Opposition Brief — May v. United States

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YDB fig Cour

No. 96-1150

In the Supreme Court of the Gnited States

OCTOBER TERM, 1996

JOSEPH A. MAY, PETITIONER

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

WALTER E. DELLINGER

Acting Solicitor General

LORETTA C. ARGRETT

Assistant Attorney General

ROBERT E. LINDSAY

ALAN HECHTKOPF

FRANK P. CIHLAR

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTIONS PRESENTED

1. Whether petitioner showed cause and prejudice

sufficient to excuse his failure to raise his double

jeopardy claim on direct review of his conviction.

2. Whether petitioner waived his double jeopardy

claim.

3. Whether the civil penalties imposed on peti-

tioner in this case for failure to pay his taxes were

remedial in nature and therefore did not constitute

“punishment” for purposes of the Double Jeopardy

Clause.

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Brady v. United States, 397 U.S. 742 (1970) ........... 7

Helvering v. Mitchell, 303 U.S. 391 (1988) ............. 9, 10

Laing v. United States, 423 U.S. 161 (1976) ............ 9

Mabry v. Johnson, 467 U.S. 504 (1984) .0.......ccccccecs. 7

Menna v. New York, 423 U.S. 61 (1975) .................. i

Missouri v. Hunter, 459 U.S. 359 (1988) ................. 9

Ricketts v. Adamson, 483 U.S. 1 (1987) .....cccccccecee. 5, 7

United States v. Broce, 488 U.S. 563 (1989) ............ 5.7

United States v. Frady, 456 U.S. 152 (1982) ........... 5

United States v. Halper, 490 U.S. 435 (1989) .......... 8, 9,

10, 11

United States v. May:

ee See A GEE RA. BIIED seciccisssenascovoucdoswnsnceasarcoanes 4

No. 96-3005, 1997 WL 126785 (8th Cir. Mar. 21,

MPU. Sealh isda Nicininpihcidadaiddcntshsiiniiculnnisniakgkeueidceussoonees 4

United States v. Morgan, 51 F.3d 1105 (2d Cir),

cert. denied, 116 S. Ct. 171 (1995) ................ 9, 10, 11

Constitution and statutes:

U.S. Const. Amend. V (Double Jeopardy Clause) ...... 2, 4,

8, 9, 10

Internal Revenue Code (26 U.S.C.):

nF RERSE RRS SEE aE ea ee Oa 10

I ia 10

SNE ce icicle bins tie iindishdasienaentsadoinmetsbbicatcuiaSdecceticss sinc as 9

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Statutes—Continued:

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SSeS

Jn the Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-1150

JOSEPH A. MAY, PETITIONER

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. B1-

B2) is unpublished, but the decision is noted at 92 F.3d

1189 (Table). The opinion of the district court (Pet.

App. A1-A4) is unreported.

JURISDICTION

The judgment of the court of appeals was entered on

August 1, 1996. A petition for rehearing was denied

on October 3, 1996. Pet. App. C1. The petition for a

writ of certiorari was filed on December 31, 1996. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

STATEMENT

Petitioner was convicted on his plea of guilty in the

United States District Court for the Western Dis-

trict of Missouri to five counts of willfully failing to

file an income tax return, in violation of 26 U.S.C.

7203. While proceedings on his appeal of his sentence

were pending, petitioner filed this motion to vacate,

set aside, or correct his conviction and sentence, pur-

suant to 28 U.S.C. 2255. He alleged that his sentence

in this case was in violation of the Double Jeopardy

Clause of the Fifth Amendment to the United States

Constitution. The district court denied the motion

(Pet. App. Al-A4), and the court of appeals affirmed

(id. at B1-B2).

1. During the years at issue in this case, 1985

through 1989, petitioner was a self-employed dentist,

specializing in endodontics. He failed to file income

tax returns (R. 182, 183; R. 196, at 3-5) and to pay at

least $58,057 in income taxes for those years (R. 196,

at 7).' Petitioner went to great lengths to hide his

income during the years at issue. He purchased

assets in the names of nominees and converted most

of his income, which he received in the form of checks

from patients, into cash. He paid most of his busi-

ness expenses with cash or with cashier’s checks

and money orders purchased with cash or patient’s

checks. Petitioner also established nominee bank

accounts, made deposits into the accounts, and used

the accounts to pay personal and business expenses.

Id. at 5-6.

