Pete Hendrickson Trial -- An Important Note

[SteveSy]

To reject the IRS interpretation where, as a matter of law, the IRS just happens to be right, is a DISAGREEMENT with the law, not a good faith belief, etc., etc., as that term is used by the Court in Cheek. Sometimes, an actual belief is not a Cheek good faith belief.

That places the word of the IRS at the same level as the written law itself. For one the IRS has been shown to be wrong by the court. Second, its ridiculous to assume a taxpayer can know when, with absolute certainty, the IRS is right concerning the law. This would require the taxpayer to be as knowledgeable about the law as the court and more than the IRS. Furthermore, even the lower courts have had their positions concerning the law overruled. Placing the burden upon the taxpayer to know, with absolute certainty, the lower court is right would require the taxpayer to be as knowledgeable as the Supreme Court. Following this even the Supreme Court changes its opinion concerning the tax law from time to time. This now places the taxpayer in the position to know the law better than the Supreme Court.

Granted, the court and the IRS may have an opinion that has stood without modification for years. It's highly likely that the position will never change concerning the law but its not absolute, therefore its unreasonable to assume the taxpayer can not have a view that is different than the courts or IRS. When the interpretation of the law changes, possibly due to a change in the court's position, the written law will has not changed at all. If it has not changed then the IRS position or the courts opinion is not "the law". Its merely the accepted interpretation for the time being and the defendant is simply disagreeing with an interpretation and not with the law itself.

Again, Cheek was well aware of court opinion that said he was wrong, along with information provided to him by the IRS that said the same. The Supreme Court still reversed the 7th and he got another chance to show he had a good faith belief he was right. Regardless, its up to the jury to decide, based on the facts, whether the defendant had a good faith belief. It's not up to the judge to make that determination.

[Famspear]

To reject the IRS interpretation where, as a matter of law, the IRS just happens to be right, is a DISAGREEMENT with the law, not a good faith belief, etc., etc., as that term is used by the Court in Cheek. Sometimes, an actual belief is not a Cheek good faith belief.

That places the word of the IRS at the same level as the written law itself.

No, because the taxpayer's willfulness is not based on his knowledge of the IRS position in and of itself. It's based on his knowledge of what the law is. The fact that the IRS position and the law happen to be the same means that if the taxpayer is aware of one, he's aware of the other. And, we're not talking about the intricacies of section 1398(f)(2) or something like that. We're just talking about whether wages are income, whether the Sixteenth Amendment was properly ratified, etc., etc. We're not talking about situations where the IRS has ever been shown to be wrong.

Second, its ridiculous to assume a taxpayer can know when, with absolute certainty, the IRS is right concerning the law.

Again, that doesn't matter. Lack of absolute certainty that the IRS is right is not a legal defense.

This would require the taxpayer to be as knowledgeable about the law as the court and more than the IRS.

Maybe, except that this is not the rule.

Furthermore, even the lower courts have had their positions concerning the law overruled.

No, not in the area of tax protester arguments. For example, even in Cheek, where the Supreme Court reversed a lower court ruling, the argument was not a frivolous argument -- not a tax protester argument.

Placing the burden upon the taxpayer to know, with absolute certainty, the lower court is right would require the taxpayer to be as knowledgeable as the Supreme Court.

Again, there is not burden on the taxpayer to know with absolute certainty, etc.

This now places the taxpayer in the position to know the law better than the Supreme Court.

Again, no, for the reason previously stated.

Again, Cheek was well aware of court opinion that said he was wrong, along with information provided to him by the IRS that said the same. The Supreme Court still reversed the 7th and he got another chance to show he had a good faith belief he was right. Regardless, its up to the jury to decide, based on the facts, whether the defendant had a good faith belief. It's not up to the judge to make that determination.

Yes, and that was the mistake that the trial judge made in the original trial - trying to convert what was really a jury question, a question of fact, into a question of law. The judge's error, under the holding of the Supreme Court in Cheek, was to instruct the jury that the defendant's belief had to be objectively reasonable. The defendant's belief can be objectively unreasonable or irrational and still negate willfulness -- as long as that belief is an actual good faith belief based on a misunderstanding -- and (at least as I understand Cheek) that misunderstanding must be caused by the complexity of the tax law, not on the defendant's obdurate rejection of the tax law through his own extensive study, etc., etc.

