CTC, dead men walking MASS PANIC PRECICTED

[Gregg]

FOR IMMEDIATE RELEASE
THURSDAY, APRIL 13, 2006
http://WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

UNITED STATES SUES NINE IN NATIONWIDE CRACKDOWN ON TAX-REFUND SCAM



WASHINGTON, D.C. - The Justice Department announced today that, in a nationwide crackdown against a tax-fraud scheme promoted by Peter Eric Hendrickson of Commerce Township, Mich., it has brought suit against nine people this week. According to the government complaints, filed in seven lawsuits across the country, the nine people—including Hendrickson and his wife Doreen M. Hendrickson—have received a total of nearly $150,000 in erroneous tax refunds by submitting false forms with their federal tax returns to replace W-2 and 1099 forms that correctly reported their income.

In seven suits filed in U.S. district courts in California, Nevada, Michigan, Alabama, Florida and Kansas, the Justice Department seeks to recover the erroneous refunds. In addition, the suit against Hendrickson, filed in the Eastern District of Michigan, asks the court to enjoin him from filing false tax forms and returns. A violation of the injunction would be punishable as contempt of court.

According to the complaint, Hendrickson claims that only government workers are subject to income taxes. Hendrickson tells people to not submit their W-2 and 1099 forms with their tax returns, and in their place submit substitute or corrected W-2 and 1099 forms that they create on which they change their reported income to zero. Under the scheme, people then submit the falsified forms with a tax return falsely reporting no income and request a refund of all taxes withheld from wages. This scheme is number one on the IRS’s 2006 list of the “Dirty Dozen” tax scams, posted at http://www.irs.gov/newsroom/article/0,, ... 93,00.html.

“Federal law provides serious penalties for filing false tax forms,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “People who engage in tax fraud schemes can expect to pay back taxes, plus interest and penalties, and may face criminal prosecution for evading taxes.”

The suit against Hendrickson alleges that he was convicted in 1992 on federal criminal charges for failing to file a federal income tax return and for a conspiracy involving a firebomb placed in a bin at a U.S. Post Office in Royal Oak, Mich. on April 16, 1990, the last day on which tax returns could be postmarked that year. Hendrickson testified at a co-conspirator’s trial that he wrapped a tea bag around the bomb’s tubing as a reference to the Boston Tea Party tax protest.

The seven people sued in addition to the Hendricksons are Sharon K. Artman of Largo, Fla.; Michael J. Dowling of San Diego; Joy M. Ferguson of Henderson, Nev.; Melvin L. Gerstenkorn of Topeka, Kan.; Larry B. Golson and Debra G. Golson of Montgomery, Ala.; and James A. Spitzer of Winter Park, Fla. Copies of all seven complaints will be posted with this press release today at http://www.usdoj.gov/tax/taxpress2006.htm.

This week’s suits are part of the IRS’s and Justice Department’s efforts against tax-fraud schemes. More information about these efforts can be found at http://www.usdoj.gov/tax/taxpress2006.htm. Information about the Tax Division can be found at http://www.usdoj.gov/tax/index.html.
Related Documents:

United States v.
Peter E. Hendrickson, et al.

Artman Complaint

Dowling Complaint

Ferguson Complaint

Gerstenkorn Complaint

Hendrickson Complaint

Golson Complaint

Spitzer Complaint

(PDF documents)


Portable Document Format (PDF) files may be viewed with a free copy of Adobe Acrobat Reader

[Demosthenes]

That's almost three years old???

[Doktor Avalanche]

Yeah, that is three years old.

[webhick]

And there I was, getting all excited.

[Famspear]

A user called "mnflyboy80sr22" over at lost horizons posted a copy of that old year 2006 news release today, and Pete quickly responded with a link to a web page showing his "explanation."

http://www.losthorizons.com/phpBB/viewtopic.php?t=1397

User "spacebar" then provides this comment:

If nothing else they can always claim 'Reliance' in their defense... The book IS copyrighted... and since it is, why would the United States copyright material which perpetuates fraud against itself?

Answer: The United States would not generally "copyright" material that perpetrates a fraud against itself -- and did not do so in this case. The United States did not "copyright" the book at all. The book is authored by Hendrickson, not by the "United States." In general, copyright is a legal right that inheres in the "author" at the time of creation of the work. As one law professor once put it, copyright is not something the author "goes to get" by sending some paperwork off to Washington or somewhere. Copyright is automatic. What many people think of as an author "getting something copyrighted" is really only registering the copyright that the author already holds.

