A Short background:
For over 40 years I have owned and operated my own businesses in 4 different states, California, Hawaii, Oregon and Nevada, an in a foreign country, Costa Rica. During that time I worked with thousands of customers and clients, and hired hundreds of employees. I have never had any legal problems, never had a customer sue me, and the only interaction with law enforcement, other than an occasional traffic matter, was when I hired police officers as part-time real estate agents in my office.
I have always been heavily involved in charity work, too. Over the past 30 years I have personally raised over two million dollars for various charities I’ve supported and worked with.
There were several years during which I was not required to file income taxes. In ’95 I changed businesses and became liable. I got together with the IRS agents in 2001 to get things straightened out. They helped me fill out the 1040s and after I signed them they filed them for me. I owed them about $60K including all the interest and penalties. I told them I was just starting a new business and I would get back to them as soon as I could start paying them.
They agreed to this.
In 2002 I opened my real estate office on a shoestring. By 2005 it was doing very well, and I was opening a new office in Costa Rica for my and my wife’s retirement. I contacted the IRS to get caught up on all our taxes…past due and present. (I contacted them…they weren’t looking for me).
They assigned me to agents Danny Gathright and Dennis Stiffler. I explained the situation, and told them if they would help determine out how much I owed, including everything, I would start paying them $5,000 a month from my business until I was caught up.
All I asked is that they leave my business alone so I could keep making money and start paying them. They agreed to this and I attended several meetings with them over the following year, and supplied all my records for their inspection.
During this time I was dividing my time between Clovis, where my main office was, and Costa Rica, where I was getting businesses started up for our retirement.
After almost two years the IRS agents hadn’t contacted me with the amount owed or a plan to start payments.
Then Gathright retired and turned my case over to a young IRS “gunslinger” named Eric Richards. Eric was out to make a name for himself (as it turned out, my conviction gave him a huge promotion!).
When he saw wire transfers to Costa Rica (offshore bank accounts) he turned my settlement case into a full-blown criminal tax evasion case. They started messing with the business, so I had to sell it for about one-third what it was worth, or watch it die before my eyes. I sold it. Then they took that money, leaving us broke and without any means of income.
Now it was about 2007. One day while I was home from Costa Rica they came storming into our house and raided us! They took box after box of records, computer hardware, and lots of personal stuff, including our passports.
They continued the criminal investigation for another three years, and I was arrested in 2010.
They never found one dime that wasn’t accounted for. In real estate everything is paid through escrow companies and banks; NO CASH! There was never any money to hide even if I wanted to!
Here’s what they came up with on the indictment “proving” I had committed tax evasion, along with the true facts of the case, which were based on evidence. These facts had either been concealed, lost, or destroyed by the IRS or the prosecution:
They claimed: “I used a false tax ID when I sold my property in Hawaii.”
This was a property I had purchased for our kids. It was in the name of a corporation which we formed solely for the purpose of holding this property. When I sold it, the tax ID number was one digit off. I showed that all taxes and fees were paid upon the sale and that the mistake in the ID number was totally insignificant and would not have possibly been on purpose…there was no reason to change it.
They claimed: “I hid the proceeds of that sale in Costa Rica so the IRS couldn’t get it.”
Since we were starting our business there, and no longer had our business in Clovis, I had instructed the escrow company in Hawaii deposit it directly into our business account in Costa Rica.
They claimed: “I had put my Clovis real estate business in my wife’s name to hide it from the IRS”
I had my wife and our office manager open the checking accounts for the business. I was not on the signature card because there was no need for me to be on them…I was spending most of my time in Costa Rica, and they were running the business in Clovis.
The “attorney” they assigned to me, after they took all my money and property, refused to investigate this even after my pleading with him. He would not enter into the court record the Fresno County Business registration papers showing me registered as the owner.
He also refused to enter on the record the Calif. Dept. of Real Estate records showing me as the sole owner of the business.
They claimed: “I concealed a Wells Fargo Bank account from the IRS agents during my interview…I was trying to hide that account from them”.
I was never involved it the day-to-day running of Sundance Real Estate. My wife and manager handled all that, including the banking and bill paying. During the interview I told Gathright about two accounts I knew of. When I gave him all the company records, the Wells Fargo records were included.
If I had been trying to hide the account, I certainly wouldn’t have given him all the bank statements and records for that account.
They claimed: “I never filed my taxes, and had been hiding from them for years”
The IRS used my signed and filed 1040 forms as evidence in an earlier case when they were taking all my money. Those tax filings “disappeared” after they raided our home and took all my records. My appointed lawyer requested copies in our discovery motion:
Motion for Discovery: filed 12/17/2010
Most of the earlier (1995-2004) letters between Laubly and the agents became “missing” after the IRS took all of Laubly’s records during their December 2008 raid on his home. But they do exist in the ‘IRS’ files.
