraud the United States is a type of conspiracy, it is the unlawful agreement that constitutes the crime: it is not necessary to show that the scheme to defraud was a success or that the government was actually harmed. United States v. Rosengarten, 857 F.2d 76, 79 (2d Cir. 1988); United States v. Everett, 692 F.2d 596, 599 (9th Cir. 1982); Pintar, 630 F.2d at 1277-78. Nor is it necessary to show that the “fraud” contemplated by the conspiracy was a crime on its own. United States v. Jerkins, 871 F.2d 598, 603 (6th Cir. 1989). This means, in a tax case, that a prosecutor who charges a conspiracy to defraud the United States is not burdened with having to establish all of the elements of an underlying offense (e.g., tax evasion) and each member’s intent to commit that offense (e.g., willfulness).5 Rather, all the prosecutor must show is that the members agreed to interfere with or obstruct one of the government’s lawful functions “by deceit, craft or trickery, or at least by means that are dishonest.” Hammerschmidt, 265 U.S. at 188; see also United States v. Hurley, 957 F.2d 1, 4-5 (1st Cir. 1992); Jerkins, 871 F.2d at 603; United States v. Nersesian, 4 Conspiracies to defraud the IRS, commonly called “Klein conspiracies” after the case cited here, are discussed at length at ¶ 23.07[2], infra. 5 However, when the government charges a conspiracy to commit a substantive tax offense, “it must prove that “the intended future conduct [the conspirators] agreed upon include all the elements of the substantive crime.” United States v. Pinckney, 85 F.3d 4, 8 (2d Cir. 1996) (cleaned up). - 23 - 19018755.1 and collection of taxes, regardless of whether the government could prove “direct tax evasion” of an actual tax due and owing. 247 F.2d at 916. The court summarized twenty acts of concealment that qualified as efforts to impede the functions of the IRS, including the following (247 F.2d at 915): 1. Alteration of the books to make liquidating dividends appear as commissions; 2. Alteration of the books to make a gratuitous payment of $1,500,000 appear as repayment of a loan; 3. A false entry in the books disguising as commissions what was actually a dividend, which in turn was diverted to corporate nominees; 4. A false statement in Klein’s personal income tax return regarding the payment for a stock purchase; 5. Klein’s false answer to Treasury interrogatories seeking to identify the owners of various corporations; 6. A return falsely reporting that stock was sold for an immense profit; 7. The evasive affidavit of Klein’s secretary denying that he remembered altering certain books; and 8. Income tax returns that falsely claimed sales of stock. - 24 - 19018755.1 While it is not necessary to have evidence of acts as pronounced as those in Klein, the government must introduce evidence establishing that the intent of each member of the conspiracy was to deceptively impede the functions of the IRS. 23.07[2][b] Examples: Klein fact patterns First Circuit 1. United States v. Flete-Garcia, 925 F.3d 17, 21- 22 (1st Cir. 2019) (scheme to fraudulently obtain tax refunds using stolen identities of Puerto Rico residents). 2. United States v. Floyd, 740 F.3d 22, 26-27 (1st Cir. 2014) (scheme to impede collection of employment taxes by funneling wages through a nominee entity). 3. United States v. Allen, 670 F.3d 12, 14-15 (1st Cir. 2012) (scheme to avoid withholding of income taxes, file “zero” returns, and place assets in name of nominees). 4. United States v. Mubayyid, 658 F.3d 35, 57 (1st Cir. 2011) (conspiracy to impede the IRS’s ability to determine whether entity qualified for nonprofit status). 5. United States v. Goldberg, 105 F.3d 770, 772 (1st Cir. 1997) (scheme to conceal payments to individuals through use of “straw employees” and benefits to third parties). 6. United States v. Hurley, 957 F.2d 1, 6-7 (1st Cir. 1992) (money laundering scheme using front - 25 - 19018755.1 companies set up in Panama and the Bahamas, and unconventional business practices such as currency transactions totaling at least $125,000 and checks made out in names of third parties). 7. United States v. Cambara, 902 F.2d 144, 146-47 (1st Cir. 1990) (laundering money through use of real estate management company as front company, structuring cash withdrawals, and purchasing large assets with currency), abrogated on other grounds by United States v. Martinez-Salazar, 528 U.S. 304, 310-11 (2000). 8. United States v. Lizotte, 856 F.2d 341, 342-43 (1st Cir. 1988) (money laundering scheme using cash to purchase real estate through nominees). 9. United States v. Tarvers, 833 F.2d 1068, 1071-72 (1st Cir. 1987) (money laundering scheme using nail polish remover company set up as front and nominees using cash to purchase real estate). Second Circuit 1. United States v. Daugerdas, 837 F.3d 212, 218 (2d Cir. 2016) (various complex tax shelters designed to create paper losses to offset real income). 2. United States v. Coplan, 703 F.3d 46, 59-60 (2d Cir. 2012) (same, as well as tax shelters through which defendants purported to convert ordinary income into long-term capital gains through the creation and cancellation of trading partnerships). - 28 - 19018755.1 purported to extinguish tax liabilities by accessing fictitious secret Treasury accounts). 3. United States v. Turner, 718 F.3d 226, 229-30 (3d Cir. 2013) (promotion of scheme to use common-law trusts to impede assessment and collection of taxes). 