A proffer agreement is sometimes made in criminal tax cases. It is an agreement, usually written, between a federal prosecutor and an individual who are under criminal investigation. It is designed to give the person some legal protection from criminal prosecution in exchange for giving up information to the government. Basically, it is a sit down with federal prosecutors, and any other attorneys or agents involved in the matter representing agencies involved, for a question and answer session.
That protection, though, is limited. A proffer session is serious business, indeed. The individual deciding to enter into a proffer agreement with a federal prosecutor over income tax issues should always seek experienced criminal tax defense counsel first. In law we are careful to qualify our statements with “sometimes,” “often,” or “it depends.” This is the exception: Individuals should always seek legal counsel prior to deciding to “proffer” with the government.
The U.S. Attorney’s Office usually asks the person under investigation to sign the proffer agreement before the session (interview) starts. The agreement governs the terms of the interview—and when your statements can and cannot be used against you.
There are some possible benefits to proffer agreements (see below). But it is important to know that such agreements do not offer complete immunity. The government typically cannot use the actual statements one makes from a proffer session in the government’s case-in-chief—but it can use the information gleaned to pursue leads, for impeachment purposes (refute a subsequent lie) and other investigations.
When Proffer Statements Can Harm You
Typical proffer agreements may state that if you are (eventually) prosecuted, “no statements made by you during the interview can be used against you in the government’s case-in-chief at trial or for purposes of sentencing, except as provided below” (emphasis added). Notice that last part—“except”. The government builds into the agreement various exceptions where statements used by you can be used against you.
For example, the government typically inserts a clause in the agreement providing that you may be impeached if you make a statement (in a proffer session) that contradicts what you later say in a legal proceeding. It is for this reason that it is important to state your responses very carefully during a proffer session.
The number of exceptions allowing your statements to be used against you varies with each proffer agreement. These agreements are “boiler plate” for the most part because a committee at the Department of Justice crafts them, but there are differences with each jurisdiction. It is important to review the proffer agreement very carefully; this should be done by your lawyer. Each and every word of the agreement has been precisely chosen by the Department of Justice, and when you agree to be bound by the agreement, you certify that you understand each term, and are in agreement with each provision.
Federal Rule of Evidence Section 410
Sometimes clients ask, “Don’t the Federal Rules of Evidence protection me? It’s a plea negotiation, right?” This is a good question. Normally, Federal Rule of Evidence §410 provides a defendant with protections by rendering inadmissible communications made during plea-bargaining. Specifically, that Rule says that, whether it is a civil or criminal case, “evidence [i.e. a statement] . . . is not admissible against [a] defendant who made the plea or participated in the plea discussions” where the “statement [was] made during plea discussions with an attorney for the prosecuting authority if the discussions did not result in a guilty plea or they resulted in a later-withdrawn guilty plea.”
Exception to Section 410—Waiver
However, as an exception, a defendant may waive the protection that Rule § 410 provides. Interestingly, waiver is not one of the exceptions noted in Section 410; rather, that exception was created by case law (i.e. judges).
This was one of main takeaways of U.S. v. Mezzanatto, 513 U.S. 196, 115 S. Ct. 797 (1995). There, the Court ruled that, “[b]ecause the plea-statement Rules were enacted against a background presumption that legal rights generally, and evidentiary provisions specifically, are subject to waiver by voluntary agreement of the parties, we will not interpret Congress’ silence [i.e. Congress’ failure to include a waiver exception in Rule §410] as an implicit rejection of waivability.” The Court then pushed the burden to the defendant to “identify [sic] some affirmative basis for concluding that the plea-statement Rules depart from the presumption of waivability”—which the defendant in that case was unable to do.
There are other times where one’s proffer statements made during plea negotiation are admissible. In one case they were allowed to rebut the defendant’s proffer statements, even where the defendant did not testify at trial. His proffer agreement stated that he waived his right to preclude those statements on cross examination or rebuttal if he testified (or if evidence was offered on his behalf). There were several other witnesses who testified defending him, and his attorney made some other statements that were inconsistent with the proffer statements. Accordingly, the prosecution sought to use those inconsistencies to its benefit and was allowed by the court to do so. See U.S. v. Rebbe, 314 F.3d 402 (9th Cir. 2002).
Benefits of Proffering
One of the benefits of proffering (talking with the government prosecutor) affords you is the possibility that your attorney can persuade the government to see you as a valuable witness against a more culpable participant in the tax evasion rather than a primary target of a criminal investigation. Through the plea bargaining process at best amnesty and at worst a much lighter sentence can be negotiated in exchange for becoming a cooperating witness.
Where you were the most culpable active participant in a tax crime, it may be advisable to proffer where there is a high likelihood that you will be prosecuted and the government has amassed overwhelmingly persuasive evidence against you based on your attorney’s assessment of the fact pattern.
