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Fourth Circuit Affirms Convictions For Wire Fraud And District Court’s Calculation of Loss

Monday, February 8, 2010 at 02:45PM

Last week, the Fourth Circuit issued an opinion in United States v. Jiten Mehta.  The opinion is available here.

The defendant was charged with a variety of crimes relating to the preparation of false tax returns, including wire fraud.  At trial, the government presented evidence that the defendant was a tax-preparer for many immigrant clients.  He  “repeatedly fabricated or exaggerated deductions” on many of the Schedule A returns for his clients.  This produced less tax liability for his clients, and, according to the government, a loss to the IRS.

Mehta challenged his conviction and sentence on three grounds:  (1) that the evidence offered at trial was insufficient to convict him, or that there was a variance of proof at trial, such that the evidence offered prejudiced him, (2) that the district court’s denial of his motion for Rule 17(c) subpoenas prejudiced him, and (3) that the district court’s tax-loss calculation was in error, and caused the miscalculation of his sentencing guidelines.

The Court’s discussion of the sufficiency and variance issues are brief and straight forward.  The more important parts of the opinion are the other issues.

In affirming the defendant’s convictions for wire fraud, the Court states in a footnote:

Mehta also challenges the district court’s denial of his motion for a Rule 17(c) pre-trial subpoena of tax returns filed [during the three year period prior to the returns covered by their testimony] by the taxpayers who testified [against him].  [Mehta] failed to provide any support for his speculation as to the contents of the tax returns sought, [the Court affirms].
The Court resolved the defendant’s entire argument regarding Rule 17(c) subpoenas in a footnote.  The defendant, it seems, hoped that by using trial subpoenas for the tax records filed by testifying witnesses in the years prior to the defendant’s conduct, he could show that the clients had themselves claimed the same “fraudulent” deductions prior to his involvement.  Because the defendant failed to meet the Nixon standard (the defendant provided “no support” and only “speculation” as to the contents of the returns sought), the Court held, the district court did not err in denying his motion for these subpoenas.

The remainder of the opinion details the vagaries of tax-loss calculation and models that are acceptable – or not – of estimating tax loss under the guidelines.  Ultimately, the Court affirms the loss calculation under the harmless error standard.