Pete Hendrickson Trial -- An Important Note

[Demosthenes]

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.

That's the point I'm trying to make.

I've sat through 11 or 12 of these cases so far, and I think it's a deciding factor for the judges involved. TPs who are still believers are facing a tight rein from the judge when it comes to introducing materials. "I'm not going to allow you to instruct the jury in the law, Mr. X".
TPs who are making a good faith argument based on a misunderstanding are getting quite a bit more freedom in what evidence they can produce. "Did you rely on this information in forming your opinion regarding whether or not you had to pay taxes?"

I think Larry Becraft seems to understand this distinction which is why his filings dance with the notion of his clients' misundtanding of the law. It enables him to enter more into evidence.

[Famspear]

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.

Separate issue, Steve.

The Supreme Court reversed the 7th Circuit because the 7th Circuit had erroneously affirmed the trial court.

The trial court judge had erroneously instructed the jury that Mr. Cheek's belief had to be objectively reasonable. The Supreme Court in Cheek ruled that the defendant's belief does NOT have to be objectively reasonable. What the Supreme Court was saying is that a defendant can have a belief that is irrational or objectively UNreasonable and that belief can still be an actual good faith belief based on a misunderstanding caused by the complexity of the tax law. The trial court judge cannot instruct the jury that the defendant's belief must be rational. The trial court judge cannot instruct the jury that the defendant's belief must be objectively reasonable.

EDIT: From the Supreme Court in Cheek:

We [the United States Supreme Court] thus disagree with the Court of Appeals' requirement that a claimed good-faith belief must be objectively reasonable if it is to be considered as possibly negating the Government's evidence purporting to show a defendant's awareness of the legal duty at issue. Knowledge and belief are characteristically questions for the factfinder, in this case the jury. Characterizing a particular belief as not objectively reasonable transforms the inquiry into a legal one, and would prevent the jury from considering it. It would of course be proper to exclude evidence having no relevance or probative value with respect to willfulness, but it is not contrary to common sense, let alone impossible, for a defendant to be ignorant of his duty based on an irrational belief that he has no duty, and forbidding the jury to consider evidence that might negate willfulness would raise a serious question under the Sixth Amendment's jury trial provision.

[ . . . ]

Of course, the more unreasonable the asserted beliefs or misunderstandings are, the more likely the jury will consider them to be nothing more than simple disagreement with known legal duties imposed by the tax laws, and will find that the Government has carried its burden of proving knowledge.

(bolding added)

The jury decides

The jury decides

The jury decides

I hope I'm being clear....

[Imalawman]

I'm confused now. Stevey, what are arguing for? What do you think Peter should be able to do at trial in his defense?

[SteveSy]

I'm confused now. Stevey, what are arguing for? What do you think Peter should be able to do at trial in his defense?

Simple really. Pete should be able to show the jury how he arrived at his position using the wording in the law and the jury have a verbatim copy of the law upon which its based.

Again, in my opinion the judge is free to tell the jury the law really means whatever he says it means and Pete's interpretation of the law is wrong. Pete should not be allowed to claim the law means this or that, he can only say the reason he didn't do whatever he was supposed to do was because he has interpreted it to mean X.

[Prof]

Whatever Stevie thinks, I suppose at trial PH starts by arguing the law:
PH:
Judge, here is the statutory and case law that says CtC is a correct legal analysis; I committed no crime because my interpretation of the law is correct.
US:
Wrong; you lost this in the civil case; every court which has considered this issue, whether Tax Court, District Court, or Circuit Court has rejected this analysis, as have the Courts in which you personally appeared.
Court:
Legal argument (e.g., Motion to Dismiss) Denied.

Now, at trial:

PH:

Cheek; here is my personal analysis of the statute and cases and this is why I believe that the US Income Tax does not apply to me.

US:
We object to his presentation because he is trying to get the JURY to find that the tax laws support his position when the jury is limited to the facts, and the only fact to be considered is his good faith.

US:
How could he have good faith when every court that has considered these arguments has rejected them?