I don't do IP law but, to the best of my knowledge, the U.S. copyright law does not make an exception for fraudulent works, or prohibit copyright protection for authors of fraudulent works.

And whether the law does or not, "spacebar's" premise appears to be faulty. In defending criminal charges regarding one's participation in a scam involving a fraudulent book, the idea that there would be a "reliance" defense based on the "ground" that the book is "copyrighted" is pretty loony.

If "spacebar" really thinks that there would be such a defense, then he needs to take his vitamins. The ability of these people to make it up as they go along never ceases to amuse me. Maybe "spacebar" was just trying to be funny, though.......

[Doktor Avalanche]

And there I was, getting all excited.

I know how you feel. I had this beautiful picture of an atomic bomb exploding and I was kinda hoping you'd work your voodoo and put a disintegrating owl in it (something a la "Terminator 2").

[Famspear]

Weston White at losthorizons has posted this:

LMAO, the folks over at Quackloss, are really on top of things as you can see in a thread posted by them today (they did not clue in on the fact that this article was from 2006 and still they have yet to realize that this "big break" for the IRS resulted in absolutely jack squat) . . .

http://www.losthorizons.com/phpBB/viewt ... 3177#13177

Gee, Weston, how is that we could "not have a clue"? Several people pointed out that the material is from 2006. Reading comprehension, Weston.

And this "big break" resulted in "absolutely jack squat"?

Obviously, Weston, you are still having a hard time keeping up. In addition to posting phony "quotes" from court cases, you are having a hard time coming to grips with this:

When the government filed the civil action against Hendrickson and his wife for the erroneous refunds paid to them, the government also filed six similar suits against some of his followers. "United States Sues Nine in Nationwide Crackdown on Tax-Refund Scam," U.S. Dept. of Justice Press Release (4/13/2006). The other suits were against Sharon K. Artman of Largo, Fla.; Michael J. Dowling of San Diego; Joy M. Ferguson of Henderson, Nev.; Melvin L. Gerstenkorn of Topeka, Kan.; Larry B. Golson and Debra G. Golson of Montgomery, Ala.; and James A. Spitzer of Winter Park, Fla. The government was successful in every case. See, e.g., United States v. Ferguson, 2007-1 U.S. Tax Cas. (CCH) par. 50,461 (D. Nev. 2007).

The judgment against James A. Spitzer was affirmed by the 11th Circuit Court of Appeals, and sanctions were imposed for bringing a frivolous appeal. United States v. James A. Spitzer, 2007 TNT 163-5, No. 07-11073 (11th Cir. 8/21/2007), aff'ng No. 06-00479-CV-ORL-22JGG (U.S.D.C. M.D. Fla. 2/13/2007) (erroneous refund of $16,614 ordered repaid). In a later order, the District Court also ordered Spitzer to pay double attorneys' fees to the United States, in the amount of $16,285.35, "as a sanction for his frivolous and bad faith defense of the entire case." Id., at Docket #49 (7/25/2007).

In the case of Hendrickson acolyte Andrew D. Scott, the United States Tax Court noted that Scott had informed the IRS that he was a follower of Hendrickson's book, Cracking the Code. The Court also noted that Scott did not consult with a tax attorney when filing his tax return, and did not check with an attorney on the validity of Hendrickson’s arguments. The IRS had warned Scott in writing that Hendrickson’s arguments had been repeatedly rejected by the courts. The Tax Court found Scott’s arguments — that he was not an “employee,” and that he did not earn “wages” — to be “frivolous and false.” The Court found Andrew Scott liable for a $10,031 deficiency in tax. The Court also sustained the IRS determination that Scott was liable for the accuracy-related penalty of $2,941 under Internal Revenue Code section 6662(a), and imposed a $20,000 penalty under Internal Revenue Code section 6673 for presenting a frivolous argument. Andrew D. Scott v. Commissioner, Docket No. 26392-06, United States Tax Court, Bench Op. (June 4, 2008).

