Tax Protestor Anti-Blog

2004-07-29T10:08:00.000-07:00

Is there a tax protestor crazier than Austin Gary Cooper? Well, yeah, but he's still pretty crazy. Here is his latest exploit.

DENVER -- A judge imposed $1,000-a-day fines and threatened to jail a Fort Collins couple Wednesday unless they stop offering to sell material purporting to explain how to legally evade federal income taxes. Austin Gary Cooper and Martha E. Cooper ignored a November order to stop offering the material and failed to attend a hearing on Friday, U.S. District Judge Lewis Babcock said. Babcock said the fines would increase to $5,000 a day after 11 days, and if they reach $50,000, the couple could be jailed. Martha Cooper said Wednesday she and her husband have not complied with the orders because they do not recognize the judge's authority. Babcock had ordered the couple to turn over names of customers, to remove materials "designed to incite others" to violate tax laws from their Web sites. The couple's company, Taking Back America, urged people to stop paying federal income taxes and to renounce their "United States citizenship" for "American citizenship." The Justice Department has estimated the couple sold the "expatriation/repatriation" system to as many as 2,000 people nationwide for fees starting at $1,595. The Justice Department accused the couple of helping investors file false forms with their employees to halt the automatic withdrawal of payroll taxes. Customers allegedly received a package of documents to be filed with numerous federal agencies that claimed to allow people to legally avoid paying federal income taxes and seek a refund of taxes already paid. Customers also could pay $2,400 for a course on the organization's philosophy. According to courts papers filed by the Justice Department, the Coopers and TBA used a network of distributors to market their scheme and promoted it on a Web site, at seminars and in periodic telephone conference calls. Austin Cooper was criminally convicted in 1990 of willfully attempting to evade or defeat the payment of federal income tax by failing to file income tax returns, failing to pay income tax, and filing false tax-withholding certificates.
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2004-07-28T11:34:00.000-07:00

As we go into the dog days of summer, it looks like the Service is starting to ramp up its activities against promoters.

FOR IMMEDIATE RELEASE TUESDAY, JULY 27, 2004 WWW.USDOJ.GOV TAX (202) 514-2007 TDD (202) 514-1888 JUSTICE DEPARTMENT SUES TO HALT PREPARATION OF FRAUDULENT TAX RETURNS BY EAST CLEVELAND TAX-RETURN PREPARER Allegedly Frivolous Returns Omit All Wage Income Earned By Preparer=S Customers WASHINGTON, D.C. - The Department of Justice filed a lawsuit in federal court in Cleveland today to stop author and tax return preparer Michael A. Allamby, of East Cleveland, from preparing federal tax returns for customers. The civil injunction suit also seeks to prevent Allamby from promoting an alleged fraudulent tax scheme under which wages are omitted from taxpayers’ tax returns, and to turn over his customer list to the Justice Department. According to the complaint, filed in the U.S. District Court for the Northern District of Ohio, Allamby prepares federal income tax returns for Cleveland-area residents that report zero total income and request refunds of all federal income taxes withheld. The suit alleges that Allamby reports zero total income on his customers returns, despite filing the returns with attached W-2 Forms indicating that the customers have received thousands of dollars in wages or salaries. The complaint states that, since January 2000, the IRS has processed hundreds of returns Allamby prepared. "Preparers of frivolous tax returns and their customers face civil and possibly criminal penalties for their actions," said Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division. According to the complaint, Allamby also conducts "training courses" across the country at which he promotes his views and solicits customers for his return-preparation business. Court papers allege that he has conducted ten courses since 2000, including courses in Detroit and New York City within the past year. The complaint alleges that Allamby has also written a book, To the Best of My Knowledge and Belief, in which he encourages readers to file tax returns that omit wages from income. In addition to seeking to enjoin Allamby from preparing future tax returns, the government seeks to halt the seminars and book sales through an injunction against Allamby that bars him from advertising, marketing, or promoting any false, misleading, or deceptive position, including the position that wages are not taxable income. More information about the Justice Department's ongoing efforts to halt the promotion of tax scams can be found at http://www.usdoj.gov/tax/taxpress2004.htm. Information about the Tax Division is available at http://www.usdoj.gov/tax/index.html .
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2004-06-24T21:53:00.000-07:00

Employers keep getting sucked into de-tax schemes, and they keep going to jail. This employer got 15 months for failing to withhold. No employer has ever beaten the IRS on these theories, though they continue to be shamelessly espoused by Bob Schulz's We-The-People scam.

June 14, 2004

PRESS RELEASE
FORMER FRANKLIN BUSINESSMAN SENTENCED FOR TAX OFFENSES

Boston, MA... A former Franklin business owner was sentenced in federal court today in connection with tax offenses involving his failure to account for and pay over to the Internal Revenue Service more than $175,000 in federal income, social security and medicare taxes that he withheld from the paychecks of his employees during the years 1997 to 1999. He was also sentenced for having failed to file individual income tax returns despite earning more than $500,000 in gross income over the same time period.

United States Attorney Michael J. Sullivan and Joseph A. Galasso, Special Agent in Charge of the U.S. Internal Revenue Service, Criminal Investigation, announced that MICHAEL SCHLEVENICK, age 51, formerly of 1 Franklin Springs Road in Franklin, Massachusetts, was sentenced by U.S. District Judge Douglas P. Woodlock to 1 year and 3 months in prison, to be followed by 2 years of supervised release.

SCHLEVENICK pleaded guilty on March 10, 2004 to a fourteen-count Indictment charging him with failure to account for, and pay, withholding taxes, and failure to file individual returns.

At the earlier plea hearing, the prosecutor told the Court that, had the case proceeded to trial, the evidence would have proven that SCHLEVENICK owned a Franklin-based business named Coastal Marketing, Inc. ("Coastal"). SCHLEVENICK prepared and issued paychecks to Coastal's employees from which he deducted state and federal income taxes and social security and medicare taxes. During the years 1997, 1998 and 1999, SCHLEVENICK withheld more than $175,000 in federal taxes from his employees' paychecks, yet willfully failed to report or pay over those taxes to the IRS.

As stated at the plea hearing, the evidence further would have shown that over the same time period, SCHLEVENICK personally received more than $500,000 in gross income, but did not timely report or pay taxes on any of it.

The case was investigated by the U.S. Internal Revenue Service, Criminal Investigation and was prosecuted by Assistant U.S. Attorney Michael J. Pineault in Sullivan's Economic Crimes Unit.

Press Contact: Samantha Martin, (617) 748-3139

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2004-06-24T21:50:00.000-07:00

Another day, another bad day for tax protestors, this time for Stephen Swan, an Irwin Schiff acolyte from New Hampshire who was sentenced to federal prison for 9 years for drinking Irwin's koolaid. Will Schiff still claim that his methods of foolproof? Of course, since to claim otherwise would kill his book and kit sales. Even Swan figured out that Schiff was just a scam artist, but too late to do himself any good.

MEDIA RELEASE Contact: Thomas P. Colantuono

For Immediate Release United States Attorney

June 24, 2004 William E. Morse

Assistant U.S. Attorney

James W. Chapman, Jr.

Trial Attorney, Tax Division

U.S. Department of Justice

(603) 225-1552

TAX RETURN PREPARER SENTENCED TO NINE YEARS

FOR PREPARING FALSE RETURNS

CONCORD, NEW HAMPSHIRE - The United States Attorney for the District of New Hampshire, Tom Colantuono, and Eileen J. O'Connor, Assistant Attorney General, Tax Division, U.S. Department of Justice announced that today Steven A. Swan, fifty-one, of Manchester, New Hampshire, was sentenced to 9 years in federal prison for a variety of tax offenses related to his tax return preparation business.

On February 12, 2004, after a six day jury trial, Swan was convicted of fifteen counts of preparing false tax returns and amended returns for others, two counts of preparing false amended tax returns for himself and one count of corruptly impeding the administration of the federal tax laws. During the period in which the crimes were committed, Swan resided in Auburn, New Hampshire.

Swan was sentenced by U.S. District Chief Judge Paul J. Barbadoro, who presided over Swan's trial. Judge Barbadoro increased Swan's sentence on the grounds that Swan obstructed justice by testifying falsely at trial. Judge Barbadoro also increased Swan's sentence, because the evidence at trial showed that Swan filed frivolous lawsuits against, threatened and sought the baseless criminal prosecution of IRS employees and other government officials who lawfully tried to assess and collect taxes from him. Under federal law, Swan will not be eligible for parole.

According to the evidence at trial, during the period 1997 through 2002, Swan prepared hundreds of so-called "zero-income" tax returns for customers of his tax return preparation business. On those returns, Swan reported that the customers did not have any income even though he knew that his customers had received substantial wages, salaries and other compensation. The evidence at trial further showed that, in 1997, Swan filed two amended returns for himself falsely reporting that he had no income for tax years 1993 and 1994. Those amended returns sought refunds of taxes Swan had paid previously for those years. Finally, the evidence showed that, after the Internal Revenue Service initiated collection efforts against him, Swan obstructed the administration of the tax laws through a continuing campaign to harass and intimidate the IRS, its employees and third parties lawfully complying with IRS collection requests.

At trial, Swan testified in his own defense that he was a former disciple of notorious tax protestor, Irwin Schiff. He further testified that, based upon Schiff's teachings and his own research, he sincerely believed that there was no law making anyone liable for the federal income tax. Swan also claimed that he believed that the federal income tax was unconstitutional, a claim which the Court had already ruled did not constitute a defense to the crimes charged. The government's evidence established that Swan was fully aware of his legal obligation to file accurate tax returns and pay taxes that were due.

The evidence established that Swan prepared more than 200 tax returns for others, making false claims for refunds in excess of $1 million dollars and generating a tax loss of approximately $3.2 million. Swan promoted his tax return preparation business by holding seminars entitled, "How Anyone Can LEGALLY Stop Paying Income Taxes" at hotels in Manchester between 1997 and 2002. Swan advertised these seminars in numerous local and regional newspapers. The evidence further demonstrated that Swan encouraged others to file Forms W-4 falsely claiming exempt status to stop the withholding of income taxes. Finally, the evidence showed that Swan initiated numerous frivolous lawsuits and sought the baseless criminal prosecution of IRS collection employees and banks, title companies, and even a recorder of deeds for complying with lawful IRS liens and levies.

United States Attorney Colantuono stated: "Today's sentence is a great one for all tax compliant residents of New Hampshire. All citizens must pay their fair share of the costs of the freedom and privileges of living in this country. The substantial sentence imposed in this case should serve as a clear warning to those attracted by tax protestors' false claim that there is no legal requirement to pay federal income taxes."

Joseph Galasso, Special Agent in Charge of the IRS's Criminal Investigation Division in Boston stated: "Today's sentencing sends a clear message to those who believe that there is no legal requirement to pay federal income taxes. The IRS will aggressively pursue and prosecute those who do not follow the law that requires taxpayers to accurately report and timely pay any tax due."

The case was investigated by the Internal Revenue Service's Criminal Investigation Division. The case was prosecuted by Assistant U.S. Attorney Bill Morse and Jim Chapman, a Trial Attorney with the Department of Justice.

For more information about illegal tax schemes, taxpayers should go to www.irs.gov, and use the keyword, "TAX FRAUD."

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2004-06-13T18:39:00.000-07:00

For years, tax protestors pointed to the existence of Judge John Rizzo, who would attend various tax protestor events and opine that the income tax was unconstitutional. The good judge was most active in helping sell memberships in Global Prosperity Group -- the leaders of which have been recently indicted. Indeed, it is speculated that the good judge's plea agreement, described below, is in exchange for his agreeing to help prosecute the GPG scammers. Oh, and John Rizzo never went to law school, and never was a real judge. Instead, he was simply a small claim justice in some small town in Arizona.

SELLERS OF BOGUS TAX ADVICE PROGRAM
PLEAD GUILTY TO TAX CHARGES

WASHINGTON, D.C. - Two Arizona residents pled guilty today to charges
they failed to report income earned from a widely marketed tax seminar
program, Assistant Attorney General for the Tax Division Eileen J. O'Connor, U.S.
Attorney for the District of Arizona Paul K. Charlton and Internal Revenue
Service Criminal Investigation Chief Nancy J. Jardini announced.

John J. Rizzo and wife Carol A. Rizzo pled guilty to felony charges of
conspiracy and to charges of willfully failing to file their income tax
return. Rizzo also pled guilty to felony charges of willfully aiding and

assisting in the preparation of a false income tax return and perjury
before the grand jury.

"Unscrupulous tax scam promoters aggressively market a variety of fanciful
schemes purporting to eliminate tax liability," said Assistant Attorney
General O'Connor. "People who promote or participate in such schemes are
risking serious civil penalties, and when appropriate, criminal prosecution."

The defendants admitted, in their plea agreements that from 1999 to 2001,
Mr. Rizzo was a prominent vendor with the Institute of Global Prosperity
(IGP). At seminars hosted by IGP, Mr. Rizzo promoted the Millennium 2000

Reliance Defense Program (M2K) package to thousands of people at offshore seminars and resulted in more than $4 million in sales. At an earlier court hearing, as reflected in a videotape made available to the court, Mr. Rizzo appeared at these seminars wearing judicial robes and portrayed himself as a judge and an expert on tax law.

The Rizzos also admitted Mr. Rizzo sold each M2K package for
approximately
$2,300.00. Additionally, they admitted they provided materials and
documentation that purported to prove, among other things, that one
could
lawfully stop filing income tax returns and cease having income taxes
withheld from personal wages based upon the long-rejected notion that
the
Sixteenth Amendment to the Constitution had not been legally ratified.

They further admitted they concealed the income earned from the sales of
M2K
packages during the period 1999 through 2002, by using a variety of
dishonest and deceitful means, including the use of offshore bank
accounts
and third-party merchant accounts to conduct credit card sales. The
Rizzos
have been in pre-trial detention for the past ten (10) months.

In December 2003, Cheryl Cully, a co-defendant in the case, pled guilty
to a
felony charge of obstruction of justice and a charge of willfully
failing to
file her 2001 income tax return. Ms. Cully faces maximum potential
sentences
totaling six (6) years' imprisonment, fines totaling $500,000 and
liability
for the costs of prosecution. Ms. Cully is scheduled to be sentenced
before
Judge Silver on March 29, 2004.

"The IRS continues to aggressively enforce tax laws in order to ensure a

strong American economy and that all taxpayers pay their taxes," said
Nancy
Jardini. "These defendants used a myriad of arguments and abusive
financial
arrangements to evade taxes. In this case, unlawful offshore banking
used
for the purpose of evading the payment of taxes has been unmasked by the

financial investigative efforts of IRS special agents."

Rizzo faces a maximum potential sentence of fourteen years in prison,
ten
years of supervised release, fines totaling $1,000,000, as well as
liability
for the costs of prosecution. Mrs. Rizzo faces a maximum potential
sentence
of six years in prison, fines totaling $500,000 and liability for the
costs
of prosecution. Judge Roslyn O. Silver of the U.S. District Court for
the
District of Arizona has scheduled sentencing for September 27, 2004.

Assistant Attorney General O'Connor thanked Tax Division trial attorneys

Edward Groves, Larry Wszalek and Mark Odulio for prosecuting the case.
She
also thanked the special agents of the Internal Revenue Service whose
assistance was essential to the successful investigation and prosecution
of
the case.

More information about the Justice Department's Tax Division can be
found at
.

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2004-06-07T21:10:00.000-07:00

In case you've missed it, one of the quickest ways to go to jail is to try to use Pure Trusts to avoid taxes. Just ask Mark Poseley of "Innovative Financial Consultants" who will probably do about a six-year stint for his selling of Pure Trusts.

FOR IMMEDIATE RELEASE
MONDAY, JUNE 7, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

PROMOTER OF SHAM TRUSTS PLEADS GUILTY
TO TAX FRAUD CHARGES IN ARIZONA

Defendant Sold Tax Schemes Through “Innovative Financial Consultants”

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, Department of Justice; Paul K. Charlton, U.S. Attorney for the District of Arizona; and Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division, announced today that at the federal courthouse in Phoenix, Arizona, before U.S. District Judge Mary H. Murguia, Mark D. Poseley pled guilty to a felony charge of conspiracy (18 U.S.C. §371) to defraud the Internal Revenue Service (IRS) for his role in marketing bogus trusts through an organization known as Innovative Financial Consultants (IFC). Mr. Poseley also pled guilty to a charge of willfully failing to file his 2000 income tax return, despite having earned substantial income from his work with IFC.

On April 4, 2003, Mr. Poseley was indicted - along with Dennis O. Poseley, Patricia Ann Ensign, John F. Poseley, David W. Trepas, Rachel McElhinney, Jeffrey G. Lewis, Keith D. Priest, and Frank C. Williams - for conspiring to defraud the IRS. Mr. Poseley faces a maximum potential sentence of six years in jail, followed by up to four years of supervised release, $500,000 in fines and liability for the costs of prosecution. Judge Murguia scheduled sentencing for September 13, 2004.

“Putting money into a trust does not exempt it from taxation,” said Assistant Attorney General Eileen J. O’Connor. “People who act as though it does risk criminal prosecution and jail. And in the end, they will still owe the taxes, with interest and penalties added.”

“IRS Criminal Investigation has made the investigation of individuals who market or who intentionally buy into abusive tax schemes a national priority. It is a matter of maintaining public confidence in the fairness of the tax laws,” said Nancy Jardini, IRS Chief, Criminal Investigation. “Trusts established to hide the true ownership of assets and income or to disguise financial transactions are considered sham trusts.”

The indictment alleges that from 1995 to 2003, IFC, based in Tempe, Arizona, created and sold over 3,000 bogus “onshore” and “offshore” trust packages by falsely claiming that taxpayers could avoid paying income taxes if they placed their income and assets into such trusts. IFC allegedly sold each onshore trust package for approximately $4,154, and each offshore trust package for approximately $10,500. According to the indictment, IFC enabled its clients to retain control and use of any income and assets they placed into the trusts, while making it more difficult for the IRS to track the true ownership of income and assets.

In his plea agreement, Mr. Poseley admitted he worked as an IFC salesman and sold both onshore and offshore trust packages. He admitted that he falsely represented to taxpayers that they could lawfully avoid paying income taxes by placing their income and assets into trusts, despite remaining as the trusts’ “managing directors.” Mr. Poseley acknowledged he knew the IFC clients, as “managing directors,” retained control over any income and assets they placed into their trusts. He admitted he ignored written publications from the IRS and other sources which directly contradicted the false claims he made. He also admitted that for the year 2000, he earned substantial gross income from the sale of IFC’s trust packages but willfully failed to file an income tax return and report that income to the IRS.

