Tax Attorney Petitions Supreme Court to Review Tax Fraud Sentence
Paul M. Daugerdas v. United States
- Case NamePaul M. Daugerdas v. United States
- CourtUnited States Supreme Court
- DocketNo. 16-1149
- Institutional AuthorsClayman & Rosenberg LLP
- Cross-Reference
Appealing United States v. Daugerdas, 837 F.3d 212 (2nd Cir. 2016).
- Subject Area/Tax Topics
- Jurisdictions
- Tax Analysts Document Number2017-71793
- Tax Analysts Electronic Citation2017 TNT 190-31
Paul M. Daugerdas v. United States
PAUL M. DAUGERDAS,
Petitioner,
v.
THE UNITED STATES OF AMERICA,
Respondent.
IN THE
Supreme Court of the United States
ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
PETITION FOR WRIT OF CERTIORARI
HENRY E. MAZUREK
BRIAN D. LINDER
Counsel of Record
WAYNE E. GOSNELL, JR.
CLAYMAN & ROSENBERG LLP
305 Madison Avenue, Suite 1301
New York, New York 10165
(212) 922-1080
mazurek@clayro.com
linder@clayro.com
Counsel for Petitioner
Paul M. Daugerdas
QUESTION PRESENTED
Petitioner Paul Daugerdas, a tax attorney, was tried by a jury for a “scheme to defraud” and obstruct the Internal Revenue Service (“IRS”) for the design, marketing and implementation of fraudulent financial tax shelters. At trial and during summations, the government presented two separate “schemes”: the first alleged that Daugerdas intentionally orchestrated a massive tax shelter fraud causing losses in excess of $1.6 billion by advising hundreds of clients to report tax losses based on financial transactions that lacked “economic substance”; the second scheme alleged that he conspired with other members of his law firm to intentionally backdate financial transactions on three or four client tax returns to fraudulently reduce their taxes owed, causing losses of approximately $2.2 million. During summations, the government urged the jury to convict Daugerdas of conspiracy, mail fraud, obstruction and relevant tax evasion counts based on the $2.2 million scheme. The jury agreed, acquitting him on six other tax evasion counts unrelated to the $2.2 million scheme. The government then asked the district court to sentence Daugerdas based on the greater $1.6 billion tax shelter scheme. As a result, the district court sentenced him to 180 months, as opposed to the 41–51 month Guidelines range for the backdating scheme, despite the government’s contrary argument to the jury and the jury’s ultimate verdict.
The question presented is:
Whether Petitioner’s sentence violated his rights under the Sixth Amendment and the Due Process Clause of the Fifth Amendment when a judge imposed a sentence based on an alleged greater “offense” than the government urged the jury to convict at trial, and after the jury convicted based on the lesser “offense” presented to them during the government’s summation?
PARTIES TO THE PROCEEDING
Those individuals and corporations that appeared in the criminal proceedings brought in the District Court for the Southern District of New York by the United States of America are:
PAUL M. DAUGERDAS, Petitioner and Defendant
ERWIN MAYER, Defendant
DONNA GUERIN, Defendant
DENIS FIELD, Defendant
ROBERT GREISMAN, Defendant
RAYMOND CRAIG BRUBAKER, Defendant
DAVID PARSE, Defendant
BDO USA, LLP, Defendant
UNITED STATES OF AMERICA, Respondent
The following parties are before the Court: Paul M. Daugerdas, Petitioner; and the United States of America, Respondent.
TABLE OF CONTENTS
QUESTION PRESENTED
PARTIES TO THE PROCEEDING
TABLE OF CONTENTS
TABLE OF AUTHORITIES
OPINIONS AND ORDERS BELOW
JURISDICTION
CONSTITUTIONAL PROVISIONS INVOLVED
STATEMENT OF THE CASE
FACTS AND PROCEEDINGS BELOW
A. PROCEEDINGS IN THE DISTRICT COURT
1. The Economic Substance “Scheme”
2. The Backdating “Scheme”
3. The Government Instructs the Jury to Convict Daugerdas of the Backdating Scheme
4. The Jury Convicted on the Backdating Scheme and Rejected the Government’s Economic Substance Scheme
5. The District Court Sentenced Petitioner on the Economic Substance Scheme
B. PROCEEDINGS IN THE COURT OF APPEALS
REASONS FOR GRANTING THE PETITION
A. THIS COURT’S DETERMINATION OF THE CONSTITUTIONAL LIMITS ON “SUBSTANTIVE REASONABLENESS” REVIEW OF FEDERAL SENTENCES IS NEEDED TO LIMIT EXECUTIVE BRANCH POWERS AND PREVENT THE EROSION OF THE JURY TRIAL PROCESS
1. Sixth Amendment Violations
2. Fifth Amendment Violations
B. THE COURT SHOULD GRANT CERTIORARI BECAUSE THE QUESTION PRESENTED IS IMPORTANT AND RECURRING AND THIS CASE IS AN IDEAL VEHICLE TO RESOLVE IT
CONCLUSION
APPENDIX A: Opinion of the United States Court of Appeals for the Second Circuit, Case No. 14-2437-cr (Sep. 21, 2016)
APPENDIX B: Judgment of the United States District Court for the Southern District of New York, Case No. 09 Cr. 581 (WHP) (Jun. 25, 2014)
APPENDIX C: Order of the United States District Court for the Southern District of New York, Case No. 09 Cr. 581 (WHP) (Jun. 18, 2014)
APPENDIX D: Transcript Excerpt: Sentencing of Petitioner Paul M. Daugerdas, Case No. 09 Cr. 581 (WHP) (Jun. 25, 2014)
APPENDIX E: Order of the United States Court of Appeals for the Second Circuit, Case No. 14-2437-cr (Dec. 20, 2016)
APPENDIX F: Constitutional and Statutory Provisions Involved
APPENDIX G: Transcript Excerpt: Government Rebuttal Summation, Case No. 09 Cr. 581 (WHP) (Oct. 29, 2013)
APPENDIX H: Joint Declaration of Henry E. Mazurek and Brian D. Linder in Support of Defendant Paul M. Daugerdas’s Sentencing Submission, Case No. 09 Cr. 581 (WHP) (Jun. 9, 2014)
TABLE OF AUTHORITIES
Cases
Alleyne v. United States, 133 S. Ct. 2151 (2013)
Almendarez-Torres v. United States, 523 U.S. 224 (1998)
Apprendi v. New Jersey, 530 U.S. 466 (2000)
Ashe v. Swanson, 397 U.S. 436 (1970)
Batson v. Kentucky, 476 U.S. 79 (1986)
Beckles v. United States, __ U.S. __, 2017 U.S. LEXIS 1572, (Mar. 6, 2017)
Blakely v. Washington, 542 U.S. 296 (2004)
Coffin v. United States, 156 U.S. 432 (1895)
Cuyler v. Sullivan, 446 U.S. 335 (1980)
Francis v. Henderson, 425 U.S. 536 (1976)
Gall v. United States, 552 U.S. 38 (2007)
In re Winship, 397 U.S. 358 (1970)
Jones v. United States, 135 S. Ct. 8 (2014)
Jones v. United States, 526 U.S. 227 (1999)
McMillan v. Pennsylvania, 477 U.S. 79 (1986)
Oregon v. Ice, 555 U.S. 160 (2009)
Patterson v. New York, 432 U.S. 197 (1977)
Peugh v. United States, 133 S. Ct. 2072 (2013)
Rita v. United States, 551 U.S. 338 (2007)
Snyder v. Massachusetts, 291 U.S. 97 (1934)
Southern Union Co. v. United States, 132 S. Ct. 2344 (2012)
United States v. Booker, 543 U.S. 220 (2005)
United States v. Daugerdas, 867 F. Supp. 2d 445 (S.D.N.Y. 2012)
United States v. Daugerdas, 837 F.3d 212 (2d Cir. 2016)
