Lawyer Says His Compulsive Hoarding Fostered Failure to Timely Pay Taxes

December 16, 2020

There are times when the Universe can be cruel: The stars align against us. More often than not, if we're being honest, the messes we get ourselves into are of our own creation. As William Shakespeare so famously wrote: "The fault, dear Brutus, is not in our stars / But in ourselves, that we are underlings." (Julius Caesar, Act I, Scene III, L. 140-141). Lawyer George Gilmore became a defendant in a criminal tax case, and the blame for his predicament seems to fall largely upon his shoulders. Still, Gilmore wasn't quite ready to go down without a fight. The fault wasn't truly, simply, clearly his . . . or so he argued.

DNJ Indictment

On January 10, 2019, George Gilmore, a partner in the law firm of Gilmore & Monahan, P.A. was indicted in the United States District Court for the District of New Jersey ("DNJ") on one count of income tax evasion for calendar years 2013, 2014, and 2015; two counts of filing false tax returns for calendar years 2013 and 2014; failing to collect, account for, and pay over payroll taxes for two quarters in 2016, and making false statements on a 2015 loan application submitted to Ocean First Bank N.A. "Ocean County Attorney Charged with Tax Evasion, Filing False Tax Returns, Failing to Pay Over Payroll Taxes, and Making False Statements on Loan Application" (DOJ Release / January 10, 2019).

DNJ Conviction/Sentencing

In response to the Indictment, Gilmore opted to go to trial, where he was acquitted of two counts of filing false tax returns for calendar years 2013 and 2014; and, further, the jury could not reach a unanimous verdict on one count of income tax evasion for calendar years 2013, 2014, and 2015. Unfortunately for Gilmore, the jury found him guilty on two counts of failing to pay over payroll taxes. As set forth, in part, in "Ocean County, New Jersey Attorney Sentenced to One Year and One Day in Prison for Failing to Pay Over Payroll Taxes and Making False Statements on Loan Application" (DOJ Release / January 22, 2020)

Gilmore worked as an equity partner and shareholder at Gilmore & Monahan P.A., a law firm in Toms River, where he exercised primary control over the firm's financial affairs. Because he exercised significant control over the law firm's financial affairs, Gilmore was responsible for withholding payroll taxes from the gross salary and wages of the law firm's employees to cover individual income, Social Security and Medicare tax obligations. For the tax quarters ending March 31, 2016, and June 30, 2016, the law firm withheld tax payments from its employees' checks, but Gilmore failed to pay over in full the payroll taxes due to the IRS. 

Gilmore also submitted a loan application to Ocean First Bank containing false statements. On Nov. 21, 2014, Gilmore reviewed, signed, and submitted to Ocean First Bank a Uniform Residential Loan Application (URLA) to obtain refinancing of a mortgage loan for $1.5 million with a "cash out" provision that provided Gilmore would obtain cash from the loan. On Jan. 22, 2015, Gilmore submitted another URLA updating the initial application. Gilmore failed to disclose his outstanding 2013 tax liabilities and personal loans that he had obtained from others on the URLAs. Gilmore received $572,000 from the cash out portion of the loan. 

Following the jury's conviction, DNJ sentenced Gilmore to one year and one day in prison plus three years of supervised release.

3Cir Appeal

On November 9, 2020, Gilmore appealed his DNJ conviction/sentencing to the United States Court of Appeals for the Third Circuit ("3Cir") citing the lower court's alleged error in excluding an expert's testimony and in the court's jury instructions about "willfulness;"  and the alleged insufficiency of the Government's evidence. United States of America v. George Gilmore, Appellant (Opinion, United States Court of Appeals for the Third Circuit ("3Cir"), No. 20-1234 / December 4, 2020) Before considering 3Cir's analysis and rationale, let's take the opportunity to consider a more thorough fact pattern about the underlying conduct at issue:

Gilmore is an attorney and a founding partner of the law firm of Gilmore & Monahan, P.A. Gilmore exercised exclusive control over the firm's financial decisions, including expenditures, bills, and taxes. Under Gilmore's management, the firm had a history of submitting late payroll tax payments. Gilmore received numerous warnings from Internal Revenue Service agents-both written and in-person-regarding the firm's payroll tax obligations. Gilmore did not heed the warnings and continued to submit the taxes late. 

Gilmore's failures to timely pay the firm's taxes were not his only financial misdeeds. After he was denied a personal loan in 2014 due to outstanding debt obligations, Gilmore applied for a $1.5 million loan in 2015. On that loan application, Gilmore did not disclose his outstanding tax obligations of roughly $500,000 or his outstanding personal debt to Dale Orlovsky of over $270,000. Instead, Gilmore checked the "no" box when asked whether he was "presently delinquent or in default on any Federal debt," App. 3367, and omitted the Orlovsky loan from his list of "all outstanding debts." App. 3366. 

