Triple Whammy

With this next story, I’m going to depart from the framework I used for the last story about Tommy. That framework was to think about the whole matter as the sum of three parts- the crime, the man and the punishment.

This story requires a different perspective for two reasons. First, there was no crime (unless you want to see one in the collusive actions of both the IRS & the DOJ). Second, the main feature of this case is the double (or triple) whammy suffered by my fellow inmate, Frank. He not only freakishly hit the Wheel of Misfortune in attracting the attention of the IRS, and then a voracious AUSA, but also hit the Lotto of Insanely Incompetent Lawyers.

Frank is now 45, and when his case began in late 2014, he owned 20 tax preparation offices in and around a major midwestern city. One of his store managers drew an audit of his personal tax returns, which turned out to be riddled with fraud. He was good at his job, and a nice guy, but had a bad gambling habit, which made a shambles of his finances. Unfortunately for Frank, he filed his taxes within the company’s system, and thus his problem became Frank’s problem.

To have in their sights a person who had so obviously committed tax fraud also be a manager of a tax preparation office, is, for an IRS agent, to have hit a ladder-climbing jackpot. “Ladder climbing” is using a small fish to reach a bigger one. (Not a mixed metaphor- google ‘fish ladders’). The bait, of course, is anything that works. In this case it was likely an offer of leniency (carrot) or a promise of the gov’t’s wrath (stick), unless a betrayal is made that meets the gov’t’s specification.

Soon various employees of Frank’s business were being interviewed by the CID (Criminal Investigative Div.) of the IRS (Internal Revenue Service), and were all told they would be “targets” of prosecution if they didn’t testify that Frank had told them to falsify documents. (Were you aware that almost all administrative state organizations have their own police force, often with their own SWAT team? Begs the question about who those gunmen answer to. Federal law? State law? Administrative State law?)

Enough of them did to breath life into the prosecution of Frank.

In addition to these employees, his CFO (Chief Financial Officer) was brought in for an “interview”. They (CID) told her that employees had confessed to the crime. They wanted to give her an opportunity to “get on the bus”, so that they wouldn’t have to see her prosecuted too, because they didn’t “want her to lose her CPA license”. (In spite of what they do, they are very “caring” people!)

The bus, they explained, is a big bus. It can hold a lot of people. The gov’t is driving the bus. It will soon be full. The question is not, ‘Will you be on the bus?’, it’s- ‘Who gets the best seats?’ Those seats are given, they explained, according to helpfulness. The most cooperative person gets the best seat.

They also said that they know she has a 4 yr old daughter, and she should know that her arrest, if it comes to that, would be on a Friday night, and that she would be held at a women’s prison in KY, without bond, for a year or more.

Her lawyer had nothing but complete fear and negativity to offer her, and advised throwing Frank under “that bus”.

The CFO told the agents, “None of what you say about how we did business is true. No, I won’t cooperate.”

[To jump ahead for a moment- she was never further investigated, nor was she indicted. Kind of makes you rething the wisdom of always trusting your lawyer, doesn’t it?]

The U.S.Attorney’s office contacted Frank. He told them he would have his attorney contact them.

Frank now had to find one. He needed a lawyer experienced in defending clients from federal criminal prosecutors. His business lawyers told him they had partners in their firm who could handle this. They wanted $100K retainer and estimated that a trial would run him $1 million. His business was lucrative, but not commensurate with that.

He turned to the internet, and though he was in a fairly large city, the pickings were rather slim. He picked one who popped up on Google for “federal criminal tax”. Due to his pressing need, he did not bother to ask for references or check out her claims of expertise, because she sounded alright.

He signed with her and sent her a $10,000 retainer. She contacted the AUSA (assist. U.S. atty) for a meeting. After that meeting, she told Frank, “They just want to talk to you. They don’t want to indict you, so just be cooperative.”

At the next meeting, the AUSA explained that this was a “proffer”, and what that meant. Once the necessary papers were signed, the AUSA began by saying that Frank had been accused by his employees of encouraging them to falsify documents so as to increase their clients tax returns and to increase their fees.

Frank said, “This is not true. Our training is explicit that this activity is not legal, and therefore not to be done. Our training is videotaped and you can view it yourself. We have an internal auditor who checks all returns. Every client signs an additional Schedule C Due Diligence form, and is made aware of the penalties of perjury. Our auditor also contacts our clients after leaving our office to reconfirm.”

AUSA: “That’s just how you CYA (cover your ass)!”
Frank: “Of course it’s CYA, but not just CYA. That’s how you do it right!”
AUSA: “Your employees tell us that when the videotape stopped, that’s when you taught them to cheat!”
Frank: “How can I prove to you something that didn’t happen?”

The AUSA was screaming and threatening. Frank asked for time alone with his attorney. When alone she said, “They really don’t want to indict you. Just give them something.” He said, “Give them what? I didn’t do anything!” She said, “Just cooperate.”

After the break, the AUSA told Frank that his CFO ratted him out, so there’s no use lying. Frank said, “I’d like to help, but I just can’t go where you want me to go.” AUSA said, “We’ve cracked tougher, smarter guys than you!”

The meeting ended. Frank noticed that although the gov’t had a person recording (i.e. taking notes) the entire proceeding, his lawyer hadn’t take a single note.

It was 5 months before Frank heard anything. He used the intervening time to look for a new lawyer, ending up back with the first ones; the ones he couldn’t afford. They were appalled to hear that his lawyer allowed the “proffer” to take place, given that at that point it couldn’t have been anything other than a fishing expedition, that is, the gov’t “fishing” for anything that could be used against him.

They were more appalled, however, that she didn’t have any notes to pass along to them, because as she explained to them, “There was no need to take notes since the gov’t had a person there to take notes and produce a transcript.” They told Frank that without notes from the defense atty, there was no way to challenge the gov’t’s claim that he had admitted that he merely took steps to ‘cover his ass’ to escape the charges he faced in defrauding the gov’t.

All that being the case, they could offer no hope to getting an indictment thrown out.

Frank therefore concluded that there was no reason to spend big bucks on these lawyers, and his best avenue was to take the best plea he could get. For that he decided to go with a public defender. He says this gal turned out to be the best of the bunch.

Without a legal defense to create problems for the prosecutors, there was no leverage to get a better deal (i.e. less unjust). He took the plea deal as offered. The judge handed it down as per the gov’t request- 4 yrs prison, $1.5 million restitution.

The kick (as in, ‘kick in the nuts’)- After sentencing, the AUSA told his lawyer (the public defender) that if Frank’s first attorney hadn’t agreed to the proffer, they would have had nothing on him.