Court:
I'll let him explain his theory because it is necessary to allow the Jury to see whether or not his Cheek defense burdens are met. However, he cannot offer as a defense the argument that the theory is correct because it is not, for the reasons given above -- that issue has been decided AS TO HIM (on appeal) [ The fact that the PH civil case is on appeal doesn't matter in the federal system; even if on appeal, the decisions below are law of the case and res judicata].

NOTE: Here is where LPC's reference to walking a fine line comes into play. Demo's comments about Beecraft's technique is absolutely correct and exactly how the Court and PH have to play these cards.

[SteveSy]

Court:
I'll let him explain his theory because it is necessary to allow the Jury to see whether or not his Cheek defense burdens are met. However, he cannot offer as a defense the argument that the theory is correct because it is not, for the reasons given above -- that issue has been decided AS TO HIM (on appeal) [ The fact that the PH civil case is on appeal doesn't matter in the federal system; even if on appeal, the decisions below are law of the case and res judicata].

Which is fair as long as the jury has the words of the written law as a reference to see if his position is in good faith. Allowing him to state his belief without allowing him to support it is unfair. The judge will reword the written law, and not say he's doing so, and provide it to the jury. The jury will be left with the preconceived opinion that its cut and dry there's no way he could have believed it, his position is unsupportable. This is exactly what happened in the Simkanin trial, even a hint at the actual wording of the law was forbidden.

[Imalawman]

I'm confused now. Stevey, what are arguing for? What do you think Peter should be able to do at trial in his defense?

Simple really. Pete should be able to show the jury how he arrived at his position using the wording in the law and the jury have a verbatim copy of the law upon which its based.

Again, in my opinion the judge is free to tell the jury the law really means whatever he says it means and Pete's interpretation of the law is wrong. Pete should not be allowed to claim the law means this or that, he can only say the reason he didn't do whatever he was supposed to do was because he has interpreted it to mean X.

I have no real disagreement with you there. BUT if Pete starts trying to prove he's correct, then Whamo! he'll get shut down hard by the judge. That's why if he's smart he's acknowledge that he's wrong first. I think that if he acknowledges that he's wrong after the civil courts ruled against, him, then he stands a fighting chance. If he goes in trying to prove his theory is correct, I think he'll get in trouble.

I think the matter comes down to how its presented. For instance, if Pete says, "see, the word includes must be a term of limitation based on this and this..." then the court will shut him down and I think rightfully so. However, if says virtually the same things, but says it like, "I thought that includes was a limiting term because of X, thus I didn't file..." then he will probably be OK. Given that Pete seems to be extremely arrogant, I don't think he'll do that. That's why I say he's convicted. I reserve the right to change my opinion if he takes a humble attitude into court.

[Prof]

Stevie, you might want to review the record and what the Circuit Court said in Simkanin. As the 5th Circuit pointed out:

The court furtherinstructed the jury that:
"Within the meaning of [26 U.S.C. § 7202], during the
years 2000, 2001, and 2002, [Arrow], through its
responsible officials, had a legal duty to collect, by
withholding from the wages of its employees, the
employees’ share of social security taxes, Medicare
taxes, and federal income taxes, and to account for those
taxes and to pay withheld amounts to the United States of
America."
Simkanin did not object to these instructions at the time they
were given.

[During the jury deliberations, the famous note came out, and the Judge replied as follows:]

During its deliberations, the jury sent a note to the
district judge asking the following question:

"Since no proof has been made that the defendant and his
employees are in an occupation listed in those 7,000
[pages], are we to conclude that they are, in fact, not
in that 7,000, or do we need to read all 7,000 to see
what the defendant was referring to, and in fact, wasn’t
listed in the 7,000[?]"

[The court responded to the jury’s question by stating:]

"Now, in answer to your note: You are instructed that you
do not need to concern yourself with whether defendant’s
employees are in an occupation “listed in those 7,000.”
The Court has made a legal determination that within the
meaning of Title 26, United States Code, Section 7202,
during the years 1997, 1998, 1999, 2000, 2001, and 2002,
[Arrow], through its responsible officials, had a legal
duty to collect, by withholding from the wages of its
employees, the employees’ share of the social security
taxes, Medicare taxes, and federal income taxes, and to
account for those taxes and pay the withheld amounts to
the United States of America. You are to follow that
legal instruction without being concerned whether there
are certain employers who are not required to collect and
withhold taxes from the wages of their employees.
Of course, you will bear in mind in your
deliberations all other instructions the Court has given
you concerning the law applicable to this case."

