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United States v. Nardozzi

United States District Court, D. Massachusetts

January 3, 2019




         Defendant has moved to discover documents generated in connection with an appeal to the Office of Appeals of the Internal Revenue Service (“IRS”) by his former tax client, Brian A. Joyce. According to the motion, Joyce appealed an IRS assessment of taxes and penalties for a distribution of IRA assets that the IRS determined was unlawfully reported on Joyce's tax return as a qualified IRS rollover. For the reasons stated below, the motion is DENIED.

         I. Background

         In an indictment filed on January 18, 2018, Defendant John H. Nardozzi was charged with Conspiracy to Defraud the United States (Klein Conspiracy), and eight counts of Aiding in the Filing of False Tax Returns. See Doc. 3. Nardozzi's conduct involved preparing tax returns for former State Senator Brian A. Joyce, his wife, and business entities associated with one or both of them.

         According to the original discovery request, Nardozzi's motion, and the Government's opposition, in 2014, Joyce withdrew $400, 000 from a Simplified Employee Pension - Individual Retirement Account (“IRA”) and used those and other funds to purchase $471, 250 in stock in a privately-held insurance brokerage company. The stock was issued in the name of Brian A. Joyce SEP-IRA and Mary Joyce SEP-IRA. Nardozzi prepared the tax return reflecting this event, treating the stock purchase as a rollover of IRA assets, and filed the return in September 2015. (The lawfulness of the tax treatment of these IRA assets is the basis of charges in the indictment.)

         Thereafter, the IRS issued a notice to Joyce of an assessment of tax and penalty, finding that the transaction did not qualify as a rollover, but rather constituted a distribution to the taxpayer, triggering a penalty for early withdrawal of IRA assets, and a tax on the distribution. Joyce initiated an appeal or review of the IRS determination in the Boston IRS Office of Appeals (“Joyce Appeal”). No. decision was rendered. It is the records of this appeal that Nardozzi seeks in discovery.[1]

         II. Analysis

         In relevant part, Rule 16 permits a defendant to inspect or copy documents in the Government's possession, custody, or control that are “material to preparing the defense.” See Fed. R. Crim. P. 16(a)(1)(E)(i). Here, the United States concedes possession of the IRS's file of the Joyce Appeal. See Doc. 68 n.2. The question then is whether the documents are material to preparing Nardozzi's defense. In addressing this showing, Nardozzi argues that if the Joyce Appeal file reflects an internal IRS dispute about the proper tax treatment of the IRA assets-taxable distribution or qualified rollover-then such information is exculpatory, and material to the preparation of his defense. I deny the motion because there are no responsive materials, and because Nardozzi's argument depends on speculation and plainly distinguishable case law.

         First and foremost, the Government represented at the hearing that it had reviewed the Joyce Appeal file and that there is no information in it responsive to Nardozzi's discovery request. Even if I allowed the motion, on the basis of this representation, it would call for no production.

         However, the motion fails to suggest a reason to question the Government's representation. Local Rule 7.1 requires that a party filing a motion also file “a memorandum of the reasons . . . why the motion should be granted.” See Local Rule 7.1(b)(1). Nardozzi has failed to do this.[2] Nardozzi fails to set forth in this discovery motion facts or information that establish-or even suggest-the basis for his assertion that there is any disagreement within the IRS that Joyce's liquidation of IRS assets to buy privately-held stock was a proper rollover, and not a distribution to the taxpayer. No. filing, including a sealed ex parte affidavit in which Nardozzi could have disclosed any sensitive defense information, identifies the basis for Nardozzi's claim. Indeed, somewhat tellingly, his submissions uniformly articulate his claim in conditional and qualified terms. For instance:

The record of the [Joyce Appeal is] material to the . . . defense in this case if it would indicate ambiguity in the tax law forming the basis of the criminal charges in this case and in particular with respect to early withdrawal of SEP-IRA assets. See Doc. 60-1, at p. 1 (Discovery Letter).
If there is disagreement within the very agency responsible for administering the tax code about the correctness of the treatment used in a tax return, then the Defendant could not have willfully prepared fraudulent tax returns because there would be serious question[s] about whether the Joyces' rollovers were improper . . . . See Doc. 63, at p. 4.
Defendant maintains that the discovery sought could support defendant's motion to dismiss the indictment because, if there is an unresolved question within the IRS about the tax reporting of the pertinent facts and figures in this case, it supports a determination that Nardozzi did not have sufficient notice that his reporting of the . . . Joyce's . . . SEP-IRA rollovers constituted criminal conduct. See Doc. 71, at p. 3.
The Motion seeks the records of the Joyces' protest proceedings to show an inconsistency in the IRS agency's interpretations of the SEP-IRA rollover analysis that ...

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