Originally published on Forbes.com.
Did you hear the one about the kid who murdered his parents and then asked the court for mercy, because he was an orphan? Gerald Scott and Don Gooch have inspired me to come up with a followup. Then the kid appealed his conviction arguing that the trial judge should not have allowed him to represent himself using such a ridiculous defense.
Chutzpah piled on the chutzpah . Scott and Gooch went to the Sixth Circuit to complain that their trial judge should not have allowed them to represent themselves, since they were using whackadoodle tax protester theories in their defense. I have to say that I have just a tad bit of sympathy for them. In some ways they are victims of an overburdened tax administration system. Of course their troubles are of their own making, so my sympathy is limited.
You can follow along from the indictment if you like. Scott and Gooch were doing a variation of the OID fraud that involved a purported Nonmortgage Widely Held Fixed Income Investment Trust (NMWHFIT). Such things do actually exist. Here is the tax information from one. Form 1099-OID includes withholding. Like W-2 withholdings, the idea is that somebody sends money on your behalf to the government which you then claim as a payment on your tax return. If, as is common with W-2s, the withholding is more than the tax, you get a refund.
Here is the ridiculous part. The IRS does not make sure that it actually received the money indicated on the Form 1099-OID, before issuing the refund. Apparently it did not even have a mechanism for flagging large refunds where the purported withholding is out of proportion to the purported income. Thus Scott and Gooch actually received some of the millions in refunds that they claimed.
This is the part that troubles me. These guys should have received a very stern letter telling them not to engage in such silly behavior. Instead, they received the money and were later tracked down and will now serve long sentences.
Of course if the IRS had tight procedures for verifying refunds, some legitimate refunds would be delayed. Damned, if the do, damned if they don’t. Still the success of the OID fraud, which should not have worked at all, indicates that they leaned way too far in the direction of getting the refunds out quickly.
The Trial
At the trial the defendants insisted that they wanted to represent themselves apparently because conventional attorneys don’t have the right stuff.
A hearing was held two days later, where Scott explained his belief that most represented defendants are “pretty much forced to plea or scared to take a plea” but that Scott had “exculpatory evidence … that would pretty much turn the tides[.]” Scott also suggested he was “an international diplomate with immunity and at peace with the United States, as well as a nonadverse party to the alleged allegation.”
Gooch had more powerful support.
Around the same time, Gooch began making pro se filings, including a notice declaring his lawyer incompetent and a motion to dismiss for lack of jurisdiction on the ground that Gooch was governed only “by God’s law.”
Their strategy seemed to be to catch the government in a mistake of some sort.
At trial, Gooch and Scott put forth an unusual defense. They claimed to know, even if the IRS did not, that NMWHFITs permitted a trustee to issue his own tax credits and thus, they had no intent to defraud the United States by claiming the credits. Gooch and Scott cross-examined the Government’s witnesses on potential bias, among other things. The defendants called no witnesses of their own and did not testify in their own defense.
Things did not go well for the defendants.
After three days of trial, the jury found Gooch and Scott guilty on all counts. Scott received a total concurrent sentence of 240 months and Gooch received a total concurrent sentence of 212 months. This appeal followed.
The Appeal
Now they are saying that the court should have ordered a competency hearing before allowing them to represent themselves.
A defendant is incompetent to stand trial when he lacks a “sufficient present ability to consult with his lawyer with a reasonable degree of rational understanding” or lacks “a rational as well as factual understanding of the proceedings against him.”
The Sixth Circuit was not having any of it.
We have examined the record and conclude there was insufficient evidence to doubt the defendants’ competence to stand trial. Yes, they espoused fringe views associated with the “sovereign citizen” or “tax protester” movement. But merely believing in fringe views does not mean someone cannot cooperate with his lawyer or understand the judicial proceedings around him.
This reminds me just a bit of Irwin Schiff’s most recent appeal where he was arguing ineffective assistance of counsel, because the issue of his bipolar disorder was not raised.
Many years ago when I was working in the hotel/restaurant industry, I remember a restaurant manager talking about how it was important to have good cash controls to avoid people being led into temptation and harming themselves. I remember that when I think about the OID fraud. It should never have worked at all. Now we have people deservedly serving long prison sentences for being idiots. It’s very sad.