## Facts

- Four Ernst & Young professionals (Coplan, Nissenbaum, Shapiro, and Vaughn) were tried for roles in designing, marketing, implementing, and defending several tax shelters sold or used between 1999 and 2001; an outside adviser (Bolton) pleaded guilty.
- The government alleged the shelters lacked economic substance and generated artificial losses for wealthy clients.
- The charged scheme allegedly included deceptive conduct intended to impede IRS administration, including misleading tax-opinion work, document practices, and audit-related conduct.
- After a 10-week jury trial in the Southern District of New York, the defendants were convicted on various counts including conspiracy to defraud the United States under 18 U.S.C. § 371, tax evasion-related counts, IRS obstruction, and false statements to the IRS (including a false-statements count against Vaughn).
- On appeal, defendants challenged the validity of the “Klein conspiracy” theory under § 371, the sufficiency of the evidence (especially as to Shapiro and Nissenbaum), venue for Vaughn’s false-statements count, and aspects of sentencing (including a $3 million fine imposed on Bolton).

## Issues

1. Whether 18 U.S.C. § 371’s “defraud” clause encompasses conspiracies to impair or obstruct IRS functions through deceit (a “Klein conspiracy”), even without charging a separate substantive tax offense.
2. Whether the evidence was sufficient to prove beyond a reasonable doubt that Shapiro and Nissenbaum knowingly joined a conspiracy to defraud the United States and/or to evade tax.
3. Whether venue was proper for Vaughn’s false-statements count.
4. Whether Bolton’s $3 million fine was properly imposed and reviewable despite a limited appeal waiver.

## Decision

- The court reaffirmed that a “Klein conspiracy” remains a valid § 371 theory in the Second Circuit and rejected the defendants’ facial and as-applied attacks on that doctrine.
- The court affirmed Coplan’s and Vaughn’s convictions, holding the record permitted a rational jury to find knowing participation and willfulness.
- The court reversed Shapiro’s and Nissenbaum’s convictions for insufficient evidence, concluding the trial record did not establish beyond a reasonable doubt that either knowingly joined the charged unlawful agreement(s).
- The court held venue was proper for Vaughn’s false-statements count.
- The court vacated and remanded the portion of Bolton’s sentence imposing a $3 million fine, leaving his conviction otherwise intact.

## Legal Principles

- Under § 371’s “defraud” clause, a conspiracy to impair, obstruct, or defeat a lawful governmental function (including IRS tax administration) by deceitful means is criminal, and Second Circuit panels are bound to follow that precedent absent Supreme Court change.
- Sufficiency review requires defendant-specific proof that each defendant knowingly and willfully joined the conspiracy’s unlawful objectives; professional involvement in aggressive tax planning, without adequate evidence of knowing agreement to deceive or evade, is not enough.
- Pinkerton liability cannot substitute for proof of knowing participation where the evidence of agreement and intent is too thin to establish membership in the conspiracy beyond a reasonable doubt.
- Venue for a false-statements offense may lie in a district with a sufficient nexus to the charged conduct and the affected governmental process, depending on the facts.
- A plea agreement’s limited appeal waiver does not necessarily foreclose appellate review of a fine where the waiver’s terms permit review and the sentencing record does not support the fine.

## Conclusion

The Second Circuit maintained § 371’s Klein conspiracy doctrine for IRS-obstruction schemes, affirmed convictions where evidence supported willful participation, reversed convictions where proof of knowing agreement was lacking, sustained venue for a false-statements count, and remanded a challenged fine for further proceedings.


United States v. Coplan, 703 F.3d 46 (2d Cir. 2012)