[jg]

A snippet from the oral argument given by the defense attorney ( linked above by SteveSy):

MR. COULSON: I am -- the standard I am applying is the one set out in Murdock. Did the defendant have a good-faith misunderstanding of his duties under the tax laws? If the defendant -- that does not include disagreement with the law. It means it's confusion or misunderstanding with his duties under the law that is a defense. And I am suggesting that that has to be a determination --

QUESTION: He -- he mistakenly thought the Supreme Court had it wrong. He just made a mistake. Why isn't that a defense?

MR. COULSON: Because -- I'm not suggesting that every citizen has the prerogative to decide for himself if he is going to obey what this Court or any other court says.

QUESTION: Or suppose that the Treasury regulations say wages are income and are taxable, and he says well, I know that, and regulation is supposed to be the law, but the Commissioner just had it wrong. They -- those regulations are just inconsistent with the statute, or with the Constitution.

MR. COULSON: The first example would present for the jury a fact question. The jury would decide, is he sincerely confused about the law, and if so how? How did he come to that confusion, that misunderstanding? Or is he pretextual, does he know darn well what the law is?

QUESTION: Counselor, that is just not helpful for this argument. What we're trying to establish, and I think it's a difficult case, is what instruction the judge should give to the jury. What is the standard for guilt. And if you say, oh, that's for the jury, that doesn't help us. We're asking what the instruction should be.

And it seems to me that based on your case, you have to say that if he sincerely believes that the Supreme Court got it wrong, that is a defense. I think that's the theory of your case. And if you say, well, the Supreme Court, then I would ask you about the Seventh Circuit, or I would ask you about a Supreme Court decision which is 5 to 4 and a justice leave the bench, and so forth and so on. We need to know what standard the judge uses when he instructs, or she instructs the jury.

MR. COULSON: The judge says to the jury it is a defense to willfulness if the defendant at the time of the alleged offenses had a good-faith misunderstanding of his duties under the tax laws. It is not a defense if the defendant had -- knew of his duties under the tax law, but had a personal or subjective disagreement with them. That's essentially -- part of those instructions were given in this case.

Repeating the last comment:
it is a defense to willfulness if the defendant at the time of the alleged offenses had a good-faith misunderstanding of his duties under the tax laws. It is not a defense if the defendant had -- knew of his duties under the tax law, but had a personal or subjective disagreement with them.

The government will have to show that Hendrickson knew of his duties under the tax laws.

The jury will decide if:
Hendrickson does or does not have a good-faith misunderstanding of his duties under the law.

My opinion is that Hendrickson has a personal or subjective disagreement of his duties under the tax laws, which is not a defense.

What Hendrickson believes, how sincerely he believes it, and whether his disagreement is sincere or not are all tangential issues to the core issues stated above. These issues only have bearing as they are probative of the core issues.

[Joey Smith]

There are many ways to question or challenge the tax laws -- tax attorneys do it every working day of the week. A taxpayer can ask for a private letter ruling. A taxpayer can file a refund lawsuit. A taxpayer can go to a qualified tax professional for an opinion letter.

What a taxpayer cannot do is to adopt a unilateral self-serving, selfish, self-interpretation of the law and then blind himself to all possible alternative explanations and simply self-determine that he is right without availing himself of the numerous avenues of challenging the law. No system of justice rightly could or would countenance such contumacy.

Tax protestors not only have self-decided in their own selfish self-interests that they are right, but they have turned a deaf ear to any suggestions that they might be wrong. They have not attempted any legitimate challenge to the tax laws, but instead have just huddled in an obstinate refusal to pay no matter what.

The funny thing is that it doesn't really even matter what their theory du jour is -- they just aren't going to pay and are convinced that the tax code is unconstitutional for some reason, even if they haven't managed to discover the right reason yet. This is why tax protestors jump so readily from one theory to another theory, even when the theories are contradictory, just as quickly as their guru is carted off in chains.

Insert here my standard comment about the FACT that after some decades tax protestors have been totally unable to get anybody with an ounce of credibility to take up their cause -- and for good reason!

[Demosthenes]

A defendant can argue good faith without admitting he is wrong.

