A Hartland businessman turned ardent tax protester faces up to 15 years in prison after a federal jury found him guilty Thursday of three counts of tax evasion.
James A. Stuart Jr., 68, claimed income of just $631 for 2005 and didn't file returns for 2006 and 2007, according to the U.S. attorney's office. Stuart had been indicted in December 2010 and was tried this week in federal court in Milwaukee.
According to court records, Stuart had filed normal tax returns until 2005, when he stopped, and also began filing amended returns from prior years seeking refunds of all taxes paid. About the same time, he began similar tax battles over his state income tax and Waukesha County property taxes.
After IRS agents raided New Age Chemical in 2009, Stuart sued to challenge the search warrant, arguing, without a lawyer, that federal agents only have jurisdiction in federal enclaves like the District of Columbia or a military base.
"We have called this theory 'frivolous squared,' " said the U.S. 7th Circuit Court of Appeals, which upheld a lower court's dismissal of Stuart's action to recover what he claimed were valuable chemical formulas supposedly taken during the search.
In 2007, the state Tax Appeals Commission had rejected Stuart's claims as "tired tax protester legal arguments" that courts had consistently rejected.
Stuart is scheduled for sentencing in April. His attorneys at the Law Office of Robert Bernhoft, SC.did not return a call for comment.
Wisconsin warrior Jim Stuart has crafted an excellent honest payment-reporting form to accommodate the couple of his workers who have requested that portions of their earnings continue to be sent to government agencies.
I agree with what has been posted regarding this subject, especially the area regarding the taxation of the people. If everyone could only learn that if they corrected their national status, and realized that they are not a U.S. citizen, they could become free once more. How to do this is found in L.B. Bork’s book titled “Red Amendment”, a must read for all.
Jim
By Jim Stuart on Mar 26, 2009
Well, we know how well the CtC advice has been working out. Nice to see that Crazy Lenny Bork is accumulating a delusional victim's list as well.
I’ll help them get more power at the Fed. - Ron Paul
Attached to petitioner's 2005 Wisconsin income tax return were a 2005 IRS Form 4852 Substitute Form W-2 and a "Corrected" 2005 IRS Form 1099-MISC, apparently prepared by petitioner, that reported zero income paid to him by New Age Chemical Inc. for that year.
Stuart was sentenced Monday in U.S. District Court in Milwaukee to 33 months in prison, followed by three years of probation. He was taken into custody immediately after sentencing. The sentencing hearing had been postponed numerous times this year. Stuart had faced up to 15 years if he had been given the maximum for each count.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JAMES A. STUART, JR.,
Defendant-Appellant.
Release Date: DECEMBER 03, 2014
IN THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Appeal from the United States District Court for
the Eastern District of Wisconsin.
No. 10-CR-288 -- Charles N. Clevert, Jr., Judge.
ARGUED SEPTEMBER 13, 2013 -- DECIDED DECEMBER 3, 2014
Before BAUER, FLAUM, and ROVNER, Circuit Judges.
ROVNER, Circuit Judge. After a three-day trial, jurors found James Stuart guilty of three counts of tax evasion for failing to pay almost $ 239, 400 in income tax between 2005 and 2007. See 26 U.S.C. section 7201. Stuart moved for a new trial and judgment of acquittal because, he argued, his trial counsel inadequately defended him. The district court denied the motions, and on appeal Stuart maintains that his trial counsel performed deficiently. Ordinarily it is imprudent to raise on direct appeal a claim of ineffective assistance if, as is usually the case, the record is not developed. United States v. Flores, 739 F.3d 337, 341 (7th Cir. 2014). But the district court allowed Stuart's new counsel to develop a record on his claim, so we consider it. Because nothing in that record demonstrates constitutionally ineffective assistance, we affirm.
During opening statements Stuart's trial counsel asserted the theory of Stuart's defense: Stuart believed that he owed no taxes. He explained that Stuart thought that the money he earned from his family business, New Age Chemical, was not income and that the United States had no authority to tax income. Stuart had adopted these views after reading a book called "Cracking the Code, " which urges people to resist paying income taxes, but his counsel told the jury that Stuart learned his ideas from his fellow church patrons. Counsel described Stuart as a curious, determined, and "kooky, not criminal" person. Only after he received no response to his inquiries from the IRS, the Secretary of the Treasury, or his accountants about his tax ideas, counsel mused, did Stuart begin to refrain from paying income tax.