Assistant Attorney General O’Connor thanked Tax Division Trial Attorneys Larry J. Wszalek and Mark T. Odulio, who prosecuted the case. She also thanked the special agents of the Internal Revenue Service, whose assistance was essential to the successful investigation and prosecution of the case.

On December 11, 2003, John F. Poseley pled guilty to the conspiracy charge and is awaiting sentencing. Trial of the remaining defendants is scheduled to begin in August 2004. The charges contained in the indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

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2004-05-25T06:13:00.000-07:00

Among the dumbest tax protestor arguments out there is the so-called "861 argument" which wrongly concludes that people who live in the United States are not required to file taxes, and that only foreign persons and corporations are taxpayers. This is the argument put forth by Larken Rose, who legal and constitutional background is derived not from any accredited law school, but rather from his years of transcribing medical records. Still, it sounds good to the tax protestors and they are of course dumb enough to fall for it even though the DOJ is pitching a total shutout against this particular bogus theory.

FOR IMMEDIATE RELEASE
FRIDAY, MAY 21, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

FEDERAL COURT IN WASHINGTON STATE HALTS TAX-SCAM PROMOTION

Tacoma Man Who Promoted False Tax Claims Required To Disclose Names Of Customers

WASHINGTON, D.C. - The Justice Department announced today that a federal court in Seattle has barred Jack Cohen of Tacoma, Washington, from selling his tax fraud schemes. The schemes are based on a discredited argument, repeatedly found frivolous by many courts, called the “U.S. Sources” or “Section 861 argument.” The “argument,” named after the provision of the federal tax code it misinterprets, posits that U.S. citizens are not required to pay taxes on income they receive from sources within the United States.

“Tax-scam promoters cheat not only their customers and the Federal treasury but also all law-abiding taxpayers. Some scams even teach people how to harass their employers and obstruct the administration of the tax system,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “The Department of Justice is working methodically to shut down tax fraud scams of all varieties.”

The court issued an order, called a preliminary injunction, which will remain in effect while the case remains pending. Pursuant to the court’s order, Cohen is barred from selling the Section 861 argument and any other abusive tax schemes. He must post a copy of the injunction on his website and must remove all false statements about the tax laws on the site. The order also requires Cohen send a copy of the court’s order to his customers and requires him to give the Justice Department a list of his customers.

Papers filed in the case show that Cohen, through his “Tax Ax” website, told employers to stop withholding federal income and social security taxes from the wages of their employees, and sold products such as the “W-4 Killer Pack,” which he advertised as “a kit for employees who wish to stop the withholding process.” He also sold the “Tax-Collecting Employer Challenge” for $250, a kit which told employees to send letters to their employers threatening to sue them unless they stopped withholding taxes from their paychecks. More information on this case is available at http://www.usdoj.gov/tax/04_tax_092.htm.

This is the latest in a series of injunctions the Justice Department has obtained in its continuing effort to shut down tax-scam promotions. Information on other recent injunctions entered and suits filed can be found at the Justice Department Tax Division website, http://www.usdoj.gov/tax/taxpress2004.htm.
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2004-05-19T21:49:00.000-07:00

Dan Evan's has pointed out that crazy old Irwin Schiff has already appealed to the 9th Circuit, although his criminal case has just started. Why he bothers is anybody's guess, as they have always given him the "thumbs down" before. This time the Vegas money is bettng that crazy old Irwin dies in prison.

Court of Appeals Docket #: 04-72364
Filed: 5/12/04
Nsuit: 0
Schiff, et al v. USDC-NVL
Appeal from: District of Nevada (Las Vegas)

Lower court information:
District: 0978-2 : CR-04-00119-1-LRL
presiding judge: Lawrence R. Leavitt, District Judge

5/12/04 FILED PETITION FOR WRIT OF MANDAMUS, DOCKETED CAUSE AND ENTERED APPEARANCES OF COUNSEL. NOTIFIED REAL PARTIES IN INTEREST OF FILING. (MOATT) [04-72364] (ft)
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2004-05-19T21:34:00.000-07:00

Meanwhile, this tax protestor got caught with foreign accounts and is considered a "flight risk" so he'll probably have to sit in jail awaiting trial, which is OK since his trial will be a slam-dunk for the U.S. Attorney and he might as well build credits towards what will probably be a very long sentence.

Erie Times-News

May 13, 2004

Tax protester appeals decision to keep him in jail
By LISA THOMPSON

The way Meadville tax protester Daniel Leveto sees it, the government took seven years to create its tax-fraud case against him.

He thinks he'll need more than an hour a week in the prison law library to prepare his defense.

Leveto filed a handwritten motion in U.S. District Court Tuesday seeking his release from jail before he goes on trial.

Leveto said he realizes it took him two years to turn himself in on the federal tax-fraud charges he faces. But he says that now he wants to answer the allegations in court.

He asked a judge to overturn U.S. District Magistrate Judge Susan Paradise Baxter's April decision to hold Leveto in Erie County Prison until his trial.

Leveto says in prison, he's housed with "sentenced convicted criminals." He does not have access to the records and resources he needs for his defense and cannot prepare for trial in that setting, he claims.

Leveto, a veterinarian, dismisses the government's claim that he belongs to militant groups. He said his history of peacefulness "speaks louder" than those claims.

Leveto wants to live with his mother in Conneaut Lake. Bond and home-monitoring "can surely assuage the government's fear of Leveto's flight," he wrote.

The appeal will be considered by U.S. District Judge Sean J. McLaughlin.

The U.S. Marshals Service arrested Leveto, 53, in March at an Ohio truck stop more than two years after a federal tax-fraud indictment was returned against him.

The indictment alleges Leveto, whose last known address was the 18000 block of Conneaut Lake Road, did not divulge foreign bank accounts and withheld veterinary business receipts.

At his detention hearing, authorities told a judge they believe a link existed between Leveto and Darrell Sivik, the Crawford County gunsmith who officials say led the Braveheart Militia Company and who they claim committed federal firearm violations.

Sivik and Atlantic resident George Bilunka's arrests the week of March 21 revealed the existence of two local militias and plans for armed resistance to government forces.

Special Agent Richard Adams, a criminal investigator for the Internal Revenue Service, testified that Sivik told authorities that he stored three machine guns for Leveto and moved them twice at Leveto's orders while Leveto was on the run.

Following the hearing, Baxter ordered Leveto to be held in prison pending his trial.

Baxter found Leveto fled the day an indictment was returned against him and apparently lived a transient life in a trailer for more than two years, at times traveling to Canada and using the name Chester Leveto.

She said Leveto doesn't recognize the authority of the IRS investigators who brought the case against him, she said. Moreover, Leveto recently renewed a commercial pilot's license, Baxter said.

In his motion, Leveto says when he left the area, the indictment against him had not been unsealed. He said he fled to get away from personal problems stemming from a "stormy" divorce.

He said he respects the court.

"Leveto's issues are with the IRS," he said.

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2004-05-19T21:30:00.000-07:00

The United States Court of Appeals for the Fifth Circuit recently affirmed the conviction of a tax protestor who failed to file. This is more cumulative proof that jury acquittals like the Kuglin case are rarities, and that much more often than not, the ordinary jurors who hear these cases refuse to see tax protestors as the patriots they fantasize they are, but instead the jurors see them as criminal deadbeats just trying to dodge their legitimate tax obligations.

UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
DON FREDERICK SCHUTT,
Defendant-Appellant.

Release Date: MAY 17, 2004

Published by Tax AnalystsTM

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

Summary Calendar

Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:01-CR-90-ALL

Before HIGGINBOTHAM, DAVIS, and PRADO, Circuit Judges.

PER CURIAM:/*/

[1] Don Frederick Schutt appeals from his conviction following a jury trial on two counts of failing to file income tax returns for the years 1995 and 1996, in violation of 26 U.S.C. section 7203. Schutt argues that the evidence was insufficient to prove that he willfully failed to file his tax returns because, based on his own research of the tax laws, he did not believe he was liable to pay taxes. Because Schutt did not move for judgment of acquittal at trial, we review to determine whether there was a miscarriage of justice. United States v. Delgado, 256 F.3d 264, 274 (5th Cir. 2001). A miscarriage of justice exists "only if the record is devoid of evidence pointing to guilt" or "the evidence on a key element of the offense was so tenuous that a conviction would be shocking." United States v. Laury, 49 F.3d 145, 151 (5th Cir. 1995)(internal quotations and citation omitted). After reviewing the record, we conclude that the evidence was sufficient for the jury to find that Schutt was aware of his duty to file tax returns and willfully failed to do so. See United States v. Shivers, 788 F.2d 1046, 1048-49 (5th Cir. 1986); see also Cheek v. United States, 498 U.S. 192, 201 (1991).

[2] Schutt also argues that the magistrate judge erroneously excluded from evidence documents that he used to form his beliefs about the federal tax system. Schutt was permitted to testify about the documents upon he which relied, to read the contents of the documents to the jury, and to explain the effect of the documents on his beliefs. There was no abuse of discretion in the court's exclusion of the documents from evidence. See United States v. Stafford, 983 F.2d 25, 27-28 (5th Cir. 1993); United States v. Barnett, 945 F.2d 1296, 1301 (5th Cir. 1991); United States v. Flitcraft, 803 F.2d 184, 186 (5th Cir. 1986).

[3] AFFIRMED.

FOOTNOTE

/*/Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

END OF FOOTNOTE

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2004-05-19T21:29:00.000-07:00

This tax protestor idiot kept filing junk motions in an attempt to tie up the courts and finally got hit with a $10,000 sanction for doing so.

UNITED STATES TAX COURT

Filed May 17, 2004

James L. Jensen, pro se.

Stephen P. Baker, for respondent.

MEMORANDUM OPINION

[1] VASQUEZ, Judge: This case is before the Court on respondent's motion for summary judgment and to impose a penalty under section 6673/1/ (motion for summary judgment) and petitioner's motion to strike respondent's motion for summary judgment (motion to strike).

[2] Rule 121(a) provides that either party may move for summary judgment upon all or any part of the legal issues in controversy. Full or partial summary judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact, and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994).

[3] We conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law.

Background

[4] Petitioner is a commercial fisherman. At the time he filed the petition, petitioner resided in Cordova, Alaska.

[5] On or about April 15, 1995, respondent received from petitioner his joint Federal income tax return for 1994. Petitioner listed his income tax liability as $ 147. This liability was attributable to petitioner's two children, whose income tax liability petitioner elected to report on his return on Form 8814, Parents' Election to Report Child's Interest and Dividends. Petitioner reported zero taxable income and no tax due for himself.

[6] On or about August 26, 1996, respondent received from petitioner his joint Federal income tax return for 1995. Petitioner reported negative taxable income and no tax due.

[7] On or about April 15, 1997, respondent received from petitioner his joint Federal income tax return for 1996. Petitioner listed his income tax liability as $ 4,040. This liability was attributable to one of petitioner's children ($ 73 reported on Form 8814), whose income tax liability petitioner elected to report on petitioner's return, and to self-employment tax ($ 3,967). Petitioner reported zero taxable income.

[8] On or about April 15, 1998, respondent received from petitioner his joint Federal income tax return for 1997. Petitioner listed his income tax liability as $ 8,121. This liability was attributable to one of petitioner's children ($ 98 reported on Form 8814), whose income tax liability petitioner elected to report on petitioner's return, and to self-employment tax ($ 8,023). Petitioner reported zero taxable income.

[9] On June 3, 1999, respondent sent petitioner a statutory notice of deficiency for 1994. Respondent determined a $ 5,387 deficiency and a $ 1,077.40 penalty pursuant to section 6662(a) for 1994. Petitioner received this notice of deficiency and responded to it with a 15-page letter containing frivolous and groundless arguments.
[10] On August 10, 1999, respondent sent petitioner a statutory notice of deficiency for 1995. Respondent determined a $ 97,021 deficiency, a $ 4,851 penalty pursuant to section 6651(a)(1), and a $ 19,404 penalty pursuant to section 6662(a) for 1995. Petitioner received this notice of deficiency and responded to it with a 15-page letter containing frivolous and groundless arguments.

[11] On December 2, 1999, respondent sent petitioner a letter advising him that his tax returns for 1996 and 1997 were under examination. On December 12, 1999, petitioner responded with a two- page letter containing frivolous and groundless arguments.
[12] On April 4, 2000, respondent sent petitioner a statutory notice of deficiency for 1996 and 1997. Respondent determined an $ 8,338 deficiency and a $ 1,667.60 penalty pursuant to section 6662(a) for 1996 and a $ 9,317 deficiency and a $ 1,863.40 penalty pursuant to section 6662(a) for 1997. This notice of deficiency was sent via certified mail to petitioner's last known address -- which also is the address petitioner used in the petition and the amended petition. This notice of deficiency was not returned as undeliverable.

[13] Petitioner did not petition the Court for redetermination of the deficiencies or penalties with respect to 1994, 1995, 1996, or 1997. Respondent assessed petitioner's tax liability, along with penalties and interest, as follows:

Year Assessment Date
1994 Oct. 18, 1999
1995 Dec. 27, 1999
1996 Aug. 28, 2000
1997 Sept. 4, 2000

[14] Respondent sent petitioner notices and demand for payment of the assessments as follows: In October 1999 for 1994, in December 1999 and February 2000 for 1995, in August and September 2000 for 1996, and in September 2000 for 1997. Petitioner responded to the requests for payment for 1994 and 1997 with several 15-page letters containing frivolous and groundless arguments.

[15] On or about December 28, 2000, respondent filed a notice of Federal tax lien regarding petitioner's income tax liabilities for 1994, 1995, 1996, and 1997 with the Recording District of Cordova, Anchorage, Alaska (tax lien). The tax lien listed $ 9,523.39 owed for 1994, $ 164,595.94 owed for 1995, $ 13,249.99 owed for 1996, and $ 13,659.98 owed for 1997.

[16] On January 3, 2001, respondent issued to petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 regarding his income tax liabilities for 1994, 1995, 1996, and 1997 (hearing notice). Attached to the hearing notice was a copy of the tax lien.

[17] On January 31, 2001, in response to the hearing notice, petitioner submitted a 15-page letter containing frivolous and groundless arguments. Petitioner did not file a Form 12153, Request for a Collection Due Process Hearing; however, respondent treated petitioner's January 31, 2001, letter as the equivalent of a Form 12153 -- i.e., as a request for a section 6330 hearing.

[18] On February 26, 2001, respondent sent petitioner a letter notifying him that his case had been assigned to an Appeals officer.

[19] On March 8, 2001, petitioner responded to respondent's February 26, 2001, letter with frivolous and groundless arguments.

[20] On April 2, 2002, Appeals Officer Donna Chilton invited petitioner to attend a section 6330 hearing with her at 10 a. m. on April 24, 2002, in Anchorage, Alaska.

[21] On April 15, 2002, petitioner wrote to Ms. Chilton to advise her that April 24, 2002, was not a convenient time and that he was seeking an attorney to represent him. Petitioner requested that the hearing be held during the week of May 19, 2002, as he would be in Anchorage, Alaska, during that time. Ms. Chilton rescheduled petitioner's hearing, on the basis of his request, for May 21, 2002.

[22] On May 14, 2002, petitioner sent Ms. Chilton a letter in lieu of a face-to-face hearing. Regarding 1994 and 1996, petitioner argued that the assessments were barred by the period of limitations. Regarding 1995 and 1997, petitioner claimed he did not receive any "notices of assessment" for 1995 and 1997 and complained that the Forms 4340, Certificate of Assessments, Payments, and Other Specified Matters, did not list the amounts demanded next to the entries listing demand for payment./2/

[23] On May 16, 2002, Ms. Chilton responded to petitioner's May 14, 2002, letter. Ms. Chilton addressed each of petitioner's claims and attached documents to support her conclusions.

[24] On May 30, 2002, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 to petitioner regarding his 1994, 1995, 1996, and 1997 tax years (notice of determination). In the notice of determination, respondent determined that the tax lien should remain in place.

[25] On June 17, 2002, petitioner timely filed an imperfect petition for lien or levy action under section 6320(c) or 6330(d) seeking review of respondent's determination to proceed with collection of petitioner's 1994, 1995, 1996, and 1997 tax liabilities.

[26] On June 20, 2002, the Court ordered that on or before July 18, 2002, petitioner file a proper amended petition and pay the filing fee.

[27] On June 24, 2002, petitioner sent Ms. Chilton two letters in response to the notice of determination. In these letters, petitioner raised frivolous and groundless arguments.

[28] On July 1, 2002, petitioner filed an amended petition for lien or levy action under section 6320(c) or 6330(d) seeking review of respondent's determination to proceed with collection of petitioner's 1994, 1995, 1996, and 1997 tax liabilities.

[29] On January 16, 2003, petitioner was served with the Court's notice setting case for trial and standing pretrial order setting the case for trial during the Court's 2-week session in Anchorage, Alaska, beginning on June 16, 2003. The Court advised petitioner that he needed to be ready and available during this 2- week period to try his case.

[30] On April 22, 2003, petitioner filed a motion to dismiss (motion to dismiss). In the motion to dismiss, petitioner stated that the parties were in negotiations to settle the case.

[31] On May 1, 2003, the Court ordered respondent to file a response to petitioner's motion to dismiss on or before May 15, 2003.

[32] On May 15, 2003, respondent filed a response to petitioner's motion to dismiss. Respondent stated that he had made a diligent inquiry and found that no negotiations were currently in progress with petitioner. Respondent further stated that he intended to file a motion for summary judgment and would be requesting a penalty pursuant to section 6673.

[33] On May 21, 2003, the Court denied petitioner's motion to dismiss. That same day, respondent filed a motion for summary judgment and to impose a penalty under section 6673 (motion for summary judgment). Attached as exhibits to the motion for summary judgment, among other things, were Forms 4340, dated June 19, 2001, and computer-generated transcripts (TXMODA), dated June 14, 2001, for petitioner's 1994, 1995, 1996, and 1997 tax years.

[34] On May 22, 2003, the Court ordered petitioner to file a response to respondent's motion for summary judgment on or before June 5, 2003, and calendared the motion for hearing at the trial session of the Court commencing on June 16, 2003.

[35] After receiving a call from the parties that petitioner was a fisherman and it was difficult for him to get to Anchorage, Alaska, the Court calendared the hearing for a date and time certain of 9 a.m. on June 26, 2003./3/

[36] On June 26, 2003, at 9:30 a.m., petitioner's case was called. Petitioner failed to appear. Instead, petitioner's wife, who is not an attorney or a party to this case, "appeared" with a "special power of attorney". Petitioner's wife stated that petitioner was out on his boat fishing because it was fishing season.

