Giambalvo - Hendrickson Disciple's Conviction Affirmed CA8

[jcolvin2]

http://media.ca8.uscourts.gov/opndir/16/01/151136P.pdf

Best bits;

Giambalvo testified that he filed tax returns stating that his wages and other income were zero after reading Peter Hendrickson's book, Cracking the Code. The book asserts that only income from the federal government is subject to income tax. Giambalvo stated that Hendrickson's book was consistent with what he had read from
materials that the Institute of Global Prosperity had published stating that the income tax could only be applied to federal employees or those who get income from the federal government. Giambalvo testified that "[t]he only difference between Peter
Hendrickson and the others is that he says that if your employer is improperly withholding money from you, you can get it back."

***

The government moved in limine to exclude the testimony of IRS employee Shauna Henline relating to tax returns that the IRS may have received after the publication of Peter Hendrickson's book, Cracking the Code, that allegedly were similar to Giambalvo's tax returns. Henline is an IRS employee who oversees "frivolous returns." According to the government, Giambalvo was attempting to
introduce evidence of a good-faith defense to the charges by showing similarities between the returns that he filed and the returns of Peter Hendrickson, who was referred to in a civil case in the Eastern District of Michigan in 2006. The government argued that a good-faith defense is subjective and that Henline's testimony relating to similarities with returns filed by other defendants fails to prove Giambalvo's beliefs. The government explained, "He is trying to show reliance on this book, Cracking the Code, written by this man named Peter Hendrickson, but I don't think that having the witness talk about similarities in returns is sufficient to do that."

In response, Giambalvo's counsel confirmed for the court that Henline had never met Giambalvo. Nevertheless, he argued that her testimony was relevant

ecause she is the witness who has testified on behalf of the United States under oath in the Eastern District of Michigan that she has . . . read Cracking the Code . . . . Ms. Henline has testified in the Eastern District of Michigan . . . that before she read this book, the IRS was not receiving the so-called zero returns . . . . Once that book was published in 2003, Ms. Henline started seeing thousands and thousands of these so-called zero returns

After hearing from Giambalvo's counsel and finding his argument unpersuasive, the court excluded Henline's testimony, stating, in relevant part:

There is no evidence before me that Ms. Henline has any knowledge
about Mr. Giambalvo, or his returns, other than there was a fax sent to the office where she works. Whether 10 people, or 50 people, or
hundred people filed a similar return, it doesn't help or hurt this case.

The court found that Henline's testimony would not "enlighten us as to Mr. Giambalvo's subjective belief about the book, or that he even read the book, or anything about his return." Furthermore, the court concluded that testimony concerning other taxpayers' returns "doesn't help us one way or the other" as to Giambalvo's returns and therefore was "not relevant and not admissible." Giambalvo asked the Court to reconsider its ruling during trial, but the district court declined. The court noted that Giambalvo's counsel had provided no proof that Giambalvo and Henline had ever spoken.

On appeal, Giambalvo argues that the district court abused its discretion in excluding Henline's testimony because it was relevant to his good-faith defense. Specifically, Giambalvo argues that by excluding testimony that the IRS began receiving many "zero tax returns" similar to Giambalvo's tax returns after Cracking the Code was published, the district court excluded "key circumstantial evidence relevant to the reasonableness of Giambalvo's good-faith beliefs." Giambalvo contends that the district court's ruling was in direct contravention of Cheek v. United States, 498 U.S. 192 (1991).

"Filing false tax returns is a specific intent crime requiring a showing of willfulness, which 'simply means a voluntary, intentional violation of a known legal duty.'" United States v. Mathews, 761 F.3d 891, 893 (8th Cir. 2014) (quoting Cheek, 498 U.S. at 201). In Cheek, the Court held "that the government must demonstrate that the defendants did not have a subjective belief, however irrational or unreasonable, that the income tax system did not apply to them." United States v. Powell, 955 F.2d 1206, 1211 (9th Cir. 1992) (citing Cheek, 498 U.S. at 201–02 (1991)). Cheek's premise "is that a person cannot be convicted of willful failure to file a tax return if he subjectively believes in good faith 3 that the tax laws do not apply to him. The test does not focus on the knowledge of the reasonable person, but rather on the knowledge of the defendant." Id. Ultimately, "the issue is whether, based on all the evidence, the Government has proved that the defendant was aware of the duty at issue, which cannot be true if the jury credits a good-faith misunderstanding and belief submission, whether or not the claimed belief or misunderstanding is objectively reasonable." Cheek, 498 U.S. at 202.

