U.S. v. Hendrickson

• Decision Date: 07 October 2009
• Docket Number: Case No. 08-20585.
• Citation: 664 F.Supp.2d 793
• Parties: UNITED STATES of America, Plaintiff, v. Peter HENDRICKSON, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

664 F.Supp.2d 793

UNITED STATES of America, Plaintiff, v. Peter HENDRICKSON, Defendant.

Case No. 08-20585.

United States District Court, E.D. Michigan, Southern Division.

October 7, 2009.

COPYRIGHT MATERIAL OMITTED

Michael C. Leibson, United States Attorney's Office, Detroit, MI, for Plaintiff.

OPINION AND ORDER DENYING DEFENDANT'S MOTIONS TO DISMISS INDICTMENT

GERALD E. ROSEN, Chief Judge.

I. INTRODUCTION

Defendant Peter Hendrickson is charged in a November 6, 2008 indictment with ten counts of filing a false document with the Internal Revenue Service ("IRS"), in violation of 26 U.S.C. § 7206(1). These charges are based on Defendant's submission of tax forms for calendar years 2000 and 2002 through 2006 in which he reported that he had received no wages.

Defendant has filed three separate motions seeking the dismissal of the indictment. In these motions, Defendant argues: (i) that the Government has impermissibly targeted him for prosecution because of his exercise of his First Amendment rights through public expression of his views as to the proper interpretation of the Internal Revenue Code; (ii) that the theory of prosecution pursued in this case impermissibly compels someone in Defendant's position to either abandon his honest disagreement with the IRS's interpretation of the Internal Revenue Code or face prosecution for acting in accordance with his divergent view of the Code; (iii) that the indictment should be dismissed under Fed.R.Crim.P. 7(c)(1) and 12(b)(3)(B) for failure to allege each element of the charged offenses; and (iv) that Defendant is not a "person" within the meaning of the statute he is charged with violating, 26 U.S.C. § 7206. The Government has responded to each of Defendant's three motions, and Defendant, in turn, has filed replies or supplemental briefs in further support of these motions.

The Court addressed these and other motions at a hearing held on May 14, 2009. Having considered the arguments of counsel at the May 14 hearing, and having reviewed the written submissions filed by the parties both before and after this hearing, the Court is now prepared to rule on Defendant's motions to dismiss. For the reasons set forth below, the Court finds that these motions must be denied.

II. FACTUAL BACKGROUND

According to the indictment, Defendant Peter Hendrickson was employed by Personnel Management, Inc. at all pertinent times, spanning from 2000 to 2006. In each of the relevant years giving rise to the ten counts of the indictment—namely, 2000 and 2002 through 2006—Personnel Management reported to the IRS that Defendant had received wages for his services to the company, but Defendant filed tax forms with the IRS in which he declared under penalty of perjury that he had received no wages. The indictment alleges that these declarations were false, and charges Defendant with violating 26 U.S.C. § 7206(1) by submitting tax forms to the IRS that contained these allegedly false reports of no wages.¹

As acknowledged in Defendant's submissions to the Court, his reports of zero wages reflect his interpretation of the Internal Revenue Code as expounded in his book, Cracking the Code: The Fascinating Truth About Taxation in America.² The principal thesis of Defendant's book is summarized in a brief he has filed in support of one of his pending motions to dismiss:

... Cracking the Code concluded that an individual whose activities are merely those of common right, such as those working for remuneration in the private sector, as opposed to an individual who earned remuneration as a result of the voluntary exercise of a federal privilege, was not an "employee" and the remuneration he earned was not "wages", as those terms of art are defined in the tax laws. To Cracking the Code, these interpretations of the relevant tax statute definitions were supported by the legislative history of the statutes, case law regarding whether the term "includes" is a term of limitation or expansion, and, most significantly, by the Constitutional provisions prohibiting capitations or other direct taxes, unless in Proportion to the Census or Enumeration, while approving indirect or excise taxes on the exercise of a privilege, measured by the dollar value of the privileged activity (that is "income").

(Defendant's 1/15/2009 Motion to Dismiss, Br. in Support at 3 (footnote omitted).)