[37] After admonishing petitioner's wife regarding petitioner's failure to appear, the Court asked respondent's counsel if he was prepared to file a written motion to dismiss for lack of prosecution. Respondent's counsel answered that he was not. The Court rescheduled petitioner's case for the next day, June 27, 2003, at 10 a.m. Respondent's counsel advised the Court that he would file a motion to dismiss for lack of prosecution if petitioner did not appear at that time, and the Court stated that the motion would be granted if petitioner did not appear. The Court further stated that we would hear argument on respondent's request to impose sanctions on June 27, 2003.

[38] That same day, respondent filed a supplemental declaration, with attached exhibits, in support of his motion for summary judgment.

[39] On June 27, 2003, at 10:55 a.m., petitioner appeared. At this hearing, petitioner made frivolous and groundless arguments. That same day, petitioner filed a response to respondent's motion for summary judgment and imposition of a penalty that contained frivolous and groundless arguments. Petitioner also filed the motion to strike.
Discussion

I. Determination To Proceed With Collection

[40] Section 6320 provides that the Secretary shall furnish the person described in section 6321 with written notice (i.e., the hearing notice) of the filing of a notice of lien under section 6323. Section 6320 further provides that the taxpayer may request administrative review of the matter (in the form of a hearing) within a 30-day period. The hearing generally shall be conducted consistent with the procedures set forth in section 6330(c), (d), and (e). Sec. 6320(c).

[41] Pursuant to section 6330(c)(2)(A), a taxpayer may raise at the section 6330 hearing any relevant issue with regard to the Commissioner's collection activities, including spousal defenses, challenges to the appropriateness of the Commissioner's intended collection action, and alternative means of collection. Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180 (2000). If a taxpayer received a statutory notice of deficiency for the years in issue or otherwise had the opportunity to dispute the underlying tax liability, the taxpayer is precluded from challenging the existence or amount of the underlying tax liability. Sec. 6330(c)(2)(B); Sego v. Commissioner, supra at 610-611; Goza v. Commissioner, supra at 182-183.

[42] Petitioner received the notices of deficiency for 1994 and 1995. The notice of deficiency for 1996 and 1997 was sent via certified mail to petitioner's last known address--which also is the address petitioner used in the petition and the amended petition. This notice of deficiency was not returned as undeliverable. Respondent submitted a certified mailing list to confirm these facts. Furthermore, petitioner did not claim that he did not receive the notice of deficiency for 1996 and 1997. Accordingly, petitioner is deemed to have received this notice of deficiency. Sego v. Commissioner, supra at 610-611.

[43] Petitioner chose not to file a petition for redetermination in response to these notices of deficiency. Accordingly, petitioner cannot contest the underlying deficiencies for 1994, 1995, 1996, and 1997. Sec. 6330(c)(2)(B); Sego v. Commissioner, supra; Goza v. Commissioner, supra at 182-183. Claims that the limitation period for assessment has expired are challenges to the underlying tax liability. Boyd v. Commissioner, 117 T.C. 127, 130 (2001). Therefore, petitioner cannot raise these claims in this proceeding.

[44] Where the validity of the underlying tax liability is not properly in issue, we review the Commissioner's determination for an abuse of discretion. Sego v. Commissioner, supra at 610.

[45] Petitioner's remaining argument appears to be that the verification requirement of section 6330 has not been met. Section 6330(c)(1) does not require the Commissioner to rely on a particular document to satisfy the verification requirement imposed therein. E. g., Schnitzler v. Commissioner, T.C. Memo. 2002-159 (citing five other cases to support this principle). We have repeatedly held that the Commissioner may rely on Forms 4340 or transcripts of account to satisfy the verification requirement of section 6330(c)(1). Hromiko v. Commissioner, T.C. Memo. 2003-107; Schnitzler v. Commissioner, supra; Kaeckell v. Commissioner, T.C. Memo. 2002-114; Obersteller v. Commissioner, T.C. Memo. 2002-106; Weishan v. Commissioner, T.C. Memo. 2002-88; Lindsey v. Commissioner, T.C. Memo. 2002-87, affd. 456 Fed. Appx. 802 (9th Cir. 2003); Tolotti v. Commissioner, T.C. Memo. 2002-86, affd. 70 Fed. Appx. 971 (9th Cir. 2003); Duffield v. Commissioner, T.C. Memo. 2002-53; Kuglin v. Commissioner, T.C. Memo. 2002-51.

[46] Petitioner has not alleged any irregularity in the assessment procedure that would raise a question about the validity of the assessments or the information contained in the Forms 4340 or transcripts of account. See Davis v. Commissioner, 115 T.C. 35, 41 (2000); Mann v. Commissioner, T.C. Memo. 2002-48. Accordingly, we hold that the Appeals officer satisfied the verification requirement of section 6330(c)(1). Cf. Nicklaus v. Commissioner, 117 T.C. 117, 120-121 (2001).

[47] Petitioner has failed to raise a spousal defense, make a valid challenge to the appropriateness of respondent's intended collection action, or offer alternative means of collection. These issues are now deemed conceded. See Rule 331(b)(4).

II. Section 6673

[48] Section 6673(a)(1) authorizes the Court to require a taxpayer to pay to the United States a penalty not to exceed $ 25,000 if the taxpayer took frivolous positions in the proceedings or instituted the proceedings primarily for delay. A position maintained by the taxpayer is "frivolous" where it is "contrary to established law and unsupported by a reasoned, colorable argument for change in the law." Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v. Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (section 6673 penalty upheld because taxpayer should have known claim was frivolous).

[49] At the hearing, the Court warned petitioner that the arguments he was advancing were frivolous and groundless, that the arguments had been rejected by the U.S. Court of Appeals for the Ninth Circuit (the court to which this case is appealable), and that we believed he filed the petition to delay collection.

[50] Our authority and willingness to impose penalties pursuant to section 6673(a) on those taxpayers who abuse the protections afforded by sections 6320 and 6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions are well established. Cf. Pierson v. Commissioner, 115 T.C. 576, 581 (2000). Petitioner filed frivolous documents and motions with the Court. Petitioner's position, based on stale and meritless contentions, is manifestly frivolous and groundless, and he has wasted the time and resources of the Court. We are convinced that petitioner instituted and maintained these proceedings primarily for delay. Accordingly, we shall impose a penalty of $ 10,000 pursuant to section 6673.

[51] To reflect the foregoing,

[52] An appropriate order and decision will be entered.

FOOTNOTES

/1/Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.

/2/A request for payment for 1997 that petitioner received and responded to with frivolous and groundless arguments, specifically lists the amount owed as $ 17,384.38. A notice for 1994 that petitioner received and responded to with frivolous and groundless arguments, specifically lists the amount owed as $ 9,567.31.

/3/ Pursuant to Fed. R. Evid. 201, we take judicial notice of the following facts: Cordova, Alaska, is approximately 125 to 145 miles from Anchorage, Alaska, "as the crow flies" and approximately 390 miles away by car.

Accordingly, because of the distance and difficulty of getting from Cordova to Anchorage, the Appeals officer, respondent, and the Court were willing to accommodate petitioner.

END OF FOOTNOTES
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2004-05-19T21:18:00.000-07:00

Another day, another bad day for tax protestors, including a couple who apparently drank heavily of the tax protestor koolaid and will now spend several years brewing hootch in their prison toilets.

OFFICE OF THE UNITED STATES ATTORNEY SOUTHERN DISTRICT OF CALIFORNIA

San Diego
California United States Attorney
Carol C. Lam
For Further Information Contact:
Department of Justice, Tax Division Trial Attorney,
Lori Hendrickson (619) 446-3528

For Immediate Release NEWS RELEASE SUMMARY -

May 13, 2004 Carol C. Lam, United States Attorney for the Southern District of California, Eileen J. O’Connor, Assistant Attorney General for the Tax Division, Department of Justice, and Denise L. Rubin, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation Division, today announced that a federal grand jury in San Diego handed up an indictment charging San Diego attorney Richard D. Corona and his wife Tracy D. Corona with federal criminal tax offenses. The five-count indictment contains charges of conspiracy to defraud the United States, income tax evasion, and failure to pay income tax.

According to Count One of the indictment, Richard and Tracy Corona conspired to defraud the United States from May 1997 through October 2001 by claiming they were not U.S. citizens, and thus challenging the authority and jurisdiction of the IRS to collect income tax from them. In one letter sent to the IRS, and quoted in the indictment, Richard Corona challenged the authority and jurisdiction of the IRS and stated that he was a “natural born free American National Sovereign Citizen of the California Republic, non-resident alien of the federal ‘United States.’” Richard and Tracy Corona furthered this “non-citizen” claim by filing several fraudulent Nonresident Alien income tax returns. The indictment states that Richard and Tracy Corona were U.S. citizens, and filed these returns in an effort to obstruct the collection efforts of the IRS. As noted in IRS Publication 519 (found on the Internal Revenue Service’s website (www.irs.gov)), “For tax purposes, an alien is an individual who is not a U.S. citizen.”

The indictment also alleges that, in furtherance of the conspiracy, Tracy Corona instructed tenants of property owned by Richard Corona not to honor an IRS levy which required the tenants to make their rental payments to the IRS instead of Richard Corona.

In Count Two of the indictment, Richard Corona is charged with one count of tax evasion for tax year 1997. That count alleges that, in order to evade the payment of significant individual tax, Richard Corona concealed his ownership in Park Centre Properties by creating a fictitious trust. Park Centre Properties is a partnership which owned commercial property in San Diego.

Lastly, Richard and Tracy Corona are each charged with three counts of failure to pay income tax due for 1998, 1999, and 2000 (Counts Three through Five). As alleged in the indictment, they filed joint income tax returns for those three years reporting over $2.5 million in income, which resulted in over $600,000 in total income tax due, but not paid.

This case was investigated by Special Agents with the Internal Revenue Service, Criminal Investigation Division, and prosecuted by Department of Justice, Tax Division, Trial Attorneys Lori A. Hendrickson and Nicholas D. Dickinson. For more information on the “non-citizen” strategy and other tax evasion schemes, visit the IRS website at www.irs.gov, and click on the link “Phony Tax Arguments.”

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2004-05-08T09:47:00.000-07:00

Meanwhile, on the same day the insanity defense apparently didn't work as planned for Donald Donovan of Delaware, who contended that while he is an "American" citizen, that he wasn't a citizen of the United States. This is an old -- and totally failed -- argument that has been put forward by tax protestors on literally dozen of occasions, all without success, and usually causing much laughter by onlookers who are amazed that anybody could be so dumb as to put forth such an argument.

Anyhow, Donovan will be able to rejoin the Union sometime in 2007.

Seaford man jailed for tax evasion
Donald Donovan given 3-year sentence
By Mary Allen
Gannett News Service
May 8, 2004
--------------------------------------------------------------------------------

SEAFORD -- A Seaford man who acted as his own defense attorney and argued the federal tax code did not require him to pay income taxes was ordered Friday to serve three years in prison.

Judge Kent A. Jordan ordered the term plus a $7,500 fine for Donald Donovan, 53. The judge said he thought Donovan had lied and perjured himself during his January jury trial at U.S. District Court in Wilmington. He said he believed a man Donovan named as responsible for his business finances was a fictional character contrived in an attempt to hide income and thwart law enforcement.

"I believe you are still trying to hide the truth today," he said.

Jordan ordered Donovan to pay $1,737 to cover the costs of his prosecution, provide his probation officer with access to any requested financial information after his release from prison and pay all taxes. He also must pay no less than 20 percent of his gross monthly income toward back taxes upon his release.

Prosecutors said at his trial that Donovan owed more than $95,000 in income taxes over four years. A jury convicted Donovan of four counts each of failing to file a tax return and tax evasion.

In remarks to the court, Donovan reinforced his stance that the tax code applied to the wealthy, corporations and possibly officers of corporations. By his calculations, anyone who makes under $240,000 annually does not owe taxes. Donovan said he is a member of the Little Shell Pembina Indian tribe, an affiliation that should also exempt him from taxes. He did not raise that argument at his trial.

He took issue with a background report prepared for his sentencing that identified him as a U.S. citizen. Donovan said he is an American, but not a U.S. citizen.

"I intend on requesting an investigation by the Supreme Court on the conduct of everyone involved in this case," he said. "I just feel due process has not been served properly."

Prosecutor Andrew J. Kameros, who was assigned to the case from the tax division of the Justice Department in Washington, was pleased with the sentence.

"We hope it sends a message to other people who might be considering engaging in similar conduct that they'll be treated seriously by the justice system," he said.

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2004-05-08T09:44:00.000-07:00

Another day, another bad day for tax protestors . . . this time for William Tiner of Florida who will be taking a vacation thorugh 2009 courtesy of the Federal Bureau of Prisons for filing false returns.

Tax Evasion To Cost Clearwater Man 5 Years
Published: May 8, 2004

TAMPA - A Clearwater man was sentenced Friday to five years in federal prison after being convicted of income tax evasion and filing false corporate income tax returns.

William Tiner was ordered by U.S. District Judge Richard A. Lazzara to serve three years' probation after his prison term and to pay $984,863 in restitution to the Internal Revenue Service. Lazzara also fined Tiner $25,000, the U.S. attorney's office said.

Officials said Tiner failed to report more than $2.5 million in income between 1996 and 1999, not paying more than $900,000 in income taxes.

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2004-05-08T09:42:00.000-07:00

Another day, another bad day for tax protestors . . . this time for David Hinkson of Idaho, whom the jury of 12 good men and women found guilty of 26 counts of various tax-related and other crimes. Like so many other tax protestors, Hinkson was also scamming people with bogus products on the side.

Water company owner found guilty of tax evasion

01:26 PM MDT on Thursday, May 6, 2004
Associated Press

BOISE -- The owner of a mineral water company in Grangeville has been found guilty of 26 tax and financial reporting charges.

David Hinkson was convicted in federal court of failing to file income taxes, failing to collect withholding tax and structuring transactions to avoid reporting requirements.

Prosecutors say Hinkson paid his employees in cash and made sure his payroll withdrawals were under ten-thousand dollars each so the amounts would not be reported to the federal government.

Earlier this year Hinkson pleaded guilty to distributing a misbranded drug for selling lithium water that wasn't labeled as a drug.

He also pleaded guilty to distributing an adulterated medical devices for selling a so-called "ozone machine," that he claimed would cure various diseases.
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2004-05-08T09:40:00.000-07:00

Use a Pure Trust and Go to Jail, Go Directly to Jail, Do Not Pass Go, and Do Not Collect $200. Is there a more sure way to go to Club Fed than to either sell Pure Trusts or try to use them to avoid federal income taxes? Anyway, David "Big Dave" Struckman, Dan Anderson and Lorenzo "Zo" LaMantia have been indicted for one of the largest and most notorious tax scams of all time, that involving the Institute for Global Prosperity, a spin-off of the amorphous Global Prosperity Group.

Global Prosperity Criminal Complaint (05/04/2004) (pdf) -- http://www.quatloos.com/Global_Prosperity_Criminal_Complaint_05_04_2004.pdf

Arrests warrants have been issued for Dave, Dan and Zoe.

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2004-05-04T06:57:00.000-07:00

Another day, another bad day for tax protestors . . . and especially for Bonita Lynne Meredith and Gayle Bybee and the others of Meredith's group who were just convicted on all counts of tax evasion and conspiracy. Lynne is one of the most high-profile promoters of all time, who wrote several (cheesy and false) books about how to avoid income taxes. She made millions, which she flaunted, including having a multi-million beachfront home in Southern California and a collection of exotic automobiles. Because she had falsified a passport, the federal judge consider her to be a flight risk and ordered her into incarceration immediately. Boy, that would be weird: One day you get up in your own bed, go down to the federal courthouse, and never get to see your house again, or even taste freedom for over a decade. If Dorothy Henderson's sentence is any indication, then Lynne will probably get around 14 years.

United States Attorney's Office
Central District of California (Los Angeles)
(213) 894-6947
www.usdoj.gov/usao/cac

Issued Monday, May 3 at 2:35 p.m. PDT

TAX FRAUD PROMOTERS ASSOCIATED WITH 'WE THE PEOPLE' CONVICTED FOR SELLING BOGUS 'PURE TRUSTS' THAT FALSELY PROMISED TO PROTECT INCOME FROM TAXES

Seven individuals associated with a tax fraud group known as "We the People" were convicted today on various federal charges related to the promotion of bogus tax shelters that falsely promised to limit exposure to federal income taxes.

A federal jury in Los Angeles convicted the seven on charges that included conspiring to defraud the Internal Revenue Service, fraudulently using Social Security Numbers and failing to file income tax returns.

The California residents convicted today are:

* Lynne Meredith, 54, of Sunset Beac h, the owner and operator of We the People;
* Gayle Bybee, 56, of Sunset Beach;
* Gregory Paul Karl, 54, of Solana Beach;
* Teresa Manharth Giordano, 41, of Murrieta;
* Willie Watts, 45, of Murrieta;
* Betty Erickson, 59, of Windsor; and
* Nora Moore, 55, of Huntington Beach.

Following the guilty verdicts, Meredith and Bybee were remanded into custody by United States District Judge Dean D. Pregerson.

The defendants are scheduled to be sentenced by Judge Pregerson on July 23.

The evidence presented during a 13-week trial showed that beginning in 1991 and continuing until April 2002, Meredith conducted seminars at which she sold books and bogus "pure trusts" to people with the purpose of leading them to believe they could legally shield inco me and assets from taxation. Meredith and her co-defendants encouraged and assisted taxpayers by forming phony "pure trusts," opening bank accounts with phony Taxpayer Identification Numbers, filing fraudulent income tax returns and encouraging taxpayers not to file income tax returns.

We the People sold the "pure trusts" for approximately $500 to $1,000 at seminars that were held throughout the United States and internationally. To entice potential "trust" purchasers at seminars, Meredith said that each "trust" was customized for the particular customer, who would retain complete control over their businesses and assets placed in trust without incurring and tax liability.

Meredith also encouraged taxpayers to file frivolous tax returns that falsely reported that taxpayers did not have any taxable income and fraudulently requested a refund of all income taxes paid. The defendants also encouraged taxpayers to send protest correspondence to the IRS with the purpose of impeding and obstructing the IRS from collecting these taxpayers' taxes.

Meredith wrote books, including How To Cook A Vulture and Vultures In Eagle's Clothing, in which she falsely claimed that individuals could lawfully stop paying income taxes, stop their employer from withholding income taxes, and refuse to produce books and records to the IRS. The books contained examples of frivolous tax returns and protest letters.