Petitioner was eventually indicted on five counts of

willfully failing to file an income tax return, in

! References to “R.” are to documents contained in the rec-

ord on appeal, as numbered by the clerk of the district court.

violation of 26 U.S.C. 7203, and two counts of willfully

attempting to evade and defeat income tax, in viola-

tion of 26 U.S.C. 7201 (R. 1). After entering into a

plea agreement, petitioner pleaded guilty to the five

counts of willfully failing to file an income tax return.

R. 182, 183. He thereafter was sentenced to 191 days’

imprisonment (time served), one year of supervised

release, and four months of home detention. He was

also ordered to pay all taxes, penalties, and interest

due for the years in question, along with the costs of

prosecution (R. 186, 194),

2. After the indictment had been returned, but

before petitioner’s guilty plea and sentencing, the

IRS issued a jeopardy assessment against him for

taxes, interest, and penalties owed to the United

States for the years 1985 through 1989. Pet. C.A.

App. 208. The jeopardy assessment was referred to in

petitioner’s plea agreement (id. at 251):

5. The United States and the defendant agree

and stipulate that defendant should be ordered to

pay his financial obligations on the criminal case

as follows:

a. on income tax due and owing for calendar

years 1985 through 1989;

b. for penalties for the same period; and

c. for interest for the same period;

The parties further agree that these obliga-

tions should be ordered to be paid as follows: that

these obligations be satisfied in the first instance

from the money seized as a result of the IRS

jeopardy assessment. Any money in excess of

these obligations shall be disposed of by order of

the Court. Any deficiency shall be satisfied by the

fixing of a payment schedule by the U.S. Probation

Office for purpose of payments based upon defen-

dant’s earnings.

In accordance with this provision, and as part of

petitioner’s sentence, the district court ordered peti-

tioner to “[pJay all taxes, penalties, and interest due

on a schedule developed by the Probation Office.” Jd.

at 138. In fact, petitioner’s tax obligations were

satisfied with monies the IRS received as a resu’t of

levies it made pursuant to the jeopardy assessment.

3. On direct appeal, petitioner contended only that

the costs of prosecution should not have been imposed

as part of his sentence. The court of appeals reversed

and remanded the case to the district court for recon-

sideration of the costs. United States v. May, 67 F.3d

706 (8th Cir. 1995). On remand, the district court

determined that the assessed costs were reasonable

and that petitioner had the financial ability to pay

them. On petitioner’s renewed appeal from that deter-

mination, the Eighth Cirenit affirmed. United States

v. May, No. 96-3005, 1997 WL 126785 (Mar. 21, 1997).

4, While his conviction was on remand to the

district court, petitioner filed a motion under Section

2255. In that motion, petitioner contended for the

first time that the tax penalties assessed against him

barred the imposition of criminal penalties under the

Double Jeopardy Clause. The district court denied

petitioner’s motion. It ruled that by entering into the

plea agreement, petitioner had voluntarily waived any

double jeopardy claim he otherwise might have had.

Pet. App. A4.

5. The court of appeals affirmed. Pet. App. B1-B2.

After a de novo review, the court of appeals deter-

mined that by voluntarily entering into the plea

agreement, petitioner foreclosed any challenge to his

sentence. /d. at B2. Moreover, the court agreed with

the government that petitioner “ha[d] failed to show

cause and prejudice, or a fundamental miscarriage of

justice, excusing his failure to raise the double jeop-

ardy claim on direct appeal.” Ibid.

ARGUMENT

1. Petitioner contends that the court of appeals

should have reviewed his double jeopardy claim on the

merits. He does not contend, however, that there was

cause and prejudice excusing his failure to raise his

double jeopardy claim on direct appeal. Section 2255

relief is not available to correct errors that could

have been raised at trial or on direct appeal, absent a

showing both of cause for the default and of actual

prejudice resulting from the errors. United States v.

Frady, 456 U.S. 152, 167-168 (1982). Petitioner has

made no such showing and, thus, is not entitled to

relief under Section 2255.

2. Furthermore, contrary to petitioner’s conten-

tion (Pet. 12-14), the courts below were correct in

holding that petitioner waived his double jeopardy

claim. The protection against double jeopardy or

double punishment is a personal right that may be

waived. United States v. Broce, 488 U.S. 563, 569-574

(1989); Ricketts v. Adamson, 483 U.S. 1 (1987). There

are ample indicia in the record that petitioner waived

his double jeopardy claim.