The prosecution opened its case with witnesses who testified that Stuart had wilfully defied his obligation to pay taxes for 2005 to 2007. Beverly Schlipp, Stuart's sister and co-owner and vice president of New Age Chemical, stated that beginning around 2004, Stuart told her that he was not lawfully required to pay income taxes. He therefore directed her to stop withholding tax from his salary. She added that a couple of years later Stuart repeated that he wished not to pay income taxes, so New Age Chemical continued not to withhold taxes. Three of Stuart's accountants also testified that Stuart did not want to pay income taxes and referred to Stuart's tax-resistor emails about "Cracking the Code." Two IRS special agents furnished inculpatory communications from Stuart. They submitted: (1) several letters that Stuart mailed to the IRS declaring that he was not liable for taxes; (2) a letter that Stuart sent to a local newspaper proclaiming that only a few people had income-tax obligations and that accountants and lawyers fail to give valid tax advice; and (3) a letter he wrote to the IRS and the Secretary of the Treasury in which, to evade taxes, he renounced his United States citizenship. Finally an IRS investigator testified that Stuart routinely paid income tax before 2004, but when, in 2007, Stuart requested tax refunds, the IRS told him then that his wages were taxable and his tax protest had no basis in law.
After the prosecution rested, Stuart's trial counsel did not put on any case in defense, so the trial moved to closing arguments. Before those arguments began, in a colloquy with Stuart, the judge asked him whether he knew that he had the right to testify on his own behalf. Stuart answered that he understood this right and that he nonetheless knowingly and voluntarily waived it. During closing arguments his counsel repeated the defense theory that Stuart believed that he owed no income tax between 2005 and 2007. Referring to evidence that the prosecution had used (Stuart's emails, letters, and conversations with the IRS and his accountants), counsel argued that Stuart was a curious, passionate, and possibly crazy person who simply was earnestly trying to understand the tax code. He was not, counsel urged, a conniving criminal thwarting tax responsibility.
The jury rejected Stuart's defense and convicted Stuart of three counts of tax evasion. But the case was not over. Stuart hired a new attorney to represent him at sentencing, and he asked for a new trial or judgment of acquittal based on ineffective assistance of his trial counsel. The district court held a hearing on that claim and received testimony from three witnesses. First Stuart testified that his decision not to testify was involuntary because he did not believe that his trial attorney was prepared. He acknowledged, however, that his counsel had received from him before trial his written synopsis of his version of events, which set forth his tax-protester beliefs. Second his daughter, Erin, testified that when she worked at New Age Chemical in 2009, Beverly Schlipp embezzled funds from the company and was fired. Stuart argued that trial counsel might have profitably elicited these facts on cross-examination of Schlipp. Third Joel Nettesheim, one of Stuart's accountants, emphasized that Stuart sincerely believed that he did not have to pay income tax.
The district court denied Stuart's motions, finding no ineffective assistance. It reasoned that the colloquy during trial, where Stuart explained that he was freely relinquishing his right to testify, refuted his contrary testimony at the post-verdict hearing. The court found, therefore, that Stuart had validly waived his right to testify. His trial counsel performed adequately, the court added, because counsel had advanced Stuart's theory that he believed that he had no tax-payment obligations. Counsel did so during his opening statement and closing argument as well as through his examination of the evidence elicited from the prosecution's witnesses and exhibits. Finally, the court observed, extrinsic evidence about Beverly Schlipp's alleged embezzlement would have been excluded. After denying Stuart's motions, the court sentenced him to a 33-month term of imprisonment.
On appeal Stuart maintains that his trial counsel was ineffective for four reasons: (1) He did not interview Stuart before trial to ascertain that the correct source of his tax-protesting beliefs was "Cracking the Code;" (2) counsel did not present a case in defense, where he could have called Nettesheim and Erin Stuart as witnesses; (3) he did not cross-examine Beverly Schlipp about her possible embezzlement; and (4) counsel did not call Stuart to testify in his own defense. To prevail on a claim of constitutionally deficient performance, we examine the record as a whole, see Pole v. Randolph, 570 F.3d 922, 934 (7th Cir. 2009), and from it Stuart must establish both that trial counsel's performance was objectively unreasonable and that he was prejudiced by that performance. See Strickland v. Washington, 466 U.S. 668, 687 (1984); Watson v. Anglin, 560 F.3d 687, 690 (7th Cir. 2009). We review this district court's decision to reject his claim de novo. See United States v. Ruzzano, 247 F.3d 688, 697 (7th Cir. 2001); United States v. Shukri, 207 F.3d 412, 418 (7th Cir. 2000).