"The Supreme Court in Cheek held that 'forbidding the jury to consider evidence that might negate willfulness would raise a serious question under the Sixth Amendment's jury trial provision.'" Powell, 955 F.2d at 1214 (quoting Cheek, 498 U.S. at 203). This means that a court "ordinarily cannot exclude evidence relevant to the jury's determination of what a defendant thought the law was in § 720[6] cases because willfulness is an element of the offense." Id. (first emphasis added). Therefore, "statutes or case law upon which the defendant claims to have actually relied are admissible to disprove that element if the defendant lays a proper foundation which demonstrates such reliance." Id. (citing United States v. Harris, 942 F.2d 1125, 1132 n.6 (7th Cir. 1991); United States v. Willie, 941 F.2d 1384, 1391–99 (10th Cir. 1991)). By contrast, "materials upon which the defendant does not claim to have relied . . . can be excluded as irrelevant and unnecessarily confusing because only the defendant's subjective belief is at issue." Id. (emphasis added).

Here, the district court properly excluded Henline's testimony. Giambalvo was the best source of his subjective beliefs, and he testified as to those beliefs. See United States v. Mann, 884 F.2d 532, 538 (10th Cir. 1989) ("Because a good-faith defense turns on the defendant's subjective belief, [the defendant's] testimony regarding his views [is] more probative than [other evidence] representing the source or articulation of those beliefs."). By contrast, Henline could not have offered any testimony concerning Giambalvo's subjective belief because Giambalvo and Henline had never spoken; in other words, Henline had no knowledge of how Cracking the Code impacted Giambalvo. Furthermore, as the government points out, the fact that other taxpayers may have filed returns similar to Giambalvo's is not evidence that Giambalvo acted in good faith or that those taxpayers acted in good faith when they filed their returns. Nor does Giambalvo claim to have relied on certain other taxpayers' tax returns. Accordingly, we hold that the district court did not abuse its discretion in excluding Henline's testimony. See United States v. Ballew, 40 F.3d 936, 941 (8th Cir. 1994) (standard of review).

[JC Note: Sadly, the defendant may have owed no tax deficiency, but this was irrelevant for the section 7212 obstruction charge and the 7206(1) tax perjury charges.]

[Hyrion]

Nor does Giambalvo claim to have relied on certain other taxpayers' tax returns.

The logic.... the logic... oh horror the logic!!!

Let's say Giambalvo relied not only on the book but also on Hendrickson's case(s) - after all, he cited one case with Hendrickson mentioned:

... showing similarities between the returns that he filed and the returns of Peter Hendrickson, who was referred to in a civil case in the Eastern District of Michigan in 2006 ...

Logically, if his research also included where Hendrickson prevailed - or other cases where others that relied on Hendrickson's work prevailed (does a single such case actually exist?) - then he did or reasonably should have known Hendrickson went to prison for applying his tax beliefs to his own taxes.

He really wanted to try and use that angle to help prove a "good faith" intent?

I think the Judge was lenient with him for not allowing it to enter the trial.... after all, the prosecution would have been able to point out the obvious flaws in his logic - not to mention point directly to where Hendrickson was sentenced for tax evasion - and the public documentation that the IRS produces outlining the frivolous claims and associating cases.

[Famspear]

I have updated Peter Hendrickson's dossier at Dan Evans' web site, with this information:

On October 2, 2014, a federal court jury found Peter A. Giambalvo guilty under Internal Revenue Code section 7206(1) of eight counts of filing false federal income tax returns for years 2003 through 2010 and one count of corruptly endeavoring to obstruct and impede the administration of the internal revenue laws under section 7212(a), in United States v. Giambalvo, case no. 14-cr-00067-RWS, in the U.S. District Court for the Eastern District of Missouri. Giambalvo was a systems engineer with The Boeing Company, and he testified that he filed his tax returns showing zero income from Boeing based on his reading of Hendrickson's book, Cracking the Code. He was sentenced to sixteen months in federal prison, and served his time as inmate # 41630-044. He was released on November 13, 2015. His conviction was upheld by the United States Court of Appeals for the Eighth Circuit on January 13, 2016, in case number 15-1136.

http://tpgurus.wikidot.com/peter-hendrickson

EDIT: Corrected a typo.

[Famspear]

Giambalvo's gross wages for the years in questions were:

2003: $15,958.99
2004: 57,018.40
2005: 60,877.58
2006: 67,331.48
2007: 65,774.40
2008: 87,472.44
2009: 70,269.25
2010: 73,837.72

--for a total of $498,540.26 in income that he had falsely reported to be "zero."

[The Observer]

Apparently, Giambalvo appealed his conviction. (U.S. v. Giambalvo, No. 15-1136, 8th Cir., 2016). Surprisingly to Giambalvo, I would guess, his appeal was rejected.

Appellate court: The trial court acted correctly when it excluded this evidence, because the best indicator of what the employee sincerely believed was his own testimony, not testimony from the IRS about how many $0 returns were filed. His 16-month sentence stands.