BILLINGS - A federal judge has dismissed the charges against an Internal Revenue Service supervisor accused of obstructing a tax investigation into the Rosebud Community Hospital in Forsyth.
On Thursday, U.S. District Judge Richard Cebull said violating the IRS' manual does not constitute a crime and threw out all nine counts against Roy Yurt of Park City, a supervisory revenue officer in the agency's Billings office.
Yurt pleaded not guilty last November to conspiracy to commit fraud, obstruction of an administrative proceeding and seven counts of willful misconduct.
His trial began Monday.
Yurt wiped his face and hugged his attorney, Larry Jent of Bozeman.
"Praise the Lord," Yurt said.
"I'm so happy for Roy," Jent said. "Roy Yurt didn't mean to do anything wrong and made a mistake by trusting his revenue officer."
Yurt was accused of conspiring to prevent the IRS from collecting a tax penalty from the hospital.
Prosecutors said he had a long-standing relationship with the president of the hospital's board, and used his position to ensure that a $46,000 penalty involving delinquent payroll withholding taxes owed by the hospital was not assessed.
Jent, however, said the government got its money and that Yurt never intended to break the law. He also argued against the use of the IRS' manual to support criminal charges.
On Thursday, Cebull said he began to agree with Jent when reading the 26-page indictment to potential jurors.
"We haven't been able to find a case," he said, referring to research by himself and his law clerk. "I have no idea what we're doing here."
Cebull repeatedly asked the prosecutor to identify a statute in which violating the IRS' manual constituted a crime.
Special U.S. Attorney Lynne Lamprecht maintained the government charged the case differently than how it was being interpreted by the judge. She asked for time to research the question, but Cebull refused.
Earlier this month, a former revenue officer pleaded guilty to a felony charge of failing to report a crime in connection with Yurt's case.
Yurt assigned the hospital investigation to Robert Owens, who made a deal with prosecutors and testified against Yurt earlier in the week.
Owens said he and Yurt disagreed over the handling of the investigation, but that he was intimidated by his boss and followed his instructions.
Owens' sentencing is scheduled for Jan. 5.