Defendant claims that "[t]housands" of people have read Cracking the Code and incorporated its analysis into their own tax filings, resulting in the IRS issuing "millions in refund checks to filers who had claimed that money was improperly withheld." (Id. at 4.) Despite this purportedly widespread practice, Defendant asserts that "very few" of those who have reported zero wages and received refunds "have been challenged, even civilly, and even fewer have been prosecuted." (Id. at 5.)³

Instead, Defendant maintains that the IRS's challenges to his reading of the Internal Revenue Code have focused primarily, if not exclusively, on Defendant himself. First, as reflected in a number of summons enforcement actions and challenges brought in 2004 in this District and elsewhere, the IRS has investigated allegations that Defendant was promoting abusive tax shelters. Next, the Government brought a civil suit against Defendant in 2006, seeking to recover the federal income tax refunds paid to him for the 2002 and 2003 tax years as a result of his reports of zero wages for these years, and also requesting that Defendant be permanently enjoined from filing tax forms in which he claimed to receive no wages. See United States v. Hendrickson, No. 06-11753 (E.D.Mich.) (Edmunds, J.)⁴ Finally and more generally, an IRS publication, The Truth About Frivolous Tax Arguments, cites certain of Defendant's contentions in Cracking the Code as examples of frivolous interpretations of the tax code.

In their written submissions, and then again at the May 14, 2009 hearing on Defendant's motions, the parties have debated at considerable length whether Defendant is accurately characterized as a "recidivist tax defier"—as the Government contends, (see Gov't 1/28/2009 Response Br. at 2)—or whether Defendant's Cracking the Code is more properly viewed as a scholarly "study of the tax laws of the United States," as opposed to an "anti-tax tract," (Defendant's 5/22/2009 Suppl. Br. at 1-2). Regardless of how one might characterize Cracking the Code, and regardless of the purposes Defendant sought to achieve by publishing this book,⁵ the Government notes that Defendant's challenges to the federal government's taxing authority pre-date this 2003 publication. Specifically, in 1992, Defendant pled guilty to the offenses of failure to file a federal income tax return and conspiracy to possess a destructive device, with this latter charge arising from Defendant's participation in the placement of a smoke bomb, wrapped in a padded envelope addressed to the "tax thieves," in a bin at a U.S. Post Office. See United States v. Hendrickson, No. 91-80930 (E.D.Mich.) (Gilmore, J.); see also United States v. Scarborough, 43 F.3d 1021, 1023 (6th Cir.1994) (discussing this incident in connection with an appeal brought by the individual who actually planted the device). Against this backdrop, the Court turns to the issues raised in Defendant's pending motions.

III. ANALYSIS

Through his three motions to dismiss, Defendant has advanced four separate challenges to the charges brought against him in this case. The Court addresses each of these challenges in turn.

A. Defendant Has Failed to Identify a Sufficient Basis for Permitting Discovery on His Claim of Selective Prosecution.

As the first of the challenges advanced in his initial January 15, 2009 motion to dismiss, Defendant contends that the Government impermissibly selected him for prosecution based on his exercise of protected First Amendment rights—namely, his publication of a book, Cracking the Code, that the Government wishes to suppress. In response, the Government argues that Defendant has failed to make even a threshold showing of selective prosecution, as necessary to warrant discovery on this issue. As explained below, the Court finds that the Government has the better of the argument on this point.

"A selective-prosecution claim is not a defense on the merits to the criminal charge itself, but an independent assertion that the prosecutor has brought the charge for reasons forbidden by the Constitution." United States v. Armstrong, 517 U.S. 456, 463, 116 S.Ct. 1480, 1486, 134 L.Ed.2d 687 (1996). The standard for proving such a claim "is a demanding one," as it "asks a court to exercise judicial power over" a matter as to which "[t]he Attorney General and the United States Attorneys retain broad discretion"—namely, the "enforce[ment] [of] the Nation's criminal laws." Armstrong, 517 U.S. at 463-64, 116 S.Ct. at 1486 (internal quotation marks and citations omitted). Thus, prosecutorial decisions are accorded a "presumption of regularity," and "so long as the prosecutor has probable cause to believe that the accused committed an offense defined by statute, the decision whether or not to prosecute, and what charge to file or bring before a grand jury, generally rests entirely in his discretion." 517 U.S. at 464, 116 S.Ct. at 1486 (internal quotation marks and citations omitted).

In light of this considerable prosecutorial discretion, evidence of mere selectivity, without more, cannot sustain a claim of selective prosecution. As the Sixth Circuit has explained:

There is no right under the Constitution to have the law go unenforced against you, even if you are the first person against whom it is enforced, and even if you think (or can prove) that you are not as culpable as some others who have gone unpunished. The law does not need to be enforced everywhere to be legitimately enforced somewhere ....

Futernick v. Sumpter Township, 78 F.3d 1051, 1056 (6th Cir.1996), overruled on other grounds by Village of Willowbrook...