A federal judge Monday sent tax dodger Winston Shrout, a prominent sovereign citizen with an international following, to prison for 10 years for issuing fake financial documents to banks and the U.S Treasury and failing to file tax returns from 2009 to 2014.
“You’re 70 years old. This may well be a life sentence,” U.S. District Judge Robert E. Jones said. “I’m well aware of that.”
The sentence was half the 20-year term that a prosecutor sought, but far more severe than the probation that Shrout’s defense lawyer urged.
Shrout aimed to cheat the Treasury and banks and preached his illegal schemes to hundreds of others in paid seminars across the country and abroad, including about a dozen people who were convicted of fraud themselves for following Shrout’s teachings, according to the prosecutor.
Shrout, of Hillsboro, testified at his trial that he hadn’t filed a federal tax return for at least 20 years.
“He’s not just trying to rob a bank. He’s actually and consistently advocating for others to rob a bank,” said Scott Wexler, the U.S. Tax Division trial lawyer who prosecuted Shrout. “Defendant is a tax cheat and convinced others to scheme against the government and perform their own fraud.”
Wexler asked the judge to send Shrout to prison for two decades to send a strong message to his fervent followers that their actions are illegal and they must “choose a different path.” If the court were to allow Shrout to walk out of the courtroom with no prison time, it would only embolden his supporters to continue to flout the law, Wexler argued.
“People are paying attention,” Wexler said.
Defense lawyer Ruben Iniguez said the court must consider Shrout’s personal circumstances, noting Shrout has no prior criminal record and the offense wasn’t a violent crime. He also described some of Shrout’s ailments, including hernias, hip replacements, back pain and cataracts.
Iniguez further argued that the Shrout never intentionally set out to defraud the government but had delusional thoughts that clouded his judgment.
Shrout didn’t invent the fraudulent financial documents he used but learned from others and was “gullible” and “delusional enough to believe them and spew them out,” Iniguez said.
“To send this man to prison, in my humble opinion, would be a travesty,” Iniguez said.
None of the financial documents Shrout sent to banks or the U.S. Treasury were honored because they were so outlandish, his lawyer said. The only actual losses to the government were from his failure to pay taxes, Iniguez said.
But Wexler said Shrout knew exactly what he was doing, and he should also be held responsible for the amount of money he intended the government to lose.
Shrout made and issued more than 300 fake “International Bills of Exchange” on his own behalf and for credit to third parties. The government said Shrout falsely claimed the bills had value and purported them to be worth more than $100 trillion.
The government proved at trial that from 2009 through 2014, Shrout received over $500,000 in gross income through pension payments, speaking fees at seminars where he espoused his theories abroad, as royalty payments for the sale of DVDs and other products he sold, and for private client consultations through his business Winston Shrout Solutions in Commerce, yet never filed a single tax return.
Shrout admitted further on the witness stand, “So I stopped paying income tax, and I stopped filing for income tax returns. That’s been well over 20 years ago.”
Wexler noted that neither Shrout’s indictment nor his conviction deterred his activity as he continued to promote the fake financial documents in weekly video podcasts.
Iniguez said Shrout took down his website recently.
“He now understands fully this is over. He is done,” Iniguez said.
Shrout, wearing a blue plaid shirt and khaki pants, stood and told the judge, “I’m very sorry this whole thing happened. … At trial, I took full responsibility for everything I’ve done. I certainly have no intention in continuing on in the matters that seem objectionable to the court. If I have offended anyone in any matter, then I ask for your forgiveness.”
Shrout stood before about 20 supporters, including his common law wife, and members of his large family, confirming to the court that he has 18 children — 12 sons and six daughters.
The judge found Shrout mentally competent to aid in his own defense before his sentencing. But the judge said it was clear Shrout holds grandiose ideas about who he is and what he can do and had advocated for hundreds of people, if not thousands, to not pay their taxes.
“There’s no question your intention was to sign these documents and have these be effective for trillions of dollars,” whether or not “anybody was a damn fool to follow them,” Jones said.
The judge ordered Shrout to surrender to the Bureau of Prisons on Nov. 25 and pay $191, 226 in restitution to the IRS.
— Maxine Bernstein