United States v. Gaudin, 51 U.S. 506 (1995)
Williams v. Florida, 399 U.S. 78 (1970)
Yeager v. United States, 557 U.S. 110 (2009)
United States Constitution
U.S. CONST., Amdt. V
U.S. CONST., Amdt. VI
Statutes
18 U.S.C. § 3553(a)
U.S.S.G. § 2T1.1
U.S.S.G. § 2T1.4
US.S.G. § 2T1.9
Other Authorities
4 W. Blackstone, Commentaries on the Laws of England 343 (1769)
OPINIONS AND ORDERS BELOW
The Second Circuit’s decision affirming the judgment of the district court is reported at 837 F.3d 212 (2d Cir. 2016) and reprinted at Pet.App. 1a–34a. Its denial for panel rehearing and rehearing en banc is reproduced at Pet.App. 66a–67a.
The judgment of the United States District Court for the Southern District of New York is unreported but reprinted at Pet.App. 35a–49a. The written ruling of the district court is reproduced at Pet.App. 50a–56a and its oral ruling from June 25, 2014 is reproduced at 57a–65a.
JURISDICTION
The Second Circuit entered its opinion and order on September 21, 2016 and denied a timely petition for panel rehearing or rehearing en banc on December 20, 2016. This Court has jurisdiction under 28 U.S.C. § 1254(1).
CONSTITUTIONAL PROVISIONS INVOLVED
The Fifth Amendment to the Constitution provides, in relevant part: “No person shall be . . . deprived of life, liberty, or property, without due process of law.”
The Sixth Amendment to the Constitution provides, in relevant part: “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crimes shall have been committed.”
STATEMENT OF THE CASE
This case presents an important and recurring constitutional issue: What constraints do the Fifth and Sixth Amendments impose on a sentence for it to be found reasonable? The facts here show how the government manipulated existing federal sentencing law to accomplish its pernicious goal of punishing a citizen for a crime never proved to a jury beyond a reasonable doubt. Allowing the government to undermine the protections of the Fifth and Sixth Amendments endangers the very validity of our criminal justice system. Only a robust protection of these constitutional rights would ensure that the “right of a jury trial could be preserved, in a meaningful way, guaranteeing that the jury would still stand between the individual and the power of the government under the new [post-Booker] sentencing regime.” United States v. Booker, 543 U.S. 220, 237 (2005).
In this case, the government proceeded to trial against Daugerdas under claims of mammoth tax fraud perpetrated by a tax lawyer who designed, marketed, and implemented fraudulent financial tax shelters to nearly 1,000 clients, thereby depriving the government of approximately $1.6 billion in tax revenue. Daugerdas was charged in multiple counts of conspiracy to defraud the IRS, mail fraud, obstruction of the IRS, substantive counts of causing clients to commit tax evasion and committing personal tax evasion by implementing these same shelters to reduce his own tax liability.
At trial, however, the government developed a second — and much less serious — offense under this same set of charges. Specifically, the government presented evidence that Daugerdas engaged with others at his law firm to fraudulently report on a total of four clients’ tax returns transactions that were backdated to a previous tax year, thereby depriving the Treasury of approximately $2.2 million.
During summation, the government explained to the jury that it could convict Daugerdas under almost all of the charges by finding only that the government proved beyond a reasonable doubt that he intentionally engaged in the backdating of transactions on four returns — independently and separately from the lack of “economic substance” allegations under the government’s primary $1.6 billion tax shelter fraud theory. Specifically, the prosecutor urged in rebuttal summation: “if you find even a subset of the criminal activity that [Daugerdas was] involved in, it can constitute [the charged] mail fraud violation, or a conspiracy violation, or an obstruction.” (Pet.App. at 80a.)
The jury followed this instruction and ultimately convicted Daugerdas of the general mail fraud, conspiracy, and obstruction counts in addition to substantive tax evasion counts involving those clients’ tax returns that were infected by evidence of backdating. The jury also acquitted Daugerdas on all other clients’ tax evasion counts for those returns where the government only alleged violations of the economic substance doctrine. The jury further acquitted Daugerdas on multiple counts of personal tax evasion based on his implementation of these same shelters.
The government then argued at Daugerdas’s sentencing that the district court should impose a sentence based on his conduct involving the acquitted tax shelter evasions, which it claimed created tax losses of more than $1.6 billion, an amount far greater than the highest loss amount reference in the Guidelines at $400 million. See U.S.S.G. §§ 2T1.9, 2T1.1, 2T1.4 (Tax Loss Table).
The district court sentenced Daugerdas to 180 months, accepting the acquitted conduct as a basis for the sentence. Daugerdas had urged the court to sentence him in the Guidelines range of 41–51 months, which was the advisory range for a fraud loss of $2.2 million — the “offense” for which the government asked the jury to convict Daugerdas.
This Court should accept certiorari to confirm that in the aftermath of Booker, the use of judge-found facts to impose a sentence to an “offense” for which the government did not ask the jury to base its conviction on, and on which the jury acquitted, violates the Due Process Clause of the Fifth Amendment and the Sixth Amendment right to a jury trial. The Federal Sentencing Reform Act of 1984 imposed a statutory requirement that sentencing courts consider the nature and circumstances of the convicted “offense,” and impose a “sufficient but not greater than necessary” sentence to reflect, inter alia, the seriousness of the convicted “offense.” 18 U.S.C. 3553(a) and (a)(2). To give meaning to this statute, and preserve its constitutionality, this Court should limit sentencing courts from imposing punishment based primarily on judge-found “offense” conduct, especially as applied here, where the government abandoned the “offense” theory in its argument to the jury and the jury rejected it in its verdicts. To do otherwise would have the proverbial sentencing factor tail wag the “offense” dog, which this Court has explained would be a violation of due process. See McMillan v. Pennsylvania, 477 U.S. 79, 88 (1986).