In another case, Joseph Alan Fennell's arguments — that the compensation he received in exchange for non-federally privileged private sector labor was not taxable, and that non-federally privileged private sector labor is not the subject of an excise (the U.S. federal income tax) — were rejected by the United States Tax Court. See Joseph Alan Fennell v. Commissioner, Docket No. 26285-07L, United States Tax Court, Order of Dismissal and Decision (June 17, 2008).

A penalty of $1,000 under section 6673 was imposed by the Tax Court on Hendrickson supporter Patrick Michael Mooney for presenting frivolous arguments. The court rejected his argument that his wages earned from a private employer were not taxable and his argument that the term "employee" was limited to "someone performing the functions of a public office." Patrick Michael Mooney v. Commissioner, Docket No. 21647-06, United States Tax Court, Order of Dismissal and Decision (May 5, 2008), aff'd per curiam, No. 08-1899 (4th Cir. 1/21/2009).

On his lost horizons web site, Hendrickson has touted the case of Eugene George Warner of Alaska as an example of an individual who has been victorious using Hendrickson’s Cracking the Code, in particular with respect to Form 1040 tax returns for various years, including 1991 and 2001. Warner, an ex-con who has previously served time in federal prison, has been indicted by a federal grand jury on twelve counts of mail fraud, two counts of bankruptcy fraud, one count of tax evasion (involving the tax year 1991, among others), one count of attempting to interfere with the administration of the internal revenue laws, and four counts of filing false tax returns (including the returns for years 1991 and 2001, per counts 3 and 5 of the First Superseding Indictment). See United States v. Eugene George Warner, case no. 3:07-cr-00123-RRB-JDR, U.S. District Court for the District of Alaska (Anchorage Division). Curiously, while Hendrickson has displayed various IRS notices issued to Warner as examples of evidence of Cracking the Code victories for Warner for 1991 and 2001, it is not clear that Warner actually used Hendrickson’s method for those years. Warner’s trial, previously scheduled for February 2009, is now set for May 4, 2009.

At least two different return preparers who expressly relied on Cracking the Code have been enjoined from preparing tax returns, the courts holding that the returns were false and frivolous. United States v. Donald A. Gray, 2007 U.S. Dist. LEXIS 19833; 99 A.F.T.R.2d (RIA) 1695, 2007 TNT 56-10, No. 1:07-CV-42 (U.S.D.C. W.D. Mich. 3/19/2007); United States et al. v. Beverly J. Hill et vir. et al., 2005 U.S. Dist. LEXIS 38086; 97 A.F.T.R.2d (RIA) 548, 2006 TNT 27-13, No. CV-05-877-PHX (U.S.D.C. Ariz. 12/22/2005).

From - The Tax Protester Dossiers, at

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

Now, go back and read the first post in this thread, and see if you can find any names you recognize, Weston. Artman, Dowling, Golson, Spitzer? Etc.? The government WON THOSE CASES, WESTIE-POO. Earth calling Weston White at Weston World......

Weston, if you spent less time on Planet Weston with your Tyrannical Response Team, and more time in the real world, you might not make a fool of yourself so often.

[Demosthenes]

still they have yet to realize that this "big break" for the IRS resulted in absolutely jack squat) . . .

Jack squat?

Sharon K. Artman DIstrict Court case:
http://www.cheatingfrenzy.com/artman5.pdf
Result: repaid $8,597.39 in 2006, and accused the government of being at fault because they trusted her CtC amended returns

Michael J. Dowling District Court case:
http://www.cheatingfrenzy.com/dowling14.pdf
Result: repaid back his $26,520 refund plus interest plus a $500 frivolous filing penalty in 2006

Joy M. Ferguson District Court case:
http://www.cheatingfrenzy.com/ferguson50.pdf
Result: repaid $4,753 plus interest in 2008 via garnishment

Melvin L. Gerstenkorn District Court case:
http://www.cheatingfrenzy.com/gerston16.pdf
Result: never responded to the DOJ's motion for summary judgment and was ordered to repay $2,275 plus interest

Larry B. Golson and Debra G. Golson District Court case:
http://www.cheatingfrenzy.com/golson18.pdf
Result: repaid $69,761 plus interest in 2006

James A. Spitzer District Court case:
http://www.cheatingfrenzy.com/spitzer49.pdf
Result: ordered to repay $16,614 plus interest plus $16,285 in sanctions

Not to mention that Pete's loss in civil court is the final nail in the "willfullness" coffin in his criminal case...

