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A Stingy Reading Of A Generous Law

It has been more than a decade since Clarence Elkins’ wrongful conviction in a horrific murder and sex assault case was overturned, but the legal system is still abusing his family.

Judy Johnson was raped, stabbed, beaten and finally strangled in her Barberton, Ohio, home in July 1998. Her 6-year-old granddaughter, who had been sleeping in Johnson’s bed, was also beaten and sexually assaulted after hiding under the bedcovers. The next morning the child found her dead grandmother and went to a neighbor’s house. When the police questioned the girl, she declared that the man who attacked her “looked like Uncle Clarence.”

But Elkins had multiple alibi witnesses for the night of the murder, including his then-wife Melinda, who was Johnson’s daughter. Forensic evidence, including hairs found on the dead woman’s body and on the child’s nightgown, pointed away from Elkins; the DNA matched neither him nor the victims. Elkins was convicted mainly on the basis of the child’s testimony and was sentenced to two life terms.

A few years later the child recanted, saying she had never meant to identify her uncle as the killer and had only done so under pressure from the prosecutor. A judge denied a new trial. Elkins’ wife Melinda continued the legal fight, raising money for the DNA testing that showed Elkins was not a match for the crime scene evidence. Again a new trial was denied, on the basis that the jury was never presented with any DNA evidence to tie Elkins to the crime, and thus the lack of a match would not have changed the verdict.

Eventually Melinda discovered that just two days before the murder, Earl Mann, a convicted sex offender with an extensive and violent criminal record, had moved next door to Johnson. In fact, it was his home to which Johnson’s granddaughter had gone for help the morning after the attack. His live-in girlfriend (described in some accounts as his common-law wife), Tonia Brasiel, was the one who had met the battered and bloody child on their doorstep. Rather than take her into the house, Brasiel left the child outside on the porch for more than 30 minutes, then drove her home without calling authorities.

In 1999 the Barberton police picked up Mann for several robberies. While drunk and under questioning, he asked why they were not arresting him for Johnson’s murder. An investigator wrote a report of the incident and sent it to investigators, but it was never mentioned to Elkins’ defense lawyers.

Finally, after more than six years behind bars, Elkins caught a break when Mann was sent to the same prison. Elkins got hold of a cigarette butt Mann had smoked and smuggled it out of prison to his lawyers. DNA tests then showed that Mann was a match for the hairs found at the murder scene.

Even then, local prosecutors resisted reopening Mann’s case until state Attorney General Jim Petro held a dramatic news conference. After yet another round of DNA testing pointed to Mann, Elkins was released in December 2005. His marriage to Melinda broke up the following year; they were divorced in 2007. She now goes by Melinda Dawson.

The state of Ohio promptly awarded Elkins a settlement of slightly more than $1 million upon his release. He proceeded with a suit against the city of Barberton and its investigators, who unsuccessfully claimed legal immunity for violations of his rights. Ultimately, that case was settled in 2010 for $5 million, of which about $2 million went to attorneys. The rest of the money was divided between Elkins, Melinda and their two sons.

This is where we pick up the latest chapter in this sad saga. After a wave of wrongful conviction reversals, many of which (like that of Elkins) involved help from the Innocence Project, in December 2015 Congress enacted a new section of the Internal Revenue Code to provide some additional relief. Released inmates were being hit with massive tax bills for their settlements, because the general provisions of the tax law make damage awards and settlements tax-exempt only if they are in compensation for personal physical injuries and sickness. This led to victims of wrongful conviction attempting to argue that all or part of their award related to any physical injuries they had sustained while in prison.

The new statute, Section 139F, provides that “in the case of any wrongfully incarcerated individual,” taxable income will not include “any civil damages, restitution or other monetary award ... relating to the incarceration of such individual for the covered offense for which the individual was convicted.” Congress even waived the statute of limitations to allow people who paid tax on such awards or settlements to seek refunds, even for tax years that were otherwise closed. However, the refund claims for closed years needed to be filed by Dec. 19, 2016.

Melinda and one of her sons, Clarence Elkins Jr., had filed for bankruptcy in 2005, and their cases were still open when they received a share of the Barberton settlement. Their share was reduced by $242,000 in taxes that the bankruptcy estate paid in 2011. After Congress enacted Section 139F they asked a bankruptcy judge, Russ Kendig, for permission to reopen their case so the bankruptcy trustee could seek a refund. But Kendig refused to reopen the bankruptcy, ruling that Section 139F clearly applies only to the individual who was wrongly incarcerated, not to family members who settled their own claims for related losses, such as loss of companionship.

Melinda and her son appealed, and the case was referred to U.S. District Judge Benita Y. Pearson. In a ruling issued on Dec. 16 – three days before the last day for filing a refund claim – Pearson also denied permission to restart the bankruptcy case and seek the refund.

The more I look at this case, the more I am dumbfounded at the result.

In the first place, I think Kendig and Pearson – neither of whom is any sort of tax law specialist – are simply wrong. Although Section 139F is, like many tax laws, hardly a model of clarity, I don’t think it is at all obvious that the statute applies only to the incarcerated individual. If that is what Congress meant, it could have easily written the statute to say that any compensation “received by the wrongfully incarcerated individual” would be spared from taxes, rather than compensation “relating to” the incarceration. Congress did not write the statute in a clearly restrictive way, and the phrase “relating to” is open to interpretation.

Maybe the Internal Revenue Service would read Section 139F the way the two judges read it; maybe not. There is no way to find out, because the courts denied even the opportunity to file a claim that the IRS would have adjudicated. Had the IRS denied the taxpayers, there would have been opportunity to appeal within the IRS or in court. The underlying claim would not have been nullified merely because it was not brought before the December 2016 deadline.

The way the two Ohio judges read the law, if a wrongfully incarcerated father is awarded damages for loss of companionship with his daughter, the damages are exempt; if the daughter is awarded damages for loss of companionship with her father, the damages are taxable. Clearly it is not a logical answer. And while there is no requirement that tax laws be logical, it is not reasonable to assume that this is exactly the way the law was expected to function when Congress wrote it.

An appeal of Pearson’s order is probably too much of a long shot, even for this long-suffering family whose entire life to this point has been a long shot. Even if Pearson’s order is reversed on appeal, the statutory deadline for filing the refund claim has passed. It is yet another stretch to assume that the IRS would agree that it has the power to waive the deadline in this case, and that it would do so even if agreed it could.

This is an unfortunate coda to an awful story. The two judges’ rulings were only arguably correct, but inarguably arrogant and superfluous. Nobody was asking them to decide a question of tax law; all they needed to do was let the legal and administrative processes run their course. If you ever wondered about the real-world downside to judicial overreach, here it is.

As for Earl Mann, he pleaded guilty to rape and murder charges in 2008 in a deal to avoid exposure to the death penalty. He was sentenced to 55 years to life in prison and will not be eligible for parole until he is 92.

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