4. United States v. DeMuro, 677 F.3d 550, 556 (3d Cir. 2012) (spending lavishly on personal and discretionary business items while professing an inability to pay delinquent taxes). 5. United States v. Stadtmauer, 620 F.3d 238, 241- 42 (3d Cir. 2010) (conspiracy to impede assessment and collection of business income by claiming bogus charitable and business expense deductions). 6. United States v. McKee, 506 F.3d 225, 238-41 (3d Cir. 2007) (conspiracy to impede IRS’s collection of employment taxes). 7. United States v. Gambone, 314 F.3d 163, 167- 68, 176-77 (3d Cir. 2003) (systematic plan to receive payments from home purchasers in cash and to hide this additional income from the IRS by buying U.S. savings bonds or by holding the cash in a safe or a nightstand). 8. United States v. Gricco, 277 F.3d 339, 346-50 (3d Cir. 2002) (scheme to skim cash from airport parking garage; structuring of financial transactions involving the proceeds of this scheme so as to avoid the filing of currency transaction reports). - 29 - 19018755.1 9. United States v. American Investors of Pittsburgh, Inc., 879 F.2d 1087, 1101-02 (3d Cir. 1989) (money laundering scheme using structured currency transactions and unauthorized use of other customer accounts to funnel currency; false statements to IRS regarding defendants’ use of those other accounts). Fourth Circuit 1. United States v. Jinwright, 683 F.3d 471, 475-76 (4th Cir. 2012) (conspiracy to underreport income that a pastor earned from his church’s reimbursements of his personal expenses and from outside speaking engagements). 2. United States v. Thorson, 633 F.3d 312, 314-17 (4th Cir. 2011) (scheme to claim charitable deductions from donations of cemetery sites, which involved fabrication of documents to create false appearance that the sites had been held long enough to qualify for deduction at fair market value). 3. United States v. Fleschner, 98 F.3d 155, 159 (4th Cir. 1996) (defendants, associated with the Hickory Carolina Patriots, advised others to claim excess allowances on Forms W-4, not to file tax returns, to hide income from the banking system, and to deal in cash). 4. United States v. Hirschfeld, 964 F.2d 318, 323- 24 (4th Cir. 1992) (complex series of financial transactions designed to create significant tax losses and provide cash flow from illegal underwriting of a small corporation; creation of fraudulent settlement - 30 - 19018755.1 of sham lawsuit to generate $2.1 million false tax deduction). 5. United States v. Schmidt, 935 F.2d 1440, 1442- 43 (4th Cir. 1991) (scheme to sell trusts known as Unincorporated Business Organizations, where participants could assign income and assets to the trusts and take false business deductions on personal expenses, as well as hide their income in financial institutions in the Marshall Islands), overruled on other grounds by United States v. Delfino, 510 F.3d 468, 472 (4th Cir. 2007). 6. United States v. Vogt, 910 F.2d 1184, 1188-90 (4th Cir. 1990) (money laundering scheme using front corporations and foreign bank accounts). 7. United States v. Kelley, 769 F.2d 215, 216 (4th Cir. 1985) (leader of tax protestor organization counseled members to claim exempt status on Forms W-4 to avoid withholding, to report zero wages on tax returns, and to deal only in cash). Fifth Circuit 1. United States v. De Nieto, 922 F.3d 669, 672-73 (5th Cir. 2019) (scheme to fraudulently claim tax refunds using stolen identities). 2. United States v. Montgomery, 747 F.3d 303, 305-06 (5th Cir. 2014) (scheme to underreport gross receipts of contracting business). 3. United States v. Heard, 709 F.3d 413, 418-19 (5th Cir. 2013) (opening and closing corporations, - 33 - 19018755.1 7. United States v. Sturman, 951 F.2d 1466, 1471- 72 (6th Cir. 1991) (conspirators created 150 corpo- rations, five of which were in foreign countries with strict secrecy laws; listed nominees as owners of the corporations; used the corporations to conceal income and make it difficult to trace income, expenses and cash skims; and destroyed corporate records after receipt of subpoenas). 8. United States v. Mohney, 949 F.2d 899, 900, 904-05 (6th Cir. 1991) (conspirators concealed ownership of adult entertainment businesses by using nominees on tax returns, skimming cash receipts, and using corporate checks to pay personal expenses). 9. United States v. Iles, 906 F.2d 1122, 1124 (6th Cir. 1990) (promotion and sale of three sham tax shelters and preparation of tax returns of investors in the shelters). 10. United States v. Jerkins, 871 F.2d 598, 600-01 (6th Cir. 1989) (attorney aided client in money laundering scheme by depositing cash in attorney’s trust fund account then purchasing real estate in the names of nominees). Seventh Circuit 1. United States v. Vallone, 698 F.3d 416, 432-45 (7th Cir. 2012) (promotion and sale of the abusive Aegis scheme, which involved the use of domestic and foreign trusts to conceal income and assets from the IRS, the preparation of fraudulent returns for clients, and making false representations to IRS - 34 - 19018755.1 agents to defend the scheme during audits), vacated on other grounds by Dunn v. United States, 570 U.S. 901 (2013); see also United States v. Wasson, 679 F.3d 938, 941-42 (7th Cir. 2012) (same scheme); United States v. Hills, 618 F.3d 619, 623- 24 (7th Cir. 2010) (same). 2. United States v. McKinney, 686 F.3d 432, 433- 34 (7th Cir. 2012) (use of nominees to avoid collection of business’s unpaid taxes). 