If you believed you were wrong (past tense), you can claim you based your decision on a good faith belief, and introduce the evidence that led you to your erroneous conclusions. If you believe you are right (current tense), in your mind you are arguing the law to the jury, not your belief in the law, which means you are attempting to instruct the jury in the law.

[notorial dissent]

Which is all quite true, and with which I agree, but.... as I said, in Pete’s case I do not see any way in any form of convoluted logic that he can argue that he has a good faith belief in his nonsense in light of the reality of his own court losses, his followers numerous and expensive court losses, and the information available that he believe that he does not have a responsibility to file, or that his wages are not wages. He has been told and shown too many time for it to be anything but willful, I DON”T WANNA, and YOU’RE NOT GONNA MAKE ME, as Joey pointed out. It is the excuse to do what he is going to do anyhow, not the issue at all, that is the heart of all this. Pete does not want to pay his taxes, and will find an excuse not to.

[SteveSy]

We're just talking about whether wages are income, whether the Sixteenth Amendment was properly ratified, etc., etc. We're not talking about situations where the IRS has ever been shown to be wrong.

Well then that leaves it subjective as to when and where a judge will or will not let the jury hear the law even though both positions are based on the written law.This was actually brought up in the oral argument and was the core of the defenses position. In short it was argued that the 7th court was using a special version of the rule just for people identified with certain types of TP arguments such as wages aren't income. The purpose of the resulting opinion in Cheek was to take that out of the hands of the judge because it was subjective. Its for a jury to decide if and when its a good faith belief. The jury is free to review all of the information the defendant saw that was contrary to his position. Obviously when its shown the court and the IRS have never changed their position on a matter they're more likely to not believe the defendant had a good faith belief. Again though that's up to the jury to make that determination, not the judge per the Supreme Court in Cheek.

jg continues to use the flawed argument that Pete should not be allowed to confuse the jury with his version and then on the other hand claim its impossible for Pete to have a good faith belief because a judge said otherwise. That's nonsensical, the two arguments are incompatible. If one is true then the other is proven false. If a jury can be confused by Pete then certainly Pete can be equally confused if he actually believes his position even though a judge or the IRS told him otherwise.

[LPC]

Can a defendant argue good faith unless he admits he's wrong?

I've read the comments of others, and here is my take on this:

Yes, the defendant can argue that he acted in good faith without admitting he is wrong, but he runs the risk of the jury concluding that he is not an idiot, but an a**hole.

I read an article years ago about plain Yiddish for lawyers, and it restated the jury instruction for comparative negligence as follows: If you find that the defendant was a schlemazel, then you should find for the defense, but if you find that the defendant was a schlemiel, then you should find for the plaintiff. (I hope I didn't get that backwards; I often do.)

Similarly, I think that the judge could instruct the jury that, if you should find a reasonable chance that the defendant was an idiot, then you should find him not guilty. But if you should find beyond a reasonable doubt that the defendant was an a**hole, then you should find him guilty.

[jg]

jg continues to use the flawed argument that Pete should not be allowed to confuse the jury with his version and then on the other hand claim its impossible for Pete to have a good faith belief because a judge said otherwise. That's nonsensical, the two arguments are incompatible. If one is true then the other is proven false. If a jury can be confused by Pete then certainly Pete can be equally confused if he actually believes his position even though a judge or the IRS told him otherwise.

It is not clear what voices you are hearing that you imagine were my words, as all I did was quote the defense attorney in the oral argument (via the link you provided and suggested was good for clarification).

Neither I nor the oral argument snippet quoted spoke to who Hendrickson should or should not be allowed to confuse with his version of reality. Unfortunately, he has confused far too many already and based on your comment you are also, at best, confused.

Your ability to argue against what was not said or written does not transform your imaginings into what I did say or write.

[Famspear]

Well then that leaves it subjective as to when and where a judge will or will not let the jury hear the law even though both positions are based on the written law.This was actually brought up in the oral argument and was the core of the defenses position. In short it was argued that the 7th court was using a special version of the rule just for people identified with certain types of TP arguments such as wages aren't income. The purpose of the resulting opinion in Cheek was to take that out of the hands of the judge because it was subjective. Its for a jury to decide if and when its a good faith belief. The jury is free to review all of the information the defendant saw that was contrary to his position.

