Apprendi Applied In ‘Largest Criminal Tax Case In American History' To Reduce Fine

There has been a development in the case that has been called "the largest criminal tax case in American history," Stein v. KPMG, LLP, 486 F.3d 753, 756 (2d Cir. 2007). 

To briefly summarize: In December 2008, following trial, John Larson was convicted of twelve counts of tax evasion under 26 U.S.C. §7201, stemming from his involvement in the design, implementation, and marketing of fraudulent tax shelters. The jury, however, made no findings regarding the amount of pecuniary loss caused, or gain derived, by Larson through his crimes. On April 1, 2009, the district court conducted a sentencing hearing at which it found that Larson had caused a "gross pecuniary loss [in] exce[ss] [of] $100 million and that the maximum fine therefore exceeds…$200 million." The district court calculated this maximum pursuant to 18 U.S.C. §3571(d), which authorizes a district court to impose a fine of not more than twice the gross pecuniary loss caused by, or gain derived from, the defendant's offenses. The district court subsequently fined Larson $6 million and sentenced him to 121 months' imprisonment. Larson did not object at sentencing to the fine amount as violative of Apprendi v. New Jersey, 530 U.S. 466 (2000). However, he appealed the fine on that ground to the U.S. Court of Appeals for the Second Circuit.
 
In its decision on Larson's appeal, the circuit court explained that where a defendant fails to object to a fine in the district court, it reviews the fine for plain error. It then found “plain error” in this case.
 
As the Second Circuit explained, generally, a defendant who has been found guilty of an offense may be sentenced to pay a fine. 18 U.S.C. §3571(b) establishes a maximum for individuals based on the severity of their offense: "for a felony," an individual may be fined "not more than $250,000." Section 3571(d), however, allows an alternative fine based on gain or loss.
 
The circuit court then explained that, in Apprendi, the Supreme Court held that, "[o]ther than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt." 530 U.S. at 490. The Supreme Court has clarified that "the 'statutory maximum' for Apprendi purposes is the maximum sentence a judge may impose solely on the basis of the facts reflected in the jury verdict or admitted by the defendant." Blakely v. Washington, 542 U.S. 296, 303 (2004).
 
In this case, the Second Circuit continued, the jury found Larson guilty of 12 felony offenses, but made no findings as to the pecuniary gain or loss caused by his conduct. Absent such gain or loss findings, the "statutory maximum" fine Larson could receive was $3 million, that is, $250,000 for each of his 12 convictions per 18 U.S.C. §3571(b)(3). This amount represented the maximum fine that could be imposed based on "the facts reflected in the jury verdict." Therefore, the circuit court held, by fining Larson $6 million under 18 U.S.C. §3571(d), a fine supported only by the district court's own pecuniary loss finding, the court violated Apprendi.
 
The circuit court therefore vacated Larson's fine and remanded the case to the district court for further proceedings.
 
The case is United States v. Pfaff, No. 09-1702-cr(L) (2d Cir. Aug. 27, 2010).
 
Attorneys involved include Alexandra A.E. Shapiro and Marc E. Isserles, Macht, Shapiro, Arato & Isserles; David C. Scheper, Scheper Kim & Overland LLP; Stuart E. Abrams, Frankel & Abrams; Jack S. Hoffinger and Susan Hoffinger, Hoffinger Stern & Ross; J. Scott Ballenger, and Lori Alvino McGill, Steven M. Bauer, and Margaret A. Tough, Latham & Watkins; and John M. Hillebrecht, Margaret Garnett, Justin Anderson, and Katherine Polk Failla, Assistant U.S. Attorneys.