Goldstein to Put His Cards on the Table at His Criminal Trial

The trial of Tom Goldstein, the elite Supreme Court advocate and co-founder of SCOTUSBlog who was charged with criminal tax evasion after years of playing ultra-high-stakes poker games, continues this week in Maryland. Bloomberg Law reporter Holly Barker, who’s there covering the proceedings, joins us to talk about it on our podcast, On The Merits.

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Barker lays out what Goldstein’s defense will likely be and why his status as an elite lawyer could make it harder for that defense to succeed. She also talks about why some poker-loving Hollywood celebrities may be called to the stand to testify against Goldstein.

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This transcript was produced by Bloomberg Law Automation.

Host (David Schultz): Hello and welcome back to On the Merits, the news podcast from Bloomberg Law. I’m your host, David Schultz.

Very few lawyers ever argue before the Supreme Court, even once. Tom Goldstein has done it dozens of times. But right now he’s involved in a case at a federal trial court in Maryland, and the defendant is himself.

An elite Supreme Court advocate and one of the founders of SCOTUSBlog, Goldstein was charged last year with committing numerous tax and banking crimes, all stemming from his habit of playing in ultra-high stakes poker games around the world against billionaires and other famous people.

The details of Goldstein’s fall from grace have been discussed in numerous places, including on this very podcast. But last week his trial actually began, and today we have with us Bloomberg Law reporter Holly Barker, who’s been at the courthouse covering it all for us.

In a bit, we’re going to get into Goldstein’s defense, whether it might work, and why some poker-loving Hollywood stars might show up to testify. First, I asked Holly to remind us how Goldstein became so prominent in the legal world.

Holly Barker: Goldstein is a very well-recognized Supreme Court advocate. He’s argued dozens of cases before the high court. And something that makes him sort of even notable among the handful of people who have accomplished that is that he was sort of a really unlikely Supreme Court advocate.

Most people who wind up arguing for the high court went to Ivy League schools, they clerked for a justice, and so forth. He did none of those things. He started cold-calling people when he saw circuit splits, like he came up with like a system of soliciting cases, and that’s sort of how he built his practice.

And he’s sort of a celebrity for law nerds, in part because he co-founded this thing called SCOTUSBlog, which is still one of the sort of most authoritative sources on what’s happening at the high court.

Host: Even if all he did was found SCOTUSBlog, I feel like that would be really notable. I mean, I remember when the Obamacare decisions were being handed down in 2012, like just hitting refresh, refresh, refresh on SCOTUSBlog over and over and over again.

Holly Barker: Yeah, it was groundbreaking. It was a really big deal. I think that’s exactly right.

Host: Now, that was the rise. Let’s get into the fall. Tell me about the indictment that came down against him about a year ago. What was he alleged to have done?

Holly Barker: So he was initially facing 22 counts. The government, on the eve of trial, moved to dismiss six of them. So now he’s facing one count of tax evasion for 2016, eight counts of aiding and assisting in the preparation of false tax returns, and that’s for 2017 through 2021, four counts of willful failure to pay taxes, and three counts of making a false statement on a loan application.

And actually, those tax charges have been garnering sort of most of the attention. But those false statement counts are really important because they actually carry the heftiest penalties in the case.

Host: Yeah, and we should say, I mean, you know, as a lot of people already know, all of these financial crimes that have been alleged stem from gambling and from specifically Goldstein’s high-stakes poker habit, I guess. Can you explain to me how the problems that he got into stem from that?

Holly Barker: Sure. So one of the alleged acts of evasion was that he used law firm funds to pay personal gambling debts. And the reason that matters from a tax perspective, it was his firm, he owned it. Like, it wasn’t like he was stealing or whatever. But the problem is mischaracterizing personal expenses as business expenses.

They also alleged that he provided false and incomplete information to his accounting firm, GRF CPAs and Advisers. They also claim that he made false and misleading statements to IRS revenue officers on two occasions. They say he transferred at least $960,000 of personal funds to his law firm’s trust account to shield it from IRS collection.