[mutter]

One of the points i was trying to make is that just cos some court says something or even issues an order against you does not mean it has changed your beliefs. Thats my issue with trying to prove what someone believes. you really cant. But what you can do is precent enough evidence to show that a reasonable person SHOULD HAVE changed their beliefs.

[Dezcad]

One of the points i was trying to make is that just cos some court says something or even issues an order against you does not mean it has changed your beliefs. Thats my issue with trying to prove what someone believes. you really cant. But what you can do is precent enough evidence to show that a reasonable person SHOULD HAVE changed their beliefs.

Do you think someone could lie about what their beliefs are?

[mutter]

One of the points i was trying to make is that just cos some court says something or even issues an order against you does not mean it has changed your beliefs. Thats my issue with trying to prove what someone believes. you really cant. But what you can do is precent enough evidence to show that a reasonable person SHOULD HAVE changed their beliefs.

Do you think someone could lie about what their beliefs are?

If they are young and male and will get them laid, then the answer is yes.

Of course they can, and dont leave the chicks out they lie too

[ASITStands]

One of the points i was trying to make is that just cos some court says something or even issues an order against you does not mean it has changed your beliefs. Thats my issue with trying to prove what someone believes. you really cant. But what you can do is precent enough evidence to show that a reasonable person SHOULD HAVE changed their beliefs.

There have been some excellent discussions of Cheek v. United States before, and particularly, in relation to Pete Hendrickson and 'Cracking the Code.' Search the forum.

However, reading from the case here, I'll post a couple of basic issues:

Syllabus

Petitioner Cheek was charged with six counts of willfully failing to file a federal income tax return in violation of § 7203 of the Internal Revenue Code (Code) and three counts of willfully attempting to evade his income taxes in violation of § 7201. Although admitting that he had not filed his returns, he testified that he had not acted willfully because he sincerely believed, based on his indoctrination by a group believing that the federal tax system is unconstitutional and his own study, that the tax laws were being unconstitutionally enforced and that his actions were lawful. In instructing the jury, the court stated that an honest but unreasonable belief is not a defense, and does not negate willfulness, and that Cheek's beliefs that wages are not income and that he was not a taxpayer within the meaning of the Code were not objectively reasonable. It also instructed the jury that a person's opinion that the tax laws violate his constitutional rights does not constitute a good-faith misunderstanding of the law. Cheek was convicted, and the Court of Appeals affirmed.

Held:

• 1. A good-faith misunderstanding of the law or a good-faith belief that one is not violating the law negates willfulness, whether or not the claimed belief or misunderstanding is objectively reasonable. Statutory willfulness, which protects the average citizen from prosecution for innocent mistakes made due to the complexity of the tax laws, United States v. Murdock, 290 U. S. 389, is the voluntary, intentional violation of a known legal duty. United States v. Pomponio, 429 U. S. 10. Thus, if the jury credited Cheek's assertion that he truly believed that the Code did not treat wages as income, the Government would not have carried its burden to prove willfulness, however unreasonable a court might deem such a belief. Characterizing a belief as objectively unreasonable transforms what is normally a factual inquiry into a legal one, thus preventing a jury from considering it. And forbidding a jury to consider evidence that might negate willfulness would raise a serious question under the Sixth Amendment's jury trial provision, which this interpretation of the statute avoids. Of course, in deciding whether to credit Cheek's claim, the jury is free to consider any admissible evidence showing that he had knowledge of his legal duties. Pp. 498 U. S. 199-204.

Page 498 U. S. 193

• 2. It was proper for the trial court to instruct the jury not to consider Cheek's claim that the tax laws are unconstitutional, since a defendant's views about the tax statutes' validity are irrelevant to the issue of willfulness, and should not be heard by a jury. Unlike the claims in the Murdock-Pomponio line of cases, claims that Code provisions are unconstitutional do not arise from innocent mistakes caused by the Code's complexity. Rather, they reveal full knowledge of the provisions at issue and a studied conclusion that those provisions are invalid and unenforceable. Congress could not have contemplated that a taxpayer, without risking criminal prosecution, could ignore his duties under the Code and refuse to utilize the mechanisms Congress provided to present his invalidity claims to the courts and to abide by their decisions. Cheek was free to pay the tax, file for a refund, and, if denied, present his claims to the courts. Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court. Pp. 498 U. S. 204-207.

