Panel Divides Over Aggravated Felony Definition and Categorical Approach, Deepens Circuit Split On Those Questions

Arguelles-Olivares v. Mukasey, No. 05-60914 (5th Cir. Apr. 22, 2008) (Garwood, Owen; Dennis, dissenting)

This case presents two very interesting questions---both of which divide the panel---concerning one of the more obscure backwaters of the aggravated felony definition: 8 U.S.C. § 1101(a)(43)(M). That provision incluces as an aggravated felony “an offense that (i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or (ii) is described in section 7201 of Title 26 (relating to tax evasion) in which the revenue loss to the government exceeds $10,000.” The questions are 1) whether tax offenses other than tax evasion can be aggravated felonies under (a)(43)(M) (in this case the offense in question was the failure to file a tax return in violation of 26 U.S.C. § 7206(1)), and 2) whether a court is limited to the Taylor/Shepard categorical approach when determining whether a tax offense involved a loss in excess of $10,000. As you might imagine, the panel resolves these questions---particularly the second one---in a way that raises even more questions for the application of this provision in criminal cases.

The first question has generated a circuit split. The Third Circuit, over a dissent by then-Judge Alito, held in Lee v. Ashcroft that tax evasion is the only tax offense that can fall within the ambit of (a)(43)(M). Lee reasoned that

subsection (M)(ii) would be “mere surplusage” if subsection (M)(i) included tax offenses because “the government has not identified, and we are unable to envision” “a case where a conviction for tax evasion would not involve fraud or deceit,” and that “the principle that the specific governs the general also favors the interpretation that subsection (M)(ii) identifies the only removable tax offense, tax evasion, while subsection (M)(i) does not apply to tax offenses.” The Third Circuit also reasoned that “for Congress to select tax evasion as the [only] ‘aggravated’ tax felony, justifying removal of an alien who committed it, while sparing lesser tax felons, is thoroughly consistent with the history and structure of criminal tax offenses.”

Finally, Lee concluded that, to the extent that (a)(43)(M) is ambiguous on this point, the ambiguity must be construed in favor of the alien.

The Ninth Circuit, on the other hand, and Judge Alito's dissent in Lee, concluded that (a)(43)(M) isn't ambiguous at all. The majority here agreed, holding that "Congress did not intend to single out tax evasion under 26 U.S.C. § 7201 for inclusion among aggravated felonies to the exclusion of all other tax felonies."

Congress may well have seen subsection 43(M)(ii) as a necessary addition to subsection 43(M) since neither fraud nor deceit is a specific element of the crime of tax evasion under 26 U.S.C. § 7201,15 as both the dissent in Lee and the Ninth Circuit recognized. Moreover, it is difficult to discern why Congress would want only a violation of 26 U.S.C. § 7201 involving $10,000 or more to constitute an aggravated felony, but not tax felonies involving fraud and deceit and the same amount of loss to the Government fisc.

Having concluded that failure to file a tax return can be an aggravated felony under (a)(43)(M), the majority confronted Arguelles's argument that "there is no evidence that his tax offense involved $10,000 or more because the judgment of conviction does not mention the actual loss," and that the Taylor/Shepard categorical approach precludes a court from relying on a PSR to determine the loss amount.

The majority disagreed, for a couple of reasons. First, relying on the Fifth Circuit's opaque decision in James v. Gonzales, it held that Congress did not intend for the categorical approach to apply to the loss-amount determination under (a)(43)(M) because loss amount is not an element of many tax and fraud offenses.

As a matter of statutory construction, its seems thatCongress intended for the inquiry under 8 U.S.C. § 1227(a)(2)(A)(iii) and § 1101(a)(43)(M) to be whether, as a categorical matter, the alien was convicted of “an offense . . . that involves fraud or deceit” as an element of the offense or that the offense necessarily entails fraud or deceit. The requirement that the offense was one “in which the loss to the victim or victims exceeds $10,000” is a factual matter to be determined from the record of conviction, but the amount of loss is not required to be an element of the conviction itself.

The majority acknowledged that it has applied the categorical approach in the immigration context in the past. But it asserted that the Fifth Circuit has done so only for purposes of determining whether an alien was convicted of a generic offense, not for determining loss amount. It also added that the rationale for employing the categorical approach doesn't apply when loss amount is in question, beacuse the INA simply requires the Government to establish an alien's deportability by clear and convincing evidence. As long as a PSR meets that standard, it can be used to determine loss amount. (And as it turns out, there's a circuit split on this question, too. The Second and Ninth Circuits respectively require the loss amount to have been pleaded and either found by the trier of fact or admitted by the alien in the prior proceedings.)

Now all that's bad enough, but here's the most troubling part:

An addendum to the PSR reflects that Arguelles-Olivares had no objections to the PSR. The PSR additionallly states that a probation officer interviewed Arguelles-Olivares regarding the report and that Arguelles-Olivares agreed with the chart in the report showing the tax losses by year, including a loss of $75,982 for 1999. The district court adopted the PSR’s factual findings. Arguelles-Olivares does not dispute that he agreed to the facts set forth in the PSR including, specifically, the fact that the amounts of loss for each year were part of the plea agreement and that they totaled in excess of $10,000 for each year. Arguelles-Olivares’s failure to object to these facts in the PSR, his admission that they were correct, and the district court’s adoption of these facts is clear and convincing evidence that the loss to the government was in excess of $10,000.

Now we've seen this sort of reasoning before, in United States v. Martinez-Vega. (Interestingly, in Martinez-Vega Judge Owen---who writes for the majority here---expressed skepticism that a defendant's admission that "everything in the PSR is correct" actually constitutes an admission that everything in the PSR is true, rather than simply an admission that the PSR accurately represents what other people or documents say.)

But as Judge Dennis points out in his excellent dissent,

the majority’s characterization of Arguelles as having agreed to certain facts relating to the loss amount for the 1999 tax year is supported only by self-serving references to the probation officer’s statements in the PSR and its addendum. The majority does not – because it cannot – point to any statement in the record of conviction by which Arguelles admitted to or failed to object to the factual statements contained in the PSR, as the Government did not include a transcript of the plea colloquy or the sentencing hearing in the immigration record, in addition to not including the Factual Basis and Plea Agreement.

(He also faults DHS for not introducing the plea agreement into evidence in the removal proceedings: "If the written Plea Agreement discloses clearly that Arguelles underpaid his 1999 taxes by more than $10,000, the DHS’s failure to file it has caused this court to expend time and effort unnecessarily on the appeal, the oral argument and the opinion writing on this issue. If the Plea Agreement does not contain clear evidence to this effect, then a serious question is raised as to whether the DHS has dealt fairly with Arguelles and honorably with this court.")

Dennis also disagrees with the rest of the majority opinion. He would hold that the only tax offense covered by (a)(43)(M) is tax evasion, and that there's no reason to abandon the categorical approach here.

Of course, this case opens up some other interesting questions. Would the majority's holding that (a)(43)(M) can include any tax offense apply in a criminal case when a prior tax conviction is being offered to support an aggravated felony sentence enhancement? Presumably so, since the Supreme Court has observed that statutes with criminal and immigration applications should be construed consistently in both contexts. But what about the holding concerning the application vel non of the categorical approach and the use of the PSR to determine loss amount? The majority's holding on that point expressly relies on the INA's burden of proof requirement in civil removal proceedings. So would that approach carry over to the criminal context, as well? Arguably not. After all, Judge Owen---who writes for the majority here---questioned such an approach in United States v. Martinez-Vega. Plus, considering a PSR in a criminal case in this manner would raise a much thornier problem in light of the rationale underlying Taylor and Shepard.