3. United States v. Chavin, 316 F.3d 666, 668-69 (7th Cir. 2002) (conspirators created fraudulent bad debt loss deduction of $900,000 by manufacturing a sham sale of a clothing store owned by defendant to defendant’s cousin without defendant’s ceding any control over store). 4. United States v. Furkin, 119 F.3d 1276, 1280 (7th Cir. 1997) (scheme involved preventing the creation of records reflecting income from gambling machines, not reporting income from gambling machines, and encouraging others to lie). 5. United States v. Price, 995 F.2d 729, 730 (7th Cir. 1993) (scheme involved concealing corporate receipts using secret bank accounts, second sales journal, alteration of deposit tickets, false notations on memo portion of corporate checks, and forged sales invoices that were later supplied to an IRS auditor). 6. United States v. Brown, 944 F.2d 1377, 1386-87 (7th Cir. 1991) (conspirators structured currency transactions and used a nearly bankrupt mortgage - 35 - 19018755.1 brokerage firm to engage in elaborate and time- consuming transfers of funds). 7. United States v. Beverly, 913 F.2d 337, 358 (7th Cir. 1990) (drug trafficker used codefendant as nominee owner of certain assets, real estate, and businesses and used codefendant’s bank account to pay expenses). 8. United States v. Bucey, 876 F.2d 1297, 1299- 1300 (7th Cir. 1989) (money laundering scheme using bogus church as a front to move proceeds to offshore bank accounts and foreign corporations). 9. United States v. Hooks, 848 F.2d 785, 793 (7th Cir. 1988) (diversion of bearer bonds worth $375,000 from inclusion in estate and liquidation of bonds through nominee). Eighth Circuit 1. United States v. Keleta, 949 F.3d 1082, 1085-86 (8th Cir. 2020) (scheme to claim tax credits for return-preparation clients for which the clients did not qualify). 2. United States v. Cole, 721 F.3d 1016, 1019-21 (8th Cir. 2013) (scheme to impede assessment and collection of taxes on illegal-source income from billing fraud scheme). 3. United States v. Wirth, 719 F.3d 911, 913-14 (8th Cir. 2013) (scheme to falsely claim personal expenses as business expenses) - 38 - 19018755.1 3. United States v. Meredith, 685 F.3d 814, 817-19 (9th Cir. 2012) (scheme to promote and sell so- called “pure trusts”). 4. United States v. Yip, 592 F.3d 1035, 1036-37 (9th Cir. 2010) (scheme to impede assessment and collection of tax on income earned from off-the- books side business). 5. United States v. Huebner, 48 F.3d 376, 377-78 (9th Cir. 1994) (defendants created sham debts and advised clients to file bankruptcy to impede IRS collection activity). 6. United States v. Crooks, 804 F.2d 1441, 1443- 44, 1448 (9th Cir. 1986), modified on denial of rehearing, 826 F.2d 4 (9th Cir. 1987) (promotion and sale of interests in bogus mineral royalty tax shelters that cycled the same funds between the partnerships and lenders and payees under the promoters’ control to create canceled checks that could be provided to the IRS as purported substantiation of the partnerships’ bogus mineral royalty payments). 7. United States v. Moran, 759 F.2d 777, 780 (9th Cir. 1985) (money laundering scheme using foreign bank accounts and foreign corporations). 8. United States v. Little, 753 F.2d 1420, 1427 (9th Cir. 1985) (promotion and sale of real estate tax shelters using retroactive application to new partner of partnership losses attributable to periods prior to partner’s entry into partnership). - 39 - 19018755.1 Tenth Circuit 1. United States v. Ray, 899 F.3d 852, 856-57 (10th Cir. 2018) (scheme to claim false deductions for job expenses and charitable contributions on returns prepared for clients). 2. United States v. Thompson, 518 F.3d 832, 840- 43, 847 (10th Cir. 2008) (commission checks deposited into bank account not disclosed to return preparer; conversion of some commission checks to cash; deposit of commission checks into one defendant’s personal savings account; corporate funds used to purchase property on which defendants intended to build personal residence; creation of phony loan document). 3. United States v. Scott, 37 F.3d 1564, 1573 (10th Cir. 1994) (promotion of trusts and unincorporated business organizations to eliminate income tax liability without losing control of money or assets). 4. United States v. Tranakos, 911 F.2d 1422, 1430 (10th Cir. 1990) (selling of sham common law trusts in an attempt to redirect income and avoid taxation). 5. United States v. Pinto, 838 F.2d 426, 428-29 (10th Cir. 1988) (conspirators concealed drug income by using cash to purchase a home, selling that home and purchasing two more homes, and devising sham mortgages purportedly encumbering the later-purchased homes to create the appearance that the purchase money came from loans). - 40 - 19018755.1 6. United States v. Kapnison, 743 F.2d 1450, 1252 (10th Cir. 1985) (scheme to obtain loans from banks for various borrowers, receive kickbacks from the proceeds of the loans, and fail to report the kickbacks). Eleventh Circuit 1. United States v. Margarita Garcia, 906 F.3d 1255 (11th Cir. 2018) (scheme to defraud by paying personal expenses through the business). 2. United States v. Shabazz, 887 F.3d 1204, 1209- 11 (11th Cir. 2018) (scheme to defraud using identifying information of prisoners obtained under false pretense of offering services of a charity for the prisoners’ benefit). 