If you do decide to proffer keep in mind that if you make a false statement, and the prosecutor has information that can prove you are lying, he or she could prosecute you for lying to federal agents in violation of 18 U.S.C. § 1001.
Why Enter Into a Proffer Agreement?
A proffer agreement is embodied in written form by a proffer letter. The agreement allows those who may be subject to criminal investigation, either as a witness, or a direct subject of the crime, to “tell their side” of the events, with the (alleged) assurance that what they say will not be used against them later at trial. Usually it is individuals who are directly under investigation that enter into proffer agreements, rather than merely a witness. Typically the witness is the less culpable co-conspirator, a tax return preparer, tax professional (or other advisor), or an employee of a corporation that is under investigation.
The Main Benefit: The Chance to Get a Plea Bargain or Immunity Agreement
The main benefit of making a proffer agreement is the possibility of obtaining an immunity agreement or plea bargain if you are facing an anticipated prosecution. This is (potentially) a big deal—since it might be the only chance you have of avoiding a criminal conviction. The decision whether to proffer is potentially very beneficial—but it should be made after considering all the possible downsides (noted elsewhere in the proffer related Q and A on this website). As mentioned, after a proffer session, the government will often provide you with either (1) a written plea bargain or (2) immunity agreement.
Before entering into a “proffer session”—the actual sit-down with you, your attorney, and the federal prosecutor—you should have carefully planned out exactly what you will proffer, and what the details of the immunity agreement or plea bargain would be. Your “post-proffer game plan” needs to be well thought out for, otherwise, if the prosecutor decides to indict you, you are headed into deep waters.
The Risks of Proffer Agreements
There are various risks to proffer agreements. We consider four.
(1) To understand the first risk associated with proffer agreements, it is helpful to contrast them with plea bargains and immunity agreements. Unlike these latter agreements, the protection afforded by a proffer agreement is more limited. The government is allowed to use the statements you made during a proffer session “indirectly” or “derivatively”—to conduct subsequent investigations and follow up on leads. Proffer agreements are similar to immunity and plea bargains in the sense that your proffer statements may not (subject to some caveats) be used against you in the government’s “case-in-chief.”
(2) There is another associated risk, but it is more psychological: If you implicate yourself during a proffer session, although you are protected (again—subject to some caveats), the prosecutor’s confidence may be boosted that he is prosecuting the “correct” person—which may lead to more vigorous investigations of you and spur him on.
(3) Usually proffer agreements allow the government to use your statements against you at trial to impeach you, if you testify to something that is inconsistent with your proffer statements—in other words, if you contradict or lie. In fact, not just your inconsistent statement you made from the proffer session, but everything you said will be admitted at trial! This is huge. It is for this reason that it is imperative that your testimony be consistent (and not lie to the prosecutor).
(4) There is a fourth consequence as well (although it is more of a corollary to the last point). Lying during your proffer session can severely hamper a later defense at trial. Suppose you said during your proffer session that you concealed some gross receipts (income); that you failed to report some of it (e.g. you did not report all your income); and suppose also you stated that you did not disclose all your foreign bank accounts overseas (e.g. in a Cayman Islands or a Swiss account), and that you stated (but this time falsely) that you had never visited New York City.
Now suppose further that after the proffer session the matter goes to trial. The situation then becomes very sticky for your defense attorney. Your attorney for example wants to call Susie Q as a witness. But he knows that to do so effectively he must mention that time you and Susie Q were in NYC. He wants to cross-examine one of the government’s witnesses, but that, too, may involve evidence that you visited him in NYC.
What is your attorney to do? On the one hand, he wants to put Susie Q on the stand and cross- examine the government’s witness to provide you with a robust defense. But, on the other hand, he knows that if he does, then the evidence of your NYC visit will come to light—contradicting your proffer statement (!), thus allowing all your proffer statements about your undisclosed gross income and your secret overseas bank account in as evidence at trial. “Bingo!” says the prosecution, “we got him.” Realizing these alternatives, your defense attorney will likely (and wisely) simply refrain from putting Susie Q on the stand and from cross-examining the government’s witness, with the consequence that your defense is weakened.
Conclusion
Proffer agreements are tricky things, but one thing is clear: whatever you do, always tell the truth, even if you are embarrassed, desire to deny (or spin) your involvement, or something similar. It is better to state the truth than it be proven that you lied down the road. But keep the truth simple and short; do not elaborate. I cannot stress enough the importance of obtaining competent legal counsel before deciding to speak with the government (proffer) about a criminal tax investigation. Proffer agreements are tricky and very serious business with potentially life altering consequences. Remember that your liberty is at stake.