Also “missing” were copies of the tax return forms for 1997, 1998, 2000, and 2001.
"When Laubly specifically asked for copies of the letters between himself and the IRS agents and copies of the signed tax forms in his discovery motion for this case, the government refused to produce them. When Laubly asked his lawyer, Fogderude, to file a motion to compel the government to produce these documents, Fogderude refused to file the motion.
Laubly also asked Fogderude several times to interview and subpoena witnesses to testify on his behalf. Fogderude not only refused to do this, but he would not even interview the government witnesses during his “investigation”. The gov’t refused to produce Laubly's filed tax returns.. These 1040 forms did exist; the government did produce them as evidence in a different trial when they were taking the $50,000 I had coming from the sale of Laubly's company:
”Evidence of these tax forms can be found at NORCAL GOLD v STEVE LAUBLY, 543 F. Supp 1132: 2008, quoting JUDGE WM. SHUBB: “For the tax years of 1997, 1998, 2000, and 2001, Steve Laubly individually filed income tax returns (Form 1040) and based on his signed tax returns…”
I asked the lawyer to file a “motion to compel” to force them to produce them, but he refused to do that, too. Instead he sent an email to the prosecutor:
“ We seem to be missing a few items of evidence, Laubly's filed 1040 forms and the letters from Laubly to various IRS agents“ The Prosecutor’s response was:
“ I'll look into it. “
Nothing was ever done.
During the trial I was not allowed to show any proof that I had previously filed.
I asked the lawyer several times to subpoena the IRS agents who did the ’95 through 2001 tax returns for me, so they could testify that I had worked with them, and that I had done everything in cooperation at that time, and that I was following through on my word when I contacted Gathright and Stiffler to start paying. The lawyer refused to even call those agents. They never came to court to testify.
During a pre-trial hearing I asked the judge to appoint me a different lawyer. I told him that this one had been lying to me, arguing with me, and would not discuss my case with me or file motions I had asked him to file. He actually at one point told me it was “illegal to file pre-trial motions in a criminal case!”. The judge’s response was to tell me that this lawyer, his friend of over 30 years, was one of the best lawyers around, and his clients love him. He went on to say that I was the problem because I wasn’t listening to my lawyer. Later I filed papers to fire the lawyer and the judge refused to let me. Then a couple weeks later the lawyer filed papers saying he wanted to withdraw from the case. The judge also denied his request!
During the trial IRS agent Gathright stated at least 11 times that I was cooperating with him, and he was helping me to get settled and caught up. Gathright testified that he had promised to help get my paperwork done, but never completed it, and that he had never asked me to start paying, right up to the time he retired.
Then, during his closing statement to the jury, the prosecutor lied at least 8 times, telling them that there was no agreement or deal between myself and Gathright and Stiffler; that I was just lying!
My lawyer never objected once to his lies.
As soon as the trial ended the judge ordered me to Fresno County Jail for the 112 days until my sentencing! After 3 days the lawyer came to talk to me. I told him to bring up to the judge that the prosecutor lied at least a dozen times, and to motion for a mistrial. He said he would “look in to it”. I learned that we had 10 days to file that motion. The lawyer came again to see me after 13 days, telling me it was too late to file the motion for mistrial! I later realized why…in filing that motion he would have to explain why he didn’t bring it up in an objection during the trial. That would be malpractice and ineffective assistance of counsel.
They claimed: “I never offered to pay my taxes, that I was a “Tax Protestor”.
In one of the meetings before the trial I told the agents I would start paying them $5,000 per month as soon as they arrived at my final balance. This was recorded in Stiffler’s private office notes.
Before the trial:
Transcript of pre-trial hearing when I tried to get a different lawyer: (The page numbers are from the official court transcript.)
Excerpts from hearing:
22. Page 4:
DEFENDANT: “He [My lawyer, Eric Fogderude] said, ‘It's not allowed to do pre-trial motions in criminal cases’.”
COURT: “My guess is that’s not exactly what he told you. My guess is he probably told you…”
23. Page 8:
(COURT) …“and my guess is that’s what he was trying to tell you…”
24. Page 14:
FOGDERUDE: “I won’t share [it] with the court unless the court wants to know…”
COURT: “No, I don’t need to know."
25. Page 19:
DEFENDANT: “And there are parts of my defense he [Fogderude] won’t even discuss.”
26. The Judge did not respond or question Fogderude on this.
27. Page 20:
DEFENDANT: “Well, you should hear the arguments [with Fogderude] when I try to bring up any of my defense.”
COURT: “My guess is that…”
28. Page 23:
DEFENDANT: “You weren’t there, Your honor...”
COURT: “I know, but I..”
