BILLY J. WILLIAMS, OSB #901366 

United States Attorney 

District of Oregon 

STUART A. WEXLER 

Trial Attorney, Tax Division 

Stuart.A.Wexler@usdoj.gov 

LEE F. LANGSTON 

Trial Attorney, Tax Division 

Lee.F.Langston@usdoj.gov 

1000 SW Third Ave, Suite 600 

Portland, OR 97204-2902 

Telephone: (503) 727-1000 

Facsimile: (503) 727-1117 

Attorneys for United States of America 

UNITED STATES DISTRICT COURT 

DISTRICT OF OREGON 

PORTLAND DIVISION 

UNITED STATES OF AMERICA, Case No.: 3:15-CR-00438-JO 

 

Plaintiff,

v. 

WINSTON SHROUT, 

Defendant.

GOVERNMENT’S MEMORANDUM 

ON MENS REA AND AVAILABILITY 

OF “GOOD FAITH” DEFENSE 

The United States of America, by and through Billy J. Williams, United States Attorney 

for the District of Oregon, and Stuart A. Wexler and Lee F. Langston, Trial Attorneys, Tax 

Division, respectfully submits this Memorandum, at the request of the Court, concerning the 

proper mens rea to be applied to the statutes at issue in this case and the availability of a good 

faith defense. 

/ / 

/ / 

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BACKGROUND

 The defendant is charged in this case with thirteen counts of fictitious obligations, in 

violation of 18 U.S.C. § 514, and six counts of willful failure to file a tax return, in violation of 

26 U.S.C. § 7203. The government briefed the law concerning these two statutes in its Trial 

Brief. See Doc. 87. The government also proposed jury instructions concerning these two 

statutes. See Doc. 82 at 26-30. 

 During the final pre-trial conference in this matter, the Court raised the possibility of the 

defendant entering certain pieces of evidence that would speak to a purported “good faith” 

defense. Government counsel and the Court then engaged in a discussion concerning the proper 

mens rea at issue in this case and the availability of such a defense to certain charges. The crux 

of the discussion was whether and to what extent the mens rea of “willfully” – an essential 

element to § 7203 – should be imputed to § 514, where it does not otherwise exist. In addition, if 

“willfully” were to be imputed, what would the proper definition be for § 514: the same 

definition as that of § 7203, or a different definition? Finally, regardless of whether “willfully” 

should be imputed to § 514 or not, is a “good faith belief” defense available to charges of 18 

U.S.C. § 514? To help frame the issue, the Court requested the government file this 

Memorandum outlining the relevant law. 

26 U.S.C. 7203

 The proper starting point for this discussion is with willful failure to file under 26 U.S.C. 

§ 7203. The language of that statute reads in pertinent part: 

Any person required under this title . . . or by regulations made 

under authority thereof to make a return, keep any records, or 

supply any information, who willfully fails to . . . make such 

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return, keep such records, or supply such information, at the time 

or times required by law or regulations, shall, in addition to other 

penalties provided by law, be guilty of a misdemeanor . . . 

As can be seen above, the term “willfully” is present in the statute and, therefore, an 

essential element of the crime. In the criminal tax context, willfully has been defined as the 

“voluntary, intentional violation of a known legal duty.” Cheek v. United States, 498 U.S. 192, 

201 (1991); United States v. Powell, 955 F.2d 1206, 1210 (9th Cir. 1992). See also 9.42 Pattern 

Jury Instructions, Criminal Cases, Ninth Circuit (2011) (“In order to prove that the defendant 

acted “willfully,” the government must prove beyond a reasonable doubt that the defendant knew 

federal tax law imposed a duty on him, and the defendant intentionally and voluntarily violated 

that duty.”) In establishing this definition of “willfully” in the criminal tax context, the Cheek

Court first acknowledged that the general rule that “ignorance of the law or a mistake of law is 

no defense to criminal prosecution is deeply rooted in the American legal system.” Cheek, 498 at 

199. Nevertheless, the Cheek Court acknowledged that due to the complexity of the tax laws, an 

exception should be carved out of the traditional rule. Id. at 200. 

Once it carved out this exception for tax crimes, Cheek established an available “goodfaith” defense to tax crimes where “willfulness” is an essential element. Cheek held that a 

“defendant’s claim of ignorance of the law or a claim that because of a misunderstanding of the 

law, he had a good-faith belief that he was not violating any of the provisions of the tax laws” 

can negate willfulness in this context. Id. at 201-202. The Cheek Court clarified, however, that 

claims that “some provisions of the tax code are unconstitutional” are of a different order. Id. at 

206. Such claims “reveal full knowledge of the provisions at issue and a studied conclusion, 

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however wrong, that those provisions are invalid and unenforceable.” Id. As such, they constitute 

mere disagreement with the law, which is not a defense. Id. at 202-206. 

