Seven men and five women Wednesday afternoon convicted Thomas Selgas and his lawyer, John O. Green guilty of tax fraud.
In a unanimous verdict, the Dallas federal jury found Selgas and Green guilty on one count of conspiracy to defraud the federal government. Separately, jurors found Selgas guilty of tax evasion for tax years 1998-2002 and 2005.
Along with Selgas’ wife, who had also been charged, the government alleges the trio prevented the Internal Revenue Service from collecting taxes on the Selgas’ income by filing false tax returns, converting cash proceeds into gold coins and hiding the couple’s funds in Green’s IOLTA account, from which Green paid their personal expenses.
On Tuesday, presiding U.S. District Judge Karen Gren Scholer directed an acquittal for Michelle Selgas, ruling that the government lacked sufficient evidence for a reasonable jury to convict her.
The jury deliberated for approximately three hours before returning its verdict to a packed courtroom filled with family and friends of the defendants, federal agents, courthouse staff and security officers — all walks of life from the legal world were intrigued by the sometimes unusual case.
Following the verdict, the government asked U.S. Magistrate Judge Rebecca Rutherford to detain both Selgas and Green, but she declined. Judge Rutherford said neither evidence from the trial nor the actions of the defendants suggested that either was a flight risk or a threat to the community.
DOJ lawyer Robert Kemins argued that Green, currently an Idaho state representative, was a potential threat to the community because he had described himself as “angry” with the IRS and had referred to the U.S. government as a criminal organization.
“They’ve never given me the opportunity to respond to the things they’ve claimed, and it’s not true, your honor,” Green said to Judge Rutherford.
Michael Minns, one of Green’s attorneys, declined to comment on the verdict, but at the detainment hearing, he argued that Green’s bond should be continued until his sentencing. He said Green has obeyed every court order in the process, has been a model citizen in his community and that he has no assets left that would enable him to become a flight risk.
“He has no money left in his defense,” Minns said, telling the court that he had been paying the hotel bill for Green and his wife while Mr. Green stood trial. “He put all his money in his kids and grandchildren. That’s his entire life. There’s no possibility on Earth that he would leave his family… he understands he will be doing some time.”
Mick Mickelson, who represents Mr. Selgas, told The Texas Lawbook that Mr. Selgas’s team was “disappointed” with the verdict, but that they “respect it and are happy that he remains on bond.”
In a written statement prepared by the Department of Justice, Principal Deputy Assistant Attorney General Richard E. Zuckerman “thanked” IRS agents who conducted the criminal investigation and Kemins and Mara Strier — both trial attorneys of the DOJ’s tax division — who prosecuted the case.
Throughout the trial, the government argued that the defendants made clear their criminal intent, sometimes through actions that seemed pointless or frivolous. For instance, Strier said, Selgas and Green visited seven different IRS offices in Texas in an attempt to pay income taxes with gold coins.
“These are smart men who studied the IRS,” Strier told the jury during closing arguments Wednesday morning. “They kept going back time and time again because it’s a show. All they were doing was trying to confuse, delay and waste everybody’s time.”
During his portion of closing arguments, Kemins compared the case facts to Alice in Wonderland.
“Alice said, ‘Why sometimes I’ve believed as many as six impossible things before breakfast,’” Robert Kemins told the jurors, referring to the title character in the Lewis Carroll classic. “Our defendants here… are not innocent babes in the woods when it comes to taxes; they’re seasoned fighters. They knew exactly what they were doing.”
When Kemins described how some of the Selgas funds flowed to Green’s IOLTA fund from a Swiss bank account, Mickelson stood up to object.
“That was just testimony by a prosecutor,” Mickelson said.
During his own closing argument, Mickelson reminded the jury the government’s indictment was merely an allegation — not evidence. He emphasized his point by ripping the indictment in half.
He told jurors that the government’s charges in the case were among very few in which “ignorance of the law is, in fact, a defense.”
Mickelson admitted to jurors that Selgas and his wife “think differently” than many, but that it was no reason for proof that his client had the criminal intent to evade paying taxes.
Ashley Arnett, who delivered the closing argument for Green, reiterated the high burden of proof presented by a standard of being “beyond reasonable doubt.” She said they should approach their decision with the same gravity they might hold in deciding whether to take a loved one off life support.