Well, the jury is free to review whatever evidence is admitted. The rule about not being able to argue "the law" to the jury applies to both the prosecution and the defense. If evidence of "the law" is going to be admitted (whether offered by the prosecution or the defense), it should be admitted only if it's being offered for the purpose of showing the defendant's awareness of the law, or to show that he made an honest mistake caused by the complexity of the law. Neither side should be allowed to try to persuade the jury that its theory about the law is "correct." Only the judge can instruct the jury on what the law actually is -- the law that the jury must follow.

jg continues to use the flawed argument that Pete should not be allowed to confuse the jury with his version and then on the other hand claim its impossible for Pete to have a good faith belief because a judge said otherwise.

I'm not clear that this is jg's argument, so I won't address that except to say that, again, neither side in cases is allowed (or at least should not be allowed) to get "evidence" admitted (whether copies of statutes, copies of court cases) for the specific purpose of confusing the jury about what the law actually is. I'm going to make a general statement here: For many tax protesters (not all, but possibly most), the whole purpose of trying to introduce copies of statutes and court decisions, etc., etc., as "evidence" is not really to persuade the jury that the defendant/tax protester had a Cheek-style actual good faith belief based on a misunderstanding, etc. The real purpose is to try to confuse the jury, to get the jury members to think to themselves, "hey, based on what I've seen here, I think the judge is wrong and the defendant is right about what the law is, so I'm gonna vote to acquit." In this situation, the tax protester is really trying to persuade the jury that the tax protester's theories are correct. That would be improper. I believe this may be what Irwin Schiff was trying to do (not sure, I'd have to go back and review the record).

If a jury can be confused by Pete then certainly Pete can be equally confused if he actually believes his position even though a judge or the IRS told him otherwise.

No, not in Pete's case. In my personal opinion, the evidence (on Peter's losthorizons web site, and in various videos of Pete I have watched, and in various audio records of him I have heard) is overwhelming that Pete is aware of what the law actually is, and that he simply refuses to accept it. Instead, Pete strongly "believes" (there's that confusing word again) that his own Cracking the Code theory is the correct statement of what the law is. That's an actual belief, but it's not an actual good faith believe based on a misunderstanding caused by the complexity of the tax law. Instead, it's a stubborn refusal to accept the law based on his own extensive study. I mean, he wrote a book about it for heaven's sake. He's got a web site. There is no way that his actual belief rises to the level of a Cheek-type belief.

By contrast, you can almost bet that each member of the jury (unless he or she lies during voir dire) will have engaged in relatively little "independent study" of the tax law (or, unless the juror discloses that tidbit and the attorneys for both the government and the defendant decide to accept the juror on the panel anyway). It is highly unlikely that the members of the jury will have studied the tax law to anywhere near the degree that Pete has studied it. So, it's tremendously more likely that a jury member, an average American, could develop a Cheek-type misunderstanding, etc., than that Peter Hendrickson could possibly hold such a misunderstanding. It is almost metaphysically impossible for Peter Eric Hendrickson to have a valid Cheek-type misunderstanding at this point. But we are in agreement that it is generally the job of the jury -- not the trial judge -- to make that determination. And the jury will have to make that determination based on the evidence presented in the trial, which may or may not consist of exactly every word and comma of Pete's materials I have personally read at his losthorizons web site, or the videos I have watched, etc.

[LPC]

I believe this may be what Irwin Schiff was trying to do (not sure, I'd have to go back and review the record).

I'm not sure that even Irwin Schiff knew what Irwin Schiff was trying to do.

[Nikki]

The LAW, upon which the jury is instructed, is generally the specific statute which is at issue in the criminal prosecution. I.e., "The defendant is charged with violating US Code blah, blah, blah which specifies ..."

Outside the arena of tax evasion trials, there are very few cases where any LAW outside the charges is at issue.

However, since the compliance-challenged gurus have spent so much timje spinning their personal webs of legal interpretation, they insist on having the opportunity to explain their view of the tax laws to the jury.

At the bottom lline, that doesn't really matter. Pete is charged with criminally evading the payment of taxes. There are specific laws which relate to that offense -- none of which have anything to do with the CtC method.

Pete's only defense against the charges at issue has nothing to do with his research, his book, or anything else. It revolves solely around the point of his knowledge of a legal duty to pay the taxes which he owes.

