Winston Shrout admitted in court Thursday that he hasn't paid taxes for nearly 20 years and created worthless documents that he sent to banks and the U.S. Treasury to relieve debts.

But the 69-year-old -- a Kentucky native, retired carpenter and prominent sovereign citizen who has gained a following across the country and abroad -- said he never intended to harm or defraud anyone.

Shrout took the witness stand in his own defense for nearly two hours at the end of a three-day trial on 13 counts of creating and issuing bogus financial documents and six counts of willful failure to file tax returns from 2009 through 2014.

Jurors deliberated about two and a half hours in the afternoon before stopping for the day. They will resume Friday.

Government lawyers argued Shrout aimed to cheat the Treasury and banks, and preached his illegal schemes to hundreds of others in paid seminars. He purposely sent a package of 1,000 homemade International Bills of Exchange, each purporting to be a legal tender for a trillion dollars, to a small community bank in Chicago "hoping to slip one by an unsuspecting banker,'' U.S. Tax Division trial lawyer Scott Wexler told jurors.

Shrout knew exactly what he was doing, Wexler said. Investigators found a copy of the U.S. Tax Code and the U.S. Department of Justice's criminal tax manual on Shrout's laptop computer, seized one night in the parking lot of The Grotto in Portland after he concluded a seminar there. The computer also contained an alert from the Office of the Comptroller of the Currency, cautioning banks and federal savings institutions to be on the lookout for the circulation of such fictitious financial documents, Wexler said.

Shrout was driven by "simple greed,'' Wexler said. He earned a total of $562,224 from a carpentry pension, plus royalties and payments for his seminars, between 2009 and 2014, the prosecutor said.

"He intended to get and keep as much money as he could,'' Wexler said. "The defendant knew he didn't have legal authority to print legal tender of the United States from his home computer. ... The defendant didn't file his tax returns because he didn't want to.''

**

During his testimony, Shrout swiveled his chair toward the 12-member jury and read from prepared notes.

He explained how he believed he had authority from Dr. Ray C. Dam of the Office of International Treasury Control to help address the problem of mortgage foreclosures in the United States. He met Dam during a trip to Cambodia in 2010 and said Dam appointed him to be a notary, judge and counsel for the organization.

"The reason why I believe I can act upon this appointment is because the legal opinion of an international lawyer in Switzerland,'' Shrout said.

The office Shrout cited, though, is considered by the U.S. government a fraudulent organization that claims ties to the United Nations and the Federal Reserve.

Shrout said he joined what he estimated are about 65 million other people in what he called "tax avoidance" in the late 1980s after the Internal Revenue Service garnished his wages and he couldn't pick up his regular carpentry paycheck.

He hired a tax consultant then. "I had made errors in my filing. It's easy enough to do,'' Shrout told jurors. He said he learned he had overpaid the IRS about $2,000 and was refunded only 10 percent of that.

"That's what caused me to delve into these matters," he said. "My actions were based on the concept of tax avoidance, which I found to be perfectly legal."

During cross-examination, he didn't acknowledge that he earned "income'" in the six years he's accused of not paying taxes. "I could never find a legal definition of the word income," he testified.

"You can use any word you want, but you did receive funds, right?'' interjected U.S. District Judge Robert E. Jones.

"Correct," replied Shrout, who is representing himself with the help of a standby lawyer, Ruben Iniguez.

Iniguez, an assistant federal public defender, told jurors the entire case rested on Shrout's beliefs and his state of mind -- whether he had a "good faith'' belief that he was acting lawfully.

Jurors may find Shrout "a little crazy," but he didn't act willfully, even if his understanding of the law was unreasonable or wrong, Iniguez said.

"Ignorance of the law – misunderstanding of the law is a defense because the tax law is so damn complicated,'' Iniguez said.

He called each of Shrout's fake bills of exchange "ludicrous on its face.'' While prosecutors described the blue decorative borders, account numbers, red thumbprints and Shrout's signature on the documents as "hallmarks of legitimacy,'' Iniguez said they failed to point out the words, "Void where prohibited by law,'' which clearly made the documents worthless.

Using a Monopoly analogy, Iniguez argued that if someone hands a player game money worth a trillion dollars but it says "void'' on its face, "is that person really trying to defraud you?''

U.S. Tax Division trial lawyer Lee Langston said the void language on the fake documents was Shrout's "escape clause'' should he end up facing criminal prosecution.

Iniguez stressed that "not a single penny was paid out or transacted by anyone'' as a result of the 13 fictitious documents Shrout is accused of sending either to a bank or the Treasury. He argued that the government simply is out to "muzzle'' his client.

"The government doesn't like the fact people espouse these views,'' Iniguez said.

**

Until his arrest, Shrout was "the most prominent sovereign citizen guru remaining who had not been prosecuted on some charge,'' said Mark Pitcavage, senior research fellow with the Anti-Defamation League's Center on Extremism.

"Shrout was highly influential within the sovereign citizen movement — even some other sovereign gurus liked to boast that their seminars taught the 'Winston Shrout method,'" Pitcavage said. "He had a great talent for looking folksy and spouting pseudo-legal gobbledygook that made all sorts of undeliverable promises to his gullible audiences."

The sovereign citizen movement includes people who hold complex antigovernment beliefs, and it's been growing at a fast pace since the late 2000s, according to the Southern Poverty Law Center. Sovereigns believe that they — not judges, juries, law enforcement or elected officials — get to decide which laws to obey and which to ignore, and they don't think they should have to pay taxes. They believe the founding fathers set up the U.S. government based on common law, but its been usurped by admiralty law, the law of the sea and international commerce.

Shrout helped spread the movement to other countries, traveling to Australia, New Zealand and Great Britain to hold sovereign citizen seminars, Pitcavage said.

"By 2008-2009, he had catapulted himself into the first rank of sovereign gurus, coming up with and promoting the pseudo-legal theories and tactics at the heart of the anti-government extremist movement,'' he said.

"If prosecutors can secure a conviction,'' Pitcavage said this week, "it could possibly even have a welcome dampening effect on the sovereign citizen movement, which has been growing steadily for years now."

-- Maxine Bernstein

mbernstein@oregonian.com

503-221-8212

@maxoregonian