Paul L. Caron

Saturday, September 20, 2008

Lessons from U.S. v. Stein: The Line Between Criminal and Civil Sanctions for Illegal Tax Shelters

Patricia B. Hsue (J.D. 2008, Northwestern) has published Comment, Lessons from United States v. Stein: Is the Line Between Criminal and Civil Sanctions for Illegal Tax Shelters a Dot?, 102 Nw. U. L. Rev. 903 (2008).  Here is part of the Introduction:

A close examination of the indictment reveals that the prosecution’s case is centered on the opinion letters written by the defendants. These letters opined on the likelihood that the four allegedly abusive tax shelters would withstand legal challenges. Before Stein, the government had never sought criminal penalties against tax planning professionals for providing opinion letters. In its first attempt to do so, the government relies on civil standards regulating opinion letters to support the charge that the defendants committed a criminal act. The governing civil standards are uncertain and ambiguous at best. Thus, this case should clarify what behavior is so egregious that criminal rather than civil sanctions are warranted. This Comment argues that the government is inappropriately seeking criminal penalties for providing opinion letters and that it should seek civil penalties instead.

To understand the significance of Stein, Part II paints the context in which Stein arises. It addresses the history of tax shelters, past attempts to regulate the industry, and the background of Stein itself. Part III analyzes the problems with and implications of the government’s theory of the case. It concludes that the government has no basis for the tax evasion charges. Most importantly, it identifies a key problem with the government’s case: the government’s attempt to use nebulous civil and ethical standards as a basis for imposing criminal sanctions. Finally, Part IV provides solutions for the holes in criminal and civil regulation of tax shelters. It proposes that civil rather than criminal sanctions should be imposed because providing opinion letters is not a service that the government would like to prohibit altogether.

Scholarship | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Lessons from U.S. v. Stein: The Line Between Criminal and Civil Sanctions for Illegal Tax Shelters:


Which reminds me of this paper:
«Abstract: Clients demand bad legal advice when legal advice can favorably influence third-party conduct or attitudes even when it is wrong. Lawyers supply bad legal advice most readily when they are substantially immunized from accountability to the people it is intended to influence.»

The actions of the USA are sometimes inconsistent. Going after people who offer options that may be meant to immunize clients against the consequences of their choices is one case.

But where are the jail sentences for people who backdated options and evaded income taxes on very large amounts of money (paying only capital gains tax at best)?

Those would be open-and-shut cases. Where are the prosecutions?

Posted by: Blissex | Sep 20, 2008 5:50:03 AM