On January 10, 2019, a grand jury indicted Gilmore for several tax and financial crimes. After trial, the verdict was mixed. Gilmore was acquitted on two counts and the jury was deadlocked on one count. But Gilmore was convicted on two counts of failing to collect, account for, and pay over payroll taxes in violation of 26 U.S.C. § 7202, and one count of making a false statement in a loan application in violation of 18 U.S.C. § 1014. After trial, Gilmore moved for a judgment of acquittal and a new trial under Rules 29 and 33 of the Federal Rules of Criminal Procedure, but the District Court denied the motions. . . .

at Pages 2 - 3 of the 3Cir Opinion


In considering 3Cir's affirmation of DNJ, we're going to omit, for now, the appellate court's handling of Gilmore's argument that the lower court had wrongfully excluded expert testimony. As such, let's leapfrog to Gilmore's second argument about DNJ's jury instruction about "willfulness," which, in part, 3Cir characterizes as follows:

[T]he Court instructed that willfulness could not be found if Gilmore believed in good faith that "the tax laws did not make his conduct unlawful." App. 2412. Gilmore requested the word "criminal" be used instead of "unlawful." App. 335. Gilmore claims the instruction was legally erroneous because it equated belief of "unlawful" action with belief of "criminal" action. Gilmore Br. 43

at Page 6 of the 3Cir Opinion

In rebuffing Gilmore's argument, 3Cir noted that in the context of a tax crime, the legal standard for proof of willfulness "merely requires knowledge and violation of a duty. It does not require knowledge that one is committing a criminal act. . .  There is no requirement that a person must be aware that the conduct is criminal. It is enough that he knew he had a legal duty and violated it-in other words, that he acted unlawfully." at Pages 6 - 7 of the 3Cir Opinion.

Sufficiency of Government's Evidence

In challenging the sufficiency of the Government's evidence against him, Gilmore argued that 
  1. there was insufficient evidence to find he acted willfully in violating a known duty to pay his payroll taxes; and, 
  2. the evidence was insufficient to prove his loan application contained knowingly false statements. 
In finding that the jury had rationally found Gilmore guilty on the two cited points, 3Cir found, in part, that:

[T]he jury heard extensive testimony from IRS Agent Miriam Popowitz about Gilmore's repeated failures to pay payroll taxes on time, despite the many warnings he received. Agent Popowitz's testimony provided the jury with more than enough to conclude that Gilmore willfully violated a known duty to pay taxes. 

As to the latter, the prosecution presented evidence pertaining to Gilmore's massive tax debt (nearly $500,000 at the time he applied for the loan), as well as testimony about the roughly $270,000 he and his wife owed Orlovsky. Given this evidence, a jury could reasonably conclude that Gilmore's failure to disclose his tax liability when asked whether he was "delinquent or in default on any Federal debt," App. 3367, as well as his omission of the Orlovsky loan when asked to list "all outstanding debts," App. 3366, constituted the submission of a loan application containing knowingly false statements.

at Pages 7 - 8 of the 3Cir Opinion

For the first time in his post-trial motions, Gilmore argued against the sufficiency of  the evidence pertaining to Count 6 of the Superseding Indictment (his making of a false statement in a loan application as derivative of his failure to list his outstanding tax obligations as "federal debt"). Given the raising of this argument in his post-trial motions, 3Cir admonishes that the issue is subject to the more exacting "plain error standard."  Applying that tighter standard, the Court found that Gilmore failed to demonstrate "a reasonable probability that the error affected the outcome of the trial." at Page 9 of the 3Cir Opinion.

Expert's Testimony

All of which returns us to Gilmore's first and what he seems to have thought was his most potent argument against conviction; namely, that an expert's testimony was wrongfully denied by DNJ. Specifically, Gilmore proffered the expert testimony of Dr. Steven Simring to refute the assertion that Gilmore had acted willfully in failing to pay his overdue payroll taxes. Given that I find the nature of the proposed testimony both fascinating (and somewhat preposterous, to be candid), I don't want to editorialize the appellate court's observations and rationale. As such.  I offer you a fairly extensive quote below (which heavily relies upon United States v. Pohlot, 827 F.2d 889 (3d Cir. 1987)

