Thomas Goldstein: Supreme Court Lawyer Indicted for Tax Evasion
Introduction
Among lawyers, SCOTUSBlog is a well-respected blog on all things Supreme Court. Thomas Goldstein and his wife, Amy Howe, started it in 2002 and it has only grown from there. In 2013, the blog earned the prestigious Peabody Award, the first for a blog.
Not only did Mr. Goldstein start a well-regarded blog, but he himself has also appeared at least 44 times before the Supreme Court and taught extensively on the subject. I don’t want to bore you with all of his various accolades and accomplishments, it is enough to say Mr. Goldstein was an experienced and respected attorney. So, when I read that he was indicted for tax evasion, I was floored.
I must admit the allegations are explosive. Mr. Goldstein is innocent until he is proven guilty. If true, however, the facts are damning for Mr. Goldstein. You have allegations of gambling, extravagant spending, hiding income, taking false deductions, lying to investigators and lenders, hiring mistresses on the payroll, and using cryptocurrency to move money around the world. In fact, Mr. Goldstein appears to have led a double life and well-respected attorney and ultra-high-stakes poker player. In one match with a foreign businessman in Hong Kong, Mr. Goldstein allegedly won a pot of over $13.8 million in US dollars. Not long afterwards, he was down millions from games he lost against other opponents. The life of a gambler, I guess. Not sure I have the stomach for stakes like that.
In a nutshell, the indictment is wild for all that is alleged. Still, even in the worst moments of a person’s life, such as it is for Mr. Goldstein here. From his misery, we can distill some lessons which I hope will lead you away from trouble.
What the IRS Alleges
I would love to provide a quick summary of the allegations. Unfortunately, the indictment is 50 pages long and it covers acts that occurred over many years. I will try to summarize the highlights just so you understand the stakes for Mr. Goldstein. In this indictment the big allegations are that he:
- Concealed the full extent of his gambling winnings (and in some cases losses)
- Concealed legal income by redirecting payments from his firm to others, mostly to repay gambling debts
- Disguised personal payments out of the firm as legal fees or other expenses
- Failed to pay multiple years of unpaid taxes for years when he had the means to do so
- Lived an extravagant lifestyle while paying little to nothing towards his tax debts
- Failing to report his many cryptocurrency transactions, which is required on Form 1040
- Lying to an IRS agent about his back taxes, specifically he is alleged to have lied that he owed taxes due to a large settlement rather than due to his gambling winnings
- Lied on mortgage applications about the extent of his debts (taxes and gambling) to buy a new home
You should read the indictment yourself to get the full flavor. I had to read it a couple of times to really take it all in. I know he is innocent until proven guilty. Still the government’s investigation has a lot of plausible allegations, which if true, could put him behind bars for years, soil his reputation, and lead to a loss of his law license. Which is why we need to ask, “Could all of this have been avoided?” I think, yes.
Could All of This Have Been Avoided?
My impression after reading the indictment is that Mr. Goldstein’s many years of unpaid taxes due triggered an investigation. I suspect IRS collections referred him for criminal investigation as his income appears sufficient to pay his taxes and thus no reason to be behind. IRS criminal investigators have a lot of power to obtain documents and conduct interviews. I don’t know what the IRS found but it is obvious that what they did look at ultimately lead to this indictment. For example, in the indictment the DOJ stated that in 2016 tax year Mr. Goldstein owed $1.6M in unpaid taxes. During the period of April to October of 2017, when taxes are due to be paid, Mr. Goldstein allegedly spent over $2M on luxury items, gambling debts, and other personal payments. I think it is clear that IRS agents reviewed his bank records and compared it to what he was telling the IRS about his ability to pay.
Furthermore, the DOJ stated it had a copy of an email where Mr. Goldstein is alleged to have told another person: I was going to use [hundreds of thousands of dollars in available funds] to pay my personal 2016 taxes, but I’m just paying penalties instead. That’s fine, and it’s my problem. Again, this suggests the IRS investigators subpoenaed his email records and found this gem. You can be sure this will be pointed out at any trial (or if no trial, at sentencing).
So, my first lesson is that you need to be careful what you say and do if you owe a significant amount. $10,000 is probably not going to get you in trouble if you go on a trip to Europe. If you owe $10 million…well that’s going to look bad. You seriously need to consider how you spend your money when you owe the IRS. You may not want to hear that but if you don’t want to end up like Mr. Goldstein. Spending money on jewelry, expensive cars/trucks, travel, “toys” like motorcycles and boats, expensive schooling for children, large amounts to charity, or paying down other loans or credit cards are all things that will put you in the IRS investigators’ bullseye. Err on the side of caution and avoid extravagant spending.
Second lesson, talk to a tax professional when the first sign of trouble arises. Don’t wait! I had a former client who owed almost $400,000. I tried hard to get him to get me what I needed to resolve his IRS tax debt. During that time, he racked up a new six figure tax debt. And that wasn’t the first time, for the last five prior years he racked up a tax debt each year. Finally, he provided me with some information, including copies of bank statements. I review those statements as a rule and found he put a downpayment on a boat and paid for a trip to Italy. When I confronted him about this, he said, “Hey, my job is stressful!” I bet it is but so is an IRS criminal investigation! I gave him the doctor-patient talk (do this, don’t do that) but he still didn’t take steps to get the problem fixed. At that point, a client who will not listen is not really a client. I let him go and shortly thereafter he was investigated by the IRS. He was never indicted though the IRS made his life miserable. He ended up paying the IRS under extremely stressful circumstances. Don’t be like my former client (and Mr. Goldstein). Get help and listen!
Finally, and most importantly, DO NOT LIE! Mr. Goldstein is alleged to have lied on his taxes, lied to IRS agents, and lied to others. Lying to the IRS (or anyone in government for that matter) is a sure-fire way to get yourself in trouble. Lies are what elevated this case beyond collecting unpaid taxes to a criminal indictment. I know of another indictment related to an audit in California. The couple lied during an IRS audit of their personal tax returns, and it turned what was likely a money problem and converted it into an emotional five-year prosecution where not only did they have to pay stiff penalties but also lose their freedom. Don’t lie and you will likely avoid Mr. Goldstein’s fate.
Summary
Tax problems hit both rich and poor. Regardless of your status in life, it is what you choose to do that determines your outcome. No one likes to be in debt to the IRS. Still, would you rather tighten your belt and get your tax debt resolved? Or would you rather life in constant fear of the IRS. Or do you want to go Mr. Goldstein’s route and try to find a shortcut and maybe find yourself facing a criminal indictment. I hope you will choose the harder right rather than the easier wrong.
If you or someone you know has an IRS problem and you have some questions about what your options are, you can reach my firm using the contact information below.
Beacon Tax Advocates, LLC
57 Portland Road, Ste. 3
Kennebunk, ME 04043
207-502-7181
jwade@beacontaxadvocates.com
www.beacontaxadvocates.com