Defense counsel objected to the court’s response on the ground
that, inter alia, the response “amount[ed] to an instructed
verdict of guilty by instructing [the jury] on that point ....

[The Circuit found nothing wrong with the instruction:]

[T]he district court in the
present case did not explicitly instruct the jury to disregard
the defendant’s beliefs about the applicability of the tax laws.
Rather, the court instructed the jury that the defendant’s
purported view of the law--that the fact that the IRC did not
list his business activities alleviated him from a legal duty to
withhold taxes--was incorrect. Thus, the district court acted
properly under the circumstances.

US v Simkanin at http://www.ca5.uscourts.gov/opinions/pu ... R0.wpd.pdf

[Famspear]

Court:
I'll let him explain his theory because it is necessary to allow the Jury to see whether or not his Cheek defense burdens are met. However, he cannot offer as a defense the argument that the theory is correct because it is not, for the reasons given above -- that issue has been decided AS TO HIM (on appeal) [ The fact that the PH civil case is on appeal doesn't matter in the federal system; even if on appeal, the decisions below are law of the case and res judicata].

Which is fair as long as the jury has the words of the written law as a reference to see if his position is in good faith. Allowing him to state his belief without allowing him to support it is unfair. The judge will reword the written law, and not say he's doing so, and provide it to the jury. The jury will be left with the preconceived opinion that its cut and dry there's no way he could have believed it, his position is unsupportable. This is exactly what happened in the Simkanin trial, even a hint at the actual wording of the law was forbidden.

Unfortunately, the defendant in a criminal tax case does not have an absolute legal right to have the jury view the actual texts of the statutes, court decisions, etc., that the defendant claims to have relied upon. You obviously feel that this is unfair, but there it is.

[Famspear]

Steve, to put this in some perspective, we should recognize that this is the case in trials generally, not just tax trials, and not just criminal trials. Trial court judges are rightfully reluctant to let members of the jury perform their own analysis of the raw texts of statutes, court cases, etc. I seem to recall years ago a story of a mistrial being declared because a juror in some case (not a tax case) somehow smuggled a copy of Black's Law Dictionary into the jury deliberations without telling the judge.

Bear in mind that the courts have already given a federal criminal tax defendant some slack in the definition of willfulness (by ruling that it was the intent of Congress to do this). As the Supreme Court pointed out in Cheek, the general rule is that lack of awareness of the law is not normally a defense in a criminal case ("ignorance of the law is not a defense", as it's often put).

In a murder case, for example, it is no defense that the defendant really, really, and truly was not at all aware that murder was a crime. In Texas, for example, I believe the mens rea requirement is (or was, when I was in law school) that it was the defendant's conscious object or desire to engage in the conduct or cause the result. If it was his conscious object or desire to kill the victim (and of course assuming there is no self defense issue, no justification issue, etc., etc.), then he is guilty, as far as the mens rea requirement, at least.

Federal tax crimes are an exception to that rule. But I argue that the exception is a somewhat limited one. You have to look at the policy behind the exception, as explained by the courts. See the discussion in Cheek, for example. It is the courts that have concluded that it was the intent of Congress to provide this exception -- which benefits criminal defendants. And therefore, it's the courts that have provided us with the parameters, the contours, the limitations of that defense.

[SteveSy]

Stevie, you might want to review the record and what the Circuit Court said in Simkanin. As the 5th Circuit pointed out.

I know what the 5th said, but as you already know I disagree. The reason he was before the jury to to find out if:

"that within the
meaning of Title 26, United States Code, Section 7202,
during the years 1997, 1998, 1999, 2000, 2001, and 2002,
[Arrow], through its responsible officials, had a legal
duty to collect, by withholding from the wages of its
employees, the employees’ share of the social security
taxes, Medicare taxes, and federal income taxes, and to
account for those taxes and pay the withheld amounts to
the United States of America."