We conclude that trial counsel was not deficient in any of the four ways that Stuart has identified. First, the record shows that counsel conducted an adequate pretrial investigation of Stuart. Counsel requested and received from Stuart a written synopsis of his version of the events, which included his tax beliefs. These beliefs became the defense theory at trial, which counsel raised during opening and closing, and which he grounded in the evidence elicited from the prosecution's witnesses and exhibits. Stuart replies that a pretrial interview would have disclosed the true source of his tax-protester beliefs. But Stuart has not explained how correcting the source of those beliefs, which the jury rejected as a defense in any case, might have exculpated him. He thus cannot show prejudice. See United States v. Lathrop, 634 F.3d 931, 939 (7th Cir. 2011); Keys v. Duckworth, 761 F.2d 390, 394 (7th Cir. 1985); United States v. Davis, 406 F.3d 505, 510 (8th Cir. 2005).
Second, counsel's decision not to call Nettesheim and Erin to testify during the defense case does not support a claim of ineffective assistance. See Menzer v. United States, 200 F.3d 1000, 1003-04 (7th Cir. 2005); United States v. Best, 426 F.3d 937, 945-46 (7th Cir. 2005); Foster v. Schomig, 223 F.3d 626, 631 (7th Cir. 2000). Nettesheim was a witness in the prosecution's case, and Stuart does not articulate what additional, admissible evidence his counsel would have offered in a defense case. Nettesheim could not recall any specific facts about Stuart other than his "passionate" belief about his views about income taxes, and this testimony was presented to the jury during the prosecution's case. Likewise, Stuart cannot point to admissible testimony that Erin might have offered. She did not work at the company before 2009, so she had no relevant, personal knowledge about its tax position. Stuart thus has not shown that the failure to call either witness prejudiced his case. See Pole, 570 F.3d at 946; Best, 426 F.3d at 945-46.
Third, counsel's decision not to cross-examine Beverly Schlipp about the alleged embezzlement does not constitute ineffective assistance. See Bergman v. McCaughtry, 65 F.3d 1372, 1379-80 (7th Cir. 1995); DeLozier v. Sirmons, 531 F.3d 1306, 1326 (10th Cir. 2008). Counsel could have asked Schlipp about embezzlement during her cross-examination, but Stuart gives us no reason to believe that she would have confessed to a crime for which she has never been charged. And counsel would not have been entitled to introduce extrinsic evidence (such as an accusation through his daughter Erin) to prove embezzlement because Federal Rule of Evidence 608 forbids introducing extrinsic evidence to prove the truthfulness of prior acts of misconduct. See FED. R. EVID. 608(b); United States v. Holt, 486 F.3d 997, 1001-02 (7th Cir. 2007); United States v. McGee, 408 F.3d 966, 981-82 (7th Cir. 2005).
Finally, counsel's decision not to call Stuart to testify at trial does not amount to ineffective assistance. Stuart had the right to testify in his defense, see Rock v. Arkansas, 483 U.S. 44, 52-53 (1987), but at trial, under scrutiny from the inquiring judge, he explicitly waived this right and acquiesced to counsel's strategy. "The decision not to place the defendant on the stand is a classic example" of a strategic trial decision. United States v. Norwood, 798 F.2d 1094, 1100 (7th Cir. 1986); see United States v. Dyer, 784 F.2d 812, 817 (7th Cir. 1986); Higgins v. United States, 267 F.3d 1202, 1205 (11th Cir. 2001); Robison v. Johnson, 151 F.3d 256, 261-62 (5th Cir. 1998). And in this case trial counsel's decision not to call Stuart to testify was reasonable. Stuart's far-fetched, tax-protesting ideas were already presented to the jury through his letters to the IRS, and his emails and conversations with the accountants. They were also reinforced during opening statements and closing arguments. Calling Stuart to testify would not have added to this information but might have further alienated the jury.
