Wednesday, November 26, 2003

Mistrial is declared in tax case
By Toni Heinzl
Star-Telegram Staff Writer

FORT WORTH - Bedford businessman Richard Simkanin remained in federal custody Tuesday night after jurors said they could not reach a verdict on a 27-count indictment accusing him of failing to withhold taxes from his employees' wages and of filing fraudulent claims for tax refunds.

U.S. District Judge John McBryde declared a mistrial after jurors said they were deadlocked after eight hours of deliberations.

Prosecutors said they would retry Simkanin, 59, who couched his opposition to federal income tax in the patriotic language of the Founding Fathers, publicly declared his contempt for the federal government and once wrote to the Treasury secretary that he had repatriated himself from the United States to the "Republic of Texas."

On his Web site, Simkanin published a warning that spoke of the "fury of a fire" that would consume his adversaries. McBryde cited the warning in a scathing order issued July 14 in which he stated his reasons for keeping Simkanin in jail pending trial.

Simkanin, 59, the owner of Arrow Custom Plastics, pleaded guilty Sept. 30 to charges of failing to collect and pay taxes on his employees' wages. The plea agreement was accepted by McBryde.

But it was later discovered that the plea documents contained a mistake regarding the potential maximum sentence. The original plea documents said the maximum possible sentence was three years, but attorneys later realized that the document should have said five years.

McBryde threw out the plea agreement, and Simkanin then decided not to accept another plea offer with a possible penalty of five years. He opted to go to trial.

He went on trial Monday on 12 counts of failing to collect and pay $175,000 in taxes on his employees' wages from January 2000 through December 2002 and 15 counts of filing fraudulent claims for tax refunds totaling $234,515 for the years 1997 through 1999.

Defense attorney Arch McColl of Dallas said seven attorneys and the judge overlooked the mistake in the original plea agreement.

McColl and Assistant U.S. Attorney David Jarvis, the lead prosecutor in the case, said they had never known of a case going from a final plea agreement to a trial.

Simkanin was a member of a group of citizens who took out a full-page ad in USA Today on March 2, 2001, declaring their opposition to the federal income tax. Members of the group call themselves "non-filers"-- the term they prefer over "tax protesters."

Simkanin testified Monday that he followed the advice of a certified public accountant who told him it was legal to stop withholding taxes from his employees' paychecks. He said his tax views are based on his Christian faith.

"I was robbing [the employees] of their opportunity if I withheld the fruits of their labor," Simkanin testified.

Jurors in Simkanin's trial had to weigh the evidence in light of a unique feature of federal tax laws: Ignorance of the law is a legal defense if a taxpayer unintentionally violates the law after accepting wrong advice in good faith.

Prosecutors argued that Simkanin knew that his employees' wages were taxable income.

The government witnesses included Simkanin's former accountant, Fred Taylor, who testified that his firm stopped representing Simkanin when Simkanin refused Taylor's advice to keep withholding and paying taxes on employees' wages. Taylor, an accountant with more than 25 years of experience, said he told Simkanin that it would be unlawful to drop out of the tax system.

Jarvis said Simkanin wrote a letter to U.S. Rep. Joe Barton, R-Ennis, on Aug. 2, 2000, urging Barton to support legislation to abolish the withholding requirement proposed by U.S. Rep. Ron Paul, R-Clute, the 1988 Libertarian Party candidate for president.

"If Mr. Simkanin had a good-faith misunderstanding of the law, if he believed withholding wasn't required under the existing law, why would he ask Congressman Barton to support a change in the law?" Jarvis asked.

McColl said his client trusted certified public accountant Wayne Paul.

"Mr. Paul advised my client he did not have a requirement to withhold because of the particular business he was in," Mccoll said. "He relied on that opinion in good faith."