3. United States v. Hough, 803 F.3d 1181, 1184-85 (11th Cir. 2015) (hiding tens of millions of dollars from the sale of medical schools from the IRS through offshore bank accounts and nominee entities). 4. United States v. Hernandez, 921 F.2d 1569, 1575-76 (11th Cir. 1991) (money laundering scheme where funds were converted to money orders and then deposited into a nominee bank account for nightclub owned in name of third party). 5. United States v. Lafaurie, 833 F.2d 1468, 1469- 70 (11th Cir. 1987) (money laundering scheme using foreign bank accounts, front corporations, and - 43 - 19018755.1 infra.) And in United States v. Caldwell, 989 F.2d 1056 (9th Cir. 1993), the Ninth Circuit held that a district court’s jury instructions were deficient because the court did not tell the jurors that, in order to convict the defendant of a conspiracy to defraud the United States, they had to find that the defendant intended to do so by “deceitful or dishonest means.” Caldwell, 989 F.2d at 1060. Prosecutors responding to judicial concerns about the breadth of the defraud clause, or to defendants citing Caldwell, Goldberg, or Coplan, should be familiar with those decisions and understand the limits of their holdings. Caldwell and Goldberg did not question the current scope of the defraud clause but instead discussed why the clause’s scope should not be enlarged. And Coplan, although it questioned the “Klein doctrine,” correctly recognized that the doctrine comes not from the Second Circuit’s decision in Klein but from century-old Supreme Court precedents in Haas and Hammerschmidt. None of these decisions provides a basis for a lower court to depart from the well-established precedent governing the defraud clause. 23.07[2][d] Precedent Governing Different Statutes Defendants sometimes attempt to attack the Klein doctrine using recent Supreme Court decisions where the Court has restricted the reach of different statutes. See, e.g., Kelly v. United States, 140 S. Ct. 1565 (2020) (“property fraud” statutes, including mail and wire fraud, 18 U.S.C. §§ 1341 & 1343, and federal-program fraud, 18 U.S.C. § 666); Marinello v. United States, 138 S. Ct. 1101 (2018) (“tax obstruction” statute, 26 U.S.C. § 7212(a), discussed in ¶17.04, supra); Skilling v. United States, 561 U.S. 358 (2010) (“honest services” fraud, 18 U.S.C. § 1346). These decisions have no relevance to Section 371 or the defraud clause. The government successfully rebutted such an argument in United States v. Atilla, 966 F. 3d 118 (2d Cir. 2020). Atilla was convicted of violating Section 371 by conspiring to obstruct the lawful functions of the Treasury Department in enforcing the laws imposing economic sanctions on Iran. Id. at 121-23. Atilla challenged this conviction, relying on Marinello to argue that “that the defraud clause should be construed narrowly to avoid vagueness concerns.” Id. at 130-31. The court, however, found the analogy to Marinello “inapposite because in that case, the Supreme Court analyzed 26 U.S.C. § 7212(a)’s - 44 - 19018755.1 unique text, context, and history – which are wholly unrelated to § 371’s defraud clause.” Ibid. United States v. Flynn, ___ F.3d ___, 2020 WL 4687010 (8th Cir. Aug. 13, 2020), likewise declined to apply Marinello to the defraud clause. Flynn pleaded guilty to a Klein conspiracy and unsuccessfully sought to withdraw his guilty plea before sentencing. Id. at *1-2. Flynn argued on appeal that his guilty plea lacked a factual basis because Marinello, which requires proof of a nexus to a pending or reasonably foreseeable targeted to sustain a tax obstruction conviction under § 7212(a), requires proof of a similar “nexus” to establish a Klein conspiracy. Id. at *3-4. This is so, Flynn maintained, because § 371’s defraud clause is otherwise void for vagueness. Id. at *4-5 & n.4. Flynn rejected these arguments, concluding that “Marinello did not alter Klein conspiracies.” 2020 WL 4687010 at *3-5 & n.4. The court explained that, unlike § 7212(a), “the broad language in § 371 makes no reference to ‘the due administration [of the Internal Revenue Code].’” Id. at 4. And Flynn reasoned that because “the broad scope of Klein conspiracies is sanctioned in ‘long-lived Supreme Court decisions’ . . . arguments aimed at narrowing it ‘are properly directed to a higher authority.’” Ibid. (quoting Coplan, 703 F.3d at 62). 23.07[3] Overlapping Conspiracies and the Sixth Circuit’s Minarik Decision As noted, Section 371 provides for two forms of conspiracies. The defraud clause and the offense clause overlap, however, when a fraud against the United States also violates a specific federal statute. See United States v. Helmsley, 941 F.2d 71, 90 (2d Cir. 1991). The question then becomes which clause should be charged. In United States v. Minarik, 875 F.2d 1186 (6th Cir. 1989), the Sixth Circuit stated that in order to properly alert defendants to the charges against them, prosecutors must use the offense clause, rather than the defraud clause, when the conduct charged constitutes a conspiracy to violate a specific statute. 