It also would render the inviolable trial process practically meaningless. Here, the government expressly asked the jury to convict on a relatively minor set of offense “facts,” but then at sentencing argued “the facts of the crime the State actually seeks to punish.” Blakely v. Washington, 542 U.S. 296, 306–07 (2004) (emphasis in original).
Based on the government’s trial argument, the jury convicted Daugerdas of a $2.2 million backdating “offense,” but he was sentenced for the separate $1.6 billion lack of “economic substance” tax shelter “offense.” The Sixth Amendment, as applied, does not permit a sentencing court to base its punishment primarily on “other offense” judge-found facts, especially under circumstances where the government expressly told the jury it could ignore these same facts and still convict. The substantial enhancement of Daugerdas’s sentence based on this other “offense” conduct, rejected by the jury, violated the Fifth and Sixth Amendments because it resulted in a “substantively unreasonable” sentence under the actual “offense” of conviction. See Jones v. United States, 135 S. Ct. 8 (2014) (Scalia, J., joined by Thomas & Ginsburg, JJ., dissenting from denial of certiorari); Rita v. United States, 551 U.S. 338, 369–374 (2007) (Scalia, J., joined by Thomas, J., concurring).
This conclusion follows not only from Justice Scalia’s concurrence in Rita and dissent in Jones, but also from this Court’s majority opinions in Apprendi, Blakely, and Alleyne. As Justice Scalia put it, the Sixth Amendment requires that “any fact necessary to prevent a sentence from being substantively unreasonable — thereby exposing the defendant to the longer sentence — is an element that must be either admitted by the defendant or found by the jury.” Jones, 135 S. Ct. at 8 (emphasis added). This position is in harmony with the Court’s pronouncement in Alleyne that “[a]ny fact that, by law, increases the penalty for a crime is an ‘element’ that must be submitted to the jury and found beyond a reasonable doubt.” Alleyne v. United States, 133 S. Ct. 2151, 2155 (2013) (citing Apprendi v. New Jersey, 530 U.S. 466, 483 n.10 (2000)).
It is also consistent with the reality that statutorily-authorized sentences lost their monopoly as constitutional guideposts because post-Booker sentences are legal only when they are “substantively reasonable.” Gall v. United States, 552 U.S. 38, 49–50 (2007). See also Beckles v. United States, ___ U.S. ___, 2017 U.S. LEXIS 1572, at *27–29 (Mar. 6, 2017) (Sotomayor, J., concurring) (noting that this Court rejected the argument that “the Guidelines are too much like guideposts and not enough like fences” and instead finding that “the Guidelines [a]re just fencelike enough — just lawlike enough — that they cannot be shielded from the Constitution’s reach”).
Resolving the constitutional tension arising at sentencing proceedings in which district courts use judge-found facts to set the range of sentences that are “substantively reasonable” is critical in restoring “the jury’s historical role as a bulwark between the State and the accused.” Southern Union Co. v. United States, 132 S. Ct. 2344, 2351 (2012) (citation omitted). It also will preserve the jury’s role by setting the “outer limits” of legal sentences through “the facts alleged in the indictment and found by the jury.” Apprendi, 530 U.S. at 483 n.10 (emphasis added).
The Second Circuit below erred in concluding that the district court could sentence Daugerdas based on “offense” conduct that the government earlier told the jury it need not find to convict, and for which the jury ultimately did not convict. This case cleanly presents the as-applied challenge to the Sixth Amendment that the Rita Court said it would decide if properly confronted.
The Court should now decide this issue and prevent the government from gaming the trial process. Rather than show respect for the jury’s work and attach meaning to the trial process, federal prosecutors here used the jury as a decoy by getting a conviction under one “offense” while seeking a sentence on the other.
FACTS AND PROCEEDINGS BELOW
A. Proceedings in the District Court
Paul Daugerdas was indicted for a “scheme to defraud” and obstruct the IRS for the design, marketing, and implementation of fraudulent financial tax shelters. He stood trial twice: a tainted jury convicted him of all charges in the first trial, see United States v. Daugerdas, 867 F. Supp. 2d 445 (S.D.N.Y. 2012); the second jury acquitted him of some crimes and convicted him of others.
Before trial, the government claimed Daugerdas executed “the largest tax fraud in U.S. history.” The Indictment was similarly grandiose. In 42 pages, Count One charged a wide-ranging tax shelter fraud conspiracy involving, among others, Daugerdas and other lawyers at his law firms. The objects of the conspiracy were threefold: (1) impeding the functions of the IRS; (2) evading taxes; and (3) committing mail fraud by evading taxes. The Indictment incorporated the same allegations into other charges of IRS obstruction, mail fraud, personal tax evasion (by Daugerdas), and aiding client-based tax evasion. To prove its case, the government presented evidence of two distinct “schemes.”
1. The Economic Substance “Scheme”
The first scheme advanced by the government alleged that Daugerdas intentionally orchestrated a massive tax shelter fraud causing losses in excess of $1.6 billion by advising hundreds of clients to report tax losses based on financial transactions that lacked “economic substance.”1 To prove Daugerdas guilty of that scheme, the government had to prove not only that the tax shelters actually lacked economic substance but also that Daugerdas knew it and nonetheless issued opinion letters to clients to facilitate the reporting of fraudulent tax losses for the client taxpayers.
The lion’s share of evidence during the seven-week trial related to this alleged scheme. The evidence did not support the government’s claim. Tax shelter clients testified (during the government’s case) that while their tax planning was inherently tax motivated, they also wanted to make money in connection with the tax shelter investment or understood that profit motive in a real investment was a necessary prerequisite to obtaining the tax benefit from the transaction. (Pet. CA Brief at 11–12) In fact, it was standard practice for the attorneys at Daugerdas’s law firm to explain to the tax shelter client that a secondary profit motive was essential. (Id. at 12.) The evidence was also clear that Daugerdas believed that the tax shelter clients had the requisite non-tax motive — no client told him otherwise and the investment firm used by Daugerdas to effect the strategy was required to structure the transactions so that clients had approximately a 33% chance of profiting on their investment. (Id.) And many clients did, in fact, profit on their investments. (Id.)
