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April 2, 2007

Two Taxpayers Commit Tax Fraud: Should They Get Separate Trials?

Tax Litigation

Houston Tax Attorney

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While a taxpayer who commits tax fraud is entitled to a hearing, in United States v. Robbins the question is whether the taxpayer is entitled to a separate hearing.

Lee Robbins founded Robbins & Associates, which was a bookkeeping and tax return preparation business located in Georgia and Oklahoma. Robbins recruited, hired, and trained Gabriel Bonner. Bonner operated the Tulsa office and Robbins operated the Atlanta office; however, Robbins continued to review and e-file the tax returns prepared by Bonner.

Unfortunately, Robbins & Associates had a practice of helping clients minimize their tax payments and maximizing their refunds by falsely characterizing nondeductible personal expenses as deductible business expenses.

Both Robbins and Bonner were indicted for conspiracy to defraud the IRS, Robbins was indicted for fifteen counts of aiding and assisting the preparation and submission of false and fraudulent tax returns, and Bonner was indicted for fifty different counts of aiding and assisting the preparation and submission of false and fraudulent tax returns.

The end result: Bonner was acquitted on all charges and Robbins was found not guilty of conspiracy but guilty of the 15 individual counts.

Robbins filed a pre-trial motion asking for a separate trial, because he felt that he would be prejudiced by being tried with Bonner. The district court denied Robbins’ motion.

The appellate court opinion found that Robbins defense was antagonistic to Bonner’s defense, but not that whether the defenses presented were so antagonistic that they were mutually exclusive, so that the acceptance of one party’s defense would tend to preclude the acquittal of the other, or that the guilt of one defendant tends to establish the innocence of the other.

At trial, Robbins and Bonner each attempted to cast all blame for tax fraud on the other.

The Court Opinion States in Part

Bonner testified that it was “¦ Robbins who “caused all the wrong and illegal tax returns to be filed.” And, according to Robbins, “Bonner’s counsel sought to deliberately undermine Robbins’ defense at trial with every witness so that Bonner appeared only to be someone who was a data clerk.” Robbins also complains that Bonner’s counsel acted as an “additional prosecutor” by identifying himself as a former prosecutor and telling the jury to disbelieve the arguments made by Robbins’ [tax] attorney.

The courts often have to make difficult decisions. On the one hand, Robbins very well could have been prejudiced by having a joint trial with Bonner. I once heard a famous Texas criminal lawyer say that a joint trial will either allow the jury to be swayed by a more sympathetic co-defendant or it will allow a less likable co-defendant sour the jury (in true Texas trial attorney form, the Texas attorney couched these ideas in terms of the sweet perfume of a beautiful woman and something about throwing a skunk in the jury box…).

On the other hand, combining tax fraud cases can speed the trial along and save the parties the time and expense associated with presenting the same evidence to two different juries.

Given the severity of the consequences in tax fraud cases and the disparate results, I might be more inclined to believe that perhaps Robbins should have been given a separate trial. Then again, Robbins picked recruited and hired his partner in crime, so maybe a joint trial with his partner was warranted….

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