The big payback

The law has some strange and obscure corners. Richard Finley found himself trapped in one of them the morning of February 8, as he tried to prove his innocence to U.S. District Court Judge Lowell Jensen.

Finley was not defending himself against charges, exactly. He wasn’t on trial for any crime. Instead, he was trying to prove himself “factually innocent” of something the government accused him of 12 years ago. The words “innocent until proven guilty” are hard-wired into our brains. We all reflexively know that if you’re not guilty, then you are innocent.

Not so in this case. Not so for Finley, a big, white-haired 73-year-old with an actor’s big voice, who was clearly exasperated as he strode around Jensen’s courtroom. His quest in federal court is for a document that few people, even people in the legal trades, have ever heard of: something called “certificate of innocence.”

“I’ve got 12 years now that I’ve been putting up with this,” Finley told Jensen, his shoulders slumped and his head shaking. “I would like to ask you to make a determination as to whether or not I am innocent. Will you give me an answer, please?”

Jensen was giving Finley room to vent, even when Finley directly addressed his opponent in court that day, Assistant U.S. Attorney Mark McKeon, standing just a few feet away, putting the bespectacled and stoic McKeon directly in the spray zone. “I should never have even been indicted!”

McKeon just looked straight ahead. Then he stood and casually replied to Jensen. “Here, the government doesn’t have to prove anything. The burden of proof is on Mr. Finley.”

Jensen would not give Finley his decision that day. He first wants to hear from the government’s witness, a psychologist who will testify about Finley’s mental health. That hearing is expected sometime in early March.

It wouldn’t be the first time Finley’s sanity would come up in court. A few years back, another federal judge said of Finley, “There’s something very much like mental illness at work here.” A psychologist has diagnosed him with having an “atypical belief system.”

Finley says there’s absolutely nothing wrong with him. When you meet him, he does seem like a passionate and stubborn person, maybe a little bit obsessed. But not mentally ill. Still, it’s hard not to wince at some of the “atypical” choices he’s made.

Starting with asking the leader of the right-wing militia group the Montana Freemen to become his business partner.

Finley is a bookseller, and has been for more than 30 years now. He and his wife Maria have owned America’s Legal Bookstore, near the corner of 7th and J streets in downtown Sacramento, for 25 of those years.

As a young man, he wanted to be an actor. “That’s what I came to California for,” Finley explained. In the 1950s, he performed onstage in Chicago at Playwrights Theater. “I was the little guy on the totem pole. I was just a beginner,” says Finley, downplaying his acting career. But he said he did share the stage with Ed Asner. Finley claims to have run his own community theater after moving to Los Angeles. And for a time, he owned a small motion-picture company, making religious films.

“I don’t regret a minute of it. But I never made any money at it. So my wife said, ‘Hey, get your act together.’” He started working in student bookstores in Southern California in the 1960s, before striking out on his own with his first legal bookstore in Sacramento in 1983. He tried several times to expand his bookselling business. He had a store in St. Paul, Minn. He had a store in San Francisco and one in Reno, Nev. He had dreams of opening 20 America’s Legal Bookstores across the United States. But the Sacramento store has been the only one that managed to survive.

In the winter of 1995, a law student who had been taking bar-review classes above the bookstore came to Finley with an opportunity. “He says, ‘Richard I know you’ve been looking for investors to open these 20 stores. Why don’t you go and see this guy?’”

The guy turned out to LeRoy Schweitzer, head of the Montana Freemen. For anyone born after 1980, the Montana Freemen might not ring a bell. In 1995, when Finley met them, the Freemen were the new rising stars of the American militia movement.

The Freemen had been in the news a little bit at this point. By the time Finley hooked up with Schweitzer, some considered the Freemen Robin Hoods; others dismissed them as a criminal band of tax-protesters, white supremacists and coots.

But they also had a following of people who considered them righteous and who thought the Freemen could help them in their various fights against the federal government, especially the IRS.

And Finley definitely needed someone’s help. He owed the IRS $179,000, a tax bill for capital gains on a house he had sold in Southern California. Finley had neglected to pay the bill for years, and it had collected considerable interest. He also had a lot of debt on his Sacramento condominium, as well as condos in Palm Springs, Las Vegas and Chicago.