882 F.2d 1263, (CA7 1989) vacated and remanded.

Notice, the words, "good-faith misunderstanding of the law," and later, "voluntary, intentional violation of a known legal duty," and consider whether Pete Hendrickson has any reason to believe that his course of action intentionally violates a known legal duty.

Consider whether there's any doubts as to his position in law.

Was there any place (or time) in which Hendrickson had been shown the law, as it is to be enforced, and was there any place (or time) in which Hendrickson had reason to believe his position might be wrong? Consider the civil loss in the erroneous refund suit.

Consider also the civil losses of other participants using 'Cracking the Code.' Those listed above and those which we know (and have discussed) on this forum, Mooney, Scott, etc.

Then consider whether anyone at any time (or in any place) had told Hendrickson his error.

And, consider the plethora of evidence that's available from Lost Horizons where someone questioned Hendrickson (and brought contrary theories to him), and he intentionally argued around the contrary theory and held to his own interpretation of law. Willfulness.

The question before the jury would be whether Hendrickson had knowledge of a known legal duty and violated same by intentionally, willfully choosing to ignore contrary evidence.

There certainly have been more than one person who carefully tried to reason with Pete Hendrickson as to his error, and he deliberately chose to ignore their argument. And, the Sixth Circuit itself, as well as the lower court and government, all told him the same.

Pete Hendrickson has had "notice of his error." He is without excuse.

He can claim a "good-faith belief," but he does not have a "good-faith misunderstanding," and in fact, he has intentionally ignored every effort to help him understand his legal duty.

I do not predict success for Pete Hendrickson or 'Cracking the Code.'

[SteveSy]

The question before the jury would be whether Hendrickson had knowledge of a known legal duty and violated same by intentionally, willfully choosing to ignore contrary evidence.

I take issue with this. Known by who, the IRS, posters on his forum? The IRS is not the final say on the law nor are the posters on his forum. He may have knowledge of someone else interpretation of the law, but an interpretation of law isn't the law itself. Lower courts are not even the final say on the law when it concerns the public in general. It's binding on the taxpayer that's in front of them and that's it. It's very clear by the IRS's own manual they do not consider lower court decisions the law for everyone. How can you expect the average person to? Granted, if it's lost a bunch of times it's highly likely it will lose again, but the IRS doesn't make distinction concerning its position does it.

You guys willfully ignore contrary evidence all the time, yet you still hold your belief. Just because it comes from the IRS, who has been proven wrong many times and lost in court, doesn't mean you now know your duty and you must have no choice but to believe you're wrong..

4.10.7.2.9.8 (01-01-2006)
Importance of Court Decisions
...
Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service only for the particular taxpayer and the years litigated. Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers.

You're right about one thing though. He's doomed to lose, but it will have little or nothing to do with a whether or not he had a good faith belief or misunderstanding. He'll never get to explain his side of the story showing the jury how he arrived at his belief using the very thing he formed his belief from, the law itself. The jury will be forced to accept an reworded version of the law from the judge. Making it look like there's no possible way Pete could have assumed he might be right, and it was obvious from the reworded version no one could have thought that.

[SteveSy]

4.10.7.2.9.8 (01-01-2006)
Importance of Court Decisions
...
Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service only for the particular taxpayer and the years litigated. - as it is for the defendant. DUH! Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers. - just as an adverse decision of a lower court does not require an ordinary plaintiff (or defendant) to alter their position when their unique case is tried.

Right and? Clearly, knowledge of a case, in which you were not a party to, saying you're wrong doesn't mean you now have no choice but to accept you're wrong. Whoever you are.

[jg]

The question before the jury would be whether Hendrickson had knowledge of a known legal duty and violated same by intentionally, willfully choosing to ignore contrary evidence.

I take issue with this. Known by who, the IRS, posters on his forum? The IRS is not the final say on the law nor are the posters on his forum. He may have knowledge of someone else interpretation of the law, but an interpretation of law isn't the law itself. Lower courts are not even the final say on the law when it concerns the public in general. It's binding on the taxpayer that's in front of them and that's it. ...