In connection with implementing or defending the tax shelters, Daugerdas (and others) charged professional fees. It was undisputed that those fees exceeded the expected profits on tax shelter investments. But, as the evidence showed, when the strategies were implemented, the tax law was unclear as to whether tax opinion fees or fees relating to tax advice were transaction costs that needed to be deducted in the economic substance profitability assessment. (Id.)
The government claimed that those fees should be included in the economic substance analysis. But its witnesses, such as professional tax advisors who discussed the issue with Daugerdas, conceded at trial that they had researched the transaction cost issue and found conflicting authorities. (Id.) Government cooperators, who had examined the question on behalf of an accounting firm involved in the strategy, testified that, in general, tax opinion fees were not considered transaction costs. And Erwin Mayer, Daugerdas’s partner and the government’s chief cooperator, claimed that he challenged Daugerdas’s position that the fees are not included by citing dicta from a 1966 tax case that had never been cited as authority on the question of whether tax opinion fees were transaction costs. (Id.) Daugerdas’s position was clear and consistent throughout: he believed that the fees clients paid him or his law firm were not fees the client was required to pay to enter into the investment component of the tax strategies; the government never proved otherwise. (Id. at 13–14.)
2. The Backdating “Scheme”
The second scheme presented at trial by the government alleged that Daugerdas conspired with others to intentionally backdate financial transactions on four client tax returns to fraudulently reduce their taxes owed causing losses of approximately $2.2 million. (See Pet. CA Brief at 16.) A handful of tax shelter transactions were implemented incorrectly, which prevented the clients from obtaining the tax benefit expected. (Id.) When the mistakes were discovered, lawyers at Daugerdas’s law firm contacted the investment firm and asked it to correct the mistakes by buying and selling the correct type and amount of securities in accord with the client’s prior year’s tax plan. (Id.) The investment firm agreed to do so and issued monthly statements indicating that the investment trades as originally intended were effectuated “as of” the date of the original incorrect trade. (Id. at 17.)
While the government initially claimed this theory pertained to only four tax returns — each of which were charged as substantive tax evasion counts in the Indictment — it later argued to the jury that the backdating of transactions constituted a different “scheme” (separate and apart from its “economic substance scheme”) and that the jury could convict Daugerdas of the conspiracy, mail fraud, and obstruction counts based on the backdating scheme alone. (Id. at 17–20.)
3. The Government Instructs the Jury to Convict Daugerdas of the Backdating Scheme
The government argued in its rebuttal summation that the jury could convict Daugerdas based solely on the evidence relating to the backdating scheme:
Now, let me just point out one thing with respect to this backdating. There are a whole series of charges to consider. There is a conspiracy charge, there is a mail fraud charge, there is a tax obstruction charge, and there are substantive tax evasion counts. The economic substance test applies only to the substantive tax evasion charges. What that means is, ladies and gentlemen, you can find Paul Daugerdas guilty based solely on his involvement in the backdating of that transaction [referring to a specific tax return] because it doesn’t revolve around [that taxpayer’s] subjective business purpose for engaging in the transaction.
If you find, as you should, that [Daugerdas] engaged with [another] in backdating of that transaction, that they agreed to prepare false tax returns that falsely reported as 2001 losses really things that were changed in 2002, that’s it.
That’s conspiracy to defraud the Internal Revenue Service. It’s also a conspiracy to commit mail fraud[.] It also constitutes an obstruction of the IRS, because he’s engaging in this corrupt tax reporting that has no basis in the law. So keep that in mind, the different sets of [charges], because if you find even a subset of the criminal activity that they are involved in, it can constitute [a] mail fraud violation or a conspiracy violation or an obstruction.
(Pet.App. 80a; Pet. CA Brief at 18–19.)
The government instructed the jury to ignore all of the evidence relating to the economic substance scheme and, instead, convict Daugerdas using a “subset of the criminal activity”: to wit, the backdating scheme.
The government’s tactic during rebuttal summation was a tacit admission that it had not proven its economic substance theory. Since the government was unable to prove that Daugerdas knew that the transactions lacked economic substance, it purposefully walked away from those abundant transactions (and more than 900 tax returns) and asked the jury to consider the same charges on a handful of transactions (and only 4 tax returns). Of course, the government knew that if the jury convicted Daugerdas of the latter it would nonetheless ask the court to sentence him as if the jury convicted him of the former.
4. The Jury Convicted on the Backdating Scheme and Rejected the Government’s Economic Substance Scheme
The jury deliberated over two days and its verdict was decidedly mixed. The jury acquitted co-defendant Denis Field on all counts (the government only presented the economic substance scheme as to him) and it acquitted Daugerdas on six counts of client tax evasion and three counts of personal tax evasion (charged under the economic substance scheme). The jury convicted Daugerdas of only four counts of tax evasion (charged under the backdating scheme) totaling $2.2 million in tax loss. It also convicted him, presumably under this same theory, under the more general charges of conspiracy, mail fraud, and obstruction of the IRS.
The jury’s verdict alone makes clear that it did what the government asked it to do: convict Daugerdas of the backdating scheme and ignore the economic substance scheme. Two jurors, in post-verdict interviews with Daugerdas’s counsel, confirmed the jury’s view that the criminal offense of conviction pertained only to the “backdating” theory. (Pet. CA Brief at 26–27.) The jurors averred that “the jury concluded that the government failed to prove its main case regarding the tax shelter fraud against [ ] Daugerdas” and that it based its conviction — including the conspiracy counts — solely on the evidence of “‘backdated’ transactions.” (Pet.App. 83a.) The jurors found the economic substance scheme unproven because “there was just too much ambiguity in the tax economic substance doctrine” and “not enough proof to convict Mr. Daugerdas of crimes based on this doctrine.” (Id.) The jurors’ statements were presented to the district court as part of Daugerdas’s sentencing hearing.
5. The District Court Sentenced Petitioner on the Economic Substance Scheme
Both the backdating and economic substance schemes were charged together in the mail fraud and conspiracy counts. As the jury’s verdict, along with statements by some of its members, made clear however, Daugerdas was convicted only of the backdating scheme and acquitted of the economic substance scheme. Daugerdas expected to be sentenced for his offense of conviction — which entailed approximately $2.2 million in tax loss. Jury acquittals, as this Court has recognized, are supposed to have meaning. Daugerdas presented these arguments to the district court at sentencing, explaining that in the context of examining a defendant’s claim of collateral estoppel, this Court has instructed: “To decipher what a jury has necessarily decided . . . courts should examine the record of a prior proceeding, taking into account the pleadings, evidence, charge, and other relevant matter and conclude whether a rational jury could have grounded its verdict upon an issue other than that which the defendant seeks to foreclose from consideration.” See Yeager v. United States, 557 U.S. 110, 119–120 (2009). The notion of viewing jury verdicts narrowly also comports with this Court’s presumption of innocence jurisprudence. See, e.g., Coffin v. United States, 156 U.S. 432, 458–459 (1895) (“[T]he presumption of innocence is a conclusion drawn by the law in favor of the citizen, by virtue whereof, when brought to trial upon a criminal charge, he must be acquitted, unless he is proven guilty. . . . This presumption on the one hand, supplemented by any other evidence he may adduce, and the evidence against him on the other, constitute the elements from which the legal conclusion of his guilt or innocence is to be drawn.”)