He claims that, at the time, “I didn’t know LeRoy Schweitzer from Adam.” The student assured him that Schweitzer’s “stuff was good.” He handed Finley a stack of photocopies of certified checks from LeRoy Schweitzer to the people who had asked for his help. The checks were for unpaid tax bills or mortgages or other debts. Also in the packet were copies of refund checks from the IRS, banks and other institutions to the people who had used Schweitzer’s checks.

In order to get in on the action, one needed only to attend a two-day class Schweitzer held in the Freemen-invented Justus Township. And that’s what Finley did, arriving on December 22, 1995.

Looking back now, Finley said Justus Township was not like the compound that was described in media reports a few months later.

“It was a farmhouse. I missed it the first time I tried to find it. It wasn’t a compound. There weren’t people walking around with AKs,” Finley said.

The township, little more than a ranch in the middle of Montana, was the Freemen’s own government outside the government of the United States. Justus had its own court system. And it had its own peculiar monetary system.

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“If you try to make any sense of it, it will just give you a headache,” says prosecutor McKeon.

But let’s try anyway. To understand Finley’s strange trip through America’s legal system, you have to start with a financial weapon that became wildly popular with the militia movement in the 1990s.

The tool they used was your basic commercial lien. Normally, a lien works like this: If somebody fixes your car or replaces the roof on your house, they expect to be paid. If you don’t pay them, they can take you to court. Or, they can go down to the county recorder’s office and file a lien against your property. You might continue to shirk the bill, but if, for example, you later try to sell your house or borrow money against it, the lien will block you from doing anything with the property until you settle things with your creditors.

In the 1990s, filing a lien was pretty easy; getting one removed from your property was anything but. The Freemen and others retooled the lien to go after their political enemies. Judges were hit with liens for making the wrong decision in court. Cops, banks, even former Attorney General Janet Reno had liens filed against them for some wrong they committed—whether real or perceived.

“There was clearly this weird loophole in the law,” says Mark Potok with the Southern Poverty Law Center. “There were tens of thousands of these liens filed.” This sort of use, or abuse, of liens was dubbed “paper terrorism” by federal officials. “Typically, you didn’t have to file anything to justify your claim. And it would cost you thousands and thousands of dollars in attorney’s fees to get them taken off,” Potok explained.

But in the case of the Freemen, it was more than a tool to harass—it became a sort of currency.

For example, as Finley learned late in 1995, the Freemen had filed a $77 million lien against the Secretary of the United States Treasury. The checks Schweitzer handed out to his students were called “warrants,” and they were supposed to be backed by the supposed value of the liens.

Pure snake oil, according to the vast majority of legal and financial experts, then and now. But you have to take into account, “the power to believe in something you want to believe is true,” explained Greg diGiere, a former researcher in the California Senate Office of Research. “A lot of very intelligent people have fallen for this.”

In 1997, DiGiere put together a report for state lawmakers called “Tactics of California’s Anti-Government Extremists.” At that point, California and other states were starting to tighten up the rules on these liens, in direct response to tactics of the militia movement. But in his heyday, Schweitzer had an eager following. According to DiGiere’s report, more than 800 people, Finley included, took classes from the Freemen in Montana. And hundreds believed—or suspended disbelief—in the Freemen’s convoluted parallel economy.

“They had this beautiful, pseudo-legal rationale,” said Mark Pitcavage, who has followed how the Freemen and other groups use “fictitious financial instruments” for years. He now works for the American Anti-Defamation League. “They did this magical trick, and then out of the goodness of their hearts, they were going to let you access some of the value of those liens,” Pitcavage explained. “You had a certain number of people who believed that Schweitzer had really found the secret that the bankers were trying to hide from everybody.”

After the class, Finley brought a business proposal to Schweitzer. That business proposal would later show up as evidence used against Finley in his trial for bank fraud.

Schweitzer gave Finley a $360,000 check to pay off his IRS debt, the idea being if there was anything left, the IRS would refund the difference to Finley. Schweitzer also gave Finley a check to pay off the mortgages Finley had on his condominiums. Most importantly, Schweitzer made a big investment in Finley’s dream of expanding his bookstore business.