From viewtopic.php?f=8&t=3630&st=0&sk=t&sd=a&start=0

Hendrickson will be convicted for two reasons:

1. He's pleaded guilty before to willfully failing to file income tax returns, and he's filed "non-CtC" returns in the past, so a clear case can be made that he willfully violated a clear (and known) legal duty; and

2. "Cracking the Code" will be incomprehensible to the jury (after all, it's largely incomprehensible to its advocates at LH), and the jury will therefore conclude that it is a lame rationale for tax evasion and not the result of a mistake.

There is strong evidence against the defense claiming that Hendrickson does not know, or even that he has a good fatih misunderstanding, of his legal duty to file a tax return because of his prior pleading. Hendrickson has been in court personally so has no basis to claim he is unaware ro does not know of his legal duty.

The correspondence with the IRS in regard to the years in question for this criminal indictment will also be evidence that there was knwledge of a legal duty. The fact that Hendrickson disagrees is not a defense.
Hendrickson's disagreement with the law will no more be a defense for him than it was for Larken Rose. Of course, the jury can still choose not to convict.

[Famspear]

. . . . Lower courts are not even the final say on the law when it concerns the public in general. It's binding on the taxpayer that's in front of them and that's it. It's very clear by the IRS's own manual they do not consider lower court decisions the law for everyone.

Sorry Steve, but you're wrong. The rulings of the lower courts are indeed binding on EVERYONE -- but within certain limitations. The Internal Revenue Manual is also wrong -- or least the language of the Manual is misleading. Whether the IRS "considers" itself to be bound by lower court decisions, the IRS is indeed bound by lower court decisions to some extent.

We need to distinguish between and among three legal concepts:

1. claim preclusion (also known as res judicata);

2. issue preclusion (mainly the variety of issue preclusion known as collateral estoppel, and also confusingly included in the term "res judicata" at times);

3. stare decisis.

When a lower court (or any court) makes a holding in a published opinion on a legal point, the holding stands as precedent, regardless of whether the court is the U.S. District Court, the U.S. Tax Court, or a higher court. Not all precedent is created equal, but precedent is binding on everyone in general, not merely on the parties to the case. By contrast, matters covered by res judicata and collateral estoppel are much more limited in their binding, or preclusive, effect.

If, for the sake of argument, we assume that tons and tons of District Court and Tax Court decisions have ruled that "compensation for personal services rendered in private sector, non-federally privileged activity is includible in section 61 gross income (and therefore is taxable)" -- which is a legal issue, not a factual one -- and literally no federal court has ever ruled the other way, then a defendant in a federal criminal tax case who is AWARE of those lower court decisions may well be found by a jury to have the mens rea element of willfulness. Under the Cheek doctrine and other federal cases, willfulness connotes the voluntary, intentional violation of a known legal duty. Even assuming for the sake of argument that no appeals court has ever ruled on the issue at hand, that WOULD NOT BE A DEFENSE. The mere fact that the U.S. Supreme Court has not ruled on the issue WOULD NOT BE A DEFENSE.

So, SteveSy is quite incorrect.

Willfulness is the voluntary, intentional violation of a KNOWN LEGAL DUTY, not the voluntary, intentional violation of a "known legal duty but only if there is a higher court ruling of which the defendant is aware."

In a sense, the Internal Revenue Service, in the Internal Revenue Manual, is also incorrect -- or at least is being misleading and imprecise in its use of language -- when the Service states that it is not bound by rulings of courts other than the Supreme Court. Here's an illustration -- using the concept of frivolous litigation.

If the INTERNAL REVENUE SERVICE (or the Department of Justice) were suddenly to come into court and start making frivolous arguments every day of the week, the Service (DOJ, etc.) would NOT have a valid defense to the imposition of penalties for taking frivolous positions in court merely by saying "Oh, but the Supreme Court has never ruled on this point of law, and we're not bound by the hundreds and hundreds of District Court and Tax Court decisions on this point, and the Internal Revenue Manual says so......."

Unlike the matters considered precluded under the doctrines of res judicata and collateral estoppel, a holding by a court of law -- a judicial precedent, a decision on a point of law -- DOES BIND EVERYONE IN GENERAL, even the IRS, even the DOJ, even if the Supreme Court has not ruled on the legal point at hand, and even if the IRS (or other party) was not a party in the case. THAT'S WHAT LAW IS: RULES THAT BIND PEOPLE IN GENERAL, AND NOT JUST THE PARTIES TO THE CASE.