DEFENDANT: “You weren’t there when he told me that it was illegal to do pretrial motions.”
COURT: “I’m sure he didn’t tell you that”.
DEFENDANT: [Yes, he did] “I asked the question and he said,’ Yes, that’s true. This isn’t a civil court. This is a criminal court. You can’t do motions’.”
…”You are not seeing clearly and you are not hearing clearly and you are not evaluating clearly…Your lawyer is not the problem…You are…”
The judge denied Laubly a new lawyer and the case preceded to trial.
During the trial:
When IRS Agent Danny Gathright was asked about whether I was cooperating with him, and whether we had an agreement in which he would do the tax forms for me and help me get started on a payment plan, here’s what he had to say:
During his testimony Gathright said repeatedly that he had made an agreement with Laubly regarding the preparation of Laubly's 1040 returns:
(The following are from the trial transcript)
page 231 line 7 to p 232 line 9:
Q: [To Gathright] "OK. Who would be the main person that Mr. Laubly would deal with?"
A: [Gathright] "He would be dealing with me regarding all tax matters".
page 235 Q: "What did you tell him?"
A: "I told him we could prepare the income amounts for him."
page 248 Q: "And during the course of your meeting with [Laubly] ...He wanted you to be the person that he dealt with with the IRS...Correct?"
A: "That's correct..."
page 258 Q: "...You stated that...you were the main man to deal with?"
A: "That's correct.”
page 263 Q: "...In response to the agreement you reached, you sent him a letter with the tax return..."
page 266 [Gathright]: "So, when I told him that I was going to be the go-to person, I would be the one who would pull out all the resources necessary to make sure everything got accomplished."
Q: “...the agreement he thought had been struck, based on the conversation, was that... you were the go-to guy, the person to come in?"
A: "I would be the one.."
page 278 "OK. And 'I told him that if I prepare his returns, I'm going to summons' ...You told him that?"
A: "Correct." 1. "And you indicated you would go ahead and prepare the tax returns for him?" A: "Yes".
page 288 Q: "At any time up to and including that date, ‘did you say ...I'm no longer going to prepare your tax returns?’"
Q: "At any time...’did you say...I'm not going to tell you what my computation of your tax liability is...?’"
page 289 Q: "Did you say anything to Laubly to cause him to believe that the agreement you reached to prepare his tax returns was off?"
Q: "As you sit here today, have you ever completed his tax returns..?"
Q: [by Mark Mckeon] "Did you actually have an agreement that you would prepare them....?”
The above testimony was given by Gathright during the trial. AFTER hearing all this, in his closing statements Mark Mckeon said to the jury:
page 838: "First of all, you heard from Danny Gathright and Dennis Stiffler. They testified there was no agreement."
page 840: "...Danny Gathright testified to you that he didn't have any sort of agreement with the defendant."
page 842"..Danny Gathright told you is there was no agreement."
page 842: "There is nothing...that shows that there was, in fact, some sort of agreement..."
page 846: "So let me summarize where we are with this so-called agreement. Danny Gathright and Dennis Stiffler testified there was none."
page 915: " But if you found an agreement, despite what Danny Gathright said, that there wasn't an agreement..."
page 915 "If there was an agreement, and I submit there wasn't..."
page 921: "Ladies and gentlemen, they want to make this about the agreement, but it was not. First of all, there is no agreement."
Laubly's lawyer, Fogderude, never objected once during all these false statements, even though he knew they were false and harmful to Laubly's defense.
After the trial:
“On July 19th, 2011, I filed a complaint against the judge for “Judicial Misconduct”, in the hopes that if I had a legal action against him personally he would have to recuse himself for “conflict of interest”, (so I would get a different judge who might listen to me). On July 20th the judge filed a “Notice to depart upward”. A month before the sentencing hearing and allocution he had already decided to “throw the book at me”! When I brought up the complaint and conflict of interest to him he just smiled and said “Mr. Laubly, I’m not going anywhere!”
When the court services did the “pre sentencing report”, their recommendation was a maximum of 33 months and no probation.
The judge read that, then smiled and sentenced me to 8 years in prison, plus 3 years probation! (He was really pissed, I guess…)
That’s a total of 11 years punishment for being late on my taxes, and offering to pay!
He then smiled again and said “And if that’s not enough time, I’ll be waiting for you when you get out!”
I spent 6 years in prison, am in the process of a year of “Halfway house”, plus three more years probation. (I got two years off for good behavior!). This all started when I was 60 years old. I’m now 68, and will be 72 when this is all over.
While I was in prison my wife became ill. We had no money and I was unable to care for her. After my being in for 4 ½ years, my wife died. We had been married for 35 years.
A little over a year after her death I was released to a halfway house, 68, alone, and totally broke.