The defendants falsely told their customers that paying taxes is "voluntary," and that they could file a W-4 or W-8 form with their employer claiming to be exempt from federal income tax withholdings. In fact, under federal law, anyone who earns income more than approximately $8,000 must file a tax return and pay taxes. There is no vehicle into which businesses or income may be placed to avoid the payment of income taxes. Those customers who purchased and u sed the "pure trusts" to hide income face serious financial penalties and interest for the income taxes they failed to pay.

From 1991 until 2002, Meredith caused thousands of taxpayers to file fraudulent income tax returns with the IRS. Those fraudulent tax returns sought refunds for as much as $32,822.

The jury heard evidence that Meredith earned more than $8.5 million as a result of the scheme. Meredith did not file a Federal income tax return during these years, and she did not pay any federal income taxes. Furthermore, none of the other six defendants filed or paid any income taxes on income they earned in the scheme.

* Meredith was convicted of conspiracy, four counts of mail fraud, two counts of using a false social security number, making a false statement in a passport application and five counts of failing to file a tax return.

* Bybee was convicted of conspiracy and three counts of failing to file a tax return.

* Karl, a former CPA, was convicted of conspiracy and four counts of mail fraud.

* Giordano was convicted of conspiracy, four counts of mail fraud and two counts of failing to file a tax return.

* Watts, also a former CPA, was convicted of conspiracy, three counts of mail fraud and three counts of failing to file a tax return.

* Erickson was convicted of three counts of failing to file a tax return.

* Moore was convicted of three counts of failing to file a tax return.

The charges of conspiracy, mail fraud and false representation of a social security number each carry a maximum possible penalty of five years in federal priosn. The passport fraud charge carries a potential 10-year sentence. Failing to file a tax return carries a maximum penalty of one year in prison for each count.

The prosecution of this case reflects the increased focus the IRS has on the anti-tax movement. Although courts have continuously rejected frivolous arguments such as those presented by Meredith, the use of false, misleading and unorthodox tax advice has gained followers, which has led many to financial ruin. The investigation of this case and others in the country, including the indictment of Irwin Schiff in Las Vegas last month, is part of the IRS's strategy to stem the flow of misinformation produced by anti-tax promoters.

The case against Meredith and the other promoters of We the People was the result of an investigation by IRS-Criminal Investigation.
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2004-04-30T19:35:00.000-07:00

Another day, another bad day for tax protestors . . . and particularly Dick Simkanin who was just sentenced to seven years at the free federal resort without a beach. Simkanin was one of the posterboy for We The People's advertisements in USA Today of employers who refused to withhold their employees taxes. Simkanin will get out sometime in 2011.

Posted on Fri, Apr. 30, 2004

Defiant tax protester gets seven-year sentence

By Toni Heinzl

Star-Telegram Staff Writer

FORT WORTH - He calls himself a "Christian patriot" and a "political prisoner."

Convicted in January on 29 counts of violating U.S. income tax laws, Bedford businessman Richard Simkanin remained defiant in his anti-government stance at his sentencing Friday.

Simkanin, 59, told U.S. District Judge John McBryde that after spending thousands of hours studying federal tax laws, the Constitution and the Declaration of Independence, he concluded that he did not agree with the tax laws.

But McBryde had heard enough. Going beyond federal sentencing guidelines, McBryde sentenced Simkanin to seven years in prison and ordered him to pay $302,000 in restitution to the government.

In explaining the tough sentence, McBryde cited Simkanin's history of radical anti-government beliefs and his "contempt and disrespect" for the federal government and the federal courts.

"He and those who share his views have a cultlike belief that laws that are generally accepted by citizens of the United States are not applicable to them," McBryde said. "The defendant has entrenched himself in anti-government groups."

McBryde said Simkanin would continue to violate income tax laws. The judge recalled that Simkanin threatened to kill federal judges and that he surrendered his Texas driver's license but continued to drive with a home-made ID card.

On Jan. 7, a federal jury convicted Simkanin on 10 felony counts of failing to withhold about $139,000 in taxes from employees' wages at his company, Arrow Custom Plastics, and 15 felony counts of filing false tax refund claims for about $235,000.

He was also found guilty of four misdemeanor counts for failing to file individual income tax returns from 1998 to 2001. Simkanin had an estimated gross income of about $410,000 during these years, prosecutors said.

Arch McColl, the Dallas lawyer representing Simkanin, said he would appeal. McColl had asked for a sentence of 41 months at the low end of the federal guidelines. He described Simkanin as a non-conformist American in the tradition of Henry David Thoreau.

"He has a sincere, well thought-out position that is at odds with the government position," McColl said. "Reasonable people disagree about the tax laws. My client is an American citizen who, like Thoreau, walked to the beat of a different drummer."

But prosecutors pointed to Simkanin's long history of law-breaking, saying the last time he filed complete individual and corporate federal income tax returns dates back to the mid-1990s.

"We're going to have chaos in this country if individual citizens are allowed to decide unilaterally which laws are constitutional and which aren't," Assistant U.S. Attorney David Jarvis said. "The sentence for Mr. Simkanin was quite severe and appropriate."

Jarvis noted that Simkanin's defiance of the federal courts continued even after his conviction in January.

In a court judgment entered March 11, Simkanin and Arrow Custom Plastics' new owner, James Keffer, to whom he sold the business Feb. 17, agreed to file employment tax returns for the years 2000 through 2003 within 30 days. The judgment was issued by McBryde in a civil action filed by tax attorneys for the Justice Department in December to force Simkanin to comply with tax laws.

But the requested tax documents were not filed by the deadline, government lawyers said in a motion on April 21, asking McBryde to hold Simkanin and Keffer in contempt.

Simkanin rose to fame in tax protester circles -- and gained the attention of the IRS -- in March 2001 when he appeared in a full-page ad in USA Today with a group of like-minded citizens who announced their opposition to the federal income taxes. Later that year, prosecutors sent Simkanin a target letter notifying him that he was under investigation.

The group behind the ad, We the People, soon portrayed Simkanin as a martyr for the cause of freedom from IRS tyranny.

While under investigation, Simkanin posted a warning on his Web site that spoke of the "fury of a fire" that would consume his adversaries. He wrote to the Treasury secretary that he had repatriated himself from the United States to the "Republic of Texas." He vowed to ignore the laws of the United States.

While tax protesters from the We the People group crowded McBryde's courtroom during the trial, hardly a handful of supporters showed up for his sentencing.

Wearing an orange jail jumpsuit and a blue jacket, Simkanin invoked Scripture, James 5:4. In his view, the passage means that a laborer's wages are withheld through fraud.

His face showed an expression of defiance and sadness. He expressed no remorse for his actions but regretted the effect of his prison sentence on his severely ill wife, Carole.

"I do apologize to my wife for what she will go through in my absence," Simkanin said.

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2004-04-25T08:44:00.000-07:00

Another day, another bad day for tax protestors. Certainly, it's a bad day for Walt Maken who tried to avoid paying taxes by submitting a bogus W-4 which is a common strategy for TPs, but now one that will land them in prison.

FOR IMMEDIATE RELEASE
FRIDAY, APRIL 23, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

KETTERING BUSINESSMAN CONVICTED ON TAX CHARGES

Defendant Submitted False Withholding Statements To Prevent Payment Of Taxes

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice, and Gregory G. Lockhart, United States Attorney for the Southern District of Ohio announced that, following a two-week trial, a federal jury in Dayton, Ohio today convicted Walter M. Maken of income tax evasion (26 U.S.C § 7201) and willful failure to file an income tax return (26 U.S.C § 7203). United States District Judge Herbert Walter Rice set sentencing for July 16, 2004.

The maximum penalty for the tax evasion charge is five years imprisonment followed by up to three years supervised release, a fine of $250,000, and liability for the costs of prosecution. The maximum penalty for the willful failure to file is one year of imprisonment followed by up to one year of supervised release, a fine of $100,000, and liability for the costs of prosecution.

According to the indictment and the evidence introduced at trial, Mr. Maken is a former employee of Joyce-Dayton Corporation and freelance photographer, who failed to timely file his federal income tax returns for the calendar years 1993 and 1994. In addition, he misled the IRS and concealed his income by submitting false W-4 forms to his employer, claiming he was exempt from income tax withholdings, and liquidated his retirement account without having any taxes withheld. Mr. Maken received about $70,000 in income in 1994 and had a tax due and owing of over $23,000. The government also introduced evidence that Mr. Maken had been involved with anti-tax protest organizations such as Our One Supreme Court and the Freedom Connection, both now defunct.

“Honest taxpayers deserve to know that people who commit tax crimes will be held accountable,” said Eileen J. O’Connor, Assistant Attorney General for the Tax Division.

“Tax crimes are not victimless crimes,” said U.S. Attorney Lockhart. “The honest taxpayers suffer whenever dishonest individuals fail to report fully their income and pay the taxes they owe to the U.S. Treasury.”

Assistant Attorney General O’Connor and United States Attorney Gregory G. Lockhart thanked Tax Division Trial Attorneys Richard M. Rolwing and Shawn T. Noud, who prosecuted the case. They also thanked the special agents of the Internal Revenue Service whose assistance was essential to the successful investigation and prosecution of the case.

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2004-04-06T14:51:00.000-07:00

Another bunch of sham trust promoters plead guilty, and yet dozen of con artists are still how there peddling these dogs to the unwary. If anyone trying to sell you a "pure trust", "pure equity trust", "constitutional trust", "unincorporated business organization" or any other package that claims to make you free of income taxes, steer clear.
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FOR IMMEDIATE RELEASE
TUESDAY, APRIL 6, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

PROMOTERS OF SHAM TRUSTS PLEAD GUILTY TO TAX FRAUD CHARGES

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Paul Warner, United States Attorney for the District of Utah; Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division; and James H. Burrus, Jr., Special Agent-in-Charge, SLC Division, Federal Bureau of Investigation, announced today that at the federal courthouse in Salt Lake City, Utah, Michael Behunin pled guilty to a felony charge of conspiracy (18 U.S.C. §371) to commit mail and wire fraud and to defraud the Internal Revenue Service (IRS). In addition, they announced that a co-conspirator, David J. Orr, pled guilty yesterday to the same violation.

Messrs. Orr and Behunin were indicted in April 2003 - along with Todd R. Cannon, Lanny White, and Max Lloyd - for conspiring to commit mail and wire fraud and to defraud the Internal Revenue Service. They face a maximum potential sentence of five years imprisonment followed by up to three years supervised release, a $250,000 fine and liability for the costs of prosecution. As a condition of his plea agreement, Mr. Behunin, who is an attorney with an advanced degree in tax law, agreed to surrender his license to practice law. No sentencing dates were set.

“Putting your money in a sham trust does not exempt it from taxation,” said Assistant Attorney General Eileen J. O’Connor. “If someone tries to convince you to buy a trust as part of a scheme to avoid taxation while otherwise retaining control of your assets, you should seek advice from an honest tax professional who doesn’t stand to profit from the scheme.”

“At this time of the year, when residents of Utah are focusing on filing their state and federal tax returns, this case gives us a graphic reminder of the many abusive tax schemes for sale,” said U.S. Attorney Paul M. Warner. “The pleas taken in this case serve as timely reminders that these tax schemes are illegal and will be investigated and prosecuted to the fullest extent of the law. It is only fair to the vast majority of law-abiding citizens who pay an honest and fair tax that we aggressively pursue those who do not.”

“Promoting abusive trusts and tax schemes for the purpose of committing tax evasion isn't tax planning; it's criminal activity,” said Nancy Jardini, Chief, IRS Criminal Investigations. “We will continue to shut down fraudulent tax schemes and hold the promoters of these schemes accountable for their actions.”

“These schemes exemplify the worse elements of white collar crime -- the combination of greed, brains, and initiative,” said James H. Burrus, Jr., Special Agent in Charge, FBI, Salt Lake Division. “Those involved had the skills to make a positive difference in the Salt Lake City community, but used that talent to bilk investors and the U.S. Treasury. These pleas are the ending of a sad tale and send a message that men and women of the Department of Justice, the U.S. Attorney's Office, the IRS, and the FBI will not allow these schemes to flourish.”

In his plea agreement, Mr. Orr admitted that, starting as early as 1993, he had operated businesses under the names Advanta Strategies and World Contractual Services, which promoted fraudulent trust schemes designed to evade federal income taxes. In his plea agreement, Mr. Behunin also admitted participating in the conspiracy. Further, Mr. Orr admitted that, with his coconspirators, he sold the fraudulent trust scheme to approximately 300 clients for substantial fees. In seminars, promotional materials and opinion letters, they fraudulently misrepresented to clients that their tax liabilities could be lawfully reduced by placing businesses, homes, investments and other assets into a trust’s name. Further, Messrs. Orr and Behunin admitted fraudulently continuing to promote the trust scheme as legal, even after IRS audits disallowed the scheme. Mr. Orr admitted his actions, which included the filing of more than 2000 false and fraudulent federal income and trust tax returns, caused the losses of federal tax revenue totaling between $5 million and $10 million. Mr. Behunin admitted his actions caused the federal tax losses totaling between $950,000 and $1.5 million.

Mr. Orr also admitted that he and his co-conspirators fraudulently obtained between $5 million and $7 million from clients by misrepresenting the safety of and expected return on investments they marketed, as well as their own investment expertise. He further admitted causing client assets to be commingled and misappropriated.

Mr. Behunin also admitted to participating in a fraudulent railroad bond investment scheme, causing customers to lose between $350,000 and $500,000. He prepared documents containing false and fraudulent misrepresentations, in hopes the documents would increase the value of the railroad bonds. Mr. Behunin admitted he knew his co-conspirators were deceiving customers regarding the safety of the investment and the purported returns on this investment.

Tax Division trial attorneys Albert Kleiner, Nicholas Dickinson, and Kevin Downing prosecuted the case. Special agents of the Internal Revenue Service and Federal Bureau of Investigation provided essential assistance to the successful investigation and prosecution of the case.

On March 18, 2004, Todd Cannon and an unindicted conspirator, Lance Hatch, pled guilty to a conspiracy charge. Messrs. White and Lloyd are awaiting trial on the indictment. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

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2004-04-06T14:48:00.000-07:00

Yet another case where sham trust promoters plead guilty. And yet many many con artists are still out there pitching these dogs to the unwary....

--------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
TUESDAY, APRIL 6, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

PROMOTERS OF SHAM TRUSTS PLEAD GUILTY TO TAX FRAUD CHARGES

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Paul Warner, United States Attorney for the District of Utah; Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division; and James H. Burrus, Jr., Special Agent-in-Charge, SLC Division, Federal Bureau of Investigation, announced today that at the federal courthouse in Salt Lake City, Utah, Michael Behunin pled guilty to a felony charge of conspiracy (18 U.S.C. §371) to commit mail and wire fraud and to defraud the Internal Revenue Service (IRS). In addition, they announced that a co-conspirator, David J. Orr, pled guilty yesterday to the same violation.

Messrs. Orr and Behunin were indicted in April 2003 - along with Todd R. Cannon, Lanny White, and Max Lloyd - for conspiring to commit mail and wire fraud and to defraud the Internal Revenue Service. They face a maximum potential sentence of five years imprisonment followed by up to three years supervised release, a $250,000 fine and liability for the costs of prosecution. As a condition of his plea agreement, Mr. Behunin, who is an attorney with an advanced degree in tax law, agreed to surrender his license to practice law. No sentencing dates were set.

“Putting your money in a sham trust does not exempt it from taxation,” said Assistant Attorney General Eileen J. O’Connor. “If someone tries to convince you to buy a trust as part of a scheme to avoid taxation while otherwise retaining control of your assets, you should seek advice from an honest tax professional who doesn’t stand to profit from the scheme.”

“At this time of the year, when residents of Utah are focusing on filing their state and federal tax returns, this case gives us a graphic reminder of the many abusive tax schemes for sale,” said U.S. Attorney Paul M. Warner. “The pleas taken in this case serve as timely reminders that these tax schemes are illegal and will be investigated and prosecuted to the fullest extent of the law. It is only fair to the vast majority of law-abiding citizens who pay an honest and fair tax that we aggressively pursue those who do not.”

“Promoting abusive trusts and tax schemes for the purpose of committing tax evasion isn't tax planning; it's criminal activity,” said Nancy Jardini, Chief, IRS Criminal Investigations. “We will continue to shut down fraudulent tax schemes and hold the promoters of these schemes accountable for their actions.”

“These schemes exemplify the worse elements of white collar crime -- the combination of greed, brains, and initiative,” said James H. Burrus, Jr., Special Agent in Charge, FBI, Salt Lake Division. “Those involved had the skills to make a positive difference in the Salt Lake City community, but used that talent to bilk investors and the U.S. Treasury. These pleas are the ending of a sad tale and send a message that men and women of the Department of Justice, the U.S. Attorney's Office, the IRS, and the FBI will not allow these schemes to flourish.”

In his plea agreement, Mr. Orr admitted that, starting as early as 1993, he had operated businesses under the names Advanta Strategies and World Contractual Services, which promoted fraudulent trust schemes designed to evade federal income taxes. In his plea agreement, Mr. Behunin also admitted participating in the conspiracy. Further, Mr. Orr admitted that, with his coconspirators, he sold the fraudulent trust scheme to approximately 300 clients for substantial fees. In seminars, promotional materials and opinion letters, they fraudulently misrepresented to clients that their tax liabilities could be lawfully reduced by placing businesses, homes, investments and other assets into a trust’s name. Further, Messrs. Orr and Behunin admitted fraudulently continuing to promote the trust scheme as legal, even after IRS audits disallowed the scheme. Mr. Orr admitted his actions, which included the filing of more than 2000 false and fraudulent federal income and trust tax returns, caused the losses of federal tax revenue totaling between $5 million and $10 million. Mr. Behunin admitted his actions caused the federal tax losses totaling between $950,000 and $1.5 million.

Mr. Orr also admitted that he and his co-conspirators fraudulently obtained between $5 million and $7 million from clients by misrepresenting the safety of and expected return on investments they marketed, as well as their own investment expertise. He further admitted causing client assets to be commingled and misappropriated.

Mr. Behunin also admitted to participating in a fraudulent railroad bond investment scheme, causing customers to lose between $350,000 and $500,000. He prepared documents containing false and fraudulent misrepresentations, in hopes the documents would increase the value of the railroad bonds. Mr. Behunin admitted he knew his co-conspirators were deceiving customers regarding the safety of the investment and the purported returns on this investment.

