Tax Evader on Hook for Prosecution’s Costs, Eighth Circuit Says

A man convicted of fraud and tax evasion should pay the costs of the government’s prosecution, the Eighth Circuit said.

Under 26 U.S.C. § 7203, anyone convicted of failing to file a tax return faces a maximum fine of $25,000, up to one year imprisonment, or both, “together with the costs of prosecution.” It’s mandatory, the US Court of Appeals for the Eighth Circuit said.

There is an unpublished Eighth Circuit decision from 2000 suggesting that courts must consider a defendant’s ability to pay in assessing the costs of prosecution. But that isn’t the case here, according to the Thursday decision.

Although ability to pay might matter for purposes of determining an appropriate fine, the prosecution’s costs are considered separately.

Jeffrey Kock argued that the prosecution missed its chance to recover its expenses because it failed to file a verified bill of costs, but the court said the statute was silent on the time limit.

The court said that it wasn’t deciding the broader issue of whether the government can file a bill of costs at any time following a guilty verdict, and that its decision allowing the government to do so here was limited to the facts of the case.

The government raised the argument about costs in a cross-appeal, after Kock challenged his convictions.

After representing himself at trial, Kock was convicted on 13 counts arising out of a scheme to cheat the IRS out of more than $10 million by falsely claiming refunds. He was sentenced to 97 months imprisonment, plus three years of supervised release.

On appeal, Kock argued that his decision to waive counsel wasn’t knowing. But he was repeatedly cautioned about the risks of proceeding pro se, the appeals court said.

Kock also argued that the court should have allowed him to present evidence related to the IRS’s failure to detect the fraud, but the agency’s diligence is irrelevant, the court said.

“We agree with several of our sister circuits which have held that a fraud victim’s negligence is not a defense to criminal charges under the federal fraud statutes,” the court said.

The court rejected Kock’s remaining challenges.

Kock is now represented by the Federal Public Defender’s Office.

Judge Ralph R. Erickson authored the decision, joined by judges Jane Kelly and David R. Stras.

The cases are United States v. Kock, 8th Cir., No. 22-1368, 4/13/23 and United States v. Kock, 8th Cir., No. 22-01576, 4/13/23.