Undeterred by the jury’s verdict, and emboldened by the continued ambiguities in post-Booker sentencing, the government asked the district court to calculate Daugerdas’s Guidelines range as though he had committed “the largest tax fraud in United States history,” i.e. the economic substance scheme with $1.6 billion in tax loss, rather than the $2.2 million backdating scheme that the jury had actually convicted him of committing as requested by the government in its rebuttal summation.
The divergence in the Guidelines calculations flowing from the two separate offenses was stark. The backdating scheme resulted in a Guidelines range of 41–51 months’ imprisonment. (Pet. CA Brief at 132 n.27.) The economic substance scheme resulted in a Guidelines range of life imprisonment. (Pet.App. at 58a.) The driving force behind this divergence is the loss amount — $2.2 million versus more than $1.6 billion — the latter of which was never proven to the jury beyond a reasonable doubt.
The district court, relying on Apprendi, Alleyne, and Williams, overruled Daugerdas’s objections to the PSR (and rejected his proffered Guidelines range) on the ground that “fact-finding used to guide judicial discretion in selecting punishment within limits fixed by law” did not “implicate[ ] the Sixth Amendment.” (Pet.App. 62a; Pet.App at 50a–56a.) Using judge-found facts, the district court calculated Daugerdas’s Guidelines range to be life imprisonment and, using that range as the primary guidepost, thereafter sentenced Daugerdas to 180 months’ imprisonment. (Pet.App. at 35a–49a.)
B. Proceedings in the Court of Appeals
Pursuant to 28 U.S.C. § 1291, Petitioner timely appealed his sentence to the Second Circuit Court of Appeals. Petitioner challenged, inter alia, his sentence on appeal in that the district court had violated his due process rights and Sixth Amendment right to jury trial by basing his sentence almost entirely on the use of acquitted conduct. (See Pet. CA Brief at 123–134.)
The Second Circuit held it was bound by its own precedent and that Justice Scalia’s concurrence in Rita was not law; thereafter it denied Petitioner’s Fifth and Sixth Amendment claims. United States v. Daugerdas, 837 F.3d 212, 230 (2d Cir. 2016). Petitioner timely sought panel rehearing or an en banc hearing, which was denied. (Pet.App. at 66a–67a.)
REASONS FOR GRANTING THE PETITION
Since this Court’s decision in Booker, the federal courts of appeal have struggled to define the contours of “substantively reasonable” sentences within the statutory requirements of the Sentencing Reform Act and constitutional limitations. This case presents an ideal vehicle for the Court to begin to define those contours.
The government charged a massive tax fraud against Petitioner only to change course at the end of trial, and ultimately urged the jury in rebuttal summation to convict on only a minor piece of its case. Despite this reversal, upon obtaining this limited conviction including multiple counts of acquittal, the government re-presented its more serious “offense” conduct to the sentencing judge, who made his own determination that Petitioner’s sentence should be enhanced by the greater “offense” that the government earlier abandoned and the jury rejected.
As applied to these facts, the Fifth and Sixth Amendments cannot support a finding that Daugerdas’s 15-year sentence was substantively reasonable. The government’s conduct here undermines the presumed validity and primacy of the trial process in our criminal justice system and effectively acts to remove the jury as the last “bulwark” between the Executive Branch and its citizens.
This Court should accept certiorari to address the issue not confronted in Rita: whether there are constitutional limitations to “substantive reasonableness” review. The facts of this case show how the government infected the trial process as to deprive Petitioner of his Fifth Amendment rights at sentencing, and that subsequent judge-found facts violated his right to trial by jury guaranteed by the Sixth Amendment.
A. THIS COURT’S DETERMINATION OF THE CONSTITUTIONAL LIMITS ON “SUBSTANTIVE REASONABLENESS” REVIEW OF FEDERAL SENTENCES IS NEEDED TO LIMIT EXECUTIVE BRANCH POWERS AND PREVENT THE EROSION OF THE JURY TRIAL PROCESS
The right to trial by jury is the cornerstone of our criminal justice system and has played an “historic role as a bulwark between the State and the accused.” Oregon v. Ice, 555 U.S. 160, 169 (2009). See also Batson v. Kentucky, 476 U.S. 79, 86 (1986) (“The petit jury has occupied a central position in our system of justice by safeguarding a person accused of crime against the arbitrary exercise of power by prosecutor or judge.”); Williams v. Florida, 399 U.S. 78, 100 (1970) (“[T]he essential feature of a jury obviously lies in [its] interposition between the accused and his accuser.”). In setting limits on sentences — every bit as much as in assessing criminal guilt — the jury supplies a “barrier between the defendant and the State” and acts as a crucial “guard against judicial overreaching.” Alleyne v. United States, 133 S. Ct. 2151, 2169–71 (2013) (Roberts, C.J., dissenting); Southern Union Co., 132 S. Ct. at 2351 (“Apprendi’s animating principle [is] the preservation of the jury’s historic role as a bulwark between the State and the accused at the trial for an alleged offense”); Booker, 543 U.S. at 237–39; Blakely, 542 U.S. at 305–06; Apprendi, 530 U.S. at 477; United States v. Gaudin, 51 U.S. 506, 510 (1995).
This case presents the question of what this right actually means in the context of federal sentencing and how far the Executive Branch can go in manipulating the trial process to eviscerate this constitutional and fundamental societal principle.
Here, the government charged Daugerdas with a massive decade-long tax fraud involving multiple financial tax shelter strategies. Daugerdas pleaded not guilty to these charges and exercised his Sixth Amendment right to trial by jury. At trial, the government pressed its claim of tax shelter fraud for more than seven weeks of testimony. Suddenly, however, and presumably because of a growing belief that the trial evidence was not proving its case, the government reversed course. At summations, the government instructed the jury that it need not decide the case based on weeks of testimony regarding the “economic substance” of complicated tax shelters, but rather could convict Daugerdas of most charges on the basis of a single client’s tax return, which included misrepresentations about the date of a specific financial transaction causing the client’s tax to be misreported. On this basis alone, so argued the prosecutor, the jury could convict on multiple counts of conspiracy, mail fraud, obstruction, and tax evasion.
