A. Conspiracy to Commit Offense or to Defraud the United States Statute – 18 U.S.C. 371
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.
If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.
B. Interpretation of 18 U.S.C. 371
Federal conspiracy is an offense with a lot of nuance. I am going to list the elements of federal conspiracy, and then I will more thoroughly review the elements of conspiracies to impede, obstruct, or impair the IRS which are known as Klein conspiracies.
1. General Elements of Conspiracy
There are two types of conspiracies:
- A conspiracy to commit any federal offense; and
- A conspiracy to defraud the United States, or any agency thereof, including the IRS.
The general elements of these conspiracies:
- An agreement by two or more parties;
- To commit a federal offense, or to defraud the US or one of its agencies;
- An overt act by one of the parties in furtherance of the agreement; and
- The requisite intent to commit the federal offense or defraud the US.
2. Klein Conspiracies
The leading case regarding cases to defraud the IRS is U.S. v. Klein.
a. Examples of Evidence of Intent to Defraud or Impede the IRS
Examples of Klein conspiracies and evidence used to infer such conspiracies includes:
- Working together to conceal the source and nature of income by altering and making false entries in books, filing false income tax returns, and providing false answers to interrogatories.
- Intentionally keeping inaccurate records.
- Not keeping proper inventory for the purpose of inflating inventory solely for tax purposes, and lying to auditors.
- Knowing the tax effects of sham bookkeeping entries and corresponding deductions on books of a fictitious company.
- If tax evasion plays any part, then the conspiracy charge will stick.
b. The Knowledge Element
To convict a person of a Klein conspiracy it must be proven that the conspirators acted with a tax motive, but it is not necessary to directly prove that the conspirators knew of the tax consequences of the conspiracy. For example, in Sanzo, a defendant argued that there was no direct evidence that the other party would not report laundered money to the IRS, but the court held that there was enough circumstantial evidence to infer that the conspirator would not report the laundered money and would falsify business records.
The punishment for conspiracy is as high as 5 years in federal prison. If you are or suspect you are being investigated by the IRS, then it is important that you have counsel to assist you in interrogations and investigation. Call our office at (408) 459-8427 for criminal legal representation.