The Ninth Circuit has extended Cheek into other areas of the law. See, e.g. United States 

v. Liu, 731 F.3d 982, 990 (9th Cir. 2013) (applying the Cheek standard to criminal copyright 

infringement under 17 U.S.C. § 506(a)). The Ninth Circuit, however, has also stated that the 

term “willful” is a word of “many meanings” and “‛its construction [is] often . . . influenced by 

its context.’” 5.5 Pattern Jury Instructions, Criminal Cases, Ninth Circuit (2011). (citing Ratzlaf 

v. United States, 510 U.S. 135, 141 (1994)). “Accordingly, Ninth Circuit cases have defined 

“willful” in different terms depending on the crime charged.” See 5.5 Pattern Jury Instructions, 

Criminal Cases, Ninth Circuit (2011) (internal citations omitted). 

18 U.S.C. § 514

Whereas the term “willfully” exists in the statutory language of 26 U.S.C. § 7203, it is 

absent in the language of 18 U.S.C. § 514. The text of that statute reads in pertinent part: 

(a)Whoever, with the intent to defraud—

(1) draws, prints, processes, produces, publishes, or otherwise 

makes, or attempts or causes the same, within the United States; 

(2) passes, utters, presents, offers, brokers, issues, sells, or attempts 

or causes the same, or with like intent possesses, within the United 

States; or 

(3) utilizes interstate or foreign commerce, including the use of the 

mails or wire, radio, or other electronic communication, to 

transmit, transport, ship, move, transfer, or attempts or causes the 

same, to, from, or through the United States, 

any false or fictitious instrument, document, or other item 

appearing, representing, purporting, or contriving through scheme 

or artifice, to be an actual security or other financial instrument 

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issued under the authority of the United States, a foreign 

government, a State or other political subdivision of the United 

States, or an organization, shall be guilty of a class B felony. 

 Instead of “willfully,” § 514 establishes a mens rea of “intent to defraud” and, as result, 

that is an essential element of the statute. Courts have specifically declined to impute an 

“ignorance of the law” defense into statutes with an “intent to defraud” element. See, e.g., United 

States v. Blagojevich, 794 F.2d 729, 739 (7th Cir. 2015) 

(“[M]istake of law is not a defense [to a wire fraud charge]. The 

wire-fraud statute requires a specific intent to defraud but not 

willfulness or any other proxy for knowledge of the law. To the 

extent that Blagojevich may think that a need to show intent to 

defraud is the same as a need to show knowledge about what the 

law requires, [he is mistaken] . . . .”). 

 

While not specifically addressing a statute that required an “intent to defraud,” the Ninth Circuit 

addressed the applicability of a “mistake of law” defense in United States v. Fierros, 692 F.2d 

1291 (9th Cir. 1982). 

Like Cheek, the Fierros Court began with the proposition that “[a] moment’s thought is 

enough to refute the general proposition that ignorance of the law is a proper defense to any 

crime requiring specific intent.” Id. at 1294. The Fierros Court recognized only two narrow 

exceptions to this general rule. The first applies in situations where the defense relies on “a 

mixed mistake of fact and law.” United States v. Smith-Balthier, 424 F.3d 913, 924 (9th Cir. 

2005); Fierros, 692 F.2d at 1294 (describing the first exception as one where “the defendant is 

ignorant of an independently determined legal status or condition that is one of the operative 

facts of the crime”). “In such a case, the mistake of the law is for practical purposes a mistake of 

fact.” Id. (citations omitted). Thus, under this exception, a mistake-of-law defense is available to 

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a defendant charged with embezzlement who believed the person from whom he bought the 

property was legally authorized to sell it. Fierros, 692 F.2d at 1294. It is also available to a 

defendant charged with illegal reentry who believed he was a citizen and therefore did not need 

the Attorney General’s permission before attempting reentry. See United States v. SmithBalthier, 424 F.3d 913, 925 (9th Cir. 2005). In essence, in these situations, the defendant’s 

argument is a factual one regarding an element of the crime charged: that he did not possess the 

requisite intent because of some mistake of fact that would have negated the law. See generally 

Morissette v. United States, 342 U.S. 246 (1952) (holding that intent, just as any other element of 

a crime, is a factual question). 

Accordingly, the defendant in this case, for example, has some latitude to argue that he 

lacked the intent to defraud because he believed, in good faith, certain specific and discrete facts 

he entered on fictitious instruments were lawful, i.e., that he was “ignorant of an independently 

determined legal status or condition.” Fierros, 692 F.2d at 1294. For example, the defendant 

could argue that, because of a good-faith mistake, he believed he did in fact have the authority to 

compel the United States to issue trillions of dollars. However, the defendant may not argue that 

he lacked the intent to defraud simply because he did not know what the law was or believed the 

law allowed him to make, present, or mail items that he knew were in fact fictitious financial 

instruments. To do so would go well beyond the narrow scope of the “mixed mistake of fact and 

law” exception. 

The Ninth Circuit indirectly addressed this “mixed mistake of fact and law” exception in 

United States v. Molinaro, 11 F.3 853 (9th Cir. 1993). In that case, the defendant was charged 

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with bank fraud, in violation of 18 U.S.C. § 1344. The Molinaro Court upheld a good faith 

instruction that read, in pertinent part: 

“You may determine whether a defendant had an honest, good 

faith belief in the truth of the specific misrepresentations alleged in 

the indictment in determining whether or not the defendant acted 

with intent to defraud.” 