Relying on the government’s instruction, the jury acquitted Daugerdas of all counts of tax evasion involving clients and his own personal tax returns in which there was no evidence of backdating. The only substantive counts of tax evasion on which Daugerdas was convicted were those infected by the separate and more limited “offense” theory the government argued to the jury in closing argument. The jury’s verdict clearly communicated its acceptance of the government’s alternative — and much lesser — version of the “offense” and crimes of conviction. See Ashe v. Swanson, 397 U.S. 436, 444 (1970) (in double jeopardy context, the review of a general verdict acquittal must take into account all “relevant matter” presented to a jury and determine “whether a rational jury could have grounded its verdict” on a particular issue).
The constitutional problems then arose at sentencing, when the government revealed its pernicious plan to seek punishment of Daugerdas based on the alleged “offense” it abandoned in arguments before the jury. The government used existing federal sentencing law to present this substantially more serious “offense” evidence to the sentencing judge as the real basis for sentencing, disregarding its jury argument and the jury’s ultimate verdict. It also disingenuously relied on the general verdicts returned on the conspiracy, mail fraud, and obstruction counts to claim that the jury convicted on the entirety of the charges, rather than the backdating conspiracy the government advocated at summation. See Snyder v. Massachusetts, 291 U.S. 97, 105 (1934) (Due process is violated if a practice or rule "offends some principle of justice so rooted in the traditions and conscience of our people as to be ranked as fundamental"). In essence, the government asked the district court to rely on the fiction that the jury acted on a basis the government itself abandoned in rebuttal summation. In re Winship, 397 U.S. 358, 363 (1970) ("[A] person accused of a crime . . . would be at a severe disadvantage, a disadvantage amounting to a lack of fundamental fairness, if he could be adjudged guilty and imprisoned for years on the strength of the same evidence was would suffice in a civil case.") (alteration in original).
The district court embraced this fiction and accepted that the government proved by at least a preponderance of evidence the more massive tax shelter fraud, which made up the vast majority of allegations in the indictment. It agreed to sentence Daugerdas in large part based on the conduct in the nine tax evasion acquittals, which encompassed the government’s lack of “economic substance” theory and not the backdating fraud. The district court also rejected the Guidelines range proposed by the defense based on the government’s backdating summation arguments and jury’s verdict (limited to 41–51 months based on a $2.2 million tax crime). The court instead adopted the extraordinary Guidelines range of life imprisonment based on the substantially different and separate offense of the “engag[ing] in the largest tax shelter fraud in the history of the United States.” (Pet.App. at 59a.) The crime the government asked the jury to convict Daugerdas of, and which it actually did, was largely ignored at sentencing. Petitioner’s jury acquittals and the government’s disavowing of the tax shelter fraud at trial were rendered irrelevant to the lengthy prison sentence imposed.
Sentencing rules, which permit substantive circumvention of the jury’s work, enable overzealous prosecutors to run roughshod over the traditional democratic checks built into the adversarial process by the Framers in our Constitution. When sentencing rules allow enhancements based on jury-rejected “offenses,” prosecutors can brazenly charge and present any and all offenses for which there is only a sliver of evidence, and pursue these charges throughout trial without fear of consequences later when presenting offense conduct to the sentencing judge. Indeed, here, it gave prosecutors the freedom initially to present its zealous charge to the jury, only to retreat from it at trial, seeking in the end only the most modest conviction for the least offense charged. The government gamed the trial process knowing that the jury’s acquittals on other counts and theories simply would not matter.
When acquittals carry no real sentencing consequences, prosecutors have nothing to lose (and much to gain) from bringing multiple charges even when they might expect many of these charges to be ultimately rejected by a jury, or simply decide to abandon some of them mid-trial.
Prosecutors can overcharge and then retrench at trial as they see fit to maximize their chances of gaining a conviction on any count or crime, so long as the jury finds the defendant did something wrong. Indeed, piling on charges makes it more likely that the jury will convict of at least one charge, thus opening the door for prosecutors to re-litigate all of the allegations before the judge at sentencing. Under such practices, the sentencing becomes the real trial, at a lesser preponderance standard, and the jury is used as a convenient dress rehearsal for prosecutors.
This case presents the Court with a clean set of facts to evaluate jury manipulation by prosecutors in the context of Fifth and Sixth Amendment limitations at sentencing. Two recent rulings by this Court provide the basis for preventing this abuse of the jury trial process. In Peugh v. United States, 133 S. Ct. 2072 (2013), this Court confirmed that Guidelines ranges, even though only advisory, still have consequential “force as the framework for sentencing” and thus are subject to constitutional limitations on how they are calculated and applied. Id. at 2083–84. In Alleyne v. United States, 133 S. Ct. 2151 (2013), this Court overturned a prior holding that had failed to recognize that the constitutional protections of the Fifth and Sixth Amendments apply fully not only to facts raising maximum sentences, but whenever the law creates a “linkage of facts with particular sentencing ranges . . . regardless of what sentence the defendant might have received if a different range had been applicable.” 133 S. Ct. at 2159–62.
1. Sixth Amendment Violations
This Court’s recent rulings give teeth to the “core concerns” of Sixth Amendment jurisprudence: “encroachment [at sentencing] by the judge upon facts historically found by the jury [and] any threat to the jury’s domain as a bulwark at trial between the State and the accused.” Ice, 555 U.S. at 169.
As several Justices already observed, the Sixth Amendment is implicated whenever substantive reasonableness review makes judge-discovered facts necessary to affirm a lengthy sentence. See Jones, 135 S. Ct. at 8–9 (Scalia, J., dissenting from denial of certiorari); Rita, 551 U.S. at 369–374 (Scalia, J., concurring). This case presents a narrow — and most troubling — set of facts that implicates the close interplay between the Fifth and Sixth Amendments. Here the prosecutors manipulated the trial process to gain any conviction (implicating the Fifth Amendment), only later to ask a sentencing judge to find the full offense conduct, even if rejected by the jury (implicating the Sixth Amendment).
In the context of these facts, the Sixth Amendment did not authorize the sentencing judge to supplant the jury’s role to enhance Petitioner’s Guidelines range and thereby justify an aggravated sentence that would be “substantively unreasonable” except for the judge’s other “offense” findings. See Rita, 551 U.S. at 369–370 (Scalia, J., concurring). By allowing prosecutors to manipulate “offense” conduct at trial and nullify jury findings as they did here, relegates the jury process “to making a determination that the defendant at some point did something wrong,” and then has the sentencing judge determine what that “something” actually was. Blakely, 542 U.S. at 306–07. Permitting the sentencing judge to determine the crime of conviction renders the jury trial as “a mere preliminary to a judicial inquisition into the facts of the crime the State actually seeks to punish.” Id.