“My deal with him was that he would become a 35 percent investor in RJ Finley Enterprises, which would open 19 additional America’s Legal Bookstores across the United States.”

In return for making Schweitzer a partner, Finley walked away from the meeting with a check for $6,125,000.

Excited when he returned home, Finley called Blossom Dunng, a vice president of the Bank of America, and gave her the good news. On December 28, 1995, Dunng came to the bookstore in person, took the $6 million check and gave him a collection receipt.

Three days later, it came back, with a note from the bank asking for more information. Finley asked Dunng to try again, but again she came back to him, saying, “Richard, there’s a fraud alert on this.”

Finley saved a letter he faxed to Schweitzer about this time, wherein he pleaded with the Freeman to help him clear things up with the bank. “She believes in me,” Finley wrote of the bank official, “and in my plan to open 20 legal bookstores across the United States. She is willing to help, but I must get her an address or phone number that she can call to get the cashier’s bank check exchanged and credited to the bookstore account.” Later, he wrote, “LeRoy, I need your help. The banker wants to help, but she needs your help.”

Schweitzer advised Finley to keep trying. “He says, ‘That’s bullshit. Call the Secretary of the Treasury, the Comptroller of the Currency.’” And Finley called them. He also tried to get help from state Sen. Richard Polanco and Rep. Robert Matsui. He sent and resent the checks to the IRS, to the mortgage companies and to Bank of America. But the checks kept coming back. “All they would say is, ‘These are no good, these are no good.’”

He didn’t stop trying to get the checks deposited until he learned that Schweitzer had been arrested in a Montana post office, and the Justus Township was under siege by the FBI.

Media accounts from the time described the Freemen as heavily armed. The same farmhouse Finley had been to just three months before was now a compound. This was after Waco, Texas; Ruby Ridge, Idaho; and Oklahoma City. So the feds weren’t taking any chances. They waited the Freemen out: The standoff lasted 81 days, and it ended with a whimper in June of 1996 when the remaining Freemen surrendered.

“When they had the standoff, I just thought, ‘Whoa!’” At that point, Finley says he backed off trying to get paid for the checks.

But he still believed in the documents he saw, in the checks that other people had cashed. He was bitterly disappointed that the grand plan for his business was unraveling. Until someone showed him absolute proof that Schweitzer was wrong, that the warrants and checks were no good, that the liens were not really valid, he was going to press for answers.

In August of 1996, he decided to go to the local office of the IRS and press the matter once again, to ask why the warrants were deemed to be no good.

“I went there and I said, ‘I need to talk to one of your higher ups.’”

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Soon, an IRS special agent came down to give Finley what should have been some unsettling news.

“He told me, ‘There’s been an investigation out on you. You’ll never cash these.’”

When he left, Finley said the special agent followed him outside and took down his license-plate number. Finley confronted him and said, “Why don’t you come down to my bookstore?” To which, Finley said, the agent replied, “‘I’ve already been to your bookstore.’”

It might have, probably should have, chilled Finley to hear he was being watched. But Finley said he shrugged it off. “You know, it didn’t bother me. You can investigate all you want. I did nothing wrong. At least, that’s what I thought.”

And for a while, that year, the next year, that seemed to be the end of it. Nothing happened from August of 1996 through all of 1997 and the first six months of 1998. Nothing happened until June ’98. That’s when Finley was asked to testify on behalf of Schweitzer and another of the Freemen leaders, Daniel Petersen, in their federal trial in Bozeman, Mont. He was happy to do so, as he still thought of the Freemen as Robin Hood figures.

By his account, he gave a good performance on the stand. “I got them a hung jury,” he claimed. So Finley was invited back for an encore in the Freemen’s second trial in November of 1998.

Finley was to testify on a Monday. That Friday, one of the defense attorneys came into Finely’s hotel room and told him he had been indicted by the federal grand jury in Sacramento.