Pursuant to his plea agreement, petitioner pleaded

guilty to five counts of willful failure to file a return,

in violation of 26 U.S.C. 7203. In exchange, the gov-

ernment dismissed two counts charging willful at-

tempted evasion of payment of tax, in violation of 26

U.S.C. 7201. In the agreement, petitioner agreed that

the maximum penalty for each of the failure-to-file

counts was imprisonment for one year, a $100,000 fine,

costs of prosecution, and a $25 special assessment.

Plea Agreement 1 ({ 2) (Pet. C.A. App. 249). He also

agreed that he could not withdraw his plea if the court

accepted it and imposed a sentence he did not like

or with which he did not agree. /d. at 2-3, 6 ({¥ 3,

16) (Pet. C.A. App. 249-250, 254). The agreement

also provided (id. at 3) (Pet. C.A. App. 251) (emphasis

added):

5. The United States and the defendant agree

and stipulate that defendant should be ordered to

pay his financial obligations on the criminal case

as follows:

a. on income tax due and owing for calendar

years 1985 through 1989;

b. for penalties for the same period; and

ce. for interest for the same period;

The parties further agree that these obliga-

tions should be ordered to be paid as follows: that

these obligations be satisfied in the first instance

from the money seized as a result of the IRS

jeopardy assessment. Any money in excess of

these obligations shall be disposed of by order of

the Court. Any deficiency shall be satisfied by the

fixing of a payment schedule by the U.S. Probation

Office for purpose of payments based upon defen-

dant’s earnings.

Thus, petitioner specifically agreed that the dis-

trict court could (as it did) both impose a criminal

punishment and order him to pay his back taxes,

including penalties, with the taxes and penalties first

being satisfied out of funds seized in connection with

Le LA OT eM tee OR

eer SS

the jeopardy assessment. The agreement plainly con-

templated that petitioner could be punished in the

criminal case notwithstanding the jeopardy assess-

ment. He therefore agreed to what he now calls

double punishment and waived any double jeopardy

claim he otherwise may have had. See Ricketts v.

Adamson, 483 U.S. at 9-10 (agreement specifying that

original charges could be reinstated under certain

circumstances after defendant pleaded guilty to

lesser offense was equivalent to agreement waiving

double jeopardy defense, even though “double jeop-

ardy” was not specifically waived by name).

Even without regard to the plea agreement, peti-

tioner’s guilty plea bars consideration of his double

jecrardy claim. Cenerally, a valid guilty plea is not

subject to collateral attack. United States v. Broce,

488 U.S. at 509-574; Brady v. United States, 397 U.S.

742, 757 (1970); Mabry v. Johnson, 467 U.S. 504, 508

(1984). As this Court held in Broce:

A plea of guilty and the ensuing conviction

comprehend all of the factual and legal elements

necessary to sustain a binding, final judgment of

guilt and lawful sentence. Accordingly, when the

judgment of conviction upon a guilty plea has be-

come final and the offender seeks to reopen the

proceeding, the inquiry is ordinarily confined to

whether the underlying plea was both counseled

and voluntary.

488 U.S. at 569. See also Mabry v. Johnson, 467 U.S.

at 508 (“It is well settled that a voluntary and

intelligent plea of guilty made by an accused person,

who has been advised by competent counsel, may

not be collaterally attacked.”). Petitioner’s guilty

plea was counseled, and there is no evidence that

petitioner did not understand the charges against him

or the ramifications of his plea.

Petitioner’s reiiance (Pet. 12, 15) on Menna v. New

York, 423 U.S. 61 (1975) (per curiam), is misplaced.

In Menna, this Court did “not hold that a double

jeopardy claim may never be waived.” Jd. at 63 n.2

(emphasis added). Nor did the Court hold that a

double jeopardy claim is never waived by a plea of

guilty. The Court held, rather, that “a plea of guilty

to a charge does not waive a claim that—judged on its

face—the charge is one which the State may not

constitutionally prosecute.” Jbid. There is nothing

about the criminal charge in the instant case to sug-

gest that (on its face or otherwise) it was barred by

the Double Jeopardy Clause or could not be consti-

tutionally prosecuted.’

Accordingly, petitioner waived his double jeopardy

claim. The civil fraud penalties in this case thus

posed no double jeopardy bar to petitioner’s criminal

conviction.