Accordingly the decision of the district court is AFFIRMED.
"I could be dead wrong on this" - Irwin Schiff
"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff
The Federal Bureau of Prisons shows a "James Arthur Stuart", age 71, as inmate # 10939-089, at the Residential Reentry Management (RRM) field office in Chicago. The projected release date is January 25, 2015.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Persons who have served federal prison sentences in connection with Peter E. ("Blowhard") Hendrickson's Cracking the Code" tax evasion scam, who have been released:
1. Blowhard Hendrickson Himself.
2. Michael O'Daniel.
3. Eugene George Warner (follower of Hendrickson; may have used the scam).
4. Roger C. Menner.
Persons currently in federal prison in connection with the scam:
5. James Stuart.
6. Carmen d'Agostino.
7. Gregory P. Boyd.
Persons who are awaiting sentencing in connection with the scam:
8. Doreen Hendrickson (sentencing scheduled for December 10, 2014).
9. James Back (sentencing scheduled for December 16, 2014).
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
I notice that Blowhard Hendrickson still has the reference, on his web site, to James Stuart. His Haughty Blowhardiness even has a link to a PDF file for the form that Stuart used in his attempt to evade taxes. Here's an excerpt:
The reporting of these payments is not to be taken as a statement regarding their legal character.
XXX XXX XXXXXXXX, Inc. (XXX) is a private, for profit company incorporated under the laws of the sovereign state of Wisconsin. The natural person(s) listed on this Quarterly Report understand that they did not receive “wages” as defined in the Internal Revenue Code, sections 3401(a) or 3121(a), however, have stated that they wish to voluntarily send a portion of the money they receive from XXX, for services performed per agreement, to the Internal Revenue Service (IRS) to be credited against any tax liability for which they might prove responsible. XXX has agreed to the request of said natural person(s) to compile this Quarterly Report only, and acknowledges no further commitments or responsibility to the natural Person(s) or the IRS.
The "XXX XXX XXXXXXXX, Inc." was actually a company called New Age Chemical that was co-owned by Stuart's sister, who was vice-president of the company.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
This guy wrote the IRS and SecTreas about his goofy ideas. We know that a lot of screw-balls do the same.
I wonder if anyone ever sent him a copy of the annual IRS publication The Truth About Frivolous Tax Arguments. But, even that's a long document and CtC (a relatively recent addition, not in time for this guy) is buried amongst all the other silliness and trash and gets only a few paragraphs. Still, even a total dope might get the idea that there's a whole lot of junk out there that sounds good to a non-expert but doesn't work and it's all a waste of time.
In the instances where it appears that CtC is the basis of a current letter, there are now at least a half-dozen cases of CtC resulting in prison (listed above,) including PH himself. Might be a good idea to have a nice CtC-related form letter laying that out with short case summaries and links to the uniformly horrible results for the TP. They could even throw in the numerous successful civil cases for recovery of improper CtC refunds from hapless CtC followers.
Yeah, yeah, 99% of that would probably just be so much water off a duck's back, but one or two of the dimmer bulbs on the chandelier might get the idea that if PH can't make his own hogwash work, nobody can. And a few dozen or hundred letters are a lot cheaper than any civil or criminal action.
All the States incorporated daughter corporations for transaction of business in the 1960s or so. - Some voice in Van Pelt's head, circa 2006.
The Observer wrote:
On appeal Stuart maintains that his trial counsel was ineffective for four reasons: (1) He did not interview Stuart before trial to ascertain that the correct source of his tax-protesting beliefs was "Cracking the Code;" ...
... First, the record shows that counsel conducted an adequate pretrial investigation of Stuart. Counsel requested and received from Stuart a written synopsis of his version of the events, which included his tax beliefs. These beliefs became the defense theory at trial, which counsel raised during opening and closing, and which he grounded in the evidence elicited from the prosecution's witnesses and exhibits. Stuart replies that a pretrial interview would have disclosed the true source of his tax-protester beliefs. But Stuart has not explained how correcting the source of those beliefs, which the jury rejected as a defense in any case, might have exculpated him. He thus cannot show prejudice.
So, what do you suppose happened here?
