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In the crosshairs of conscience: John Kitzhaber's death penalty reckoning

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To cope with his dread, John Kitzhaber opened his leather-bound journal and began to write.
It was a little past 9 on the morning of Nov. 22, 2011. Gary Haugen had dropped his appeals. A Marion County judge had signed the murderer's death warrant, leaving Kitzhaber, a former emergency room doctor, to decide Haugen's fate. The 49-year-old would soon die by lethal injection if the governor didn't intervene.
Kitzhaber was exhausted, having been unable to sleep the night before, but he needed to call the families of Haugen's victims.
"I know my decision will delay the closure they need and deserve," he wrote.
The son of University of Oregon English professors, Kitzhaber began writing each day in his journal in the early 1970s. The practice helped him organize his thoughts and, on that particular morning, gather his courage.
Kitzhaber first dialed the widow of David Polin, an inmate Haugen beat and stabbed to death in 2003 while already serving a life sentence fo…

Missouri: Execution Drug Supplier Won't Say If It Alerted Financial Crimes Unit

The Apothecary Shoppe
The Apothecary Shoppe
Missouri paid a family-run pharmacy in Oklahoma more than $30,000 in cash for execution drugs. Federal law requires recipients of large amounts of cash alert a federal financial crimes unit - but the pharmacy isn't saying whether it did.

Over the past 2 1/2 years, the state of Missouri has handed out $250,000 in cash to members of an execution team in an effort to keep their identities hidden. Its methods have raised questions about whether the state has followed federal law - but also whether at least 1 of the recipients of the cash payments complied with the law.

Most of the execution team payments were in increments of several thousand dollars. But one recipient, a pharmacy in Oklahoma that provided drugs for several executions, received payments of $11,091.

As BuzzFeed News revealed last week, the state has not been alerting the Internal Revenue Service to the payments. Experts said the state's methods raise the risk that the recipients could be evading taxes, and is likely in violation of federal tax law.

Further investigation of the "confidential execution team member receipts" reveals another potential legal issue. Anytime more than $10,000 in cash changes hands, the recipient is obligated to inform the Treasury Department's Financial Crimes Enforcement Network (FinCEN), which investigates money laundering.

The Apothecary Shoppe, the pharmacy that received 2 cash payments of $11,091, apparently would have been subject to the law, an expert who spoke with BuzzFeed News explained, and therefore required to alert the Financial Crimes Enforcement Network of the payments.

"If any one of the payments was more than $10,000, then they should have made the filing with FinCEN," said Bryan Camp, a former IRS employee who is now a law professor at Texas Tech.

Attorneys have sometimes balked at the requirement of alerting the financial crimes unit of large cash payments, arguing it violates attorney-client privilege and their code of ethics. But a federal appeals court disagreed in a 1992 case, holding that an attorney had to disclose the information to the unit.

The penalties for not alerting the unit would be the same penalties the state could face for not disclosing the payments to the IRS. The penalties are relatively modest, starting at $100. But the penalties can add up, and increases if the violation was intentional.

The Apothecary Shoppe is currently under a court-ordered receivership. The receiver did not answer when asked if he would look into whether the pharmacy had alerted the financial crimes unit, or paid taxes on the large amount of cash it received. Since Missouri did not issue 1099s, the IRS would have no way of knowing to check for tax payments on the payments.

The pharmacy began supplying for executions in November 2013. In the 1st execution, the pharmacy was first paid $8,000. The state then increased its payments to the pharmacy to $11,091 per execution for another 2 executions. A corrections official testified that the extra cost was to pay for testing of the drug before it would be used.

In total, the Apothecary Shoppe received $30,182 for 3 executions.

The other members of the state's execution team did not meet that threshold in a single transaction. But other members cumulatively received well over $10,000 in cash. The law requires alerting the financial crimes unit if the payments are more than $10,000 in one "or more related transactions." A tax expert BuzzFeed News spoke with said it's unclear if the payments counted as "related transactions" for separate executions - meaning it's unclear if they would also need to alert the financial crimes unit.

In late 2013, St. Louis Public Radio discovered the pharmacy was selling drugs to Missouri despite not being licensed to do so in the state. Shortly thereafter, the pharmacy was sued by a death row inmate facing execution. He claimed the drugs that the Apothecary Shoppe was making would likely put him through severe pain.

The case was settled out of court. The terms were confidential, but the pharmacy agreed to not sell drugs for any more executions. The Apothecary Shoppe has refused to discuss its involvement in Missouri's executions, and the state found a new drug supplier.

Since then, the Apothecary Shoppe has defaulted on loans from the bank and their board resigned en masse. The bank sued the pharmacy, and put in place David Rhoades, a receiver who specializes in fraud.

Rhoades initially declined to comment on if the pharmacy paid taxes on the cash, and if it alerted the financial crimes division, since it took place well before his tenure. But when BuzzFeed News pointed out that the IRS could collect on the taxes, or could penalize the pharmacy if it did not alert the financial crimes division, Rhoades offered a brief statement.

"Regardless of what form revenue takes, it would be typical that it is recorded as income and therefore included in the tax preparation," Rhoades said.

Although he added, "I do not believe that it is a current issue for the pharmacies," Rhoades would not specifically answer questions as to whether the pharmacy paid taxes on the payments or alerted the financial crimes division.

The Department of Corrections did not respond when asked for comment. However, the director of the Department of Corrections, George Lombardi, was asked to explain the cash payments before the state legislature this week.

Lombardi could not point to an exemption that allowed the department to not issue 1099s, but defended its practice nonetheless.

"Is it your understanding that there is some sort of exemption for the department of corrections to skirt that federal requirement?" Rep. Jeremy LaFaver asked.

"It is my understanding that giving 1099s to these individuals would reveal who they were, and would mean the end of the death penalty, because these individuals wouldn't do it," Lombardi said.

Gov. Jay Nixon, who oversees the department of corrections, declined to comment.

Source: BuzzFeedNews, Chris McDaniel, February 3, 2016

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