Goldstein Faces Daunting Path to Overturn Tax Fraud Conviction

The federal prosecution of Tom Goldstein on tax fraud charges was never going to be a routine case. A renowned US Supreme Court advocate, co-founder of the legal website SCOTUSblog, and a high-stakes poker player, Goldstein brought to the courtroom a resume—and a persona—that demanded attention.

But strip away the celebrity witnesses (actor Tobey Maguire and legal analyst Jeffrey Toobin testified), the tens of millions of dollars in poker chips won and lost, and the movie studios circling the story, and the case turned on something far more prosaic: Intent.

In white-collar criminal law, particularly in tax fraud cases, the government’s burden isn’t simply to prove that something went wrong. Prosecutors must show the defendant engaged in a “voluntary, intentional violation of a known legal duty.” That formulation of the willfulness standard of intent, drawn from Supreme Court precedents such as Cheek v. United States and United States v. Pomponio, imposes an unusually high bar.

From the start, the defense smartly leaned into that demanding standard. Goldstein’s lawyers argued that any underreporting stemmed from their client’s reliance on accountants who “didn’t ask the right questions.” That’s a classic strategy in tax cases. If a defendant relies on professional advice in good faith, the willfulness element folds.

Early signs suggested the strategy was working. The first real testimony about Goldstein’s intent came from an accountant at the firm that prepared the tax filings—someone with every incentive to deflect blame. The defense showed on cross-examination that the accountant made mistakes on the returns and gave Goldstein questionable advice. The defense hadn’t yet started calling witnesses, and prospects of an acquittal were very real.

But that’s when Goldstein’s appetite for risk may have failed him. He overlooked that, in white collar cases, putting the government to its burden is just the beginning. The cost of that miscalculation resulted in being found guilty on 12 of 16 counts.

Pair of Errors

Goldstein’s first error was testifying. Defendants in white-collar cases rarely take the stand, and for good reason. What sounds precise and forceful in a conference room or at a Supreme Court lectern can come across as evasive or combative under cross-examination. The trials of Elizabeth Holmes, the founder of health technology company Theranos, and FTX cryptocurrency exchange founder Sam Bankman-Fried—both serving lengthy prison sentences—provide recent examples.

In a case hinging on willfulness—on what was in the defendant’s mind—testifying is a high-risk bet. You not only open yourself to a withering cross, but you also run the risk of coming off as a liar. The prosecution was able to confront Goldstein with previous lies and exorbitant spending. It’s like pushing all your chips to the center and trusting that the judge and jury will see you the same way you see yourself.

Goldstein’s second error was forgetting the stats. More than 98% of federal cases end in a plea agreement. Of the remaining few that go to trial, an incredibly high percentage still end in convictions. Put another way, all roads lead to sentencing.

While the odds may be a little better for well-resourced white-collar defendants, and a little better still in tax cases, the most probable outcome for Goldstein was always going to be a sentencing hearing. By taking the stand, he made that even more likely. Worse yet, he may have alienated the person—US District Court Judge Lydia Kay Griggsby—who now controls his fate.

Looking Ahead

Goldstein can expect a challenging sentencing. A typical tax fraud defendant with no prior convictions might get probation or a few months in prison. But the government is alleging tens of millions of dollars in losses, and that drives federal white-collar sentences.

With no acceptance of responsibility, violating a position of trust as a lawyer, and other enhancements, Goldstein is facing a hefty sentencing range—likely 10 or more years. The final sentence won’t be that high, but when a judge starts higher, they end higher.

Being acquitted of four counts won’t help much. Goldstein was convicted on the most serious counts of loan fraud carrying the highest penalties. While the Sentencing Commission recently curtailed the use of acquitted conduct at sentencing, the judge still retains significant discretion under her statutory authority to consider all conduct. Bottom line is that he has exposure to a multi-year prison term.

Goldstein may have a few cards left to play. To be convicted of loan fraud, the government must prove proper venue, meaning that the criminal offense took place in the charging district. Under the US Court of Appeals for the Fourth Circuit’s recent decision in United States v. Mosby, mere “preparatory” acts to the underlying offense cannot provide a basis for venue.

The defense will argue that while prosecutors may have proven preparatory acts such as filling out loan applications took place Maryland, they didn’t prove from where he sent the documents. The Second and Eleventh Circuits would seem to agree, but language from the Tenth Circuit could create a split. That is the meatiest of a number of arguments, including over the admission of statements made in media interviews and the wording of jury instructions, that he will surely make on appeal.

Goldstein built a career managing legal risk at the highest level. Yet he’s never faced what’s happening now: being on the other side of a white-collar conviction. He undoubtedly will continue to push his chips forward.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Todd Haugh is an associate professor of business law and ethics at Indiana University’s Kelley School of Business.

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