This case starkly presents facts of two separate crimes that the government brought against Petitioner: (1) the massive $1.6 billion tax shelter fraud based on a theory that Daugerdas intentionally violated the “economic substance” tax test, and (2) a more modest $2.2 million fraud based on the intentional manipulation of dates of financial transactions for tax reporting. These offenses were not dependent of each other. While the government at various times argued that the alleged backdating was a means of carrying out the larger “economic substance” fraud, it changed course during summations and made clear that the backdating stood alone as a separate crime. (See Pet.App. at 80a.) At that point, it changed the “offense” or crime for which it sought to convict Daugerdas. Both offenses invoked the general elements of conspiracy, mail fraud and obstruction, but they represented two entirely different crimes. Ultimately, the jury followed the government’s advice and threw out the tax shelter crime and convicted Daugerdas of the lesser backdating offense.
The district court, therefore, erred when it evaluated “the nature and circumstances of the offense” under the Sentencing Reform Act (“SRA”), 18 U.S.C. § 3553(a), because it evaluated the “offense” that the government abandoned in its rebuttal summation and that the jury rejected. Rather than adopting the loss amount of $2.2 million (based on the convicted backdating crime alone), which would have resulted in a recommended sentence of between 41–51 months, the district court calculated Petitioner’s Guidelines range based on an intended loss range of $1.6 billion (based on the acquitted conduct) resulting in a recommended sentence of life imprisonment. The district court then sentenced Petitioner to 180 months imprisonment (129 months above the top of Petitioner’s range of 41–51 months resulting from the convicted backdating crime alone).
The “offense” on which the sentencing judge calculated the Guidelines was a different one from the “offense” the government asked the jury to convict on, and consequently different than the verdicts actually returned. In several places within the SRA, the sentencing court is directed to fashion a “sufficient but not greater than necessary” sentence based on the “offense” of conviction — not some other crime. See 18 U.S.C. § 3553(a)(1) (“the nature and circumstances of the offense”); § 3553(a)(2)(A) (“to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense”); § 3553(a)(4) (“the applicable category of offense committed”); § 3553(a)(6) (“the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct”). The government asked the jury to convict, and the jury convicted Daugerdas, of the crime of engaging in reporting backdated transactions on four client tax returns. This was the “offense” on which a substantive reasonableness review was to be conducted.
Petitioner’s 15-year sentence for a $2.2 million backdating fraud could not be deemed “substantively reasonable” under a Booker review without the judge-found facts of a completely separate crime that the government disavowed before the jury, and that the jury actually rejected in its verdict. By sentencing Petitioner to this other crime, the sentencing court violated both the dictates of the SRA and the Sixth Amendment. It was not “substantively reasonable” for the sentencing court to un-do what the jury already did.
The facts here can be distinguished from those that this Court considered when it rejected certiorari in the Jones case. See Jones, 135 S. Ct. at 8–9. There, the sentencing court enhanced defendants’ sentences based on findings that the narcotics distribution crimes, for which each defendant was convicted, were committed within the context of gang and narcotics trafficking affiliations that were a necessary part of the crime of conviction. In making this determination, the sentencing judge was not reversing the jury’s acquittal on the narcotics conspiracy charges or sentencing based on a different “offense,” but rather making findings about the specific “nature and circumstances of the offense” of conviction. 18 U.S.C. § 3553(a)(1).
In contrast, the sentencing judge in this case necessarily applied facts related to a separate “offense” that did not motivate, enable, assist, or otherwise involve the “nature and circumstances of the offense” of conviction. Petitioner was not able to commit the backdating crime because he employed an “economic substance” tax scheme. Indeed, the jury found the opposite, i.e., it found that Petitioner acted in good faith in the application of tax shelters, Daugerdas’s law firm changed the dates on a few financial transactions to misreport taxes owed in a certain year. The jury’s findings contemplated that if the transactions were actually executed in the appropriate tax year, there would have been no crime. We know this because the jury acquitted Daugerdas on all tax returns that executed similar tax shelters, where the financial transactions were correctly reported in the year they actually took place.
Thus, the facts here show that the sentencing judge’s own determination, by a preponderance of evidence, that Daugerdas committed the other “offense” of “economic substance” tax fraud, was the basis for the sentencing enhancement from 41–51 months to life imprisonment. This finding violated the SRA and the Sixth Amendment because the government did not ask the jury to base its conviction on this crime, and the jury actually rejected it. Petitioner’s sentence could not be “substantively reasonable” based on the sentencing judge’s findings alone.
2. Fifth Amendment Violations
This case also implicates the Fifth Amendment in a way that other cases seeking this Court’s review on the issue of constitutional limitations to “substantive reasonableness” review have not. Specifically, the government invited the error it now disavows by expressly asking the jury to abandon the “economic substance” fraud and to convict based only on the separate crime of backdated tax reporting. Even in cases like Patterson v. New York, 432 U.S. 197 (1977), and McMillan v. Pennsylvania, 477 U.S. 79 (1986), in which this Court held that states had not transgressed due process requirements, the Court made clear that constitutional concerns attach to any government efforts to circumvent traditional trial procedures. As this Court explained in Patterson, “there are obviously constitutional limits beyond which the States may not go in this regard.” 432 U.S. at 210; see also McMillan, 477 U.S. at 85.
In Jones v. United States, as part of a lengthy review of cases “dealing with due process and the guarantee of trial by jury,” this Court warned of the “relative diminution of the jury’s significance” and reprinted a prescient discussion authored 350 years ago by William Blackstone. 526 U.S. 227, 240, 244–46, 249 (1999). In words still relevant today, Blackstone warned that “other liberties would remain secure only ‘so long as this palladium remains sacred and inviolate, not only from all open attacks, (which none will be so hardy as to make) but also from all secret machinations, which may sap and undermine it.’” Id. at 246 (quoting 4 W. Blackstone, Commentaries on the Laws of England 342–44 (1769)) (emphasis omitted).
Similarly, in Almendarez-Torres v. United States, 523 U.S. 224 (1998), the Court discussed these principles and repeatedly reiterated that numerous cases support “the broad proposition that sometimes the Constitution does require” that certain facts be proved through traditional trial procedures rather than being repackaged as sentencing factors. Id. at 242. As the Court stressed in Almendarez-Torres, the Constitution’s trial protections are not always implicated for “the most traditional [bases] for a sentencing court’s increasing an offender’s sentence” — such as prior convictions — but the Constitution forbids sentencing procedures that would increase the “risk of unfairness.” Id. at 243–45.