(a) Mr. Stuart figured out that "CtC" was a millstone around his neck, got a bad case of buyer's remorse, and wanted to put as much distance between it and him as possible? Or,
(b) Mr. Stuart figured out that the IRS is so prejudiced against "CtC" based methods (since they work so well, I guess) that labeling them as such was, basically, more prejudicial than probative?
Neither way seems very complimentary of Mr. Hendrickson's methods.
Stuart doesn't sound very bright any way you slice it just to start with, and if his reasons are the best he can come up with, I can see why he is in the trouble he is.
I would say NOT a ringing endorsement for the one true sure fire answer to taxes, at least according to Prattlin' Pete.
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.
morrand wrote:
So, what do you suppose happened here?
(a) Mr. Stuart figured out that "CtC" was a millstone around his neck, got a bad case of buyer's remorse, and wanted to put as much distance between it and him as possible? Or,
(b) Mr. Stuart figured out that the IRS is so prejudiced against "CtC" based methods (since they work so well, I guess) that labeling them as such was, basically, more prejudicial than probative?
Neither way seems very complimentary of Mr. Hendrickson's methods.
I was curious about this myself -- curious enough to find the opening appellate brief, which I've put up on Scribd for anyone interested.
While I certainly agree with the outcome of the appeal, I think that the opinion's summary of Stuart's argument is a bit oversimplified. And of course, since it's too long to reasonably quote, I'm about to oversimplify it again, but in a different direction. Basically, the brief's argument came down to 'The case was all about Stuart's views on taxation, and whether or not he sincerely held those views. If the defense attorney had done a better job of interviewing and research prior to trial, he'd have found a variety of pieces of information -- including Cracking the Code -- that he could have used to present a better argument at trial.' Of course, the argument couldn't be that 'Stuart was right'; but, the brief proposed, the defense attorney could have done a better job of arguing 'There was enough here from enough different sources to lead Stuart to a genuine-if-mistaken belief, as opposed to Stuart finding a convenient excuse to stick his head in the sand.'
I think, as usual, Peter's take on the subject was pretty mild, and definitely seen through very hazy glasses.
The plain fact is that Stuart did himself in. He had a history of paying taxes prior to his temporary infatuation with CTC, and he had been told repeatedly that it wasn't legal, and he did it any way. The problem with a Cheek defense is that you really do have to convince a jury that you are too dumb to tie your shoe laces and remember where you live at the same time. I don't think Stuart could have carried that off, it would seem that the jury saw him for what he was, and wasn't impressed, at least positively, and I don't think his attorney wanted to court sanctions. The evidence that he had fallen for CTC was presented and presented fairly well I think by both sides, and it didn't earn him any sympathy.
I see Dan got a nice shout out for his info as well.
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.
notorial dissent wrote: I see Dan got a nice shout out for his info as well.
I see a reference to Quatloos, but not to me or my FAQ.
Dan Evans
Foreman of the Unified Citizens' Grand Jury for Pennsylvania
(And author of the Tax Protester FAQ: evans-legal.com/dan/tpfaq.html)
"Nothing is more terrible than ignorance in action." Johann Wolfgang von Goethe.
notorial dissent wrote: I see Dan got a nice shout out for his info as well.
I see a reference to Quatloos, but not to me or my FAQ.
It's in there. I saw it as well.
"We've been attacked by the intelligent, educated segment of the culture." -- Pastor Ray Mummert, Dover, PA, during an attempt to introduce creationism -- er, "intelligent design", into the Dover Public Schools
I don’t doubt their sincerity in embracing those beliefs. Nonetheless, they recognize even if Peter Hendrickson and Irwin Schiff are correct, the entire federal judiciary disagrees with them. Many of the promoters of those theories, neglect to mention that. Daniel Evans has done a pretty thorough job of cataloging and refuting many tax protester theories. You can check out this site(Tax Protestor FAQ) and see if he has covered your favorite.
Down below the picture Dan.
Disciple of the cross and champion in suffering
Immerse yourself into the kingdom of redemption
Pardon your mind through the chains of the divine
Make way, the shepherd of fire
notorial dissent wrote: I see Dan got a nice shout out for his info as well.
I see a reference to Quatloos, but not to me or my FAQ.
It's there, just buried in one lone little line. The problem is that you just have to parse through all the gelatinous goo to get there.
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.
