Substituting "Moral Equivalence" for Actual Knowledge in Criminal Tax Cases

[author: Jeremy Temkin]

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The “conscious avoidance” doctrine has long confounded criminal defense lawyers and their clients.

In most criminal cases, the government need only prove the defendant knowingly engaged in the conduct at issue, not that he knew the conduct violated a specific law. This burden of proving criminal intent is often relaxed through the “conscious avoidance” doctrine, which permits a jury to convict if it finds (1) the defendant “was aware of a high probability” that a specific fact existed and (2) “acted with deliberate disregard” of that fact, unless (3) he “actually believed” the fact did not exist.

While conscious avoidance has long been applied by lower federal courts in criminal cases, the United States Supreme Court addressed the doctrine for the first time in Global-Tech Appliances, Inc. v. SEB, S.A., a civil patent case decided last spring. In Global-Tech, the Supreme Court held that a defendant can be liable for inducing infringement without actual knowledge of the patent where it knows there is a high probability the patent exists and deliberately avoids learning that fact.

Tax cases are different from most other criminal prosecutions. In order to convict a defendant of violating the tax laws, the government is required to prove: (1) that the law imposed a duty on the defendant; (2) that the defendant knew of that duty; and (3) that he voluntarily and intentionally violated that duty. In other words, a defendant cannot be convicted if, in good-faith, he was ignorant of the law, misunderstood it, or believed that the duty he violated did not exist. This is true even where the claimed ignorance, misunderstanding or belief is unreasonable.

In light of the government’s heightened burden to prove the defendant’s intent, the conscious avoidance doctrine raises unique issues in criminal tax cases. Courts generally view the defendant’s knowledge of tax law as “a fact to be proved as part of the government’s case,” and allow the government to prove that fact through evidence of deliberate disregard. In the words of one court, “[b]y definition, one who intentionally avoids learning of his tax obligations is not a taxpayer who ‘earnestly wish[es] to follow the law,’ or fails to do so as a result of an ‘innocent error[] made despite the exercise of reasonable care.’”

In his dissent in Global-Tech, Justice Kennedy argued that “[w]illful blindness is not knowledge; and judges should not broaden a legislative proscription by analogy.” Justice Kennedy explained that even if a willfully blind defendant can be characterized as “equally blameworthy” as one who acted with actual knowledge, the consequence for such wrongdoing should be determined by Congress when it drafts criminal laws, rather than by courts creating a moral equivalence. Justice Kennedy further recognized the danger of addressing an issue that arises in criminal cases in the context of a civil patent case, without the input of criminal defense counsel.

Perhaps Justice Kennedy’s dissent in Global-Tech will breathe new life into the government’s burden in criminal tax cases. If a criminal defendant who actually, but unreasonably, believes he is obeying the tax laws is entitled to be acquitted, should the government be able to obtain a conviction by arguing the defendant consciously avoided learning that his belief was wrong? Is Justice Kennedy right in suggesting that trumping a defendant’s actual belief that his conduct was lawful with evidence that he intentionally disregarded the truth means replacing the requirement of willful misconduct with an “equally blameworthy mental state”?

Published In: Criminal Law Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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