Conspiracy to Defraud the United States
“Conspiracy” is one of the government’s most powerful tools in federal prosecutions, including in tax cases The conspiracy to defraud the United States charge—often called a Klein conspiracy in tax law—lets prosecutors pursue groups of people who allegedly worked together to obstruct the IRS.
What Is a Klein Conspiracy?
Under 18 U.S.C. 371, it is a crime for two or more people to agree:
To defraud the United States, or
To commit another federal offense.
In the tax context, the “defraud” clause is what DOJ typically relies on. A Klein conspiracy doesn’t require proof of traditional fraud like false statements. Instead, prosecutors must show an agreement to impede or obstruct the lawful functions of the IRS—even if the agreement was not carried out.
Common Examples
The government often uses this statute in cases involving:
Promotion of abusive tax shelters, where advisors and clients allegedly agreed to mislead the IRS
Payroll tax schemes, where business owners and bookkeepers agreed to withhold but not pay over employment taxes
Offshore structures, where multiple actors agreed to conceal assets from IRS reporting
Coordinated false deductions or credits, where multiple individuals were involved in inflating or fabricating claims.
Why the Charge Is Serious
Broad Scope: Conspiracy charges can reach conduct that would be hard to prosecute as a standalone tax crime
Multiple Defendants: One person’s statements or acts can be used against others if prosecutors tie them to the same conspiracy
Flexible Evidence: DOJ often uses emails, recorded calls, marketing materials, and witness testimony to show an agreement. An agreement does not have to be formal or in writing. Instead, courts routinely allow an “informal” agreement through “circumstantial” evidence.
Severe Penalties: A Klein conspiracy is a felony carrying up to 5 years in prison and other monetary penalties. And because it is often paired with other charges (evasion, false returns, aiding and abetting, payroll tax crimes), exposure increases quickly.
Defendanding Against A Klein Conspiracy
Defense in a Klein Conspiracy requires a tailored approach based on the particular facts of the case. Common strategies include:
Challenging the Existence of an Agreement: The government must prove more than parallel conduct. Showing no true "agreement” may be helpful to negate the government’s theory.
Attacking Willfulness: The IRS must prove the defendants intended to defraud the United States—not just that they took aggressive tax positions or potentially made mistakes.
Isolating Defendants: In a multi-defendant case, highlighting differences in roles, knowledge, or intent can separate a client from the alleged conspiracy, depending on the facts of the case.
Reliance on Professionals: In some cases, demonstrating that actions were taken based on professional advice may help negate willfulness.
Expert Testimony: Tax experts may be able to testify or consult behind the scenes to explain that the tax positions at issue had legitimate basis, potentially undercutting the government’s theory.
Conspiracy to Defraud the United States is one of the government’s go-to charges in criminal tax cases because of its breadth. But that breadth also gives the defense room to fight—by showing the absence of an agreement, the lack of willfulness, or the legitimacy of disputed tax positions. When the stakes are high, a strong defense is critical.