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Evidence sufficient to support a tax protester’s conviction for filing false federal tax returns


In United States v. Croteau, the defendant challenged the sufficiency of the evidence for his ten-count criminal conviction in federal court for making false and fictitious claims on this tax returns and for the reasonableness of his 56 month federal sentence. Croteau was a tax protester who filed false returns for three consecutive years claiming that he was entitled to refunds totaling $400,000 and to substantiate his return he submitted false 1099-OID forms reporting that financial institutions had issued interest income to Croteau and withheld the interest for federal tax purposes. Croteau’s tax returns sought refunds of the money withheld. None of the financial entities listed on Croteau’s 1099-OID forms had issued any interest income or any income to Croteau. Despite communication from the I.R.S. notifying him that he had provided the I.R.S. with frivolous tax information, Croteau repeatedly submitted amended tax returns for the same years containing fictitious and fraudulent 1099-OID information.   To make matters worse, Croteau also recorded several false and fictitious liens and documents in the Lee County Clerks’ office asserting that the IRS owed him hundreds of millions of dollars.   At his trial he did not contest that he had in fact filed false and fictitious tax returns and other financial documents. He raised a good-faith defense, claiming he had an honest belief that what he was doing was correct.

Croteau testified at this trial and testified to his honest belief that what he was doing was correct because he learned from tax protest group that he could become a member of a sovereign group known as the Little Tribe of the Pembina Nation and did not need to submit to government authority to pay taxes. He also learned from a seminar put on by William Shrout that he had a secret Federal Reserve Bank account containing money he was entitled to and that he could access by using the 1099-OID forms. Croteau called as a witness Dr. Jethro Toomer, a clinical forensic psychologist who evaluated Croteau and found he suffered from mild depression, schizoid personality disorder and delusional disorder; that his disorder caused him to be very certain to his opinions and to be fixed in his beliefs and to repeatedly persist in filing frivolous tax returns despite repeated warnings. The government called its expert witness that disagreed with Croteau’s expert opinion about his delusional disorder.

Court of appeals found that the evidence was sufficient to show that Croteau did not act in good faith and the evidence was sufficient to uphold his conviction. A criminal defendant may not be compelled by the government to testify but where he testifies on his own behalf he runs a substantial risk of bolstering the government’s case. Also the jury was free to disbelieve the testimony of the expert Dr. Toomer.

In reviewing the reasonableness of a sentence the court must first ensure the district court committed no significant procedural error. Second, the court must assess the substantive reasonableness of the sentence in that the sentence imposed must be sufficient but no greater than necessary to comply with the purposes listed in 18 USC 3883(a)(2) including the need to reflect the seriousness of the offense, promote respect for the law, provide just punishment for the offense, deter criminal conduct, and protect the public. The court of appeals upheld the sentence because it fell within the guidelines range of 51 to 63 months, and the court normally expects a sentence falling within the guidelines range to be reasonable. It also found the sentence was well below the statutory maximum of 53 years.