October 1, 2003

Tax Protester in Texas Pleads Guilty to Felony Charge

By DAVID CAY JOHNSTON
 

A Texas businessman who stopped withholding taxes from paychecks in 1999, making him a hero to the small but growing movement that contends most Americans are not required to pay taxes, has pleaded guilty to a felony tax charge.

Richard M. Simkanin, 59, the owner of Arrow Custom Plastics in Bedford, Tex., admitted in Federal District Court in Dallas on Tuesday that he knew he had to pay taxes but hoped to get away without paying.

In return for his guilty plea to one felony, failure to turn over withholding taxes, the Justice Department dropped 26 other charges against Mr. Simkanin. He must pay a $250,000 fine, will be sentenced to no more than three years in prison and remains liable for the unpaid taxes under a plea agreement with the United States attorney in Dallas, Jane J. Boyle. If convicted on all counts he could have been sentenced to more than 10 years in prison.

Mr. Simkanin's admission of criminal conduct appears to be a serious blow to the so-called tax honesty movement, which urges people not to pay taxes because it contends the government refuses to specify the law that requires payment. But its leader said the guilty plea only showed that a hostile judge had forced Mr. Simkanin to bow to his power.

Bob Schulz, president of We the People Foundation for Constitutional Education in Queensbury, N.Y., the chief organizer of the tax honesty movement, said Mr. Simkanin was "railroaded by a prejudiced judge."

Arch D. McColl III of Dallas, Mr. Simkanin's lawyer, declined to comment on Mr. Schulz's assertion that Mr. Simkanin does not truly believe he committed a crime and that the judge abused his power.

He said that he was ready to take the case to trial. The decision to accept the plea bargain "was entirely Dick's and was very personal and was influenced his concern for his family and his wife, whose health is not good," Mr. McColl said.

The courts have uniformly upheld the validity of the income tax laws, but that has not stopped a variety of promoters from finding people willing to embrace one or more of the theories that there is a legal way to escape taxes.

The Internal Revenue Service said recently that prosecuting people like Mr. Simkanin and obtaining civil orders against others who do not pay their taxes are among the ways that the government is answering questions about the law that makes people liable for taxes.

Mr. Simkanin had adopted the so-called 861 position, named after a section of the tax code, which holds that the I.R.S. drafted regulations that mean Americans who work for domestic companies are not liable for income taxes. The I.R.S. calls the argument nonsense, noting that the tax law itself says all wages earned by Americans anywhere in the world and by people living in the United States, with minor exceptions, are taxable.

The I.R.S. has acknowledged that it knows of 1,500 businesses that refuse to withhold taxes. Mr. Simkanin is the only 861 advocate indicted so far by the federal government.

Mr. Simkanin had been held without bail since soon after his indictment in June because of statements he reportedly made to an informant about killing federal judges to incite a tax revolt.

At one of Mr. Simkanin's Web sites, www.arrowplastics.net, he had posted a warning that "public officials can and often do make the fatal mistake of attempting to harm the servants of God (Exodus 14:9) and inasmuch as the servants of God are required by Ezekiel 3:18-19 to warn the wicked, I, a Christian, do hereby issue this proclamation." He warned that any government officials who moved against him would be consumed by fire.

As part of the plea agreement Mr. Simkanin is required to post his guilty plea and admissions on the Web site.