And the willful failure to pay counts are based on, this is sort of the most interesting set of counts in my view. They seem aggressive. They’re based on Goldstein’s failure to pay his taxes on the date that they were due. And he actually filed a return or an extension for every year in question and has paid the taxes with penalties and interest before he was indicted.

But the government’s theory is that he had the money at the time to pay, but was opting instead to spend it on luxury items and luxury travel and maintaining this really high-profile lifestyle.

Host: Yeah, because I think as a lot of people know, it’s not illegal to request an extension on your taxes or to request an extension to pay your taxes, but it sounds like what the government is saying is that he requested this extension that he didn’t need, that he was just doing that to avoid having to pay the money that he did have.

Holly Barker: Yeah, that’s right.

Host: Okay, tell me about Goldstein’s defense to all of this. What is his theory of the case and why he is not guilty?

Holly Barker: So his defense seems to be first that he relied on his accountants and staff to get his returns right and didn’t deliberately mislead anybody. He basically just says they didn’t do their jobs well, like failed to ask the right questions, failed to request the right documents, didn’t follow up with him to review the returns. That’s sort of one theme that’s emerging very early on.

And that ignorance defense works insofar as it cuts against willfulness. So tax crimes generally have a heightened intent standard. So for a defendant to be found guilty, the government has to prove beyond a reasonable doubt that he acted knowingly and willfully. That’s really important.

Host: Let’s linger on that for a second. So they have to prove that he knew that he was filing his taxes incorrectly, not just that he made a mistake, even if that mistake was a, you know, multi-million dollar mistake. They have to prove that he knew what he was doing.

Holly Barker: Exactly. So the jury gets instructions sort of like this. Willfully means the voluntary intent to violate a known legal duty and knowingly means that the act must be done deliberately. And that means not because of a mistake, negligence, or any other innocent reason. That’s why that defense does work.

Host: Well, you know, given the willfulness standard, it seems like that could be a pretty effective defense. But in this case, we’re not talking about just anyone. We’re talking about a lawyer who presumably should know a lot about the law. And we’re not just talking about any lawyer. We’re talking about Tom Goldstein, who’s argued before the Supreme Court dozens of times. This is an elite lawyer. Do you think that that will undermine this sort of ignorance defense that he’s someone who would seem to be a legal expert?

Holly Barker: So yes and no, I guess is my answer. So for sure, the prosecution led with that. You know, I think they actually said Goldstein was not just any lawyer. I think that’s a direct quote. You know, he’s a Supreme Court lawyer. He taught at Harvard and so on. And they’re going to want to establish that he knew what his obligations were with respect to reporting his gambling and everything else.

That said, he could know what the law is, know it well, and still not have realized that he violated it, particularly if he was relying on others to handle all the paperwork and preparation. So like a mischaracterized transaction, that could be the result of an honest mistake or miscommunication just as easily as it could be the result of ignorance of the law, if that makes sense.

Host: This could be, I guess, the theory that, you know, even Clarence Darrow could have made a mistake on his taxes if his accountants were bad.

Holly Barker: Correct.

Host: Yeah. Interesting. You wrote in your preview of the trial that a lot of this will hinge on whether the jury believes that Tom Goldstein is a good guy or a bad guy. That’s sort of a vibes-based trial, I think is what you said.

Holly Barker: So the good guy, bad guy dichotomy, that’s actually, those are Goldstein’s own words.

Host: Oh, interesting.

Holly Barker: And I think it sort of oversimplifies it, right? But it makes sense. In this case, like basically all white-collar cases, it turns on intent and what was in his mind. So he either intentionally lied, he acted knowingly and willfully, or he made an innocent mistake and relied on the wrong people to get it right. So in that sense, it matters a lot whether the jury thinks he’s a good guy or a bad guy.

Host: Then let’s, you know, to that point, let’s get to who is going to be called to testify in this trial. Do we have a sense of who the witnesses are? And if any of them will get to Goldstein’s character or his, you know, whether or not he is a good guy or a bad guy.