Id. at 863 (“[A]n honest, good-faith belief in the truth of the misrepresentations may 

negate intent to defraud. . . .”) (citing United States v. Benny, 786 F.2d 1410, 1417 (9th Cir. 

1986). The Ninth Circuit cites Molinaro in the Comment to its model jury instruction for “intent 

to defraud,” suggesting this instruction is appropriate where the defendant is charged with an 

intent to defraud but argues a good-faith defense. See 3.16 Pattern Jury Instructions, Criminal 

Cases, Ninth Circuit (2011). The bank fraud statute in Molinaro is very similar to the § 514 

statute at issue in this case and both statutes require an intent to defraud. It would be proper, 

therefore, for this Court to instruct the jury consistent with Molinaro regarding a possible goodfaith defense to Section 514. 

The second exception recognized by the Fierros Court applies in cases involving 

“prosecution under complex regulatory schemes that have the potential of snaring unwitting 

violators.” Fierros, 692 F.2d at 1295. This exception is very limited and is essentially the Cheek

exception discussed above. However, the fictitious obligations statute is not a tax statute and 

does not speak in terms of “willfulness.” While the Ninth Circuit does not have a model jury 

instruction for 18 U.S.C. § 514, the Ninth Circuit’s Model Jury Instructions do clearly reflect that 

the mens rea requirement for “intent to defraud” statutes is different than that for tax offenses. 

For example, whereas the government’s burden in a wire fraud case is to prove that “the 

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defendant acted with the intent to defraud,” in a tax case, it is to prove “that the defendant knew 

federal tax law imposed a duty on [him] [her], and the defendant intentionally and voluntarily 

violated that duty.” Model Crim. Jury Instr. 9th Cir. 8.121 and 9.42. (2010); cf. Blagojevich, 794 

F.3d at 738–39 

(“The argument for a good-faith instruction relies principally on 

Cheek v. United States, 498 U.S. 192, . . . (1991), but that’s a 

different kettle of fish. The Justices read the word “willfully” in a 

particular tax law to require proof that the accused knew the law, 

which the Justices saw as technical and beyond the ken of many 

taxpayers. The word ‘willfully’ does not appear [in the wire fraud 

statute, 18 U.S.C. § 1343].”) 

Accordingly, the Fierros Court’s exception for cases involving “prosecution under complex 

regulatory schemes that have the potential of snaring unwitting violators” is inapposite where, as 

here, the defendant is charged with making, presenting, and mailing fictitious financial 

instruments. 

Conclusion

Ninth Circuit case law, as discussed above, clearly delineates between “willfully” in the 

tax context as compared to other, less complex statutes. While not necessarily addressing 

whether the term “willfully” should be imputed into statutes where it does not otherwise exist, 

the Ninth Circuit has specifically declined to impute the higher, Cheek standard of willfulness 

into those statutes. Section 514 is not overly complex. It is very similar to the statute for wire 

fraud, a statute into which the Ninth Circuit, in its Model Jury Instructions, has chosen not to 

impute the term “willfully.” Therefore, the Ninth Circuit model instruction on “willfulness,” 

proposed by the government as Government’s Requested Instruction No. 21, should only apply 

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to Counts 14 through 19 (willful failure to file). See Doc. 82-1 at 30. The jury instruction for 

Section 514 should only contain definitions related to terms present in that statute. 

As noted above, however, the defendant may have a good faith defense to Section 514 

under a “mixed mistake of fact and law” argument. Nevertheless, the defendant should not be 

entitled to the same “good faith” instruction that the Ninth Circuit has set aside for tax 

willfulness, which is a broader exception that encompasses ignorance of the law. Instead, the 

defendant should be given a good-faith instruction related to § 514 similar to that in Molinaro, 

which is narrower and does not encompass ignorance of the law. The dilemma for the Court and 

the parties, to the extent that one exists, is the best way to provide these differing standards of 

“good faith” to the jury without creating undue confusion. 

The government believes the proper approach is to create four separate and clear 

instructions that separately address the statutory language and definitions relevant to the charges 

at issue in this case. The government will submit, therefore, revised proposed instructions for 

Section 514 and its definitions, and Section 7203 and its definitions. 

Dated this 14th day of April, 2017. 

Respectfully submitted, 

BILLY J. WILLIAMS 

United States Attorney 

/s/ Stuart A. Wexler 

STUART A. WEXLER 

LEE F. LANGSTON 

Trial Attorneys, Tax Division 

(202) 305-3167 

 

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CERTIFICATE OF SERVICE

 I HEREBY CERTIFY that on April 14, 2017, I electronically filed the foregoing with the 

Clerk of the Court using the CM/ECF system, which will send notification of such filing to the 

attorney(s) of record for the defendant. Additionally, a copy of the foregoing was emailed to the 

defendant at milieannjones@gmail.com. 

/s/ Stuart A. Wexler 

STUART A. WEXLER 

Trial Attorney, Tax Division 

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