Now, of course all this discussion is subject to the caveat that not all precedent is "created equal." For example, the mere fact that a U.S. District Court in Alabama has ruled one way on a point of law does not necessarily mean that I cannot argue the opposite in a U.S. District Court in Texas. A full discussion of the limitations of the precedents established in different courts in different jurisdictions at different levels in the hierarchy of the legal system, etc., is beyond the scope of this post.

[ASITStands]

I agree with 'jg' and 'Famspear.'

The fact that Pete Hendrickson is aware of the plethora of lower court decisions that held contrary to his interpretation is enough to satisfy the element of knowledge.

"... a known legal duty."

And, the fact he disagrees with those decisions, or the government's reading of them, is NOT a defense that overcomes willfulness or establishes a "good-faith misunderstanding."

"... intentional violation of a known legal duty."

His past behavior in filing returns, his previous pleading of guilt, his experience in court and correspondence with the government, as well as his civil case, are all against him.

He can claim a "good-faith belief" in his reading of tax law, but he cannot claim either a "good-faith misunderstanding" or not having knowledge of a known legal duty.

Really, the decision in his civil case effectively seals his fate as far as willfulness.

[LPC]

. . . . Lower courts are not even the final say on the law when it concerns the public in general. It's binding on the taxpayer that's in front of them and that's it. It's very clear by the IRS's own manual they do not consider lower court decisions the law for everyone.

Sorry Steve, but you're wrong. The rulings of the lower courts are indeed binding on EVERYONE -- but within certain limitations. The Internal Revenue Manual is also wrong -- or least the language of the Manual is misleading. Whether the IRS "considers" itself to be bound by lower court decisions, the IRS is indeed bound by lower court decisions to some extent.

We need to distinguish between and among three legal concepts:

1. claim preclusion (also known as res judicata);

2. issue preclusion (mainly the variety of issue preclusion known as collateral estoppel, and also confusingly included in the term "res judicata" at times);

3. stare decisis.

When a lower court (or any court) makes a holding in a published opinion on a legal point, the holding stands as precedent, regardless of whether the court is the U.S. District Court, the U.S. Tax Court, or a higher court. Not all precedent is created equal, but precedent is binding on everyone in general, not merely on the parties to the case.

In another thread, there was a discussion about how legal thinking is different from software thinking, engineer thinking, and accountant thinking, and I think that this is one of those issues that brings that difference to fore.

“The prophecies of what the courts will do in fact and nothing more pretentious are what I mean by the law.” Oliver Wendell Holmes Jr., "The Paths of the Law" (1897).

Prophesying (or predicting) how judges will rule is what lawyers do. Which means that much of what we learn in law school is learning how to think like judges think.

So when a lawyer says that a precedent is "binding" the lawyer is not saying that a judge who doesn't follow the precedent will be fined or punished. What the lawyer is saying is that every judge the lawyer can imagine will follow that precedent.

Predicting how a judge will rule can involve a lot of different factors. The literal language of the statute. What appears to be the purpose of the statute. The regulations. Previous IRS rulings on the issue. And court opinions.

Considering court opinions, you think about the level of the court, and whether it was a trial court or appellate court opinion. Were the courts in my district or circuit? How good were the opinions? Did the judges consider the issues that seem to be the important issues or were they distracted by facts peculiar to the case in front of them?

Obviously, if the Supreme Court has ruled on an issue, that pretty much ends the inquiry, because every other court is going to follow the Supreme Court, so unless you can think of a good reason to "distinguish" the case, or convince the Supreme Court itself that it was wrong before, and are willing to litigate the matter all the way up to the Supreme Court, you're probably going to bail out right there.

But suppose that the only decision on point is a district court opinion, what then? Then you read the opinion to see how persuasive it is, and try to figure out if other judges are going to follow it. Or should you argue that the first judge was wrong and that later judges should ignore the first ruling?

It sometimes happens that later judges decide to ignore the first opinions. Suppose the 1st Circuit Court of Appeals rules one way on an issue, but then a district court in the 5th Circuit rules a different way. If you've got the same issue in the 6th Circuit, how much weight do you give the conflicting circuit and district court opinions?

