For non-U.S. citizens, criminal convictions can have broader reaching consequences, in addition to the already severe criminal and civil penalties. A felony tax evasion conviction in which the revenue loss to the government exceeds $10,000, or even an attempt or conspiracy to evade with over $10,000 in intended losses, is expressly mentioned in the Immigration and Nationality Act, allowing the Department of Homeland Security (DHS) to remove a non-citizen using expedited proceedings. The $10,000 threshold amount for tax losses, often referred to as an aggravated felony, is quickly accumulated, especially in a corporate tax fraud setting. In Evdokimow v. Att’y Gen, No. 20-2051 (3d Cir. 2022), filed on August 4, 2022, the petitioner has experienced this powerful authority that DHS over tax dodgers.
After a jury found him guilty of multiple counts of tax evasion and serving his prison time, the petitioner, Swedish national David Evdokimow, was ordered to leave the United States. He challenged the removal order on the basis of due process, claiming that there was no clear and convincing evidence of an aggravated felony.
David Evdokimow came to the United States on a J-1 visa to study medicine and later established a successful reconstructive surgery practice. His immigration status was changed to an O-1 visa, which is available to people with extraordinary abilities or achievements.
As the 3rd Circuit pointed out, as with his practice, the petitioner’s tax liability also grew. The petitioner responded to the rising tax bill by channeling funds through shell companies. He claimed these funds as business expenses on his corporate return, but used them for personal expenses and left them off his personal tax return. He also failed to report “a large portion of the cash and check payments he received directly from patients.” In this manner, he amassed nearly $3 million in unpaid corporate and personal taxes.
Subsequently, the petitioner was charged with one count of conspiracy to defraud the United States under 18 U.S.C. § 371 and seven counts of tax evasion under 26 U.S.C. § 7201 and 18 U.S.C. § 2. On all counts, the jury found him guilty. After his incarceration ended, DHS issued a notice of intent to issue a Final Administrative Removal Order (FARO), alleging that he was deportable because he had been “convicted of an aggravated felony. The DHS issued the FARO notice and ordered him to leave the country (Order of Removal).
At issue when the petitioner requested that the United States Court of Appeals review the Order of Removal, was whether the petitioner’s convictions satisfy the “aggravated felony” requirement under 8 C.F.R. § 238.1(b); see 8 U.S.C. §§ 1227(a)(2)(A)(iii), 1228(b).
“An aggravated felony includes, among other things, (1) an offense that “involves fraud or deceit in which the loss to the victim or victims exceeds $10,000,” (2) an offense “described in section 7201 of title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $10,000,” or (3) “an attempt or conspiracy to commit” one of those offenses with over $10,000 in intended losses. 8 U.S.C. § 1101(a)(43)(M), (U); Rad v. Att’y Gen., 983 F.3d 651, 670 (3d Cir. 2020).”. The petitioner did not dispute that his conviction was for an offense listed in the statute, e.g., one that involved fraud or deceit or was described in section 7201 of title 26, but rather he claimed that the threshold requirement of more than $10,000 was not met. Despite the fact that the conviction for tax evasion involved an amount of nearly $3 million, petitioner argued that the tax loss amount was not part of the jury finding.
In relying on Ku v. Att’y Gen., 912 F.3d 133, 139 (3d Cir. 2019 and Nijhawan v. Holder, 557 U.S. 29, 34 (2009), rooted the court’s “circumstance-specific approach,” the court, looked to the specific way the crime was committed rather than only the elements of the crime or the charging document or jury findings. The court then determined that, based upon the indictment which charged evasion of at least $1.5 million in tax, the presentence report which noted total tax loss of $2,978,774, the jury conviction on all counts, and sentencing-related materials, it was shown by were clear and convincing evidence that the total tax loss was “far beyond $10,000” in the absence of any contradictory evidence.
Fighting a non-U.S. citizen’s removal after conviction for a tax crime can be insurmountable. A reminder that addressing tax noncompliance early and, importantly, well before a criminal tax investigation has been initiated is often the most crucial step a non-citizen residing and working in the U.S. can take. Consulting with an attorney experienced in assisting individuals facing decisions about correcting tax noncompliance, including the potential for a voluntary disclosure submission with the IRS, may be the best defense to not only a criminal tax investigation but also preventing a removal action with the DHS.
Sandra R. Brown is a Principal at Hochman Salkin Toscher Perez P.C., and former Acting United States Attorney, First Assistant United States Attorney, and the Chief of the Tax Division of the Office of the U.S. Attorney (C.D. Cal). Ms. Brown specializes in representing individuals and organizations who are involved in criminal tax investigations, including related grand jury matters, court litigation and appeals, as well as representing and advising taxpayers involved in complex and sophisticated civil tax controversies, including representing and advising taxpayers in sensitive-issue audits and administrative appeals, as well as civil litigation in federal, state and tax court.
Steven Toscher is a Principal and Managing Partner at Hochman Salkin Toscher Perez P.C., and specializes in civil and criminal tax litigation. Mr. Toscher is a Certified Tax Specialist in Taxation, the State Bar of California Board of Legal Specialization and represents clients throughout the United States and elsewhere involving federal and state, civil and criminal tax controversies and tax litigation.
Philipp Behrendt is an Associate at Hochman Salkin Toscher Perez P.C., licensed in California as well as in Germany and assists in advising clients in civil and criminal tax controversies as well as international money laundering investigations stemming from tax avoidance structures. He also focuses on the technical aspects involved in advising voluntary disclosures in connection with DeFis, NFTs, and other crypto assets.
TAXLITIGATOR - Tax Controversy (Civil & Criminal) Report 