3. Finally, even if it were not barred by the cause-

and-prejudice standard and had not been otherwise

waived, petitioner’s double jeopardy claim would be

without merit. Contrary to petitioner’s contention

(Pet. 10), the imposition of a civil fraud penalty does

not constitute “punishment” that bars a subsequent

criminal prosecution. Consistently with the Double

Jeopardy Clause, Congress may impose both a crim-

inal and a civil sanction with respect to the same act

or omission. See United States v. Halper, 490 U.S

2 Unlike Menna, who pleaded guilty only after his double

jeopardy claim had been rejected by the court, petitioner here

did not make his double jeopardy claim until long after his

guilty plea, sentencing, and direct appeal.

435, 450 (1989); United States v. Morgan, 51 F.3d 1105,

1113 (2d Cir.), cert. denied, 116 S. Ct. 171 (1995). If

the civil sanction is remedial in nature, rather than

punitive, it does not constitute punishment and may

be imposed on the same conduct in the same or suc-

cessive proceedings.’ United States v. Halper, 490

U.S. at 448-449; United States v. Morgan, 51 F.3d at

1113.

The civil fraud penalties under the tax laws long

have been recognized to be merely remedial, providing

reimbursement to the government for its investiga-

tion and other costs of a taxpayer’s fraudulent activi-

ties. Helvering v. Mitchell, 303 U.S. 391, 401 (1938).

In Helvering v. Mitchell, this Court held that the

then-50% addition to tax for fraud and other “‘Addi-

tions to the Tax’ were intended by Congress as civil

incidents of the assessment and collection of the

income tax.” Jd. at 405. This Court pointed out:

The remedial character of sanctions imposing

additions to a tax has been made clear by this

% Moreover, even if the tax penalties were considered pun-

ishment in the constitutional sense, multiple punishments that

would be impermissible if imposed in successive proceedings

are permissible if imposed in a single proceeding. See Missouri

v. Hunter, 459 U.S. 359, 368-369 (1983); United States v.

Halper, 490 U.S. at 450. For these purposes, the jeopardy as-

sessment against petitioner and the levies under it were not a

“proceeding” or a final adjudication of petitioner’s tax liability.

Petitioner could have contested the jeopardy assessment in

district court or the underlying tax liability in Tax Court. See

26 U.S.C. 6861(b), 6863; Laing v. United States, 423 U.S. 161,

i70-171 (1976). Since petitioner was required to pay the fraud

penaities only as part of the criminal judgment in this case,

there were no successive proceedings to implicate the Double

Jeopardy Clause.

Court in passing upon similar legislation. They

are provided primarily as a safeguard for the

protection of the revenue and to reimburse the

Government for the heavy expense of investigation

and the loss resulting from the taxpayer’s fraud.

Id. at 401. Helvering v. Mitchell conclusively estab-

lishes that the fraud penalties that petitioner agreed

to pay are remedial. They do not constitute punish-

ment and do not implicate the Double Jeopardy

Clause.

The same result follows from this Court’s decision

in Halper. In that case, the Court held that a civil

penalty constituted punishment for purposes of the

Double Jeopardy Clause only in the “rare case” where

it was so “overwhelmingly disproportionate to the

damages he has caused” that “it constitutes a second

punishment.” 490 U.S. at 449, 450. See also United

States v. Morgan, 51 F.3d at 1115. Halper was such a

“rare case,” because the government sustained an

actual loss of only $585, while the authorized civil

sanction for Halper’s conduct amounted to more than

$130,000. 490 U.S. at 438-439.

Measured by the Halper standard, the fraud penal-

ties in this case cannot be characterized as punish-

ment. The government alleged in its jeopardy assess-

ment that petitioner owed a total of $179,185, of which

$56,178 was attributable to the fraud penalties. Pet.

C.A. App. 219-223.4 Those penalties were not dispro-

portionate to the damages resulting from petitioner’s

conduct. The government “is entitled to rough reme-

4 Pursuant to the Internal Revenue Code, depending on

the tax year, the penalties were 50% or 75% of the portion of

the underpayment that was attributable to fraud. See, e.g., 26

U.S.C. 6653(b) (198) 3(b) (1988).

dial justice” and “may demand compensation accord-

ing to somewhat imprecise formulas” without cross-

ing the line between remedial sanctions and pun-

ishment. United States v. Halper, 490 U.S. at 446;

United States v. Morgan, 51 F.3d at 1113. As this

Court pointed out in Halper, 490 U.S. at 449, “in

the ordinary case fixed-penalty-plus-double-damages

provisions can be said to do no more than make

the Government whole.” Here, the penalties were

merely a percentage of the taxes due and were

less than double damages. Accordingly, petitioner’s

double jeopardy claim is groundless.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.