Tax Division trial attorneys Albert Kleiner, Nicholas Dickinson, and Kevin Downing prosecuted the case. Special agents of the Internal Revenue Service and Federal Bureau of Investigation provided essential assistance to the successful investigation and prosecution of the case.

On March 18, 2004, Todd Cannon and an unindicted conspirator, Lance Hatch, pled guilty to a conspiracy charge. Messrs. White and Lloyd are awaiting trial on the indictment. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

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2004-04-05T14:42:00.000-07:00

Looks like the IRS is getting wise to the games, such as the 861 Scheme being played at the Employer level.

IRS Warns Businesses, Individuals to Watch for Questionable Employment Tax Practices
IR-2004-47, April 5, 2004

WASHINGTON — The Internal Revenue Service issued a consumer alert today for eight schemes where federal employment taxes are not properly withheld or paid by employers from their employees’ paychecks. The IRS alert to business owners and other taxpayers follows a string of recent convictions and court rulings involving employment tax schemes.

“Failure to pay employment taxes is stealing from the employees of the business,” said IRS Commissioner Mark W. Everson. “The IRS pursues business owners who don’t follow the law, and those who embrace these schemes face civil or criminal sanctions.”

There are many reasons employers don’t withhold or pay employment taxes. For some, it may be an attempt to use the government as a bank to 'borrow the money for a short while' with good intentions to pay it back later. For others, it may be a situation where an employer collects the taxes and elects to keep it during a period of financial difficulty rather than pay it to the IRS. For a small number, it involves philosophical differences with the tax law of the United States that courts consistently reject. Regardless of the reason, federal law requires employment tax withholding and payment by employers.

Employment taxes consist of federal income tax withholding along with Social Security and Medicare taxes and unemployment taxes. Also, many states have withholding requirements for various employment related taxes, such as contributions to a worker’s compensation fund. Improper reporting or payment of employment taxes affects the ease with which employees can claim future benefits from these programs.

The IRS takes a variety of steps to combat employment tax non-compliance. The agency has a number of civil actions it can take like audits and filing tax liens against property the taxpayer owns. In addition to civil actions, IRS Criminal Investigation investigates and refers for prosecution individuals and businesses that have willfully attempted to avoid filing and paying employment taxes. These efforts have led to significant criminal convictions resulting in incarceration and fines.

During the past three years, 117 individuals have been sentenced to confinement in a federal prison, a halfway house or home detention for criminal violations related to employment taxes. Approximately 77 percent of the persons sentenced for evading employment taxes served an average of 17 months confinement and were ordered to make restitution to the government for the taxes evaded, plus interest and penalties.

Recent examples of employment tax prosecutions can be found at IRS.gov. See the link for Significant Employment Tax Case Summaries, below.

The IRS urges all businesses to resist the temptation to become involved in or victimized by unlawful activities. The eight most common types of employment tax non-compliance include:

* Pyramiding. "Pyramiding" of employment taxes is a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the IRS. An often cause is a lack of profit or capital for operating costs, so the business owner uses the trust funds to pay other liabilities. The quarterly employment tax liabilities accumulate (or “pyramid”) until the employer has little hope of catching up. Businesses involved in pyramiding frequently shut down or file for bankruptcy and then start a new business under a different name starting the cycle over.

* Unreliable Third Party Payers. There are two primary categories of third party payers – Payroll Service Providers and Professional Employer Organizations. Payroll Service Providers typically perform services for employers such as filing employment tax returns and making employment tax payments. Professional Employer Organizations offer employee leasing meaning that they handle administrative, personnel, and payroll accounting functions for employees who have been leased to other companies that use their services. Many of these companies provide outstanding services to employers. Unfortunately, in some instances, companies of both types of services have failed to pay over to the IRS the collected employment taxes. When these employment service companies dissolve, millions in employment taxes can be left unpaid. Employers are urged to exercise due diligence in selecting and monitoring a third party payer. For example, when choosing a third party payer, employers should look for one that is reputable and uses the Electronic Federal Tax Payment System (EFTPS). This allows the business owner to verify payments made on their behalf. Also, an employer should never allow their address of record with the IRS be changed to that of the third party payer.

* Frivolous Arguments. Unscrupulous individuals and promoters have used a variety of false or misleading arguments for not paying employment taxes. These schemes are based on an incorrect interpretation of “Section 861” and other parts of the tax law and have been refuted in court. One variation of this scheme involves the improper use of Form 941c, Supporting Statement to Correct Information on Form 941, to attempt to get a refund of previously paid employment taxes. Recent court cases have resulted in criminal convictions of promoters. Employer participants could also be held responsible for back payments of employment taxes, plus penalties and interest.

* Offshore Employee Leasing. This scheme, which was designated as a Listed Transaction by the Service in 2003, misuses the otherwise legal business practice of employee leasing. Under the typical promotion, an individual taxpayer supposedly resigns from his or her current employer or professional corporation and signs an employment contract with an offshore employee leasing company. The offshore company indirectly leases the individual’s services back to the original employer using a domestic leasing company as an intermediary. The individual performs the same services before and after entering into the leasing arrangement. While the total amount paid for the individual’s services stays the same or increases, most of the funds are sent offshore as “deferred” compensation. The “deferred” compensation is then paid to the individual as a “loan” or ends up in an account under the individual’s control. Promoters of these arrangements improperly claim that neither employment taxes nor income taxes are owed on the “deferred” compensation. Because it is a Listed Transaction those who use the scheme are required to disclose their participation on current tax returns, and will be liable for the unpaid tax and subject to penalties and interest. Civil and criminal actions are being taken against promoters and participants in offshore leasing schemes – one promoter was convicted of defrauding the U.S. and sentenced to 70 months imprisonment, two other promoters have been ordered by the courts to stop marketing the scheme and a San Diego doctor plead guilty to tax evasion and is awaiting sentencing.

* Misclassifying worker status. Sometimes employers incorrectly treat employees as independent contractors to avoid paying employment taxes. Generally if the payer has the right to control what work will be done and how it will be done, the worker is an employee. Employers who misclassify employees as independent contractors (and are not eligible for relief under Section 530 of the Revenue Act of 1978) will be liable for the employment taxes on wages paid to the misclassified worker and subject to penalties.

* Paying Employees in Cash. Paying employees in whole or partially in cash is a common method of evading income and employment taxes. There is nothing wrong with compensating an employee in cash, but employment taxes are owed regardless of how the employees are paid. And the IRS will build its case using all available information even if there are no payroll records or checks.

* Filing False Payroll Tax Returns or Failing to File Payroll Tax Returns. Preparing false payroll tax returns intentionally understating the amount of wages on which taxes are owed or failing to file employment tax returns are methods commonly used to evade employment taxes.

* S Corporation Officers Compensation Treated as Corporate Distributions. In an effort to avoid employment taxes, some S Corporations are improperly treating officer compensation as a corporate distribution instead of wages or salary. By law, officers are employees of the corporation for employment tax purposes and compensation they receive for their services is subject to employment taxes.

The IRS encourages employees to report any concerns that an employer is failing to properly withhold and pay federal income and employment taxes. Taxpayers can contact the IRS at 1-800-829-1040 or report suspected tax fraud by calling 1-800-829-0433.

Employers must report employment taxes withheld from their employees on Form 941, Employer’s Quarterly Federal Tax Return. Employers are also responsible for filing Form 940, Employer’s Annual Federal Unemployment Tax Return. Payment of employment taxes must be made to an authorized bank or financial institution according to federal tax deposit requirements. Employers may also pay these taxes electronically.
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2004-03-24T14:36:00.000-08:00

Mr. Big is looking at the Big House, again. Schiff, his girlfriend, and an employee are all facing a 33 count indictment. This is big news for the Tax Cheat Movement.

FOR IMMEDIATE RELEASE
IRWIN SCHIFF AND TWO ASSOCIATES INDICTED FOR TAX FRAUD

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Daniel G. Bogden, U.S. Attorney for the District of Nevada; and Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division announced today that in Las Vegas, Nevada, a federal grand jury returned a thirty-three (33) count indictment charging Irwin Schiff, Cynthia Neun, and Lawrence Cohen with conspiracy (18 U.S.C. §371), and aiding and assisting in the preparation and filing of fraudulent federal income tax returns (26 U.S.C. §7206(2)). Messrs. Schiff and Cohen are also charged with income tax evasion (26 U.S.C. §7201). Ms. Neun is also charged with willfully failing to file federal income tax returns (26 U.S.C. §7203), Social Security disability fraud (42 U.S.C. §408) and theft of government property (18 U.S.C. §641).

If convicted, Mr. Schiff faces maximum potential sentences totaling forty-three years in jail and $3.25 million in fines; Ms. Neun, fifty-one years in jail and $3.4 million in fines; and Mr. Cohen, twenty-seven years in jail and $1.5 million in fines.

“There is no magic way out of paying taxes,” said Assistant Attorney General Eileen J. O’Connor. “If you fall for a scheme to cheat the IRS, you may lose your money to a con artist. You may wind up in federal prison. In the end, you will still owe taxes, and you may also owe interest and penalties.”

“The indictment today reminds us that fulfilling individual tax obligations is a legal requirement and those who willfully evade that responsibility will be prosecuted,” stated Nancy Jardini, Chief, IRS Criminal Investigation. “We should not forget that the ultimate victims in tax fraud cases are the people of the United States. Those taxpayers who diligently file tax returns each year.”

Count one of the indictment alleges that the defendants conspired to file and cause other persons to file fraudulent tax returns, including more than 4,950 tax returns that fraudulently reported no income, a scheme the defendants referred to as a “zero return.” Counts two through sixteen of the indictment charge the three defendants with allegedly aiding and assisting in the preparation and filing of fraudulent “zero returns.” The indictment alleges that the fraudulent “zero returns” reported zeroes on every line of a federal income tax return related to income and expenses, and often claimed a full refund of all federal taxes withheld or paid over to the IRS. It also alleges the defendants promoted the “zero return” scheme through written materials and audiotapes sold through a business known as Freedom Books; and during seminars, radio shows such as “Freedom Now” (co-hosted by Mr. Schiff and Ms. Neun), and personal consultations with clients.

The indictment further alleges that after filing “zero returns,” many of the defendants’ clients faced IRS audits and collection of taxes due. Mr. Schiff, who has owned Freedom Books since at least 1995, together with his co-defendants, allegedly encouraged clients to pay for additional products that were supposed to help the clients handle their problems with the IRS. The indictment alleges that Mr. Schiff and Ms. Neun charged clients for writing responses to IRS correspondence, drafting court pleadings, and representing them at administrative hearings before the IRS or in judicial proceedings. Between 1997 and 2002, Freedom Books allegedly generated gross business receipts of approximately $3,726,000. Despite owning the lucrative business, the indictment alleges Mr. Schiff did not report any income on any federal income tax return filed with the Internal Revenue Service for calendar years 1987 through 2002.

The indictment also charges Mr. Schiff with allegedly evading the payment of $1,369,000 in federal taxes, interest, and penalties due for the years 1979 through 1985. It alleges that he hid income and assets in an offshore bank account, using wire transfers and debit cards to bring the money back as needed; opened bank accounts using fictitious tax identification numbers; tried to hide the true ownership of his car by placing it in the name of a Pennsylvania-based business; and conducted financial transactions through anonymous warehouse banking services offered by the Christian Patriot Association.

On June 7, 2002, after trial in the United States District Court in Oregon, leaders of the Christian Patriot Association, including Richard and Dorothy Flowers, were convicted of tax crimes in connection with a “warehouse bank” scheme designed to eliminate records customarily made in financial transactions.

The charges contained in the indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

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2004-03-13T09:00:00.000-08:00

Seems like hardly a week goes by that some paytriot doesn't get slammed for selling Pure Trusts. With the IRS's conviction rate at 100% for Pure Trust promoters, this seems like one of the sure ways to go to jail.

For the people who buy them, the bad thing is that their name shows up on the paytriot promoter's client list, meaning that they are easy picken's for the IRS to go after them on criminal charges and for back taxes, interest and HUGE penalties.

FOR IMMEDIATE RELEASE
THURSDAY, MARCH 11, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

FEDERAL COURT HALTS TAX SCAM INVOLVING SHAM TRUSTS

Promoter Ordered To Give Customer List To Justice Department

WASHINGTON, D.C. - The Justice Department today announced that a federal court has granted a preliminary injunction ordering Tacoma, Washington resident David Carroll Stephenson to stop promoting a tax scam in which customers paid $2,500 to $8,000 to use sham trusts and corporations to evade federal income taxes. The court found that Stephenson, to promote the scheme, falsely claimed to be a lawyer. Also barred by the court order are several businesses operated by Stephenson: American Business Estate & Tax Planning Service; Advocate and Associates, Inc.; Advocate NW & Co., Inc.; A-1 Credit & Co.; the American Business Law, Inc. and American Business & Estate Planning. Today’s court order states that Stephenson’s promotion has cost the federal treasury more than $43 million in lost tax revenue. The court order also states that Stephenson’s customers have suffered substantial harm, “as they too are in violation of internal revenue laws.”

“This spring, as millions of Americans engage in the annual ritual of complying with the tax laws, some people are cynically helping others to evade them,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “The Department of Justice is working to halt the promotion of tax fraud schemes and to help the IRS identify those who use them.”

The court found that the defendants have promoted an abusive tax scheme that assists customers in evading federal tax liabilities and IRS collection efforts through the fraudulent use of trusts and business entities. The court found that defendants instruct customers to transfer their personal assets into four different trusts, each intended to perform a unique function within the scheme, with the ultimate goal of evading taxes on income and wages and hiding assets from IRS collection efforts. The court also referred to numerous misrepresentations and false claims made by Stephenson in marketing his tax schemes, such as:

- Trust income is not subject to tax;

- Filing tax returns is voluntary;

- Only those individuals or businesses that voluntarily disclose personal information on a tax return are subject to tax;

- Participants’ trusts cannot be compelled to turn over books and records to the IRS or to file federal tax returns;

- Property held by contract trust is exempt from IRS seizure;

- Only licensed business organizations have employees for employment tax purposes, all other businesses have independent contractors; and

- Income to a trust can be used to purchase assets without first being subject to tax.

The court order said that as of March 2000, Stephenson had 472 customers in 22 states and in Canada. Stephenson was ordered to give the Justice Department, within ten days, the names, addresses, and social security numbers of all customers who purchased trusts or corporations from him, or to whom he gave any tax advice. The order also requires Stephenson to notify his customers of the injunction and to post a copy of it prominently in the front window of his office on 27th Street in Tacoma.

Information about this case is available at . Additionally, more information about the Justice Department’s efforts against tax-scam promoters can be found at . Further, information about the Justice Department’s Tax Division can be found at .

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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-13T08:41:00.000-08:00

And for those who claim that Larken Rose is not a paytriot and trying to profit from his tax scamming, here is a little ditty on Larken's new Multi-Level Marketing scheme to sell his disks that are based on his Theft-By-Deception tape that so far has landed dozens of people in tax court. None have left within anything close to victories, most have left with sanctions, and the judges have been in stitches at the stupidity of the 861 argument (such as it is).

Scam on, Larken, scam on.

-----Original Message-----
From: VRS [mailto:info@vrs.theft-by-deception.com]
Sent: Monday, March 08, 2004 5:19 PM
Subject: Life without IRS? You can help make it happen.

We've got 'em outnumbered; it's just as simple as that.

Just as the playground bully of our childhood could only do his dirty work when he got his victim alone and in the corner, so it is with us today. Only this time, we're winning.

You may have heard: A close-up look at the law reveals that most Americans don't owe federal income tax at all, and never have. Granted, government needs to fund its operations, but we insist it must do so within the constraints of the law as written.

As a nation of free people, this situation is our responsibility to correct—we must right this wrong. We're accomplishing this by carrying the news to every corner and doorstep of America. When enough people know about the deception, the deception will fall.

With this in mind, we've created a system you can use to help spread the word, and earn money while doing it.

Our educational video—called Theft By Deception; click here for more information—is a detailed analysis of federal income tax law, and it shows clearly how a small handful of government lawyers have cleverly conspired to have us believe we owe the tax, when in fact we really don't.

Already over 15,000 copies of the video are in circulation, and demand will soon be increasing even more—we're getting ready to announce yet another powerful tool for informing our fellow Americans. A more general overview of the issue, it'll feature engaging discussion by credentialed professionals, and it'll be packaged on a media format that'll be easy and inexpensive to pass around.

Visit our website at https://vrs.theft-by-deception.com/ and start making money right away, while at the same time exercising your First Amendment-protected rights of free speech and assembly.

It's time to bring the deception to an end. Won't it be nice when April 15th is just another warm sunny spring day?
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-13T08:36:00.000-08:00

Speaking of Bob Schulz's growing series of failures, here's another of the idiots who allowed his name to be used in Bob's USA Today advertisements back in 2000 and 2001. Anybody who has followed Al Thompson knows that this guy's IQ is only barely about that of the average poodle, and he has asserted some of the most asinine arguments ever, such as that his name must be (or must not be) spelled in "ALL CAP" (as if that made a difference in the price of tea in China).

So, anyhow, Al's finally going to the stone lonely and, oh, by the way, his wife finally got fed up with his stupidity and divorce him too, after his antics got her slammed with a $2,000 fine. We will miss Al's messages though for the free and gut-wrenching humor they provided daily.

Arrest Warrant Issued in Income Tax Case

March 8, 2004
By THE NEW YORK TIMES

A federal judge in Sacramento has issued an arrest warrant
for a California businessman who stopped withholding taxes
from his employees' paychecks four years ago. The man, Al Thompson, a prominent figure in a movement claiming the tax laws are a hoax, asserted yesterday that any arrest warrant would be invalid if his name was printed in capital letters.

Judge Frank C. Damrell Jr. of United States District Court issued the warrant on Friday when Mr. Thompson failed to appear at a hearing into why he has not paid $500,000 in back taxes from his Cencal Aviation Products in Shasta Lake, Calif. Mr. Thompson and his wife, Denise, were also fined $2,000 each for making frivolous arguments.

On his Web site, Mr. Thompson wrote, "any warrant, court document or order" must capitalize only the first letter and that putting his name all in capitals made any court order "null and void."

Names on federal court documents are ordinarily printed in capital letters. The claim that the typography makes such documents invalid, made by many tax protesters, has been uniformly rejected by judges as nonsense.