875 F.2d at 1187. - 45 - 19018755.1 Subsequent Sixth Circuit decisions, however, have “confined the [Minarik] decision to its facts.” United States v. Damra, 621 F.3d 474, 506 (6th Cir. 2010); see also United States v. Sturman, 951 F.2d 1466, 1473-74 (6th Cir. 1991); United States v. Mohney, 949 F.2d 899, 900-03 (6th Cir. 1991); United States v. Kraig, 99 F.3d 1361, 1364-68 (6th Cir. 1996); United States v. Khalife, 106 F.3d 1300, 1303-04 (6th Cir. 1997); United States v. Rozin, 664 F.3d 1052, 1064-66 (6th Cir. 2012). These cases have held that Minarik is applicable “only when the defendant receives no specific notice of the crimes charged, the violation was too isolated to comprise a conspiracy to defraud, and the taxpayer’s duties are technical.” Damra, 621 F.3d at 507; see also Khalife, 106 F.3d at 1303-04 (elaborating upon these requirements, and concluding that Minarik’s statement regarding the application of the offense and defraud clauses of § 371 was “[d]icta”). Other circuits have rejected Minarik entirely and allow the government to charge the defraud clause regardless of whether the fraud constitutes a separate federal criminal offense. See, e.g., United States v. Fletcher, 322 F.3d 508, 519 (8th Cir. 2003); United States v. Arch Trading Co., 987 F.2d 1087, 1092 (4th Cir. 1993); United States v. Harmas, 974 F.2d 1262, 1266-67 (11th Cir. 1992); United States v. Hurley, 957 F.2d 1, 3 (1st Cir. 1992); United States v. Derezinski, 945 F.2d 1006, 1010 (8th Cir. 1991); United States v. Notch, 939 F.2d 895, 900-01 (10th Cir. 1991); United States v. Bilzerian, 926 F.2d 1285, 1301-02 (2d Cir. 1991); United States v. Reynolds, 919 F.2d 435, 438-39 (7th Cir. 1990); United States v. Haga, 821 F.2d 1036, 1044-45 (5th Cir. 1987). 23.07[4] Scope of Intent 23.07[4][a] Generally The crime of conspiracy includes an intent element that requires the government to show that each member of the conspiracy had knowledge of the object of the conspiracy and joined the conspiracy intending to achieve that object. Ingram v. United States, 360 U.S. 672, 678 (1959). The government may rely on circumstantial evidence to establish this element. E.g., United States v. Lore, 430 F.3d 190, 204 (3d Cir. 2005); United States v. Hayes, 190 F.3d 939, 946 (9th Cir. 1999), aff’d en banc, 231 F.3d 663, - 48 - 19018755.1 23.07[4][c] Klein Conspiracy Coupled with a Narcotics or Money Laundering Prosecution In some cases, prosecutors will charge a Klein conspiracy in conjunction with narcotics or money laundering charges. Such cases typically involve the failure to report income derived from the sale of narcotics or the laundering of drug proceeds. In these cases, the element of intent, especially as to the Klein objective, becomes an issue. A question is raised as to whether acts of concealing sources of income and disguising the character of narcotics proceeds are alone sufficient to infer an intent to impede and impair the functions of the IRS. A line of cases holds that when acts of concealment are reasonably explainable in terms other than a motivation to evade taxes, the government must produce independent evidence of an intent to evade taxes. United States v. Pritchett, 908 F.2d 816, 820-22 (11th Cir. 1990); United States v. Krasovich, 819 F.2d 253, 256 (9th Cir. 1987). For example, in Krasovich, the Ninth Circuit reversed a defendant’s Klein conspiracy conviction where the evidence adduced at trial failed to establish a link between the defendant and the tax laws. 819 F.2d at 256. Krasovich was an auto mechanic for John and Andrea Drummond, who were cocaine traffickers. The evidence at trial showed that Krasovich knew the Drummonds sold narcotics and that Krasovich knowingly registered, in his own name, vehicles and equipment purchased by the Drummonds, for the purpose of keeping title out of the Drummonds’ names. 819 F.2d at 254. The government charged Krasovich and the Drummonds with a Klein conspiracy relating to the personal income taxes of John Drummond. 819 F.2d at 254-55. Krasovich argued that there was no direct or circumstantial evidence to indicate that he agreed with anyone to impede the functions of the IRS. In response, the government pointed to the defendant’s acts of concealment as circumstantial evidence of his intent. 819 F.2d at 255- 56. The court of appeals rejected the government’s position. The court found that when efforts at concealment can be explained in terms of motivation other than to evade taxes, the government must supply other evidence to show the defendant knew that the purpose of the concealment was to impede the functions of the IRS. 819 F.2d at 256. - 49 - 19018755.1 The Krasovich court based its holding on the Supreme Court decision in Ingram v. United States, 360 U.S. 672 (1959). There, the Court reversed the convictions of two low-level co-conspirators in a gambling operation, who had been charged under the offense clause of Section 371 with conspiracy to evade the wagering tax. 360 U.S. at 673. The Supreme Court stressed that, under the offense clause, the government must establish an intent to agree and an intent to commit the substantive offense itself. 360 U.S. at 678. The Ingram Court found the record barren of any direct evidence to establish an underlying intent to evade taxes. Further, the Court held that the government could not use the acts of concealing the gambling operation to infer a tax motive because concealment is common to all crime and may be used to infer any number of motives. Without independent proof to show knowledge of the tax motive, the intent element could not be made out, and the Court reversed the convictions. 