The “risk of unfairness” here is clear. The government created the problem by shifting its view of the crime at summation, asking the jury to convict based on a lesser crime, but seeking sentencing based on the greater one. This manipulation of the trial process produced serious unfairness to Petitioner. If the government had not made its jury argument, Petitioner would have been acquitted on all counts — as his similarly situated co-defendant was. Instead, Daugerdas was convicted of the lesser crime of backdating on a few tax returns, but was sentenced to the crime the government asked the jury to abandon. This is exactly the Fifth Amendment problem the Court described in Almendarez-Torres: “due process forbids the reallocation or reduction of burdens of proof in criminal cases.” Id. at 252–53.
Though various forms of judicial fact-finding within a structured sentencing system may raise constitutional concerns, this case only concerns the uniquely serious and dangerous erosion of both the Fifth and Sixth Amendment trial protections when the government treats the trial process as a decoy for its ultimate presentation at sentencing. It may remain possible “to give intelligible content to the right of a jury trial,” Blakely, 542 U.S. at 305–06, by allowing judicial sentencing discretion to be informed by Guidelines calculated based on facts of “offense” conduct never decided by a jury. But when a federal judge substantially enhances a prison sentence (from three or four years to fifteen years) based on an “offense” that the government retreated from at trial and the jury rejected, the jury trial right becomes unintelligible and practically meaningless.
B. THE COURT SHOULD GRANT CERTIORARI BECAUSE THE QUESTION PRESENTED IS IMPORTANT AND RECURRING AND THIS CASE IS AN IDEAL VEHICLE TO RESOLVE IT.
This Court should answer the question presented to resolve an important, recurring problem generated by Booker. This Court “has not foreclosed as-applied constitutional challenges to sentences” and has indicated that a defendant could possibly “demonstrate that his sentence, whether inside or outside the advisory Guidelines range, would not have been upheld but for the existence of a fact found by the sentencing judge and not by the jury.” Gall, 128 S. Ct. at 602–603.
But the courts of appeals remain constrained and have not better defined the contours of “substantive reasonableness” review. The Second Circuit here declined to endorse the Sixth Amendment as-applied doctrine based on this Court’s precedent and the Second Circuit’s reluctance to “embark on a quest to change it.” Daugerdas, 837 F.3d at 231.
Given the lack of direction emerging from the courts of appeals, the concern raised here will repeat itself unless and until this Court provides clearer guidance. District courts will continue to calculate the “correct” Guidelines using judge-found (and, sometimes, jury-rejected) facts; the courts of appeals will continue to view those Guidelines as the guideposts in determining whether the sentence is legal; and prosecutors will continue to transmute trials by jury into the opening act to a Fatico hearing. As Justice Scalia noted, “[t]his has gone on long enough.” Jones, 135 S. Ct. at 9.
This Court should accept certiorari to provide the lower courts with a constitutional framework to review “substantive reasonableness” in the context of manipulation by the government at trial and abuse of trial as a decoy for sentencing. This is particularly troubling to the sanctity and primacy of the trial process in the context of sentencing based on acquitted conduct.
Not to decide this important issue also will encourage other prosecutors to engage in a manner similar to that undertaken here. The government will continue to move the constitutional guideposts of legal sentences by playing “bait-and-switch” with its trial charges by overcharging a case, only to push for the least offense at trial, knowing it could return to its most severe charge at sentencing — even if a jury acquitted. If allowed, the government will continue to reap the sentencing benefits it seeks despite an offense never proven (or unprovable) beyond a reasonable doubt. As a consequence, sentences will continue to skyrocket based only on evidence proven by a “mere preponderance” and judge-found facts will be the “tail which wags the dog of the [jury-found] substantive offense.” Apprendi, 530 U.S. at 495.
This case is an ideal vehicle to resolve the issue left unresolved in Rita. See Cuyler v. Sullivan, 446 U.S. 335, 341 (1980) (granting certiorari to consider recurring issues left unresolved by prior decision); Francis v. Henderson, 425 U.S. 536, 538 & n.3 (1976) (same). The facts here also provide a unique interplay of Fifth and Sixth Amendment implications. They also present the actual issue the Rita Court contemplated deciding later, if it were presented with these facts.
Petitioner was convicted of a $2.2 million tax fraud and, consistent with the government’s argument to the jury, acquitted of the larger $1.6 billion tax fraud on which he was sentenced. Based on jury-rejected, judge-found facts, the district court increased his Guidelines range from 41–51 months to life imprisonment. Petitioner was sentenced to 15 years — a sentence far longer than a legally permitted sentence based on the jury verdict alone.
Unlike prior petitions seeking certiorari, the government here actually invited the jury to ignore months of evidence. Petitioner squarely raised the claim, briefed it, and argued it at each level of the proceedings below.
Daugerdas received his 180-month sentence in 2014. He is a 66-year-old man who is not due to be released from this unconstitutional sentence until 2027, at the earliest. The government only asked the jury to convict Daugerdas of a crime that could not legally sustain such a draconian sentence. The sentencing judge should have sentenced Daugerdas for the offense that the jury convicted him of: not the offense that the jury acquitted him of. This combination of Fifth and Sixth Amendment error goes to the heart of “constitutional protections of surpassing importance.” Apprendi, 530 U.S. at 476. These facts, therefore, provide an ideal opportunity for the Court to finally address whether the government’s abuse of the trial process through the vagaries of unsettled federal sentencing law comports with the bedrock protections of the Bill of Rights.
CONCLUSION
The underlying sentence reflects a serious, recurrent, and unconstitutional sentencing practice made all the worse by the government’s offensive use at trial of this Court’s silence on Fifth and Sixth Amendment jurisprudence.
The petition for a writ of certiorari should be granted.
Respectfully submitted,
Henry E. Mazurek
Brian D. Linder
(Counsel of Record)
Wayne E. Gosnell, Jr.
Clayman & Rosenberg LLP
305 Madison Avenue, Suite 1301
New York, New York 10165
Counsel for Petitioner
Paul M. Daugerdas
MARCH 20, 2017
FOOTNOTES
1 Transactions lack economic substance if (1) the taxpayer entered into them without a non-tax purpose and (2) there was no reasonable possibility that the transactions could be profitable.
END FOOTNOTES
- Case NamePaul M. Daugerdas v. United States
- CourtUnited States Supreme Court
- DocketNo. 16-1149
- Institutional AuthorsClayman & Rosenberg LLP
- Cross-Reference
Appealing United States v. Daugerdas, 837 F.3d 212 (2nd Cir. 2016).
- Subject Area/Tax Topics
- Jurisdictions
- Tax Analysts Document Number2017-71793
- Tax Analysts Electronic Citation2017 TNT 190-31