Mr. Thompson contends that Congress repealed the income tax laws in 1939. The statute he cites did repeal the previous income tax law, because Congress enacted a new tax code that year, as it also did in 1954 and 1986.
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-13T08:29:00.000-08:00

Looks like We-The-People is falling apart more rapidly than we thought. First, their numbers are dwindling from drawing several thousand nuts at rallies around 2000 to where Bob Schulz is barely able to fill a small conference room today. Everybody knows that Bob is a just another Paytriot who is scamming for bucks, as even Devvy Kidd aludes to in her resignation message, where she points out that Bob's latest bogus lawsuit could be prepared and filed for a couple of hundred bucks, not the quarter-of-a-million that he is trying to raise.

Speaking of which: Bob announced his Right-To-Petition lawsuit last September (2003) and promised that it would be filed within 30 days. Here we are six months later, and no lawsuit. That's Bob Schulz: He talks the talk but can't walk the walk.

Resignation from We the People Congress, Inc.

By: Devvy
March 4, 2004

On February 24, 2004, I resigned as Executive Director of Bob Schulz’ We the People Congress, Inc. As I resigned there is no financial compensation package. Despite the immediate financial burden of a lost paycheck and the expensive move back to California from Maryland, I had to do what my conscious dictates. Additionally, I am now faced with trying to find someone to take over this lease on the townhouse I rented or I'll end up with that additional financial burden, too.

I resigned for philosophical reasons. Please do not send me e-mail asking for all the “juicy” details. I am aware that my departure came as a surprise to many and there have been requests that I define what ‘philosophical reasons’ are in this case. Because these situations do happen in the business world, the affected individuals seek to keep the situation from deteriorating even further. There is one major issue I feel compelled in the strongest of terms to state my position about:

I fully support the effort to educate Americans on the right to petition, its important history and the obligation of government to respond. This is very important. However, in my opinion, the WTP Foundation for Constitutional Education’s “Right to Petition” lawsuit is the most colossal waste of money I have seen since I quit working for the Department of Defense.

There are several other avenues, including a fairly common court filing, which would achieve better results for a few hundred bucks, the usual briefs and a few court appearances. The expenditure of $285,000 on a lawsuit that still is not filed and will go no where, is not something I could support and was one of the reasons I simply could not stay on as Ex Dir for WTP Congress, a corporation affiliated with WTP Foundation.

No one should allow my resignation to affect their support of Bob or his organizations. People are free to join any organization they want to support and associate with whomever they please.

What next? I hope to leave for Sacramento by the first of April. I will continue my writing, doing radio shows and will go back on the lecture circuit. If you'd like to book me for your event in 2004, please contact my agent.

A few people who knew I resigned suggested I do talk radio. I doubt there's much likelihood of that since it appears most "conservative" am stations only want to hire blonde GOP mouthpieces like Laura Ingram to promote their socialist agenda. If a decent offer came along, I would certainly consider it.

That's it for now. God bless our Republic.

Resignation from We the People Congress, Inc.
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-05T07:02:00.000-08:00

Another day, another bad day for tax protestors. In this case, Al Thompson's wife, Denise Thompson, gets zinged $2,000 for filing a stupid motion in court. Tax protestors file lots of junk in court, but it never, ever wins for them. One wonders why they waste the time and paper, especially since they have no clue what they are filing and are just regurgigating junk they found on one of the PAYtriot websites.

UNITED STATES OF AMERICA
Plaintiff,
v.
WALTER THOMPSON, A/K/A
AL THOMPSON D/B/A
CENCAL SALES COMPANY, D/B/A
CENCAL AVIATION PRODUCTS,
Defendants.

No. S 03-1532 FCD GGH

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA

MEMORANDUM AND ORDER

This matter is before the court on motion by plaintiff, United State of America ("government") for Rule 11 sanctions against defendant Denise Thompson ("defendant") for allegedly filing frivolous papers with the court.[Note 1]

Background

On November 18, 2003, defendant filed a Plea in Abatement with the court. This brief was virtually identical in substance to a Plea in Abatement filed by co-defendant Walter Thompson, the filing of which resulted in an order for Rule 11 sanctions against that defendant by this court on November 18, 2003. On December 10, 2003, the United States served on Anthony Thompson a motion for Rule 11 Sanctions with supporting brief, requested that he withdraw the Plea in Abatement by December 31, 2003, and warned that if he failed to do so the United States would file the Rule 11 motion with the court. Defendant did not withdraw the plea in abatement and the United States subsequently filed the motion for Rule 11 sanctions with the court.

Standard

Rule 11 provides that the district court may impose sanctions upon attorneys or parties "[i]f, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated. . . ." Fed. R. Civ. P. 11(c). As an initial inquiry, the district court must determine whether a violation of Rule 11(b) has occurred. See Warren v. Guelker, 29 F.3d 1386, 1388 (9th Cir. 1994) (reversing district court denial of Rule 11 sanctions against pro se litigant for failure to make initial determination that a violation of Rule 11 occurred.) If a violation is found, the court may in its discretion decide to impose sanctions. Fed. R. Civ. P. 11(c); Guelker, 29 F.3d at 1388 N.1 (9th Cir. 1994). See also 2 Wm. J. Moore, Federal Practice § 11.23(2) (3d ed. 2003). Sanctions are limited to what is "sufficient to deter repetition of such conduct or comparable conduct by others similarly situated." Fed. R. Civ, P. 11(b)(2)(A). The court has broad discretion to choose the appropriate type of sanction to achieve the Rule's goal of deterring future violations. Link v. Wabash R.R. Co., 370 U.S. 626, 633 (1962).

By its express terms, Rule 11 applies to pro se litigants. Fed. R. Civ. P. 11(b); Guelker, 29 F.3d at 1389. A court can consider the party's pro se status in determining whether to impose sanctions and the nature and severity of sanctions to be imposed. However, the court cannot exempt a party from Rule 11 sanctions merely because he appears pro se. Id.

Analysis

I. Rule 11(b) Violation

Pursuant to Rule 11, every pleading, motion, and other paper presented to the court must be signed by the attorney or an unrepresented party. By presenting to the court a pleading, motion or other paper, an attorney or party represents that "the claims, defenses and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law[.]" Fed. R. Civ. P. 11(a)(b), (b)(2). The certification requirements of Rule 11 are violated "if the paper filed . . . is frivolous, legally unreasonable or without factual foundation, even though . . . not filed in subjective bad faith." Zaldivar v. City of Los Angeles, 780 F.2d 823, 831 (9th Cir. 1986), overruled on other grounds by, Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990). See also Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362-65 (9th Cir.1990)(en banc).

The language of 11(b) makes clear that pro se litigants are charged with a duty to make a reasonable inquiry of the facts and law before signing papers and submitting them to the court. Fed. R. Civ. P. 11(b). Courts apply an objective standard in determining whether a party or attorney's inquiry was reasonable. Unigard Security Ins. Co. v. Lakewood Inq'g & Mfg. Corp., 982 F.2d 363, 370 (9th Cir. 1992). In determining the reasonableness of an investigation by a pro se litigant, the court may consider the problems associated with appearing without counsel. Committee Note to 1983 Amendment to Rule 11(b).

The United States claims that defendant violated Rule 11(b) when she filed his Plea in abatement because this pleading is "objectively frivolous" and filed "for no other reason than to harass and to cause unnecessary delay to these proceedings."

In its November 18, 2003 order imposing sanctions on co-defendant Walter Thompson, the court analyzed the content of the Plea in Abatement, concluding that it raised wholly frivolous and legally unreasonable arguments. The substance of the arguments asserted in the Plea in Abatement filed by defendant is identical to that filed by her husband, co-defendant Walter Thompson. Accordingly, the court finds that defendant violated Rule 11(b) by signing and presenting to the court the Plea in Abatement.

II. Sanctions

Where the court finds that a party violated Rule 11(b), it may, in its discretion impose sanctions sufficient to deter a repeated violation by defendant or others similarly situated. Fed. R. Civ. P. 11 (c) .

Here, defendants have repeatedly wasted the time and resources of the United States and this court responding to pleadings that wholly lack merit. The court therefore finds monetary sanctions necessary to deter defendants from filing additional such frivolous papers with the court.

CONCLUSION

For the reasons stated above, the court makes the following orders:

1) The clerk of the court is directed to STRIKE from the record the Plea in Abatement, filed by defendant Denise Thompson on November 18, 2003.

(2) Defendant Denise Thompson shall pay sanctions in the amount of $2,000.00. Defendant shall submit payment to the clerk of the court not later than thirty (30) days from the filing of Order.

DATED: February 9, 2004

FRANK C. DAMRELL, Jr.
UNITED STATES DISTRICT JUDGE

FOOTNOTE

1 Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs E.D. Cal. Local Rule 78-230.

END OF FOOTNOTE
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-02T06:29:00.000-08:00

When the $5,000 frivolous filing penalty gets passed into law, the IRS will be required to post a list of frivolous positions to which that $5,000 penalty will be applied. What do you think will be on it? An IRS Notice released today might give some clues. If it takes the IRS 2 or 3 years to catch us with you, that adds up to $10,000 or $15,000 in addition to taxes, interest, and penalties.

Frivolous Arguments to Avoid

Notice 2004-22

SECTION 1 INTRODUCTION

As April 15 approaches, taxpayers are reminded to steer clear of tax-avoidance schemes that purportedly reduce or eliminate taxes. If an idea to save on taxes seems too good to be true, it probably is.

Tax-avoidance schemes are based on frivolous arguments that the Service and the federal courts have repeatedly rejected. These schemes typically are sold by promoters for a substantial fee, and may be sold over the Internet, through advertisements in newspapers and magazines, at conferences and seminars (including conferences for professional groups such as doctors or dentists), and through recommendations of friends or acquaintances who have learned about these schemes.

Section 2 of this Notice sets out many of the most common frivolous arguments used by these tax-avoidance schemes. The Service is committed to identifying taxpayers who attempt to avoid their tax obligations by using schemes based on these and other frivolous arguments. Frivolous returns and other similar documents submitted to the Service are processed through its Frivolous Return Program. The Service also reviews other non-return documents making frivolous arguments submitted by taxpayers, such as correspondence, to determine whether these individuals have filed required tax returns and paid all taxes due for previous years.

Section 3 of this Notice identifies potential civil and criminal penalties. Taxpayers who engage in tax-avoidance schemes will be liable for unpaid taxes and interest. In addition, the Service will impose civil and criminal penalties against taxpayers where appropriate. The Service also will determine appropriate penalties against persons who promote these schemes and who prepare frivolous returns based these schemes.

SECTION 2 COMMON FRIVOLOUS ARGUMENTS

This section sets out many common frivolous arguments used by taxpayers to avoid or evade tax.

• “The 16th Amendment is invalid because it contradicts the original Constitution, and it was not properly ratified.” The 16th Amendment, which authorizes the income tax, was properly ratified and is valid.

• “A taxpayer can make a ‘claim of right’ to exclude the cost of his labor from income.” There is no “claim of right” doctrine under any federal law, including the Internal Revenue Code, that permits a taxpayer to deduct or exclude the value of his labor.

• “Only income from a foreign source is taxable under section 861.” Sections 861-865 do not exclude income from tax. In particular, nothing in these sections or the Treasury regulations provides that only income earned from certain foreign sources is subject to U.S. tax.

• “I am not a ‘citizen’ or a ‘person’ within the meaning of the Internal Revenue Code.” A citizen of each of the 50 States (e.g., New York or California) of the United States and the District of Columbia is also a citizen of the United States.

• “Citizens of States, such as New York, are citizens of a foreign country and therefore not subject to tax.” Section 911 permits a taxpayer to elect to exclude income from U.S. income tax only when the taxpayer earns income and resides outside the United States under the conditions and limitations set forth in that section. For purposes of section 911, States (e.g., New York or California), Commonwealths, and Territories (e.g., Johnston Atoll) of the United States are not foreign countries.

• “A taxpayer can escape income tax by putting assets in an offshore bank account.” A citizen or resident of the United States cannot use an offshore arrangement (such as a foreign bank or brokerage account, or a credit card issued by a foreign bank) to avoid his tax obligations. In addition, taxpayers are required to disclose foreign financial accounts to the Treasury Department and may face civil and criminal penalties if they fail to do so.

• “A taxpayer can eliminate tax by establishing a ‘corporation sole.’” A taxpayer cannot avoid income tax by establishing a corporation sole for the purpose of avoiding tax on the taxpayer’s income. A corporation sole may be used only by a bona fide religious leader for specific, limited purposes relating to the religious leader’s office.

• “A taxpayer can place all of his assets in a trust to escape income tax while still retaining control over those assets." A taxpayer who places assets in a trust but retains certain powers or interests over the assets, including the power to control the beneficial enjoyment of the assets, is treated as the owner of the assets and is subject to tax on the income from those assets.

• “A taxpayer can deduct any amount paid to maintain his household by establishing a home business.” Business expenses, including expenses related to a home-based business, are not deductible unless the expenses relate to a bona fide, profit-seeking business. Promoters of home-based business schemes improperly encourage taxpayers to claim household expenses as business deductions although the purported home-business used in these schemes is not a bona fide trade or business.

• “Nothing in the Internal Revenue Code section imposes a requirement to file a return.” Section 6011 expressly authorizes the Service to require, by Treasury regulation, the filing of returns. Section 6012 identifies persons who are required to file income tax returns. Under Treasury regulations, taxpayers who receive more than the statutory minimum amount of gross income must file returns. Taxpayers also are required to pay any tax owed.

• “Filing a tax return is ‘voluntary.’” Some people mistake the word "voluntary" for 'optional" -- but filing a tax return is not optional for those who meet the law's requirements. The word "voluntary," as used in IRS publications, refers to the fact that the U.S. tax system is a voluntary compliance system, which means that taxpayers themselves determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them. For those who do not comply with their tax obligations, the tax law authorizes various compliance measures.

• “Because taxes are voluntary, as an employer, I don’t have to withhold income or employment taxes from my employees.” Every taxpayer is responsible for completing and filing required returns and paying the correct amount of tax. An employer is required by law to withhold income and employment taxes from salary and wages paid to employees. Employers also must deposit the amounts withheld with the IRS.

• “A taxpayer can refuse to pay taxes if the taxpayer disagrees with the government’s use of the taxes it collects.” No law, including the Internal Revenue Code, permits a taxpayer to avoid or evade tax obligations on grounds that the taxpayer does not agree with the Government’s past or possible future use of the taxes collected.

• “A taxpayer can avoid tax by filing a return that reports zero income and zero tax liability.” All taxpayers who receive more than the statutory minimum amount of gross income must file returns and pay tax. No law, including the Internal Revenue Code, permits a taxpayer who has received wage and other income to file a return with zero income and zero tax liability.

• “A taxpayer can escape income taxes or the tax system by filing a set of documents in lieu of a tax return.” Taxpayers must file income tax returns using the forms prescribed by the Service. No law, including the Internal Revenue Code, permits a taxpayer to file a document or series of documents to remove himself from the income tax system.

• “A taxpayer can avoid tax by filing a return with an attachment that disclaims tax liability.” A return with an attached disclaimer of tax liability is not a valid tax return under the law. Filing a disclaimer of tax may result in penalties for failure to file in addition to other applicable civil and criminal penalties.

• “A taxpayer can file a return with an altered penalties of perjury statement to generate a tax refund.” Alterations to an income tax return or to the penalties of perjury statement may nullify a return. Filing an altered document may result in penalties for failure to file in addition to other applicable civil and criminal penalties.

• “Certain taxpayers can claim a ‘reparations tax credit’ to right wrongs done in the past.” No law, including the Internal Revenue Code, permits a “reparations tax credit.”

• “By purchasing equipment and services for an inflated price, a taxpayer can use the Disabled Access Credit to reduce tax or generate a refund.” The Disabled Access Credit, which is limited to specific medical equipment, may only be claimed for amounts actually paid by a taxpayer. Promoters of this scheme improperly offer to sell equipment or services at highly inflated prices in order to generate a large credit. Taxpayers participating in this scheme, however, ultimately are not required to pay, and do not pay, the entire price stated in the sales contract.

• “A taxpayer can deduct the amount of Social Security taxes under section 3121 that he paid and get a refund of those taxes.” Section 3121 does not exclude wages from taxation and does not authorize a refund of Social Security taxes paid.

• “A taxpayer may sell (or purchase) the right to use dependents in order to increase the amount of EIC claimed.” A taxpayer may not purchase or sell the right to use additional dependents for purposes of the Earned Income Credit. To be claimed as a dependant, a child must be a qualifying child under the Earned Income Credit rules.

The Service and the federal courts also have repeatedly rejected variations of these arguments as well as numerous other tax avoidance schemes and frivolous arguments used by taxpayers to avoid or evade taxes.

SECTION 3 CIVIL AND CRIMINAL PENALTIES

Civil and criminal penalties may apply to taxpayers who make frivolous arguments. Potentially applicable civil penalties include: (1) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; (2) the section 6662 accuracy-related penalty, which is equal to 20 percent of the amount of taxes the taxpayer should have paid; (3) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (4) a $500 penalty under section 6702 for filing a frivolous return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers who engage in tax-avoidance schemes also may face criminal prosecution for: (1) attempting to evade or defeat tax under section 7201 for which the penalty is a fine of up to $100,000 and imprisonment for up to 5 years; and (2) willful failure to file a return under section 7203 for which the penalty is a fine of up to $25,000 and imprisonment of up to one year; and (3) making false statements on a return under section 7206 for which the penalty is a fine of up to $100,000 and imprisonment for up to 3 years.

Persons who promote tax-avoidance schemes and those who assist taxpayers in claiming tax benefits based on a tax-avoidance scheme also may face penalties. Potential penalties include: (1) a $250 penalty for each return prepared by an income tax return preparer who knew or should have known that the taxpayer’s argument was frivolous (or $1,000 for each return where the return preparer’s actions were willful, intentional or reckless); (2) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (3) criminal prosecution under section 7206 for which the penalty is a fine of up to $100,000 and imprisonment for up to 3 years for assisting or advising about the preparation of a false return or other document under the internal revenue laws. Promoters and others who assist taxpayers in engaging in these schemes also may be enjoined from doing so under section 7408.

SECTION 4 ADDITIONAL INFORMATION

Other information about frivolous tax positions is available on the Service website at www.irs.gov.

This notice was authored by the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this notice, contact that office on (202) 622-7800 (not a toll-free call).
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-01T20:10:00.000-08:00

Another day, another bad day for tax protestors. This day, however, is particularly bad since -- as Demo has posted below -- the IRS has gone nuclear on a couple of popular tax protestor strategies, including Irwin Schiff's "Zero Income Return" and the "861 Argument" which used to be pitched by Thurston Bell and Rick Haraka/Bryan before they were enjoined by the Justice Department, and now has as its sole remaining champion Larken Rose, who by the way disclaims at every opportunity that he is giving advice.

