United States Attorney
Northern District of Texas

1100 Commerce St., 3rd Fl.
Dallas, Texas 75242-1699

Telephone (214) 659-8600
Fax (214) 767-0978

FEDERAL JURY CONVICTS RICHARD SIMKANIN

Businessman Found Guilty on 29 Tax Charges

United States Attorney Jane J. Boyle announced that Richard Michael Simkanin, a local business owner who has not withheld taxes from his employees' checks for three years, was convicted last night by a federal jury in Fort Worth, Texas, on 29 counts of a 31-count superseding indictment that charged him with various tax violations. Simkanin, age 59, is the owner of Arrow Custom Plastics in Bedford, Texas. The jury deliberated more than 13 hours before returning its verdict. Following the verdict, Simkanin was returned to the custody of the U.S. Marshals Service. Simkanin has been in federal custody since his arraignment on June 27, 2003 when evidence was presented to the Honorable United States District Judge John McBryde that Simkanin did not accept the authority of the federal courts.

The jury found Simkanin guilty of ten counts of wilful failure to collect, account for and pay over taxes due; 15 counts of making false claims against the United States; and four counts of failure to file individual income tax returns. The jury could not reach a verdict on two counts of wilful failure to collect, account for and pay over taxes due and Judge McBryde declared a mistrial on these two counts. Simkanin faces a statutory maximum sentence of 129 years imprisonment and millions of dollars in fines. He is scheduled to be sentenced by Judge McBryde on April 30, 2004.

U.S. Attorney Jane Boyle said, "The jury's verdict sends a very loud and clear message that there are consequences to disregarding the tax laws of this country and a federal conviction is one of them."

Michael Lacenski, Special Agent in Charge of the Dallas IRS-Criminal Investigation office stated, "The jury's verdict reaffirms that this is a nation of laws not of anarchy. Taxes provide for the freedoms we all enjoy as Americans. Those that mock our Government and our tax laws will feel the full force of the law."

During trial, government witnesses testified that Simkanin's bookkeeper and two members of the accounting firm who prepared company tax returns for Arrow Custom Plastics, all told Simkanin that was unlawful to refuse to collect taxes from the wages of his employees. Simkanin was also given sections of Internal Revenue Code that mandated the collection of these taxes. Simkanin told one of his accountants that as a "Free Man," he was not obligated to pay taxes or collect the taxes of his employees. In March 2000, his accounting firm quit after it was unsuccessful in persuading Simkanin to reconsider and collect the employee taxes.

Evidence presented at trial also showed that Simkanin was warned by the senior partner of the accounting firm that he would get into "criminal trouble" if he refused to withhold taxes on the wages of his employees. By refusing to withhold taxes during the period 2000-2002, the Simkanin was able to retain over $175,000 in taxes lawfully due to the IRS.

The false claim counts of the superseding indictment were based upon false claims resulting from Simkanin filing a $235,000 claim for refund in taxes already collected for 1997-99. Testimony at trial showed that when his claim was denied, Simkanin was told that federal courts had repeatedly rejected his position that "wages are not taxable income." In March 2001, following an exchange of several letters between Simkanin and Congressman Joe Barton, the Congressman informed Simkanin that wages are taxable income.

Simkanin testified that he was aware of the IRS website that listed the court cases that had rejected his position. He discounted these court cases because he "did not trust the IRS." Simkanin also admitted that he filed several documents in 2000-2002 which stated that he was not within the jurisdiction of the United States. Several of these documents and newspaper ads challenged the validity and the constitutionality of federal tax laws. In fact, Simkanin is one of five small business owners who published a full page ad in USA Today on March 2, 2001, claiming that there was no law requiring taxes to be withheld from employees' wages. This ad and others like it, were sponsored by an anti-government, tax protest organization known as We The People. In the documents, Simkanin claimed he was a "stranger to the laws of the United States" and that the federal government was the "present insurgent government that was in rebellion to the Texas Republic." As part of his rejection of state jurisdiction, Simkanin also admitted that he surrendered his Texas driver's license in 1996 and operated a motor vehicle without a valid driver's license.

The government presented 11 witnesses including Simkanin's former CPA's, an IRS Revenue Agent who reviewed Simkanin's claims, and his sister-in-law who worked as his office manager at Arrow but resigned after Simkanin's decision to stop withholding. Based upon the evidence presented, the jury concluded that Simkanin clearly understood the requirements of the law but simply disagreed with and refused to obey the tax laws. They did not find that he had a "good faith misunderstanding" of the law, as presented by his defense.

Besides calling Simkanin as a witness, the defense called Joseph Banister, a former IRS Criminal Investigator, who now claims there is no law mandating income taxes, Larkin Rose, a medical transcriber from Pennsylvania who sells video tapes stating only foreign earned income is taxable, Robert Schultz, the self-described head of the We The People organization, and Edward Rivera, an attorney from California who was recently enjoined by the Federal District Court, from selling patently false and frivolous tax advice. "The jury saw right through defense arguments and realized they made no sense whatsoever and discounted them completely," said U.S. Attorney Boyle. Ms. Boyle continued, "One would hope that would give the leaders of this so-called movement pause for thought."

"Employers who ignore their obligations to withhold and pay federal taxes on their payrolls harm their employees and cheat honest taxpayers," said Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division. "The Department of Justice is working with the Internal Revenue Service to see that these tax crimes are detected, prosecuted, and punished," continued Ms. O'Connor.

"The IRS-CI did an outstanding job in stopping this scheme dead in its tracks. The message is simple; obey our tax laws or look forward to some quality time in federal court," said U.S. Attorney Boyle.

U.S. Attorney Boyle also thanked the U.S. Marshals Service and the Federal Protective Service for their excellent work in providing security throughout the trial.

Assistant United States Attorney David Jarvis and Trial Attorney Robert Kemins of the Department of Justice, Tax Division, prosecuted the case.

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