360 U.S. at 678-80. In United States v. Pritchett, 908 F.2d 816 (1990), the Eleventh Circuit followed the rationale of Ingram and Krasovich. The defendants, David and Mark Pritchett, along with three others, were indicted for conspiracy to distribute cocaine and conspiracy to evade the personal income taxes of Joe Pritchett. The evidence showed that both defendants knew of the drug operation and participated in concealing assets of Joe Pritchett, including the unknown contents of several safe deposit boxes. 908 F.2d at 818- 21. - 50 - 19018755.1 Relying on Ingram, and Krasovich, the court found: [T]hese two [defendants’] efforts at concealing Joe’s source of income and ownership interests are “not reasonably explainable only in terms of motivation to evade taxes.” . . . Because David knew about and participated in the drug sales, his efforts at hiding the income are explained in terms of an effort to prevent detection of the drug business. The evidence does not show that Mark knew Joe’s cash represented current income, and therefore only shows that Mark knew that Joe was hiding his ownership interests in various assets. 908 F.2d at 821 (quoting Ingram, 360 U.S. at 679). The court distinguished two earlier cases — United States v. Enstam, 622 F.2d 857, 861-64 (5th Cir. 1980), and United States v. Browning, 723 F.2d 1544, 1546-49 (11th Cir. 1984), based on what it described as differences in the evidence in those cases. According to the court, in Enstam and Browning, the government “offered independent evidence of an intent to avoid income taxes,”7 evidence the court found to be lacking in Pritchett. 908 F.2d at 821-22. The Pritchett court concluded that, because of the additional evidence proven in Enstam and Browning, the findings in those cases were consistent with Ingram. 908 F.2d at 821-22. Consistent with the Fifth and Eleventh Circuits’ decisions in Enstam and Browning, other circuits have also sustained convictions where there was evidence supporting a finding of intent to defraud the IRS along with evidence of concealment of the source of money or other assets or the true ownership of income or assets. See United States v. Beverly, 913 F.2d 337, 357-58 (7th Cir. 1990); United States v. Vogt, 910 F.2d 7 That evidence consisted primarily of statements made by co-conspirators evincing an intent to avoid taxes. 908 F.2d at 822. - 53 - 19018755.1 23.08[3] Withdrawal Defense The government is not required to prove that each member of a conspiracy committed an overt act within the statute of limitations. Hyde v. United States, 225 U.S. 347, 369-70 (1912); see also United States v. Read, 658 F.2d 1225, 1233-34 (7th Cir. 1981) (interpreting Hyde). Once the government establishes that a member joined the conspiracy, that member’s continued participation in the conspiracy is presumed until the object of the conspiracy has been accomplished, or until the member has withdrawn from or abandoned the conspiratorial purpose. See, e.g., United States v. Vaquero, 997 F.2d 78, 82 (5th Cir. 1993); United States v. West, 877 F.2d 281, 289 (4th Cir. 1989); United States v. Juodakis, 834 F.2d 1099, 1103 (1st Cir. 1987); United States v. Finestone, 816 F.2d 583, 589 (11th Cir. 1987); United States v. Krasn, 614 F.2d 1229, 1236 (9th Cir. 1980). See also United States v. Jimenez Recio, 537 U.S. 270 (2003) (a conspiracy does not automatically terminate simply because the Government has defeated its object). Withdrawal marks a conspirator’s disavowal or abandonment of the conspiratorial agreement. Hyde v. United States, 225 U.S. at 369. Whether a conspirator has withdrawn from the conspiracy is a question of fact for the jury. In United States v. U.S. Gypsum Co., 438 U.S. 422, 464-65 (1978), the Supreme Court stated that “[a]ffirmative acts inconsistent with the object of the conspiracy and communicated in a manner reasonably calculated to reach co-conspirators have generally been regarded as sufficient to establish withdrawal or abandonment.” The courts have held that mere cessation of activity is insufficient to prove withdrawal. Rather, some sort of affirmative action that demonstrates one has abandoned the object of the conspiracy is required. See United States v. Berger, 224 F.3d 107, 118-19 (2d Cir. 2000); United States v. Antar, 53 F.3d 568, 583 (3d Cir. 1995), overruled on other grounds by Smith v. Berg, 247 F.3d 532, 534 (3d Cir.2001); United States v. Lash, 937 F.2d 1077, 1083 (6th Cir. 1991); United States v. Juodakis, 834 F.2d 1099, 1102 (1st Cir. 1987); United States v. Finestone, 816 F.2d 583, 589 (11th Cir. 1987); United States v. Gonzalez, 797 F.2d 915, 917 (10th Cir. 1986); United States v. Krasn, 614 F.2d 1229, 1236 (9th Cir. 1980). A conspirator’s withdrawal from a conspiracy starts the running of the statute of limitations as to that conspirator. If an indictment is filed after the applicable statute of - 54 - 19018755.1 limitations period as to a conspirator has run (i.e., more than six years after the conspirator’s withdrawal from the conspiracy where the limitations period is six years), the statute of limitations bars prosecution of that conspirator for his or her participation in the conspiracy. United States v. Read, 658 F.2d 1225, 1232-33 (7th Cir. 1981). The defendant carries the full burden of establishing this affirmative defense; the burden does not shift to the government merely because the defendant “produces some evidence supporting such a defense.” Smith v. United States, 568 U.S. 106, 107, 110-12 (2013). In short, the government technically is not required to prove that each member of the conspiracy committed an overt act within the limitations period. Indeed, a defendant cannot raise such a “statute-of-limitations bar for the first time on appeal.” Musacchio v. United States, 136 S. Ct. 709, 716, 193 L. Ed. 2d 639 (2016).8 In practice, however, a prosecutor should critically review those conspirators whose membership predates the limitations period and be prepared to rebut any withdrawal defense based on the statute of limitations. 