Holly Barker: So we don’t have a complete witness list. That said, we know that witnesses may include some celebrities, Tobey Maguire and Kevin Hart, for example.

Host: Tobey Maguire and Kevin Hart?

Holly Barker: Yeah, it’s unclear to me exactly who, I have a suspicion of who Hart might be in this whole saga. I do have some understanding of what Maguire’s role was. So he allegedly hired Goldstein to help him collect about $15.6 million in poker winnings from a match with someone the indictment refers to as Texas businessman. And instead of collecting his legal fee of $500,000, he asked Maguire to wire the money directly to someone to whom he owed a gambling debt. And that’s problematic from a tax perspective insofar as it means that the $500,000 in firm income goes totally unreported.

The other witnesses might be professional poker players. We saw that on day one. The first witness the government called was Keith Gibson, who’s a professional poker player who allegedly coached Goldstein to help him beat Alec Gores in a heads-up poker match in 2016. The second witness was Gores himself. And for those of our listeners who don’t know the name, he’s a billionaire investor and he allegedly lost $26 million to Goldstein in 2016.

Host: All right. Well, if you have a chance to get some autographs at the courthouse, let me know.

Holly Barker: I most certainly will. Yeah.

Host: No, but in all seriousness, let’s finish with talking about this New York Times Magazine profile. Tell me about what Goldstein said to the New York Times and why this could potentially be used against him in court.

Holly Barker: So at some point last fall, winter, Goldstein sat for multiple interviews with a New York Times Magazine writer, Jeffrey Toobin, and he talked extensively about his gambling and detailed some specific matches and money that he won. Like he told Toobin he won $50 million in heads-up poker, for example, in 2016. He also basically admitted that he intentionally failed to disclose significant debts on his mortgage applications.

Host: Yes. In fact, I have the article printed right here. And this is what it says. Goldstein told me that he omitted the information because he wanted to keep that debt secret from his wife. That seems like, in terms of the bank fraud charges, that’s like potentially a smoking gun.

Holly Barker: If admissible, I would imagine it would be highly problematic.

Host: If admissible is the key word there.

Holly Barker: Yeah, it is the key word. So the government moved to pre-admit most of the New York Times article. And at this point, the judge denied the motion to pre-admit the statements. It’s hearsay within hearsay. And she just wasn’t sure when he got to the second level of that analysis whether or not she could really consider that reliable and admissible. It’s a high threshold for evidence at trials, right?

Host: Right, because that’s the reporter paraphrasing Goldstein. It’s not a direct quote in the article, right?

Holly Barker: Yeah, I think that was part of her beef with that particular section of the article that the government wanted to admit. I can definitely see the government trying again. She didn’t say, no, absolutely not, not ever. Don’t talk to me about it again. She said, for now, I’m going to deny this. Whether or not the government’s attempts that I anticipate they’ll make will succeed, I have no idea. But it’ll come up again, I think.

You know, one thing that will be interesting to see is to find out how much of the money that he was playing with was actually his. Something that emerged in the first day of trial was that there’s a person in the indictment referred to as foreign gambler number three. The guy, his name is Paul Phua. He, based on the evidence that is coming in, bankrolled, backed a lot of Goldstein’s gambling. People who take stakes out on players, they get that money back, right? Like, it’s an investment. So we don’t know. That will be interesting. We’ll find out just sort of how deep he got himself. And I suspect it’s going to be pretty deep, but it might not be as deep as we’re all thinking.

Host: All right. Well, Holly Barker will be there for all of it. Holly, thank you so much for talking about this.

Holly Barker: Thank you so much for having me.

Host: And that’ll do it for today’s episode of On The Merits. For more updates, visit our website at news.bloomberglaw.com. Once again, that’s news.bloomberglaw.com.

The podcast today was produced by myself, David Schultz. Our editors were Chris Opfer and Alessandra Rafferty. And our executive producer is Josh Block.

Thanks, everyone, for listening. See you next time.