Why is this so important? Because we these notices it will be vitually impossible for a tax protestor to assert the so-called Cheek Defense, i.e., "I didn't know that what I was doing was wrong." To deflate that defense, the U.S. Atorney will only have to prove that the IRS specifically warned that the strategy was bogus, and that will be that: Club Fed is now a SURE THING for those stupid enough to follow these strategies.

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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-01T12:05:00.000-08:00

The IRS has released some details about the bigger scams on the dirty dozen. Ignore at your own peril!

Corporation Sole Scheme:
http://www.irs.gov/pub/irs-drop/rr-04-27.pdf

Section 911 Scheme:
http://www.irs.gov/pub/irs-drop/rr-04-28.pdf

Section 1341 Claim of Right Scheme:
http://www.irs.gov/pub/irs-drop/rr-04-29.pdf

Section 861 Scheme:
http://www.irs.gov/pub/irs-drop/rr-04-30.pdf

Debt Removal / Redemption Schemes:
http://www.irs.gov/pub/irs-drop/rr-04-31.pdf

Phony home based business deductions:
http://www.irs.gov/pub/irs-drop/rr-04-32.pdf

Reparations Tax Credit Scheme:
http://www.irs.gov/pub/irs-drop/rr-04-33.pdf

Schiff’s Zero Return:
http://www.irs.gov/pub/irs-drop/rr-04-34.pdf

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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-03-01T11:06:00.000-08:00

The Tax Protest crowd should recognize quite a few of these scams...

IRS Updates the "Dirty Dozen" for 2004:
Agency Warns of New Scams

WASHINGTON - In an update of an annual consumer alert, the Internal Revenue Service urged taxpayers to avoid falling victim to one of the "Dirty Dozen" tax scams and a variety of other schemes. In the new 2004 ranking, several new scams have reached the top of the consumer watch list, including abusive trusts and the "claim of right" doctrine.

In addition, the IRS has taken a new step this year and issued 10 new pieces of legal guidance involving scams in the "Dirty Dozen" and other tax schemes. The new guidance debunks the schemes and provides new legal details to help tax practitioners and taxpayers.

"At the IRS, we're augmenting our enforcement resources to attack schemes and scams. While we're actively targeting promoters, taxpayers themselves should be wary of anyone who promises to eliminate their taxes," said IRS Commissioner Mark W. Everson. "Don't be fooled by these outrageous claims. There is no secret way to escape paying taxes."

The IRS and other federal agencies are aggressively pursuing and successfully prosecuting promoters of these schemes and many of their clients for fraud and tax evasion. Participation in these schemes can result in imprisonment, fines and repayment of taxes owed with interest and penalties. Even innocent taxpayers involved in these schemes can face a staggering amount of back interest and penalties.

Taxpayers who suspect tax fraud can report it to the IRS at 1-800-829-0433. More information on tax scams and schemes is available by visiting "The Newsroom" section of IRS.gov.

The IRS urges people to avoid these common schemes:

1. MISUSE OF TRUSTS. Promoters of abusive tax transactions are increasingly urging taxpayers to transfer assets into trusts. The promoters promise a variety of benefits, such as the reduction of income subject to tax, deductions for personal expenses paid by the trust and reduction of gift or estate taxes. Taxpayers should be aware that abusive trust arrangements will not produce the tax benefits advertised by their promoters and that the IRS is actively examining these types of trust arrangements. More than a dozen injunctions have been obtained against promoters, and numerous promoters and their clients have been criminally prosecuted. Before entering any trust arrangements, taxpayers should seek the advice of a trusted tax professional.

2. "CLAIM OF RIGHT" DOCTRINE. In this emerging scheme, people file returns and attempt to take a deduction equal to the entire amount of their wages. The promoters advise them to label the deduction as "a necessary expense for the production of income" or "compensation for personal services actually rendered". The deduction is based on a complete misinterpretation of the Internal Revenue Code and has no basis in law.

3. CORPORATION SOLE. Participants in this scam apply for incorporation under the pretext of being a "bishop" or "overseer" of a one-person, phony religious organization or society. The idea is that the arrangement entitles the individual to exemption from federal income taxes as a nonprofit, religious organization as described in tax laws. When used as intended, Corporation Sole statutes enable religious leaders - typically bishops or parsons - to become incorporated as individuals as a way of separating themselves legally from the control and ownership of church assets. But the rules have been twisted at seminars where promoters charge fees of up to $1,000 or more per person. Would-be participants are mistakenly told that Corporation Sole laws provide a "legal" way to escape paying federal income taxes, child support and other personal debts.

4. OFFSHORE TRANSACTIONS. Some people use offshore transactions to avoid paying United States taxes. Use of an offshore bank account, brokerage account, credit card, wire transfer, trust, offshore employee leasing or other arrangement to hide or underreport income or to claim false deductions on a federal tax return is illegal. A taxpayer involved in these schemes could be subject to payment of taxes, interest, penalties and potential criminal prosecution. This was the top scam in the 2003 "Dirty Dozen." A special program last year has yielded more than $170 million in taxes, interest and penalties, and the IRS and the states continue to aggressively pursue taxpayers and promoters in this area.

5. EMPLOYMENT TAX EVASION. The IRS has seen a number of illegal schemes that instruct employers not to withhold federal income tax or other employment taxes from wages paid to their employees. These schemes are based on an incorrect interpretation of "Section 861" and other parts of the tax law and have been refuted in court. Recent court cases have resulted in criminal convictions of promoters. Employer participants could also be held responsible for back payments of employment taxes, plus penalties and interest. Employees who have no withholdings are still responsible for payment of their personal taxes.

6. RETURN PREPARER FRAUD. Unscrupulous return preparers can cause a lot of problems for taxpayers who use their services. Abusive return preparers derive financial gain by diverting a portion of the taxpayer's refund for their own benefit, charging inflated fees for the return preparation services, and increasing their clientele by advertising guaranteed larger refunds. Taxpayers should choose carefully when hiring a tax preparer - no matter who prepares the return, the taxpayer is ultimately responsible for all of the information on that return.

7. AMERICANS WITH DISABILITIES ACT. Another scheme seen for several years involves the purchase of equipment and services that the promoter alleges meets the strict criteria of the Disabled Access Credit, which was created with the passage of the "Americans with Disabilities Act". A minimal payment is made and a non-recourse note signed. The investor then provides insignificant services to complete the purchase agreement. This scheme is based on an incorrect interpretation of law and an over-inflated value of the services rendered.

8. AFRICAN-AMERICANS GET A SPECIAL TAX REFUND. Thousands of African Americans have been misled by people offering to file for tax credits or refunds related to reparations for slavery. There is no such provision in the tax law. Some unscrupulous promoters have encouraged clients to pay them to prepare a claim for this refund. But the claims are a waste of money. Promoters of reparations tax schemes have been convicted and imprisoned. And taxpayers could face a $500 penalty for filing such claims if they do not withdraw the claim. Related scams include claiming an illegal tax credit by misusing Form 2439, "Notice to Shareholder of Undistributed Long-Term Capital Gains." The slavery reparations scam was at the top of the 2002 "Dirty Dozen," and, although claims have fallen considerably, the IRS continues to see activity in this area.

9. IMPROPER HOME-BASED BUSINESS. This scheme purports to offer tax "relief" but in reality is illegal tax avoidance. The promoters of this scheme claim that individual taxpayers can deduct most, or all, of their personal expenses as business expenses by setting up a bogus home-based business. But the tax code firmly establishes that a clear business purpose and profit motive must exist in order to generate and claim allowable business expenses. This scam has been around for years, but the IRS continues to see activity in this area.

10. FRIVOLOUS ARGUMENTS. Frivolous arguments are false arguments that are unsupported by law. When a scheme promoter says "I don't pay taxes - why should you" or urges you to "untax yourself for $49.95," beware. The ads may claim that the promoter knows the "secret" for never paying taxes again, but that's just plain wrong. The U.S. courts have continuously rejected this and other frivolous arguments. Unfortunately, people across the country have paid for the "secret" of not paying taxes or have bought "untax packages." Then they find out that following the advice contained in them can result in civil and/or criminal penalties. Numerous sellers of the bogus schemes have been convicted on criminal tax charges. More than a dozen injunctions have been issued.

11. IDENTITY THEFT. Identity thieves use someone's personal data to steal his or her financial accounts, run up charges on the victim's existing credit cards, apply for new loans, credit cards, services or benefits in the victim's name and even file fraudulent tax returns. The IRS is aware of several identity theft scams involving taxes or the IRS.

In one example, fraudsters sent bank customers fictitious bank correspondence and IRS forms in an attempt to trick them into disclosing their personal and banking data. In another, abusive tax preparers have used clients' Social Security numbers and other information to file false tax returns without the clients' knowledge. For taxpayers, it pays to be choosy about disclosing personal and financial information. And the IRS encourages taxpayers to carefully select a reputable tax professional.

12. SHARE/BORROW EITC DEPENDENTS. Unscrupulous tax preparers "share" one client's qualifying children with another client in order to allow both clients to claim the Earned Income Tax Credit. For example, one client may have four children but only needs to list two to get the maximum EITC. The preparer will list two children on the first client's return and the other two on another client's tax return. The preparer and the client "selling" the dependents split a fee. The IRS prosecutes the preparers of such fraudulent claims, and participating taxpayers could be subject to civil penalties.

Beyond the "Dirty Dozen," the IRS sees many more tax schemes. In one, a telephone caller says you've won a prize, and all you have to do to get it is to pay the income tax due - to the caller. Other scams can play off recent news events, such as one last year targeting members of the military.

"Taxpayers should think carefully before paying for services or signing important documents," Everson said. "Don't be a victim of these scams or others that promise the moon. They carry a high price."
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-02-28T20:10:00.000-08:00

Another day, another bad day for tax protestors. Picked up this message on one of the tax protestor's message boards about John Harpole.

John Harpole was arrested on charges while exiting the plane
that brings back the workers from Prudhoe Bay. John said he knew
something was up when they stated on the airplane intercom to contact
the Alaska Airlines Counter.
I have not talked directly to John, but it seems that 6
police + IRS agents and others were present to arrest John. This of
course was for the show effect to whip others into line and as the
story spreads on the slope, the benefits of "taxpayers" not filing,
others will be of great benefit to the IRS.
John had a hearing this morning in the USDC at 10 am and was
released according to the clerk at USDC, but of course he was taken
back to the Anchorage Jail to await the fax and processing to exit.
I called at 12:40 PM and the fax is yet to arrive and the Anchorage
jail said to try again at 4 PM. Don't you just love the police
state criminals and how expeditiously they work. Anchorage jail is
about 7 block from the USDC.
Anchorage Jail is another step in the New World Order, as the
Anchorage court is right in the AJ - not the USDC -where John was
taken. There on only seats for about 15 people maximum. The
political prisoners are behind a bullet proof glass, as is the podium
with the microphone. If the prisoner tries to say something the
judge doesn't want on the record, the judge just kills the microphone
and proceeds forward. Unless you are an attorney (sic), they will
not let you use the telephone to talk to the prisoners. The
attorneys are also in the confined area if they are "represented."
John was supposedly charged with willful failure to file and
tax evasion.
I am headed into Anchorage to file into federal court today
and will probably see him later.

Ralph

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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-02-26T18:52:00.000-08:00

Another day, another bad day for tax protestors. This time it is Eddie Kahn in the news. We've previously identified Eddie as the stupidest tax protestor of all time, and he's doesn't prove us wrong with his latest antics in a Florida court as related below. I wonder if it is possible to deport tax protestors who don't claim to be citizens of the U.S. since a few weeks in Haiti or Cuba might shake some sense into them.

Article published Feb 25, 2004

Federal judge finds tax protesters' logic baffling
Five stand accused of marketing 'abusive' tax-avoidance plans.

OCALA - A Mount Dora-based tax protester told an Ocala federal judge Tuesday that since he's not a U.S. citizen, the judge might be able to deport him to the place he was born - Texas.

Eddie Kahn told Senior U.S. District Judge William Terrell Hodges that although he was born in one state of the United States, he is a citizen only of Florida, not of the United States.

Hodges questioned Kahn's logic. "The U.S. Constitution doesn't apply to you?" Hodges asked.

"Only when traveling between the states," Kahn responded.

Hodges reserved ruling on whether he would find Kahn, Kahn's wife Kathleen, and three others in civil contempt of court. The Kahns, Gainesville lawyer Milton Baxley II, David Stephen Lokeitz and Texas resident Bryan Malatesta are under a temporary restraining order to stop selling what the Internal Revenue Service calls "abusive tax avoidance plans."

The U.S. Department of Justice filed a civil lawsuit against the five people and three incorporated businesses in December. Anne Norris Graham, the lawyer representing the government, argued that the defendants and the organizations - Guiding Light of God Ministries, American Rights Litigators, and Eddie Kahn and Associates - have been illegally interfering with the IRS's ability to collect taxes.

One of Kahn's Web sites says taxpayers are involved in a "master/servant relationship" with the IRS.

"If you act like a master and treat them like a servant, you get much better results," the Web site notes.

Hodges issued a temporary injunction in December, ordering the defendants to stop selling their tax products, post a copy of the injunction on affiliated Web sites, and provide lists of their customers to the Justice Department within 20 days of the initial order.

Graham said Tuesday that the defendants had done little or nothing to comply, and asked Hodges to jail them until they did.

"Due to the defendants' blatant defiance of this court's injunction, we feel that the court should incarcerate them," Graham said. "We do not anticipate that a monetary sanction would produce the desired coercive effect in these defendants."

The government's complaint alleges, among other things, that the defendants sold counterfeit checks for low fees to customers. The customers in turn sent the fake checks, made out in larger amounts, to the IRS, resulting in the agency releasing tax liens. The IRS has received counterfeit checks from American Rights Litigators and Guiding Light of God Ministries totaling more than $2.2 million, according to the complaint filed in December.

Eddie Kahn said Tuesday he never intended to break the law or deceive anyone and that he wanted to know what to do to be in compliance with Hodges' order. Kahn presented a floppy disc to Graham that he said contained the names of his organizations' customers.

Kathleen Kahn said she was a housewife who didn't work in the organizations. Baxley said he had not been affiliated with the organizations since October. Lokeitz said he had not intentionally violated Hodges' order.

Malatesta, who lives in Texas, did not appear Tuesday.

Eddie Kahn's logic appeared to escape Hodges at times.

"Ms. Graham has been under the presumption that my wife and I are U.S. citizens," Kahn said at one point. "We are Florida state citizens. . . . We are not federal citizens. We do not live on federal land."

When Hodges asked Kahn where he was born, Kahn responded that he was born in Texas. Hodges asked if Kahn had ever renounced his U.S. citizenship. Kahn replied that he couldn't renounce something he never had.

The judge asked Kahn if he was subject to deportation.

"I don't know where I'd go. Maybe back to Texas," Kahn responded.

"You could end up a stateless person," Hodges said.

Graham confirmed Tuesday that federal agents executed a search warrant at Kahn's Mount Dora offices last week as part of a separate criminal investigation.
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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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2004-02-25T09:41:00.000-08:00

This tax protestor wasn't even a U.S. citizen, and when he refused to pay they deported him! Hope he enjoys going back to Italy where tax rates are much higher than in the U.S. Does this ruling apply to those who claim they are not citizens of the United States? Hope so, because it means that a lot more deadbeats shipped out.

LOUIS EVANGELISTA,
Petitioner-Appellant,
v.
JOHN ASHCROFT, ATTORNEY GENERAL OF THE UNITED STATES; JAMES
ZIGLAR, COMMISSIONER OF THE IMMIGRATION & NATURALIZATION SERVICE;
UNITED STATES IMMIGRATION AND NATURALIZATION SERVICE,
Respondents-Appellees.

Release Date: FEBRUARY 23, 2004

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

August Term, 2003

(Argued: December 3, 2003
Decided: February 23, 2004)

Before: CARDAMONE, SACK, and GIBSON,/*/ Circuit Judges.

[1] Appeal from a judgment of the United States District Court for the Eastern District of New York (Leonard D. Wexler, Judge) dismissing the petitioner-appellant's petition for a writ of habeas corpus preventing his deportation to Italy because (1) he was convicted of an aggravated felony under 8 U.S.C. section 1101(a)(43)(M)(ii), for which he thereby became deportable, and (2) discretionary relief from deportation was not available to him.

[2] Affirmed.

MATTHEW L. GUADAGNO, Bretz & Coven, LLP (Kerry William Bretz and
Jules E. Coven, of counsel), New York, NY, Petitioner-
Appellant.

DIONE M. ENEA, Special Assistant United States Attorney for the
Eastern District of New York (Roslynn R. Mauskopf, United States
Attorney, and Varuni Nelson, Assistant United States Attorney,
of counsel), Brooklyn, NY, for Respondents-Appellees.

SACK, Circuit Judge:

[3] The petitioner-appellant, Louis Evangelista, appeals from a judgment of the United States District Court for the Eastern District of New York (Leonard D. Wexler, Judge) dismissing his petition for a writ of habeas corpus to prevent his deportation/1/ to Italy. The district court held that Evangelista had been convicted of an offense "described in section 7201 of Title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $ 10,000," 8 U.S.C. section 1101(a)(43)(M)(ii), for which he was deportable under the Immigration and Nationality Act (the "INA"). We agree with the district court's conclusion, although on grounds that differ somewhat from those on which the district court relied.

[4] The district court also held that Evangelista was not eligible for a waiver of deportation because he was convicted of the offense at issue after Congress had abolished such relief for persons convicted of an aggravated felony. The unavailability of a waiver is not impermissibly retroactive in this case, the district court reasoned, because irrespective of the timing of the underlying criminal conduct, Evangelista's conviction of the relevant crime occurred when the waiver was no longer available.

BACKGROUND

[5] The petitioner-appellant, Louis Evangelista, is a sixty- three-year-old native and citizen of Italy. He has been a lawful permanent resident of the United States since 1961. In 1995, a superseding indictment was filed in the United States District Court for the Eastern District of New York charging Evangelista with various federal tax crimes involving events that occurred as early as 1988. In count 26 of the superseding indictment, Evangelista was charged with "willfully attempt[ing] to evade and defeat [an] income tax by failing to pay said income tax to the Internal Revenue Service and by concealing and attempting to conceal from all proper officers of the United States of America his true assets" in violation of 26 U.S.C. section 7201. Superseding Indictment at 16, United States v. Evangelista, No. 94-CR-1277(S-2)(LDW) (E.D.N.Y. 1996) (emphasis added).