For example, I've been following an issue for several years relating to the estate tax, and the issue is whether section 7520 applies to lottery winnings. (Don't ask.) The first court (9th Circuit) thought that it did not. The second court (2nd Circuit) also thought it did not. But then the 5th Circuit disagreed, along with district courts from the 10th and 1st Circuits. Most recently (2009), the 6th Circuit agreed with 5th Circuit and disagreed with the 9th and 2nd Circuits, offering reasons that explain why the law has changed since the 9th and 2nd Circuits issued their opinions.

So if you've got the same issue in the 4th Circuit, which precedent do you follow? The 6th and 5th Circuits or the 9th and 2nd Circuits?

All the IRM is saying is that IRS lawyers are going to act the same way as other lawyers. Losing one case in one district, or even one circuit, does not necessarily mean you give up. You rethink your position, and you think about it, but you're not "bound" by one court opinion that you think reached the wrong result.

Hendrickson doesn't have this kind of problem, because no judge has ever agreed with him, or ever will, and that's because what he's peddling his crap. Whether one district court or 50 district courts have ruled against him, and whether one district or 11 districts have ruled against him, isn't the issue, because he's still peddling gibberish and crap.

Hendrickson had no good reason to ignore the rulings of the courts that had ruled against his theories, and a jury has no good reason to believe that he made a mistake, because his theories not only conflict with all precedent since 1796 but also make no sense.

[Famspear]

After having been called on his "jack squat" comment, Weston White has now backpedalled:

Oh and by jack squat, I was referring to the fact that CtC is still going strong, CtC is in its 10th edition, PH is still doing what he enjoys doing.

http://www.losthorizons.com/phpBB/viewtopic.php?t=1397

Sure, you were, Weston. And Pete is still doing what he enjoys doing: preparing for another criminal tax prosecution. I hope this one goes better for him than the last one did. If he is convicted again, I can guarantee you that the prison term will be a lot longer this time.

By the way, Weston, we notice that you still aren't mentioning to your fellow scammers at losthorizons that you were caught on the phony quotes you posted on your own web site.

Weston continues:

The book has not been band [sic] from distribution as Irwin Schiff's work has been, we are all still helping those in need of help, the CTC victory tally keeps climbing, etc., etc.

Ah yes: the scam code words for "we are still filing fraudulent claims for refunds using the Cracking the Code scam," and "the fraudulent refund tally just keeps rising."

Referring to the scammers who have already lost their court cases over the Cracking the Code scam, Weston writes:

So sad for those other subjects that got scared and showed cowardice to the Feds. Obviously they did not fully understand where they were standing and failed to become well versed in such matters, failed to do their own footwork and research prior to taking action.

(bolding added).

Of course, we can count Peter Eric Hendrickson himself among the group of scammers who "got scared" and "showed cowardice." Blowhard Hendrickson couldn't even win his own case after having filed his tax returns using his own scam. Hendrickson has had penalties imposed, and now he is under a court order not to use his Cracking the Code scam on his own tax returns.

Ah, in stark contrast to Liar Weston White, who DID HIS "RESEARCH" and posted it on his own web site -- in the form of fakery. Yes, posting fake quotations from court cases will look really good if Weston is ever indicted for a federal tax crime, and is trying to assert his "lack of willfulness" based on his supposed "belief" about the tax law. Weston, if you have a actual good faith believe based on a "misunderstanding" caused the "complexity" of the tax law, then please explain to the ladies and gentlemen of the jury why you are a LIAR.

Weston continues:

They [the Cracking the Code scammers who have lost in court] exposed their backs to the enemy they [sic] enemy put them into a choke hold and played them like a harp, turn those subjects gave up before the battle even began. So it is quite sad for those that did not bother to first fully comprehend what to expect from filing correctly. Reward and prosperity goes to those whom prepare!

Ah, which means that Weston White believes that "reward and prosperity" will go to Weston White, who has "prepared." Prepared lies and fakery, that is. Although Pete Hendrickson and the other scammers lost their cases, Weston ("Einstein") White will be prepared when the time comes.

Weston, your saving grace may be that very few federal tax scammers are ever prosecuted.

[Famspear]

. . . . . By the way, has John J. Bulten abandoned LH, or is he waiting to see which way the wind blows after PHs trial. Or is even he appalled by the knuckle-dragging troglodytes that have infested LH?

I looked for you.....

The most recent post by John J. Bulten at losthorizons was December 17, 2008.

At Wikipedia, December 15, 2008.

Who knows?