The judge clearly told the jury they had no choice but to convict because "The Court has made a legal determination" that he was required. Ridiculous if you ask me, the judge's job was to correctly interpret the law to the jury not to say if or when Arrow was in violation of it. Why was a jury even there? He hadn't paid it, he admitted so. If all there was left was to make a legal determination that he was to pay it then the jury was a waste of time. Of course that's not how it was supposed to go. It was their job to see if he had a duty not the Judge's.

Whatever, it doesn't matter. They've locked it down so tight with their verbal gymnastics that the law could explicitly say X, the judge says its Y, so you lose. The government could be completely corrupt, make up charges nothing would stop them, certainly not some petty jury.

Hope it never gets that way, but there's certainly little to stop them these days.

[Prof]

Stevie, you might want to review the record and what the Circuit Court said in Simkanin. As the 5th Circuit pointed out.

I know what the 5th said, but as you already know I disagree. The reason he was before the jury to to find out if:

"that within the
meaning of Title 26, United States Code, Section 7202,
during the years 1997, 1998, 1999, 2000, 2001, and 2002,
[Arrow], through its responsible officials, had a legal
duty to collect, by withholding from the wages of its
employees, the employees’ share of the social security
taxes, Medicare taxes, and federal income taxes, and to
account for those taxes and pay the withheld amounts to
the United States of America."
The judge clearly told the jury they had no choice but to convict because "The Court has made a legal determination" that he was required. Ridiculous if you ask me, the judge's job was to correctly interpret the law to the jury not to say if or when Arrow was in violation of it. Why was there even a jury there?

The jury was there to decide a question of fact: Simkanin's good faith belief. Unfortunately, for him, if you read the 5th Circuit decision, you find that Simkanin was told over and over what the law was; even his witnesses weren't much help:

Banister, Schultz, and Rose all testified
that they did not advise Simkanin to stop withholding taxes or to
stop filing tax returns. Eduardo Rivera, an attorney from
California, testified that he had consulted with Simkanin in
1999, that Simkanin had paid him over $10,000, and that he told
Simkanin that his employees had no legal duty to pay a tax and
that Simkanin only had a duty to send money on their behalf to
the government if he contracted with them to do so.3
____________
3 Rivera admitted on cross-examination that in 2003 a
permanent injunction had been entered against him, barring him
from making such statements.

And, remember, all of these witnesses got to tell the jury what they thought the law was. See the opinion, cited above.

You continue to try to let folks like Simkanin have their cake and eat it, too. The Cheek defense is a defense of good faith in the face of the law, not a case which allows the jury to decide what the law is or is not.

[SteveSy]

And, remember, all of these witnesses got to tell the jury what they thought the law was. See the opinion, cited above.

Yeah without anything to be able to support their conclusions Prof. The jury doesn't get to see that its reasonable he could have read it that way. All they get to hear is the reworded version of it from the judge. Of course the jury isn't going to believe anyone. The jury assumes the reworded version is what these guys are basing their position on. If it were so frigging clear the judge wouldn't have to spoon feed the reworded version to them. It's just ridiculous to claim that's anything by unfair. It's nothing but a sham.

You have a person identified as an expert and you have a Joe nobody in front to 12 people.

Joe: "I think the result is this based on the data".
Expert: "You're wrong the data means this and everyone knows it"

Nobody isn't allowed to show the data to the 12 people, who are they going to believe. More importantly is it plausible Joe could come to that conclusion. Hmmm, let's really think about this....hmmm.

[Prof]

And, remember, all of these witnesses got to tell the jury what they thought the law was. See the opinion, cited above.

Yeah without anything to be able to support their conclusions Prof. The jury doesn't get to see that its reasonable he could have read it that way. All they get to hear is the reworded version of it from the judge. Of course the jury isn't going to believe anyone. The jury assumes the reworded version is what these guys are basing their position on. If it were so frigging clear the judge wouldn't have to spoon feed the reworded version to them. It's just ridiculous to claim that's anything by unfair. It's nothing but a sham.

Unfortunately, your opinion about "fairness" (and mine, for that matter) is not the important opinion. The 5th Circuit found the process fair, and Simkanin went to jail. As I recall, the Supremes denied cert., too. So, the District Judge thought this was fair, a panel of the Circuit thought it fair, and -- assuming my memory is correct -- no one thought it unfair at the Supreme Court level. I suppose, although I am not going to look this up, that Simikanin asked for reconsideration and en banc consideration at the 5th and no one thougt the process unfair. In other words, lots of people thought this was fair.

