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Wesley and Gina Halihan felt the opportunity was too good to pass up when their landlords offered to sell them the home they’d been renting in Santa Rosa.

“I never thought I’d get to buy a home, and all of a sudden the landlord knocks on the door and says, ‘yeah I’ll sell you a house,’ ” Halihan said.

But their dream turned into a nightmare about 10 months later when they discovered their Brown Street home was entangled in hundreds of thousands of dollars in liens for an unpaid mortgage taken out on the property by the Petaluma couple that sold it to them, according to court records.

Now, federal agents are searching for the Halihans’ former landlords, James Christopher Castle, 49, and his wife, Lara Castle, 44, who are at the center of a bitter fight with the Internal Revenue Service. A federal indictment unsealed last month accuses the couple of trying to steal more than $2 million from the U.S. government by claiming tax refunds based on phony documents.

James Castle, who is also known as Chris Castle, said the couple has violated no laws and accused the government of unjustly targeting them.

“It’s not only arbitrary, it’s a ridiculous waste of taxpayer time and money,” he said.

He added that some of his and his wife’s actions, such as not paying taxes, were committed in protest of unjust government laws and banking practices.

“Citizens are required to challenge the government, to call them to the carpet if things aren’t being addressed appropriately,” he said.

Castle would not say in a recent phone interview whether he, his wife and their daughters were still in California or even the United States. The IRS has not been able to contact the couple since the June 24 indictment, said Special Agent Arlette Lee. “If (they) want to contact us, we’d be more than happy to have a conversation with them,” she said.

When asked if he planned to do so, Castle replied, “Why would I reach out? They’re a bunch of liars, cheats and henchmen.”

However, he said, he and his wife are planning to submit a response to the court. Castle said he had a “fundamental problem” with the income tax, which he described as voluntary. He has opted out from paying it as a conscientious objector for 30 years, he added. Castle listed concerns about banks and banks’ relationship with the federal government among his objections.

Being a conscientious objector does not give someone immunity from paying taxes, said Jay Weill, who served as chief of the U.S. Attorney’s tax division for 25 years before becoming a partner at Sideman Bancroft, a law firm in San Francisco. Now he defends people in civil and criminal tax matters.

“Stealing from the government is not a nonviolent form of protest,” he said.

The Castles’ actions and philosophy are typical of a loosely formed group of tax and government protesters often described as “sovereign citizens,” said JJ MacNab, who writes about the movement for Forbes and is planning to publish a book on the subject next year. Such people often use “fake legal research” to avoid paying taxes, she said.

James Castle denied being part of any group or movement.

“I’m an individual that chooses to read instead of watch TV, push back instead of getting trampled on,” he said. “If more people chose to do this, we probably wouldn’t have problems with government run amok and a judiciary that exhibits arrogance to the people they’re supposed to serve and protect.”

Castle at times has fought the government’s attempts to collect taxes from the couple. In October 2009, he filed liens totaling nearly $150,000 against two IRS employees involved in trying to collect taxes they said the Castles owed, court records show. Castle said he did not owe the taxes and used legal means to place a lien on the IRS employees after they did not respond to what he called “a contract” he sent requiring them to provide proof of the couple’s tax liability or face financial penalties. A lien is a legal tool that ties up the recipient’s property until they satisfy a debt.

The federal government filed a civil complaint seeking to nullify the liens, writing that Castle’s filings were “without any legal basis whatsoever” and “solely designed to harass federal employees in their personal lives for the performance of their official duties.”

The court agreed to remove the liens in May 2011. “But that doesn’t mean (the liens) weren’t valid,” Castle said.

Last month, a federal grand jury indicted the couple for allegedly preparing six false tax forms used to file returns seeking refunds totaling more than $2 million. The returns were filed in 2008 and 2009 through the Castles’ Petaluma-based business, TTF Consulting, according to the indictment. The indictment also alleges that Lara Castle, who officials referred to by her maiden name Karakasevic, filed a false amended individual income tax return for 2005.

Specifically, the Castles are accused of falsifying IRS 1099-OID forms, which are used to report typically large amounts of income received from interest on bond investments. The IRS listed 1099-OID fraud on a list of the “dirty dozen” tax scams of 2014.

Castle said TTF Consulting was his wife’s business and that he only helped out occasionally by sending correspondence to clients. He emphasized that she did not prepare the 1099 forms for her clients. Her job was simply to electronically file tax forms that had already been prepared by tax preparers or individuals, he said.

The IRS would not explain why the people whose tax returns were filed by the Castles are not named as co-conspirators in the indictment.

If convicted, the Castles face a maximum sentence of five years’ prison time and a fine of $250,000, officials said.

The Halihans were not surprised when they learned of the indictment. The Santa Rosa couple, their title company and other plaintiffs have filed suit against the Castles and more than a dozen other people and businesses they accuse of racketeering and fraud.

The home sold to the Halihans in 2009 had been used to secure a nearly $500,000 loan taken out in 2005 by Lara Castle, referred to as Karakasevic, according to the lawsuit. The Castles allegedly made it appear the home was free and clear of the debt by fraudulently reconveying the deed of trust back to themselves, according to court documents.

The Halihans were renting the home on Brown Street from the Castles when the couple offered to sell it to them in 2009, stating that it was free and clear of liens, Halihan said.

Castle said the Halihans first expressed interest in buying the home, not the other way around.

The Halihans eventually agreed to buy the home for $264,000 in December 2009, Halihan said. He hesitated to purchase title insurance because of the cost, but ultimately opted for it. He doesn’t regret the decision for a moment.

The title insurance company, Fidelity National, did not spot any problems with the house title at the time of the sale, he said. But about 10 months later, the couple started getting papers from World Savings Bank (now Wells Fargo Bank), which owned the Castles’ original loan. The bank initiated foreclosure proceedings, he said.

The title company “went to bat for us,” Halihan said. Litigation between the title company and the Castles is ongoing, but not at the Halihans’ expense. They’ve been able to remain in their home.

“I’m the poster boy for title insurance,” he said.

The Castles first struck him as “really clean-cut, yuppie like,” Halihan said. But over time, he said, he grew more suspicious of the couple, getting the feeling they were trying to sell him something. Halihan said he believes the Castles moved away, possibly to New Zealand, in late 2010 or early 2011.

Castle said he and his wife’s actions regarding the house were “100 percent legal.” He said they had cleared the property title through a “legal administrative process” and that Wells Fargo refused to recognize that.

Castle has filed what he says is an unrelated suit against Wells Fargo, accusing the bank of fraud.

Wells Fargo Bank declined to comment, citing the ongoing litigation. Fidelity National didn’t return calls seeking comment.

You can reach Staff Writer Jamie Hansen at 521-5205 or jamie.hansen@pressdemocrat.com. On Twitter @jamiehansen.

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