Earlier testimony…
The following trial account was updated Nov. 15, 2020 to include the government’s cross-examination of John O. Green.
As lawyers closed their evidence Tuesday afternoon — in the federal tax case against Thomas Selgas, Michelle Selgas and their lawyer John O. Green — the defense did something predictable: they renewed motions to acquit their clients.
But then Judge Scholer did something that had not been predictable: she granted the motion for Michelle Selgas, directing an acquittal.
Alongside her husband, Tom Selgas, Michelle Selgas was charged with one count of tax evasion. Along with their lawyer, John O. Green, the couple was also charged with one count of conspiracy to defraud the federal government. The jury will still determine the fate of Mr. Selgas and Mr. Green.
Without the jury present, Judge Scholer explained that even while viewing the evidence in the most favorable light for the government, no reasonable jury could find Mrs. Selgas guilty. At the most, Judge Scholer said, the evidence of Mrs. Selgas’ guilt would be only circumstantial — which doesn’t cut it for criminal cases.
“I’ve made my ruling,” Judge Scholer told the government. She then pointed out her earlier warning to prosecutors: that she was reserving her right to consider such an acquittal for Mrs. Selgas.
In an email to The Texas Lawbook, Dallas criminal defense attorney John Helms, who represented Mrs. Selgas at trial, expressed his satisfaction with Judge Scholer’s ruling.
“We are extremely happy about this ruling,” Helms said. “The judge went to extraordinary lengths to conduct a thorough review of the evidence and to make absolutely sure that her decision was the right one, and it was. Michelle Selgas has finally been vindicated.”
A spokesperson with the Department of Justice declined to comment on the ruling.
Judge Scholer said she had been considering the evidence throughout the whole weeklong trial, and that it was overwhelmingly clear that Mrs. Selgas should not stay on the jury form.
“I do not take this lightly,” the judge said.
While the remaining lawyers moved on to discuss the jury charge, Mrs. Selgas departed the defendants’ table and passed through the swinging door into the courtroom gallery, where loved ones hugged her for her new role in the case: spectator.
The jury will return Wednesday morning for closing arguments.
On Monday, Mrs. Selgas had described the purchase of a house she and her husband had purchased following distribution of a $1.1 million settlement in 2005 from her husband’s technology business.
Mrs. Selgas recounted that purchase of their house in Athens, Texas, by describing for the jury the first features she noticed on the day she found the property: the long, tree-lined driveway; the cross fence; and the fixer upper nature that offered the ability to make the home their own.
What happened next is key to the tax evasion conspiracy charges against the couple and their lawyer; but Mrs. Selgas described it to the jury as just an afterthought: they purchased the $385,000 house with gold coins.
“That’s what we had. We had gold coins, so we wanted to pay for it in gold coins,” she told a federal jury during testimony on Monday. “I didn’t think there was anything wrong with using gold.”
That transaction is just part of a string of violations federal prosecutors say shows that the Selgases and their lawyer, John O. Green, were conspiring to defraud the federal government. Aside from the house purchase, they say the trio concealed income through false tax returns and precious metals, even transferring the Selgases’ funds to Green’s IOLTA account so he could pay their personal expenses while hiding their money.
Throughout her half-day testimony, Mrs. Selgas – whose defense is separate from her husband’s – reiterated that she had no involvement in preparing her family’s taxes nor any of the financial decisions made in the household — she left that all up to Mr. Selgas.
Moreover, she said, she had no reason to believe that multiple years of the couple’s taxes were not paid when she signed the tax returns — which the government is now alleging were false — because they were “cleared by the CPA” and she trusted her husband to give her something accurate.
She even believed so when she appeared before the United States Tax Court in 2005 to contest the collection efforts the IRS had pursued against the couple for their outstanding tax debt between 1998 and 2002. Selgas told the jury that she remembers “being thoroughly confused” about why she was even there.
“I hadn’t worked in years, and I don’t know why they wanted taxes on money Tom said was already paid,” Selgas told the jury.
She said she never read any judgments related to the proceedings because she doesn’t understand tax issues — she relied on her husband and Green, who represented them at the proceedings.
But during cross-examination, government lawyer Mara Strier asked Selgas whether she received W-2 forms during previous jobs at a pharmacy and as a secretary for a law school dean in Oklahoma.
