letter dated July 8, 1993 the United States Attorney received authorization to investigate Tenzer for Title 26 offenses, without limit. The following day, July 9, 1993, Special Agents Trezza and Gross notified Myron Weinberg that Tenzer was now a subject of a Grand Jury investigation into his personal tax matters.
On September 28, 1994, Special Agents Trezza and Gross attended a pre-referral conference with James Biaggi, an attorney with the IRS' District Counsel's Office. As a result of that meeting, by a memorandum authored by Robert B. Marino, Assistant District Counsel, the IRS concluded that it would be appropriate for the United States Attorney's Office to proceed with a prosecution for failure to timely file tax returns as Tenzer did not meet the criteria for the Voluntary Disclosure Policy.
As will be understood, this was unusual. Most prosecutions for failure to file originate with the IRS and are sent to the Department of Justice which may decline. In this case the request to proceed against Tenzer as a non-filer originated with the DOJ, or more correctly, the local United States Attorney's Office, after it had exhausted its ability to make a case against Tenzer for his likely complicity in the JRD tax fraud. An understandable desire to make some charge of some sort stick against Tenzer appears to have influenced subsequent consideration of his case in light of the Voluntary Disclosure Policy.
The Special Agent's Report dated November 15, 1994, recommending that charges be brought for failure to timely file, was forwarded by the IRS to the Department of Justice. Thereafter, Tenzer's counsel attended a meeting at the DOJ where they argued that Tenzer should not be prosecuted because he fell within the provision of the IRS' Voluntary Disclosure Policy. Rejecting this contention, the DOJ subsequently authorized this prosecution of Tenzer for failure to timely file tax returns for the years 1987-1990, as four separate counts.
THE VOLUNTARY DISCLOSURE PROGRAM
Since about 1961, the IRS has had a publicly announced Policy, changed from time to time, which is to encourage taxpayers who have failed to file returns, to do so and in effect come, or be brought back into the system for past and future returns. There are many such non-filers, some of whom are entitled to refunds, and some of whom fail to file for a variety of reasons which do not include the intent to evade income taxes. The goal of the agency is not to procure misdemeanor convictions against these non-filers as a general deterrent to others, as authorized by Congress, but rather, to collect their taxes and welcome them back to the largest voluntary tax assessment system in the world.
To lure these non-filers into a state of grace with their taxes, offers and promises were made from time to time with much public fanfare, couched, unfortunately, in language not always precise as a penal statute, and written without much consideration of possible application of the rule of the Caceres footnote.
While the applicability and scope of the Voluntary Disclosure Policy are a matter of law for this Court to determine, there is some dispute as to what the actual publicly stated Policy of the IRS was at the relevant times in this case, and how it was imparted to the public.
In this regard, the testimony of Assistant District Counsel Robert Marino and former Acting Assistant Attorney General James Bruton during the evidentiary hearing is relevant.
Mr. Robert Marino testified that the Voluntary Disclosure Policy (the "Policy") governs how the IRS reviews its cases when considering a referral for prosecution, and that it is not intended to create any substantive rights.
Marino testified that it was the IRS' view that Tenzer did not make a true voluntary disclosure, and that even if he had, prosecution was warranted due to his egregious circumstances. (Transcript, 170.) We note that there is no exception stated in the Policy for egregious circumstances, whatever that means. Marino testified that the voluntary disclosure did not apply to Tenzer because (1) it was "triggered" by Mr. Trezza's service of the JRD subpoena on Mr. Tenzer; (2) that he did not believe that the Offer and Compromise was legitimate; and (3) that "the amount of money involved; the amount of years involved; no withholding paid; taxpayers sophistication; being an attorney: All of these matters, I think, make this an egregious case." (Transcript, 171.) This Court agrees that the misconduct of Tenzer is egregious by any definition of the word; that is besides the point under the IRS Policy.
The Internal Revenue Manual ("I. R. M.") at Section 342.142 (promulgated April 5, 1993) set forth the Service's Voluntary Disclosure Policy as effective when this prosecution commenced. Subsection (3) lays out the conditions under which a non-filer may qualify for relief under the Voluntary Disclosure Policy. The person must have:
1) informed the Service that he or she has not filed returns for one or more taxable years;
2) had only legal-source income;