23.09 CO-CONSPIRATOR STATEMENTS Statements made by a co-conspirator as part of a conspiracy are not excluded from evidence by the hearsay rule or the Confrontation Clause of the Sixth Amendment. Fed. R. Evid. 801(d)(2)(E); Crawford v. Washington, 541 U.S. 36, 56 (2004) (“by their nature . . . statements in furtherance of a conspiracy” are “not testimonial”). Whether a statement qualifies as a co-conspirator statement must be proved by a preponderance of the evidence, and the court must consider the statement itself in determining whether there existed a conspiracy and whether the statement was in furtherance of the conspiracy. Bourjaily v. United States, 483 U.S. 171 (1987). There also must be some independent corroborating evidence: although “[t]he statement must be considered,” it 8 Some circuits have indicated, however, that a defendant may still attempt to premise a claim of ineffective assistance of counsel on a failure to raise a limitations defense, even after Musacchio. See, e.g., United States v. Samchuk, 739 Fed. App’x 460, 461 (9th Cir. 2018) (declining to address issue on direct appeal, and observing that the ineffective assistance “claim is better suited for review in a [collateral] proceeding . . . under 28 U.S.C. § 2255”). - 55 - 19018755.1 “does not by itself establish . . . the existence of the conspiracy or participation in it.” Fed. R. Evid. 801(d). Because the existence of a conspiracy for the purpose of introducing a co- conspirator statement is a preliminary, factual question for the court, see Fed. R. Evid. 104; Bourjaily, 483 U.S. at 181, “it is not necessary that the conspiracy upon which admissibility of the statement is predicated be that [conspiracy] charged” in the indictment. United States v. El-Mezain, 664 F.3d 467, 502 (5th Cir. 2011). Indeed, many courts have concluded that the “conspiracy” need not be criminal at all. The subsection excluding co-conspirator statements from the definition of “hearsay” in Rule 801(d)(2) deals with statements by an “opposing party,” including the defendant’s own statements and statements by a defendant’s agent. See Fed. R. Evid. 801(a), (c); see also id., Notes of Committee on the Judiciary, Senate Report No. 93–1277. Accordingly, numerous courts of appeals have concluded that the “conspiracy” referred to in Rule 801(d)(2)(E) includes joint undertakings generally, both legal and illegal. See United States v. Russo, 302 F.3d 37, 45 (2d Cir. 2002) (collecting cases) (“[T]he objective of the joint venture that justifies deeming the speaker as the agent of the defendant need not be criminal at all.”); see also Government of the Virgin Islands v. Brathwaite, 782 F.2d 399, 403 & n.1 (3d Cir. 1986); United States v. Nelson, 732 F.3d 504, 516 (5th Cir. 2013); United States v. Porter, 933 F.2d 1010 (6th Cir. 1991); United States v. Kelley, 864 F.2d 569, 573 (7th Cir. 1989); United States v. Layton, 855 F.2d 1388, 1400 (9th Cir. 1988); United States v. Bucaro, 801 F.2d 1230, 1232 (10th Cir. 1986); United States v. Brockenborrugh, 575 F.3d 726, 735 (D.C. Cir. 2009). In the usual conspiracy prosecution, however, there will be substantial overlap between the evidence needed to prove the existence of a conspiracy to the court (to establish applicability of the co-conspirator exception by a preponderance of the evidence) and the evidence needed to prove the existence of a conspiracy to the jury (to prove the conspiracy charged in the indictment beyond a reasonable doubt). Circuit practice varies as to how and when the government must meet these two distinct burdens. A number of circuits encourage district courts to conditionally admit co-conspirator statements and then evaluate, at the conclusion of the government’s case, whether the government met its burden of proving the conspiracy by a preponderance of the evidence. See United Sates v. Correa-Osorio, 784 F.3d 11, 23-24 (1st Cir. 2015); United States v. - 58 - 19018755.1 provision for conspiracies, USSG § 2X1.1, applies to offense-clause conspiracies, while Klein conspiracies are specifically covered by USSG § 2T1.9. See ¶ 16.02[6], supra; ¶ 43.03[1][g], infra; see also USSG App. A (statutory index). Under Section 2X1.1(a), the base offense level is the “base offense level from the guideline for the substantive offense, plus any adjustments from such guideline for any intended offense conduct that can be established with reasonable certainty.” Under this provision, “the only specific offense characteristics from the guideline for the substantive offense that apply are those that are determined to have been specifically intended or actually occurred. Speculative specific offense characteristics will not be applied.” USSG § 2X1.1 comment. (n.2). The offense level under Section 2X1.1 is decreased by three levels “unless the defendant or a co-conspirator completed all the acts the conspirators believed necessary on their part for the successful completion of the substantive offense or the circumstances demonstrate that the conspirators were about to complete