“I stewed about it Saturday and Sunday, and Monday I walk into court. The judge sends out the jury and says, ‘Mr. Finley, I understand you’ve been indicted by the grand jury in Sacramento. You don’t have to testify because anything you say will be used against you.’”

Finley testified anyway. But with the indictment hanging over his head, Finley figures he was rattled, because he rates his second performance on the stand as lacking: Schweitzer was convicted of conspiracy and fraud and sentenced to 22 years in prison.

Today, Finley characterizes his indictment, coming literally on the eve of testimony on behalf of LeRoy Schweitzer, as “witness tampering.”

And his current lawyer, David Springfield, says the timing wasn’t coincidental. “He never had the frame of mind to defraud a single soul. It was simply convenient to indict him, in order to help the case against the Montana Freemen.”

Though Finley didn’t know it until later, the government was going after Schweitzer’s students, one by one, and putting them in prison.

According to the Senate Office of Research report, the Freemen lien scheme spawned 65 different criminal investigations, involving more than 150 defendants. The checks and warrants issued would have been worth more than $2 billion had they been used successfully.

A Southern California woman who had been to the Justus classes and who called herself “The Lien Queen” was convicted of fraud in 1997. She actually managed to take in over $1 million. The judge sentenced her to 17 years in prison.

Finley, by contrast, was a smaller and more distant fish from the Freemen’s main core of support. He wasn’t indicted until 1998 and wasn’t tried until late 1999. In January 2000, he was convicted of three counts of bank fraud, one count of submitting a false claim to the IRS and one count of attempting to obstruct the IRS. Judge William Shubb sentenced Finley to four years in federal prison.

Life in the Lompoc Federal Correctional Complex, apparently, is pretty low-key. When Finley talks about his time at the prison, he mostly mentions the friends he made. In his office, he points to a picture of himself and some other guys, mostly middle-aged, posing in their work clothes. “These are my homies,” he says with a laugh, explaining that two were drivers for the landscape committee, which he worked on, mowing the grass at the warden’s house. Another friend drove the truck for the prison dairy, delivering milk all over the state to the other federal prisons. Finley has even framed some of the Lompoc Dairy milk containers and hung them on his office wall. “I had two judges in prison with me, six lawyers. I was in good company.”

One of Finley’s biggest complaints about life inside was that he was deemed by prison officials to be a bigot because of his association with the Freemen.

“That followed me all the way through federal prison. When I was in there, I had a black unit manager, and he liked to have white inmates as his orderlies. So when I became his orderly, I used to have to make his coffee and all. I would have to drink his coffee in front of him before I gave it to him, in case I pissed in it or spit in it or whatever.”

And when Finley would appear before prison administrators for regular evaluations, “They’d say, ‘Oh yeah, here he is, the Montana Freeman.’”

During this time, with Finley’s legal bills and incarcerations, he lost the condos to bank foreclosures. And he had to declare bankruptcy.

While in prison, he also worked on his own appeal. And in 2002, the 9th Circuit Court of Appeals reversed and remanded Finley’s conviction, finding that the trial court had not allowed testimony from experts regarding Finley’s mental health, evidence that might have exonerated him.

He was granted a new trial, and on April 1, 2004, federal Judge David Levi acquitted Finley. In Levi’s oral verdict, the judge said he had “reasonable doubt” that any banker would have honored Finley’s check warrants, so it was unlikely Finley would ever have gotten away with the crime. And Levi had reasonable doubt that Finley even intended to break the law. Levi did rule that the warrants and liens that got Finley in trouble were bogus—even though that still wouldn’t satisfy Finley. Finally, Judge Levi said, “There does appear to be something very like mental illness at work here in Mr. Finley’s activities concerning these warrants. Otherwise, I can’t truly explain to myself what happened here.”

The thing that got Finley off—the thing that, if he’s successful, may get Finley declared factually innocent, is the court’s opinion that the man is in the grips of some sort of delusion. In his current case, the government wants to put on the stand a witness who will say Finley is completely sane. And Finley would agree. “I never wanted to see any shrink. There’s nothing wrong with me.”

And yet, consider what Finley did right after being acquitted.

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In May of 2004, “I put a $40 million lien on Judge Shubb,” Finley said, with a laugh.