She replied “yes” without asking what a W-2 is, despite testifying during her own lawyer’s questioning that she didn’t know what a K-1 was — one such form that listed her with a 26% partnership interest in MyMail, her husband’s technology business, which had her own signature on the page.
Michael Minns, Green’s lawyer, asked if it was possible for her and Green to have conspired together to defraud the federal government. She answered “no.”
Then Green took the stand.
Green, who is licensed as a lawyer in Texas, lists a law office in Athens, but he is currently a legislator in Idaho, where he ran for office while under indictment. He said he views his “self-taught” knowledge of tax law as a continuation of his grade-school affinity for standing up to bullies.
“My view is the government is trying to put me in prison for doing my job as a lawyer,” he told the jury.
Green said he never charged for the legal work he did for the Selgases, whom he has known since the early 2000s, because he doesn’t charge his friends. And even though holding the Selgas funds in his IOLTA trust account was “kind of a pain in the neck,” he said he agreed to it because it was only meant to be short term.
Due to what Tom Selgas’s legal team has described as an aversion to banking, Green said he was asked by Mr. Selgas if he could use Green’s IOLTA when the couple moved to Athens in 2008. At the time, many banks in Texas were closing, which made it hard to find a bank in the couple’s new hometown that Tom wanted to use, Green said.
Green said short-term became long-term for the Selgas funds in his IOLTA account after he found out the federal government was investigating him. Green said his own lawyer advised him not to close or change anything because it would look suspicious.
Once Green was indicted, he said he asked the court for permission to return the funds to Tom Selgas.
“Did the government say, ‘Hey, that’s our money?”’ Minns asked.
“No,” Green replied.
When he continued direct examination Tuesday morning, Green told the jury that he accompanied Tom Selgas at least four times to the IRS taxpayer’s assistance center offices in April 2006 in an attempt to pay taxes with gold coins. He said Selgas went even more times without him.
Green said he felt obligated to represent Selgas. “My job was to make sure they were not paying more taxes than what they were legally required to do, and my job required me to use the law to do that,” he said.
Minns asked why he paid his clients’ credit card bills out of his IOLTA account; Green disputed the government’s argument that he did so in order to help hide their money. Green said the whole idea behind a credit card payment would make it impossible to hide anything from the IRS because credit card companies maintain records of who pays the bills. He said the use his IOLTA account was a convenience he had offered to other clients.
Green said he had not been involved in the filing of the 1065 tax return for the MyMail partnership agreement. He said a CPA he knew in Washington state, Don Gary, had worked on it. Green said he referred the matter to Gary because he didn’t feel competent to deal with such a sophisticated tax matter.
Green ended his direct testimony with a simple declaration about the charges brought against him: “I’m innocent and not guilty.”
Following direct examination, prosecutor Robert Kemins asked Judge Scholer to admit evidence that would allow him to question Green about his own history of not filing personal tax returns. Kemins argued that Green had opened his testimony to impeachment by maintaining he “followed the law.”
Judge Scholer denied the motion, but promised to review the caselaw.
On cross-examination, Kemins grilled Green regarding documents and emails reflecting Green’s involvement in the questionable Selgas tax filings, particularly those related to MyMail, the Selgas business.
Green continued to insist that he hadn’t prepared the returns, but had found more knowledgeable tax preparers to help the couple.
Kemins questioned Green about an incident in 2004 when U.S. District Judge Richard Schell barred Green for five years from practicing in the Eastern District of Texas for engaging in unethical conduct in connection with his representation of a dentist. Judge Schell ruled that Green had made “recklessly false statements” when he accused the magistrate judge overseeing the case of lying.
“I didn’t violate any ethics,” Green answered.
Later, during redirect, Green’s attorney noted that the State Bar of Texas had never disciplined Green for the Eastern District incident.
But during his cross-examination, Kemins examined Green’s relationship with a group known as American Rights Litigators, a group of tax-protestors from whom Thomas Selgas, Green’s co-defendant, had previously sought advice.
The forms Green filed in 2007 to open the disputed IOLTA trust account listed Bryan Malatesa as Green’s “legal assistant.” In 2004, Malatesa was permanently enjoined – along with several other tax protestors and tax protest groups – from engaging in or promoting any tax avoidance schemes.