IRS’s Criminal Investigation Division Celebrates Its 100th Year, and Issues 2019 Annual Report.
The CI’s annual report for the year 2019 highlighted its successes in criminal enforcement actions. Quoting IRS Commissioner Chuck Rettig, "CI is critical to the overall enforcement efforts of the IRS in pursuing its mission in a fair, impartial, diligent and where appropriate, tenacious manner."
In 1919, the Commissioner of the IRS established a group of criminal investigators to ferret out those who would cheat on their U.S. taxes. The group was initially called the Intelligence Unit. In 1978, the Intelligence Unit changed its name to Criminal Investigation (CI). This branch of the IRS is often referred to as the Criminal Investigation Division (CID).
Non-Compliance in a Voluntary Tax System Carries Penalties
The U.S. has a voluntary tax system. The IRS laws may be voluntary, however, if a person does not comply and willfully violates the tax laws, that person can wind up in prison. The 2019 annual report states that CI supports the efforts of compliant taxpayers by visibly demonstrating the risks of noncompliance thereby helping otherwise honest taxpayers stay honest and compliant.
CI Is a Prominent Investigation Unit
Throughout its history, CI has gained a reputation for being a first-class law enforcement agency skilled in investigating financial crimes and, in particular, tax crimes. CI also investigates money laundering and often helps other federal law enforcement agencies analyze financial evidence in complex fraud and major financial investigations.
The latest annual report describes CI’s emphasis to include virtual and cryptocurrencies, traditional tax investigations, international tax enforcement, employment tax, refund fraud, and tax-related identity theft, public corruption, corporate fraud, and money laundering.
Throughout its history, CI has made many high-publicity tax cases, which started with the prosecution of the infamous gangster, Al Capone, for tax fraud. Since then, many other high-profile cases have been brought, including the prosecution of actor Wesley Snipes for failing to file tax returns, billionaire real estate owner Leona Helmsley, Arthur Jones founder of Nautilus variable resistance exercise equipment, and a Vice President of a national stock brokerage firm, to list a few.
In addition to those cases, the IRS has also investigated and prosecuted professionals such as doctors, accountants, lawyers, owners of large and small businesses, as well as people who take false deductions or do not report all income on their tax returns.
Only CI has jurisdiction to investigate federal tax crimes. In 2019, CI boasted a 91.2% conviction rate. The annual report states that this is the highest conviction rate of all federal law enforcement agencies.
Working with CI Special Agents on Criminal Tax Matters
As an Assistant United States Attorney, I prosecuted criminal tax matters and had the pleasure of working with excellent, hard-working CI Special Agents. In private practice, I have employed retired CI Special Agents to assist me in conducting complex defense investigations when dealing with major fraud and tax cases. As defense counsel, I have represented numerous people under criminal investigation and prosecution by CI.
A CI investigation will be thorough and can take years to complete. It will end by sending the case to the Department of Justice for prosecution or by closing the investigation if the IRS does not believe that it has a strong enough case to be successful at trial.
On many occasions, I have been able to convince CI agents that their case is not strong enough to win at trial. There are, however, cases in which the IRS cannot be dissuaded from making the referral to the DOJ and a criminal prosecution usually results. In the criminal tax cases that I have taken to trial, 70% of my clients have been acquitted of all charges. Included in my successful defenses was the not guilty verdicts obtained at the conclusion of the criminal trial of Nautilus’ Sports Equipment owner and founder, Arthur Jones.
The ability to analyze the strengths and weaknesses of the CI investigation and to engage in meaningful discussions prior to the case being sent to the DOJ for prosecution is an important part of representing an individual under investigation. The attorney’s presentation as to why a person should not be prosecuted will be given more weight if the defense attorney has a track record of winning criminal tax trials.
Presence of CI Agent Signifies Seriousness of Investigation
Another interesting point brought out in the latest CI Annual Report is that the number of CI Special Agents the IRS employs has dropped to the lowest level since the early 1970s. In spite of this fact, CI initiated 2,485 cases in the fiscal year 2019. This means that the number of criminal investigators is limited and therefore, a precious resource to the IRS. The appearance of a CI Special Agent signifies that a decision has been made to expend this precious resource to make a criminal case.
A person is usually unaware that they are under investigation until a CI Special Agent makes an unannounced visit, either to a person's home or place of business, and asks to talk. At the time of this first contact, the IRS has already opened a criminal investigation.
CI has learned that it can often gather information to help its case by having a drop-in conversation with an unsuspecting target. The risks to anyone who speaks with a CI Special Agent are significant and include:
- The person makes an admission that provides evidence leading to a conviction, which would not otherwise have been possible.
- The agent makes a mistake, either inadvertently or intentionally, in preparing a memorandum of the conversation, and the mistake is adverse to the defendant.
- The interview will be conducted by two government agents and will not be recorded. Years later, when the case goes to trial, the agent will testify to what he or she recalls was said, instead of playing a recording of the interview.
It is critical that a person not speak with CI Special Agents without an attorney experienced in defending criminal tax cases. The presence of a CI Special Agent should automatically alert a tax professional, such as a CPA, that the IRS has opened a criminal investigation and prosecution is possible.
The Law Offices of Horwitz & Citro, P.A. stand willing to confer with anyone who is confronted with a potential criminal tax prosecution that could result in conviction and years in prison. Call us today at (407) 901-5852 or contact us online.