The judge who put Finley away for almost two years was now the target of Freemen-like paper terrorism. “The judge couldn’t sell anything, he couldn’t do anything with his property,” Finley explained. “I froze him. I just froze him.”

Finley wasn’t surprised when a federal prosecutor showed up at the bookstore shortly thereafter. “I knew I’d get a reaction.”

“We sat here for two hours. He says, ‘You can’t do this.’ ‘Well, I did it,’ I say. I told him about how I had been robbed of all those years by Judge Shubb.”

The prosecutor went away but came back a few days later when Finley’s wife Maria was working the store.

“He’s telling her, ‘Mrs. Finley, you don’t want him to go back to jail, do you?’” Indeed, she didn’t. “She says, ‘Richard, give this up.’ I said, ‘Maria, I can’t.’ She says, ‘You either give it up or I’ll leave you. I can’t go through another 20 months with you in prison. I can’t do it.’”

And that apparently scared Finley more than anything that had happened so far. When the prosecutor came back the third time, Finley signed all the papers to expunge the lien.

But he hadn’t given up on his quest to get justice. “When I was in prison, the inmates used to say, ‘Oh, if you were ever reversed and remanded, you can collect money for when you were in here.’”

Finley figures the federal government owes him about $89,000 for locking him up when he wasn’t guilty. He also says they owe him damages because he lost so much money and property during his legal fights and incarceration—the foreclosures, the bankruptcy.

So he filed a claim against the federal government in July of 2007. Shortly afterward, he was told that in order to pursue the claim, he would need a “certificate of innocence.”

In all of the years that Finley has been in the legal bookselling business, he said he’d never heard of a certificate of innocence. The lawyer who got him acquitted told Finley he’d never heard of a certificate of innocence.

SN&R called the public information officer at District Court, and he said, “I’ve never heard of it.”

Mike Vitiello, a criminal-law professor at McGeorge School of Law, told SN&R the same: “Never heard of it.”

It’s a very unusual legal process. It turns our usual idea of the court system upside down. But here’s Finley, guilty until proven innocent. Or at least, not innocent until proven innocent.

And proving one’s innocence in federal court is a tough trick to pull off.

According to U.S. law, Finley has to first prove that his conviction has been set aside. So far, so good. But he also has to prove that he “did not by misconduct or neglect cause or bring about his own prosecution.”

That he can’t do, said U.S. Attorney Michael McKeon, who’s been involved in Finley’s case on and off for years.

“If he had listened, if he had not been so negligent in his own affairs, he would not have brought about his own prosecution,” said McKeon. Of all people, the prosecutor argued, Finley should have known what he was getting into. “He knows about checks, banks and property. He offers bar-review courses to lawyers. This is not a person who lacked the means to find out whether the warrants were valid or not. He chose to ignore every piece of advice that was given to him.”

But Finley’s lawyer David Springfield counters that Finley is factually innocent. He never got a dime out of the liens or the bogus checks he tried to deposit into his bank account. “The only person who lost out was Mr. Finley,” explained Springfield. “Because he was gullible enough to believe what he was told.”

During the February 8 hearing, Springfield reminded the court of Judge Levi’s assessment that Finley was deluded.

“The very fact that most people would not have attempted to cash these checks shows Mr. Finley’s atypical belief system. To this day, he’s still laboring under this atypical belief system.”

Indeed, Finley insists he’s been perfectly rational about the whole thing. By his lights, nobody has proved to him that the liens aren’t valid or weren’t valid at the time. He’s researched and researched the matter, pored over law books and U.S. codes. He says that one of the Freemen liens, the one that backs his $6 million check, is still in place.

When he gets his certificate of innocence, he says, he’ll go to Washington, D.C., to press his claim for compensation. When he does, he says he has a little side trip planned.

“I want to go to Washington, D.C. I want to take that $6 million warrant, walk over to the Secretary of the Treasury, and say, ‘Look, have you found anything wrong with this? No? Cash this.’ Then we’ll see what happens.”

In other words, Finley still believes that $6 million check is good.

“I believe it with all my heart and soul,” he said. “With all my heart and soul.”