Representing a client in a criminal tax investigation and prosecution is very different than in other criminal contexts. In a criminal tax case, counsel’s role is crucial during investigation and long before an indictment is ever made. Although formal discovery is not available, counsel will need to be able to effectively represent the client in Criminal Investigation Division and Tax Division conferences if prosecution is ultimately recommended. Effective representation of the client at this stage relies heavily on counsel’s ability to parallel the work of the investigators and special agents developing their case against the taxpayer.
Fact Finding During a Criminal Tax Investigation
When paralleling the work of the special agent as a defense technique, counsel will engage in fact finding similar to investigators. Counsel may choose to begin the fact-finding process at the same time as the Criminal Investigation Division when the client’s case is referred to CID following an IRS audit. Alternatively, counsel may choose to begin fact-finding once the full-scale CID investigation has completed. If fact-finding takes place after the completion of a CID investigation, counsel should begin by determine the nature of the investigation against the client and whatever steps have already been taken by the CID. In either case, counsel’s fact-finding process can be greatly aided by the client’s cooperation and openness.
The primary goals of the fact-finding process should be to determine who was interviewed during the investigation, what testimony was given, whether any subpoenas or summonses were issued, whether there is an informant, and the identity of any potential witnesses on behalf or against the taxpayer. In every case, counsel should also undertake a thorough interview of the client and review any documents that might have initially sparked the interest of the CI special agent. This may include tax returns, foreign bank account reports or other financial account reports and any publicly available information about the client.
Interviewing Witnesses as a Fact Finding Technique in a Criminal Tax Investigation
One of the most important aspects of counsel’s fact-finding process should be interviewing witnesses before they are interviewed by CID special agents, followed by a thorough debriefing of the witness after the CI interaction takes place. Three crucial pieces of evidence can be gleaned by interviewing and debriefing witnesses:
- what the witness has said or will say under oath;
- whether the witness’s testimony is positive or negative for the client; and
- whether what the witness has said is consistent with what the client has told counsel.
Debriefing a witness after he or she has already spoken to CI special agents or a Grand Jury is not controversial and counsel is clearly within proper etiquette to do so. However, the propriety of interviewing witnesses prior to the CI or Grand Jury interview is slightly up for debate. CI special agents or a Grand Jury will almost certainly ask the witness if they have had any contact with the defendant or defense counsel. Thus, counsel should be very careful to avoid any comments or questions that might suggest solicitation of a bribe, evidence tampering, obstruction, perjury, or any other form of impropriety.
How to Proceed During an “Eggshell” Civil Audit
Oftentimes, counsel is retained while the client is undergoing an ongoing ”eggshell” IRS civil audit. Here, there is often undiscovered taxpayer misconduct, which is why these audits are referred to as “eggshell” audits. In these audits, counsel typically monitors the progression of the audit and investigation and provides advice to the client regarding how to properly interact with the interviewing agent. In particular, the client should not make any incomplete statements or misrepresentations of fact to the agent. At this point, it is not necessary to reveal counsel’s involvement to the examining agent. Counsel’s involvement does not need to be made known until it is clear that the examining agent intends to refer a case up to the Criminal Investigation Division.
The primary goal of counsel’s involvement in the eggshell audit is to decrease the chances that the taxpayer’s case will be referred up to the CID for criminal investigation and processing. This role is much less adversarial than counsel’s role in other criminal contexts, so counsel typically will not offer facts, legal arguments, or precedent. Instead, the goals of the tax attorney in the representation can be achieved by keeping the client far away from the examining agent, avoiding any discussion of the taxpayer’s knowledge and intent, and controlling the level of cooperation the taxpayer displays with IRS personnel. This is easier said than done, as it is not easy to refuse to answer questions or produce documents without arousing the suspicions of the IRS agent. As a general matter, it is advantageous to provide minimal documentary evidence if requested and agree to any adjustments that are proposed for particularly troublesome areas for the taxpayer. By doing this, counsel and the taxpayer may be able to gain a tactical advantage as the case proceeds to the Notice of Deficiency stage.
How a Tax Attorney Can Help with Your Criminal Tax Case
If you are under investigation by the IRS for a potential criminal prosecution, then you must consult with an experienced tax attorney. San Diego Tax Attorney William D. Hartsock has been successfully helping clients with criminal tax issues since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.