all such acts but for apprehension or interruption by some similar event beyond their control.” USSG § 2X1.1(b)(2). The Guidelines commentary explains that, for “most prosecutions for conspiracies, . . . no reduction of the offense level is warranted” under this provision because “the substantive offense was substantially completed or was interrupted or prevented on the verge of completion by the intercession of law enforcement authorities or the victim.” USSG § 2X1.1 comment. (backg’d). Under Section 2T1.9, the base offense level is the offense level — including any applicable specific offense characteristics — from § 2T1.1 (which covers most tax crimes) or § 2T1.4 (which specifically covers aiding and assisting in the filing of false returns), “as appropriate,” but the offense level is increased to a minimum of 10 if either of those provisions yields an offense level lower than 10. USSG § 2T1.9(a), comment. (n.2).9 There are also offense-level enhancements for planned or threatened use of 9 In United States v. Kraig, 99 F.3d 1361 (6th Cir. 1996), the defendant argued that his offense level should be 10 under this provision because “his offense is not similar to either of the tax offenses covered by sections 2T1.1 or 2T1.3,” which the version of 2T1.9 then applicable cross-referenced instead - 59 - 19018755.1 violence (four levels) or for “encourag[ing] persons other than or in addition to co- conspirators to violate the internal revenue laws” (two levels), but if both these enhancements apply, only “the greater” 4 level enhancement is applied. USSG 2T1.9(b); see also United States v. Hopper, 177 F.3d 824, 833 (9th Cir. 1999) (remanding for resentencing because both enhancements were applied). The enhancement for encouraging others besides co-conspirators to violate the internal revenue laws cannot be applied in addition to the enhancements under § 2T1.4(b)(1) for being in the business of preparing false returns, deriving substantial income from the scheme, or using sophisticated means in carrying out the offense. See USSG § 2T1.9(b)(2). Application note 4 to Section 2T1.9 explains that “[s]ubsection (b)(2) provides an enhancement where the conduct was intended to encourage persons, other than the participants directly involved in the offense, to violate the tax laws,” and gives two examples of offenses to which the enhancement applies: “an offense involving a ‘tax protest’ group that encourages persons to violate the tax laws,” and “an offense involving the marketing of fraudulent tax shelters or schemes.” See also, e.g., United States v. Reinke, 283 F.3d 918, 920-21 (8th Cir. 2003) (applying enhancement where defendants “marketed and sold hundreds of trusts” and falsely “told trust purchasers that they could assign their assets and income to the trusts and then deduct from their taxes the money that they paid for personal living expenses”); United States v. Fant, 180 F.3d 261 (Table), 1999 WL 274489, at *1 (5th Cir. 1999) (per curiam) (applying enhancement where defendant “invited someone who was not a coconspirator to a ‘tax protest’ meeting for the purpose of encouraging him to violate the tax laws”). The enhancement’s application, however, is not limited to these examples, and prosecutors should seek the enhancement where it applies. See United States v. Macchia, 104 F.3d 350 (Table), 1996 WL 518509, at *3 (2d Cir. 1996) (rejecting argument that enhancement applies only to of Section 2T1.4. Id. at 1370. The court, however, rejected this argument, concluding that “the plain language of the guideline directs that one of these two sections is to be used” if the offense level under the “most applicable” of those two sections is greater than 10. Ibid.; see also USSG § 2T1.9, comment. (n.2) (directing the use of “whichever guideline [2T1.1 or 2T1.4] most closely addresses the harm that would have resulted had the conspirators succeeded in impeding, impairing, obstructing, or defeating the Internal Revenue Service”). - 60 - 19018755.1 “tax protest groups and promoters of fraudulent tax shelters,” and applying it where the defendant encouraged others to prepare false invoices so he and his co-conspirators could evade gasoline excise taxes); United States v. Rabin, 986 F. Supp. 887, 890-91 (D. N.J. 1997) (where agreement in Klein conspiracy was between company manager and company union representative, enhancement applied where a girlfriend and an attorney were encouraged to violate tax laws). In United States v. Sabino, 307 F.3d 446 (6th Cir. 2002), the court rejected the defendants’ argument that it was improper double-counting to impose an obstruction of justice enhancement under USSG § 3C1.1 for providing false grand jury testimony when they were convicted of a Klein conspiracy and sentenced under Section 2T1.9. Although the defendants’ false statements to the grand jury were alleged as overt acts in furtherance of the conspiracy, the court reasoned that because Section 2T1.9 “applies to conspiracies under § 371 that are designed to ‘defraud the United States by impeding, impairing, obstructing, and defeating . . . the collection of revenue,’” there was “no reason to conclude that this guideline takes into consideration a defendant’s obstruction of the administration of justice in furtherance of the fraudulent scheme, such as giving false testimony before the grand jury or bribing a witness.” Id. at 450-51 (quoting USSG 2T1.9, comment. (n.1)).