[Famspear]

And, remember, all of these witnesses got to tell the jury what they thought the law was. See the opinion, cited above.

Yeah without anything to be able to support their conclusions Prof. The jury doesn't get to see that its reasonable he could have read it that way. . . .

Of course, Steve's point here is at least partially valid. Any evidence that makes the defendant's position appear more reasonable (or at least "less unreasonable") than that position would otherwise appear would also tend to support the defendant's assertion that his belief was a Cheek good faith belief.

You could argue, however, that showing the jury the actual texts of statutes and court opinions would make the defendant's asserted belief appear to the jury to be less reasonable, not more reasonable. And, as the Supreme Court said in Cheek (I'm paraphrasing), the less reasonable the defendant's belief appears to the jury to be, the more likely it is that the jury might simply conclude that the defendant's belief was not a Cheek good faith belief, and that the belief was instead simply the result of a stubborn rejection of, or obdurate disagreement with, a law of which the defendant is abundantly aware.

This is just another aspect of the point that showing the juror copies of statutes, etc., on which the defendant relied could either help or hurt the defendant.

[SteveSy]

You could argue, however, that showing the jury the actual texts of statutes and court opinions would make the defendant's asserted belief appear to the jury to be less reasonable, not more reasonable. And, as the Supreme Court said in Cheek (I'm paraphrasing), the less reasonable the defendant's belief appears to the jury to be, the more likely it is that the jury might simply conclude that the defendant's belief was not a Cheek good faith belief, and that the belief was instead simply the result of a stubborn rejection of, or obdurate disagreement with, a law of which the defendant is abundantly aware.

I would argue that's a good thing. If it's obvious the guy is a flake and no moron could read it that way then the jury will convict. I'm trying to be objective here. I say let the government throw everything at the jury that shows the defendant knew he was wrong or was likely wrong. Court cases, IRS letters, or anything else the defendant viewed or received. But...that should work both ways.

[Imalawman]

You could argue, however, that showing the jury the actual texts of statutes and court opinions would make the defendant's asserted belief appear to the jury to be less reasonable, not more reasonable. And, as the Supreme Court said in Cheek (I'm paraphrasing), the less reasonable the defendant's belief appears to the jury to be, the more likely it is that the jury might simply conclude that the defendant's belief was not a Cheek good faith belief, and that the belief was instead simply the result of a stubborn rejection of, or obdurate disagreement with, a law of which the defendant is abundantly aware.

I would argue that's a good thing. If it's obvious the guy is a flake and no moron could read it that way then the jury will convict. I'm trying to be objective here. I say let the government throw everything at the jury that shows the defendant knew he was wrong or was likely wrong. Court cases, IRS letters, or anything else the defendant viewed or received. But...that should work both ways.

I really think that PH is going to at least the the portion of 3401(c) that is at issue into evidence. Hell, the Gov't is probably going to prop it up really big on a projector. I don't think a person in the jury is going to think, "oh yeah, employee 'only' includes gov't officers". In fact, I predict chuckles from the jury when it explained. But I think they'll get that in. So, I think I have to disagree with you a little Famspear, I think you make the Cheek defense a little harder than it is. Cheek is in my opinion way too easy for TPs to get out of criminal charges.

[Judge Roy Bean]

At least one fly in the ointment for Hendrickson is that he's repeatedly and publicly claimed everyone else in the entire judiciary is wrong and he's right. I fall back on Judge Easterbrook in these matters; Hendrickson's own interests just happen to coincide with his preposterous beliefs way too much. Whether the jury is sympathetic or not is the key.

[Nikki]

DoJ has so much material from Pete's book & web site that Pete won't need to testify at all.

Everything he could possibly want to say is available in print to share with the jury.

If anything, he's going to have to take the stand to rebut his own words.

[SteveSy]

DoJ has so much material from Pete's book & web site that Pete won't need to testify at all.

Everything he could possibly want to say is available in print to share with the jury.

If anything, he's going to have to take the stand to rebut his own words.

Pete won't get to see his book in court. Just like Larken and Schiff didn't get to see theirs.