He has admitted that there is a legal duty to pay all taxes which are owed. The only controversy is the difference of opinion over what is taxable and what is oewd.

Given that Pete promotes himself as a preeminent legal researcher -- in fact the only person in history who has been able to unravel the mysteries of the tax code -- his only defense would be to convince the jury that his interpretation of "includes", which is contrary to specific language in 26USC, is correct.

However, to do so, he will need to be able to present an interpretation of the law to the jury. Since his interpretation is contrary to the specifically stated law, he will not be permitted to attempt to convince the jury that his view of the law is correct.

He MAY be permitted to testify as to his interpretation of "includes." However, if he is allowed to do so, he will be opening himself to a very rough cross examination revolving around his willful ignorance of (1) the specific definition of "includes", (2) his willful ignorance of "for the purposes of this chapter", and (3) his willful ignorance of "compensation for ...". Plus, at the conclusion of cross examination, there is a high likelihood that the judge will instruct the jury to ignore Pete's opinions regarding the law.

Pete is toast. He, like many other self-styled gurus, decided long ago that he didn't want to pay income taxes. With that goal in mind, he carefully constructed a house of cards to support his goal. Those facts will be made clearly evident to the jury.

Also, the government has a potentially lethal witness against Pete -- Mrs Pete. If she pleads out in exchange for testimony against him, she might actually be able to keep her family together instead of losing it while she and hubby do hard time.

[wserra]

If you believed you were wrong (past tense), you can claim you based your decision on a good faith belief, and introduce the evidence that led you to your erroneous conclusions. If you believe you are right (current tense), in your mind you are arguing the law to the jury, not your belief in the law, which means you are attempting to instruct the jury in the law.

Right. That scenario creates the problem for the trial court which the Fifth Circuit discussed in Simkanin. But they didn't say that Simkanin couldn't do it, just that he couldn't have his cake and eat it - that is, maintain that position but object to the judge explaining in response to a jury note what the law really is, even if that explanation tells the jury that the defendant is really a schlemiel.

Yiddische kopf, Dan.

[SteveSy]

The real purpose is to try to confuse the jury, to get the jury members to think to themselves, "hey, based on what I've seen here, I think the judge is wrong and the defendant is right about what the law is, so I'm gonna vote to acquit." In this situation, the tax protester is really trying to persuade the jury that the tax protester's theories are correct. That would be improper. I believe this may be what Irwin Schiff was trying to do (not sure, I'd have to go back and review the record).

How can you not see how your argument is faulty?

1) If you claim Pete could not actually believe he's right about the law because authority told him differently then there is no way a jury could believe it either. A judge will be sitting there telling them he's wrong. The result is that Pete can not be telling them what the law is at best he could only tell them his interpretation of it. Its a matter for the jury to decide if his interpretation is in good faith.

2) If you claim Pete might convince a jury he's right then you're admitting its possible Pete could hold his belief that he's right even though authority has told him differently. You are also admitting that its possible he didn't act willfully because you can not willfully violate a law that you believe does not exist. This matter is for the jury to decide.

3) Does Pete have the authority to tell the jury the law and it be the actual law? Of course not, Pete is just like anyone else. No matter what Pete tells them its meaningless unless from an authoritative legal perspective. Pete can not be telling the jury the law no matter how hard he tries. Saying Pete could tell the jury the law is admitting Pete has the same authority as a judge.

[Doktor Avalanche]

The real purpose is to try to confuse the jury, to get the jury members to think to themselves, "hey, based on what I've seen here, I think the judge is wrong and the defendant is right about what the law is, so I'm gonna vote to acquit." In this situation, the tax protester is really trying to persuade the jury that the tax protester's theories are correct. That would be improper. I believe this may be what Irwin Schiff was trying to do (not sure, I'd have to go back and review the record).

I'll save you a trip: that's precisely what he tried to do.

[Famspear]

The real purpose is to try to confuse the jury, to get the jury members to think to themselves, "hey, based on what I've seen here, I think the judge is wrong and the defendant is right about what the law is, so I'm gonna vote to acquit." In this situation, the tax protester is really trying to persuade the jury that the tax protester's theories are correct. That would be improper. I believe this may be what Irwin Schiff was trying to do (not sure, I'd have to go back and review the record).