According to Gilmore, Dr. Simring's testimony would have informed the jury that because Gilmore was a compulsive hoarder, his failure to timely pay taxes could not be considered willful or voluntary. Dr. Simring would have explained to the jury that Gilmore "suffers from a mental-health disorder that explains his otherwise irrational behavior of not paying taxes while knowing that such failure would be apparent to the IRS." Gilmore Br. 27 (internal quotations omitted). Gilmore further argues that "[a]s [Dr.] Simring would have testified, Gilmore felt compelled to make those personal expenditures by his hoarding disorder" because "[c]ollecting ha[d] long ago overwhelmed his good judgment, and ha[d] taken over a large portion of his life." Id. at 23 (internal quotations omitted). Gilmore claims that permitting Dr. Simring's testimony at trial would have "given the jury an admissible alternative explanation of the behavior the Government presented as proof of willfulness." Id. at 17. 

As we noted in Pohlot: "District courts should admit evidence of mental abnormality on the issue of mens rea only when, if believed, it would support a legally acceptable theory of lack of mens rea." 827 F.2d at 905-06. We cautioned that evidence of diminished volitional control or the lack of ordinary self-judgment does not constitute an acceptable theory of lack of mens rea. Id. at 906 ("[A] lack of self-reflection does not mean a lack of intent and does not negate mens rea."); accord United States v. Cameron, 907 F.2d 1051, 1066 (11th Cir. 1990) (holding that evidence "of an incapacity to reflect or control the behaviors that produced the criminal conduct" does not constitute "psychiatric evidence to negate specific intent and should not be admitted" (internal quotation marks omitted)); id. at 1062 ("Psychiatric evidence of impaired volitional control or inability to reflect on the ultimate consequences of one's conduct is inadmissible . . . ."). 

The proffered testimony of Dr. Simring is like the testimony we held inadmissible in Pohlot. Dr. Simring's report sought to explain away the element of willfulness by noting that Gilmore suffered from a hoarding disorder that "overwhelmed his good judgment." Gilmore Br. 23. But evidence of a lack of volitional control does not constitute a "legally acceptable theory of a lack of mens rea," as "any showing of purposeful activity, regardless of its psychological origins," will generally satisfy mens rea. Pohlot, 827 F.2d at 904-06. So the District Court's exclusion of Dr. Simring's testimony was no abuse of discretion. See, e.g., United States v. Foster, 891 F.3d 93, 107 n.11 (3d Cir. 2018) (holding that reversal is appropriate only when "the district court's decision is arbitrary, fanciful, or clearly unreasonable"). 

The District Court also rightly noted that Dr. Simring's testimony was "largely a conduit for hearsay . . . [as it contained] more of Gilmore's would be testimony than [expert] opinion . . . as if the tail wags the dog." App. 7. An expert may rely on otherwise inadmissible facts and data to form his opinion, but those facts and data may be put to the jury only if they are of the type other experts in the field would reasonably rely upon, and if their "probative value . . . substantially outweighs their prejudicial effect." FED. R. EVID. 703.

Here, the probative value of Gilmore's statements contained in Dr. Simring's report do not substantially outweigh their prejudicial effect. The document contained numerous statements that simply proclaimed Gilmore's innocence without informing any expert conclusion. For example, the report included: "He told me he would never dream of hiding income tax or taking any other illegal steps to evade taxes" and "He told me he has never filed a false tax return." App. 6. We agree with the District Court that dressing up Gilmore's statements in the guise of expert opinion does not render such statements- or the expert opinion itself-admissible. 

In sum, because Dr. Simring's testimony would not have provided a legally acceptable theory of a lack of mens rea, and it would have been an impermissible conduit of hearsay, the District Court did not err in ruling it inadmissible.

at Pages 3 - 6 of the 3Cir Opinion

Bill Singer's Comment

Every so often you come upon something that is so stunningly awesome in its audacity that you feel like your breath has been knocked out of you and you just have to sit down, if only for a moment. Which was my response to this portion of the 3Cir Opinion:

[D]r. Simring's report sought to explain away the element of willfulness by noting that Gilmore suffered from a hoarding disorder that "overwhelmed his good judgment." Gilmore Br. 23. But evidence of a lack of volitional control does not constitute a "legally acceptable theory of a lack of mens rea," as "any showing of purposeful activity, regardless of its psychological origins," will generally satisfy mens rea. . . .

Gilmore didn't pay his taxes because he suffered from a hoarding disorder. Okay. Sure. I could see that. Maybe. Possibly. Well, then again, maybe not. All of which reminds me of that adage that when the law is on your side, argue the law; when the law isn't on your side, argue the facts; and when the law and facts are not on your side, just argue.