How can you not see how your argument is faulty?

Steve, if you're referring to the quoted material, I'm not sure what you're driving at. It's not really my "argument". That is, I'm not trying to explain the law, I'm just explaining my understanding (correct or incorrect) of the motivation of some tax protesters.

1) If you claim Pete could not actually believe he's right about the law because authority told him differently then there is no way a jury could believe it either.

Again, I'm not sure what you're driving at, but I'm not "claiming" that Peter cannot "actually believe" that he is "right about the law." What I am saying is that under my interpretation of the decision in Cheek, Peter's actual belief is not equivalent to a Cheek actual belief.

A Cheek actual belief, as I understand it, is an actual good faith belief based on a misunderstanding caused by the complexity of the tax law. That's not the kind of actual belief Peter has.

[wserra]

A Cheek actual belief, as I understand it, is an actual good faith belief based on a misunderstanding caused by the complexity of the tax law. That's not the kind of actual belief Peter has.

I agree both that this is the rationale for the defense and that the rationale does not apply to Hendrickson. However, no court of which I am aware has required that a Cheek "misunderstanding" actually be based on "the complexity of the tax law". Assuming he goes with Cheek, the issue will (and should) get to Hendrickson's jury.

[ASITStands]

I'd like to 'chime in' and say that I agree with 'Dr. Caligari,' 'Wes' and 'Joey.'

In my experience (accumulated by observing several criminal tax trials), it's entirely possible for a defense attorney to present a defendant's interpretation or view of tax laws, though they run the risk of alienating the judge or jury if not done properly or delicately.

For instance, while it's not possible to read directly from statute, code or regulation, and discuss the defendant's understanding of same, it's entirely possible to read portions of documents written by the defendant in response to a particular IRS notice or letter.

That's particularly true when it's a document introduced as an exhibit by the prosecution, though it could also be introduced by the defendant if the proper foundation is laid.

In both instances, a defense attorney will have to walk a fine line to not offend the judge and overcome prosecution objections. It's when the attorney crosses the line between presenting direct evidence and testimony to presenting law that it becomes a problem.

It's also possible for a defendant to testify as to his "good faith belief" in regard to tax laws, but it takes a strong witness, and it takes deft handling by the defense attorney.

Not many succeed, but one example is the Tommy Cryer case where the defense attorney had a "good faith belief" against willfulness and could present it through a good witness.

Neither of those instances rise to the level of "arguing law before the jury," as attempted by certain in the tax movement (Irwin Schiff and Larken Rose come to mind), and you'll find the judge is able to "present the law" through instructions to the jury, which not only cite the relevant statute but circumscribe the element of willfulness in accord with the law.

I've seen jury instructions which define or circumscribe what constitutes a willful argument.

In my opinion, the Kuglin and Long cases were strongly influenced by the questions asked by the defendants prior to indictment. In other words, because the defendants asked questions which went unanswered played heavily before the jury in terms of a "good faith belief."

Of course, neither was correct according to law, and both paid the full fare.

It's entirely possible that Pete Hendrickson can present his interpretation or view of tax laws, but as 'Joey' suggested, his prior injunction will not help him in the final verdict.

There's simply too much actual law (statute, regulation, case law, etc.) against him.

EDIT: A possible exception would be the prosecution's motion in limine to exclude evidence and testimony regarding Hendrickson's views of tax law, and there'll likely be such motion.

It could depend on how well the defense argues such a motion.

[SteveSy]

A Cheek actual belief, as I understand it, is an actual good faith belief based on a misunderstanding caused by the complexity of the tax law. That's not the kind of actual belief Peter has.

So how could the Supreme Court reverse the 7th then? Cheek also claimed to have heavily researched the law, he was also well aware of court and IRS opinion contrary to his belief. In fact he lost a case previous to that case trying to argue similar arguments. If you read the oral arguments it leaves little doubt that the 7th tried to do exactly what you're saying Cheek prevents, yet they reversed the 7th.

[Demosthenes]

I believe this may be what Irwin Schiff was trying to do (not sure, I'd have to go back and review the record).

I'm not sure that even Irwin Schiff knew what Irwin Schiff was trying to do.

Schiff was trying to present his seminar to the jury to convert them into tax protesters.