[6] Evangelista pleaded not guilty to all of the counts against him. However, a jury found him guilty on all counts. The district court's judgment of conviction, dated October 29, 1996, states that Evangelista was adjudged guilty under count 26 of "[a]ttempt[ing] to evade or defeat tax" in violation of 26 U.S.C. section 7201. Judgment of Conviction, United States v. Evangelista, No. CR 94-1277(S-2) (E.D.N.Y. Oct. 29, 1996) (emphasis added). Evangelista appealed his conviction to this Court. We affirmed. See United States v. Evangelista, 122 F.3d 112, 114 (2d Cir. 1997), cert. denied, 522 U.S. 1114 (1998). Our opinion focused primarily on counts under 26 U.S.C. section 7202, not on the section 7201 counts. Id. at 116-22. But we did note in passing that Evangelista "was convicted of evading personal income taxes (in violation of 26 U.S.C. section 7201)," id. at 113 (emphasis added), and that "[t]he jury found [Evanglista and another defendant] guilty on all of the counts with which they were charged," id. at 116.

[7] As a result of Evangelista's conviction, on April 14, 1998, the Immigration and Naturalization Service ("INS") issued to Evangelista a Notice To Appear, stating that he was subject to removal from the United States for having been convicted of an "aggravated felony" as defined in the INA, 8 U.S.C. section 1101(a)(43)(M)(ii). Section 1101(a)(43) contains a lengthy list of those crimes constituting an "aggravated felony" for the purpose of determining who is deportable under the INA. The list includes as an aggravated felony in section 1101(a)(43)(M)(ii) -- the section relevant to the Notice To Appear -- "an offense that . . . is described in section 7201 of Title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $ 10,000." Id.

[8] In removal proceedings before an Immigration Judge ("IJ"), Evangelista challenged his potential deportation. He first contended that he had not been convicted of an aggravated felony because there was no clear and convincing evidence that he had been convicted under count 26 of evading taxes, rather than defeating taxes, and that only evading taxes constitutes an aggravated felony under the INA. Evangelista also argued that he was eligible for a waiver of deportation pursuant to former section 212(c) of the INA, 8 U.S.C. section 1182(c) (1994) (repealed by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ("IIRIRA"), Pub. L. No. 104-208, Div. C, section 304(b), 110 Stat. 3009-546, 3009-597), because at the time of his criminal conduct he was eligible for the waiver. The IJ, rejecting Evangelista's arguments, ordered his removal.

[9] Evangelista appealed the IJ's decision to the Board of Immigration Appeals ("BIA"). The BIA held that Evangelista had been convicted of an aggravated felony within the meaning of the INA. First, the BIA concluded that Evangelista had been convicted of tax evasion, an aggravated felony under 8 U.S.C. section 1101(a)(43)(M)(ii). The BIA relied on (1) the judgment of conviction, which stated that Evangelista was found guilty on count 26 for attempting to evade or defeat taxes in violation of 26 U.S.C. section 7201, (2) the indictment, which set out count 26 as a charge of both evading taxes and defeating taxes, and (3) our decision on Evangelista's appeal, which referred to Evangelista as having been convicted of tax evasion. Second, the BIA reasoned that even if Evangelista had been convicted under section 7201 only of defeating taxes and not of evading them, he would nonetheless have committed an aggravated felony under the INA, because the parenthetical phrase in the relevant section -- "(relating to tax evasion)" -- is merely descriptive of the substance of section 7201. According to the BIA, the parenthetical phrase does not limit the definition of an aggravated felony under section 1101(a)(43)(M)(ii) to those offenses that involve tax evasion, but also includes those that involve defeating taxes. And third, the BIA concluded that even if the "relating to tax evasion" parenthetical phrase restricted the scope of section 1101(a)(43)(M)(ii) to convictions relating to tax evasion under 26 U.S.C. section 7201, defeating taxes was "relat[ed] to tax evasion" and therefore qualified as an aggravated felony. The BIA then held that Evangelista was not eligible for a waiver of deportation under former section 212(c) because he was convicted and formal deportation proceedings against him were begun only after the section was repealed. The BIA therefore dismissed Evangelista's appeal. See In re Evangelista, No. A12 352 319 (B.I.A. Oct. 25, 2000).

[10] Evangelista then filed in the district court a petition for a writ of habeas corpus pursuant to 28 U.S.C. section 2241 seeking relief from deportation. The court denied his petition. See Evangelista v. Ashcroft, 232 F. Supp. 2d 30 (E.D.N.Y. 2002). Relying on the conjunctive language in count 26 of the indictment ("willfully attempt[ing] to evade and defeat [an] income tax" (emphasis added)) and our opinion on Evangelista's appeal, the court concluded that "there can be no doubt that Evangelista was convicted of an offense 'described in section 7201 of Title 26 (relating to tax evasion) in which the revenue lost to the Government exceeds $ 10,000.'" Id. at 34 (quoting 8 U.S.C. section 1101(a)(43)(M)(ii)). The court therefore decided that Evangelista had been convicted of an aggravated felony and was deportable. Id. The district court also concluded that relief from deportation under former INA section 212(c) was not available to Evangelista, "a criminal defendant [who] elect[ed] to go to trial in connection with conduct or a conviction that pre-dates the repeal of Section 212(c), but [who was] convicted and placed in removal proceedings after the repeal of the statute." Id. at 37. According to the district court, it is the date of conviction, not the date of the criminal conduct or of entry of a plea of not guilty, that controls. The court reasoned that there are no fairness concerns when the defendant elects to proceed to trial -- as opposed to entering into a plea agreement -- before the repeal of section 212(c). Id. at 36.

[11] Evangelista appeals.

DISCUSSION

I. Conviction for an Aggravated Felony

[12] "Any alien who is convicted of an aggravated felony at any time after admission [to the United States] is deportable." 8 U.S.C. section 1227(a)(2)(A)(iii). The INS "has the burden of establishing [deportability] by clear and convincing evidence," which must be "reasonable, substantial, and probative." Id. section 1229a(c)(3)(A).

[13] We have no jurisdiction to review a final order of removal against an alien who is removable for having committed an aggravated felony. Id. section 1252(a)(2)(C). But "[w]e do retain jurisdiction . . . to review the question whether, as a matter of law, [a petitioner] committed an 'aggravated felony' under [the INA]." Dalton v. Ashcroft, 257 F.3d 200, 203 (2d Cir. 2001). We therefore have jurisdiction to review whether Evangelista was convicted of an aggravated felony under the INA.

[14] The INA sets forth a list of offenses that qualify as types of aggravated felonies. Among them is "an offense that . . . is described in section 7201 of Title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $ 10,000." 8 U.S.C. section 1101(a)(43)(M)(ii). 26 U.S.C. section 7201 in turn criminalizes "willful[] attempts in any manner to evade or defeat any tax imposed by [Title 26] or the payment thereof." We therefore must decide whether Evangelista's conviction under 26 U.S.C. section 7201 falls within the scope of section 1101(a)(43)(M)(ii), thus rendering him deportable.

A. Standard of Review

[15] "On appeal from the denial of a habeas petition brought pursuant to 28 U.S.C. section 2241, we review the merits of the petition de novo." Chrzanoski v. Ashcroft, 327 F.3d 188, 191 (2d Cir. 2003). We review the BIA's interpretation of ambiguous provisions of the INA, however, with substantial deference to the BIA, Dickson v. Ashcroft, 346 F.3d 44, 48 (2d Cir. 2003), rejecting its interpretation only if it is "arbitrary, capricious, or manifestly contrary to the statute," Chevron, U.S.A., Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837, 844 (1984). "If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43. We review de novo the BIA's interpretation of federal criminal statutes, such as 26 U.S.C. section 7201, because we and not they are charged with the responsibility of such interpretation. See Dickson, 346 F.3d at 48; see also Ming Lam Sui v. INS, 250 F.3d 105, 116 (2d Cir. 2001) (reviewing de novo whether a petitioner's conviction fits within the BIA's reasonable interpretation of a subsection of the definition of "aggravated felony").

B. Scope of Section 1101(a)(43)(M)(ii)

1. The Arguments.

[16] Evangelista argues that the language of 8 U.S.C. section 1101(a)(43)(M)(ii) -- an offense "described in section 7201 of Title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $ 10,000" -- together with the rule of lenity, require us to interpret that section to render deportable only persons convicted for tax evasion under 26 U.S.C. section 7201, and not those convicted of "defeat[ing] a[] tax" under that section. He contends further that the crime of "defeat[ing] a[] tax" is not a section 7201 crime "relat[ed] to tax evasion," under the language of the parenthetical phrase, because "'[e]vasion' appears to involve concealment of assets, whereas 'defeating' appears to involve improper tax avoidance, unlawfully minimizing one's tax liability, or other refusal to pay tax." Petitioner's Br. at 16. Evangelista urges us to conclude that because only tax evasion and section 7201 crimes related to tax evasion are aggravated felonies under the INA and because the INS did not meet its burden of proof to establish that Evangelista was convicted of tax evasion or a section 7201 crime "relating to tax evasion," he is not deportable for commission of an aggravated felony under the INA.

[17] The government responds that the language of section 1101(a)(43)(M)(ii) provides that any conviction under 26 U.S.C. section 7201 is an aggravated felony, provided that the revenue loss to the government exceeds $ 10,000, because the parenthetical phrase "relating to tax evasion" is merely descriptive of the offenses set out in 26 U.S.C. section 7201. And, the government continues, even if section 1101(a)(43)(M)(ii) is restricted to convictions under 26 U.S.C. section 7201 for offenses described in the parenthetical phrase -- "relating to tax evasion" -- a conviction for "defeat [of a] tax" is a conviction under 26 U.S.C. section 7201 that "relat[es] to tax evasion," because there is no legal distinction between tax evasion and "defeat [of a] tax." The government asks us to conclude that Evangelista is removable whether convicted under section 7201 of tax evasion, defeating taxes, or both.

2. Analysis.

[18] There are, it seems to us, at most four offenses described in 26 U.S.C. section 7201: (1) "evad[ing] . . . a[] tax"; (2) "defeat[ing] a[] tax"; (3) "evad[ing] . . . the payment thereof;" and (4) "defeat[ing] . . . the payment thereof." Cf. Sansone v. United States, 380 U.S. 343, 354 (1965) ("As this Court has recognized, section 7201 includes the offense of willfully attempting to evade or defeat the assessment of a tax as well as the offense of willfully attempting to evade or defeat the payment of a tax." (emphasis omitted)). Although Evangelista attempts to distinguish between "defeat[ing]" a tax and "evad[ing]" a tax, courts and commentators use the two terms interchangeably. See, e.g., id. at 351 ("As has been held by this Court, the elements of section 7201 are willfulness; the existence of a tax deficiency; and an affirmative act constituting an evasion or attempted evasion of the tax." (citations omitted)); United States v. Schwartz, 325 F.2d 355, 356 (3d Cir. 1963) (noting first that the defendant was indicted for tax evasion and then that the substance of the charge is that he willfully attempted to defeat the payment of taxes); Ian M. Comisky, Lawrence S. Feld & Steven M. Harris, Tax Fraud & Evasion paragraph 7.01[2][a] (2004) ("[Section] 7201 defines two distinct crimes: (1) the willful attempt to evade or defeat any tax and (2) the willful attempt to evade or defeat the payment of any tax."). We conclude from this that whatever differences there may be between them, "defeat [of a] tax" is at least "relat[ed] to tax evasion," rendering a conviction for it an "aggravated felony" within section 1101(a)(43)(M)(ii). Whether Evangelista was convicted under 26 U.S.C. section 7201 of evading taxes, defeating taxes, or both, according to the accepted usage of the terms, he was convicted of an aggravated felony under section 1101(a)(43)(M)(ii). We therefore agree with the BIA's reading of section 1101(a)(43)(M)(ii).

[19] This reading of "relating to tax evasion" obtains whether the parenthetical phrase in section 1101(a)(43)(M)(ii) has a restrictive meaning, as Evangelista argues, or a descriptive meaning, as the government argues and as the BIA determined. And inasmuch as we see no ambiguity in the scope of section 1101(a)(43)(M)(ii) as applied to Evangelista, the rule of lenity has no place in our analysis. See INS v. Cardoza-Fonseca, 480 U.S. 421, 449 (1987) (noting "the longstanding principle of construing any lingering ambiguities in deportation statutes in favor of the alien"); Fong Haw Tan v. Phelan, 333 U.S. 6, 10 (1948) ("We resolve . . . doubts in favor of [a] construction [of a deportation statute in favor of a habeas corpus petitioner] because deportation is a drastic measure and at times the equivalent of banishment or exile. . . . [S]ince the stakes are considerable for the individual, we will not assume that Congress meant to trench on his freedom beyond that which is required by the narrowest of several possible meanings of the words used." (emphasis added)).

[20] In United States v. Monjaras-Castaneda, 190 F.3d 326 (5th Cir. 1999), cert. denied, 528 U.S. 1194 (2000), the Fifth Circuit took a somewhat different approach in reaching a similar conclusion in a similar case. 8 U.S.C. section 1101(a)(43)(N) declares "an offense described in paragraph (1)(A) or (2) of section 1324(a) of this title (relating to alien smuggling)" to be an aggravated felony. In interpreting the parenthetical phrase as descriptive rather than restrictive, the Fifth Circuit relied on grammatical rules and the structure and context of section 1101(a)(43) as a whole to determine that the parenthetical phrase modifies "paragraph (1)(A) or (2) of section 1324(a) of this title" rather than "an offense." Id. at 329-30 (upholding an enhanced sentence that the defendant received for having committed an "aggravated felony," as defined by section 1101(a)(43)(N), for his conviction under 8 U.S.C. section 1324(a)(1)(A) of transporting aliens, which is arguably different from smuggling aliens); accord Patel v. Ashcroft, 294 F.3d 465, 472-73 (3d Cir. 2002) (holding, in reliance on Monjaras-Castaneda and other cases, that a habeas petitioner's conviction for harboring an alien under 8 U.S.C. section 1324 is an "aggravated felony" under 8 U.S.C. section 1101(a)(43)(N), rendering the petitioner deportable); United States v. Galindo-Gallegos, 244 F.3d 728, 733-34 (9th Cir. 2001) (holding that a defendant's conviction for transporting aliens is an aggravated felony and that the defendant therefore deserved an enhanced sentence); United States v. Salas-Mendoza, 237 F.3d 1246, 1247-48 (10th Cir. 2001) (same).

[21] The Monjaras-Castaneda court reasoned that traditional rules of grammar indicate that the parenthetical phrase in section 1101(a)(43)(N) modifies "paragraph (1)(A) or (2) of section 1324(a) of this title" because of its placement following those words instead of directly after the word "an offense." Monjaras-Castaneda, 190 F.3d at 329. It then noted that section 1101(a)(43) contains a long list of aggravated felonies that it references by statutory section. The court concluded that parenthetical phrases found throughout the statute were included to assist readers in identifying the crimes referred to by the statute, without having to endure the "long and arduous process" of "look[ing] up each section number in the Code." Id. at 330. The court then observed that other parenthetical phrases in that section are expressly restrictive. See id. (quoting 8 U.S.C. section 1101(a)(43)(F) (listing as an aggravated felony "a crime of violence (as defined in section 16 of Title 18, but not including a purely political offense) for which a term of imprisonment is at least one year") and 8 U.S.C. section 1101(a)(43)(J) (enumerating "an offense described . . . in section 1084 (if it is a second or subsequent offense)" as an aggravated felony)). The Fifth Circuit was of the view that had Congress intended the parenthetical phrase in section 1101(a)(43)(N) to be restrictive, it would have said so, as it had in the other subsections. Id.

[22] We are not entirely comfortable with applying the Fifth Circuit's approach to the case before us. Section 1101(a)(43)(L) deems to be an aggravated felony an offense described in:

. . .

(ii) section 421 of Title 50 (relating to protecting the
identity of undercover intelligence agents); or

(iii) section 421 of Title 50 (relating to protecting the
identity of undercover agents).

8 U.S.C. section 1101(a)(43)(L). The legislative history indicates that the addition of section 1101(a)(43)(L)(iii) to what already included section 1101(a)(43)(L)(ii) served the purpose of "add[ing a] new offense[] to the definition relating to . . . revealing the identity of undercover agents." IIRIRA, H.R. Conf. Rep. No. 104-828, at 223 (1996). Plainly, the parenthetical phrases in subsections (L)(ii) and (L)(iii) distinguish between different parts of section 421 of Title 50 -- one relating to "undercover intelligence agents" and one relating to "undercover agents"; they therefore do not simply describe 50 U.S.C. section 421. Evangelista argues in his reply brief that the inclusion of both sections 1101(a)(43)(L)(ii) and (iii) as distinct types of an aggravated felony where the parenthetical phrases cannot be read as descriptive indicates that the similar parenthetical phrase in section 1101(a)(43)(M)(ii) is not descriptive either. Evangelista's objection is sufficiently compelling for us to refrain from adopting the reasoning of Monjaras-Castaneda for section 1101(a)(43)(N) as our analysis of the language of section 1101(a)(43)(M)(ii).

[23] We conclude that irrespective of whether Evangelista was convicted of tax evasion under 26 U.S.C. section 7201, he was convicted of an offense "relating to tax evasion" under 26 U.S.C. section 7201. Evangelista is thus deportable./2/

II. Section 212(c) Waiver of Deportation

[24] Because we conclude that Evangelista is deportable, we must consider his argument that he is eligible for a waiver of deportation pursuant to former section 212(c) of the INA, 8 U.S.C. section 1182(c) (1994). He argues that the application of the INA would be impermissibly retroactive if it disqualified him from consideration for such a waiver under a repealed section of the INA, because that section was in effect when he violated 26 U.S.C. section 7201. He asserts that he relied on the waiver's availability, even though it had been repealed at the time he was convicted of the crime and when formal deportation charges were brought against him. The government responds that we are bound by our case law establishing that it is not impermissibly retroactive to deny discretionary relief to petitioners such as Evangelista, who, after the repeal, were convicted of an aggravated felony after a jury trial and against whom deportation proceedings were commenced. We agree with the government.

A. Repeal of Section 212(c)

[25] A recent opinion by this Court succinctly sets forth the background of former INA section 212(c), which provided for discretionary relief from deportation:

[T]he deportation of resident aliens who commit aggravated
felonies is controlled by the Immigration and Nationality Act
("INA"). See 8 U.S.C. section 1227(a)(2)(A)(iii) (2001).
Prior to 1997, aliens deportable under the INA could apply to
the Attorney General for a discretionary waiver of deportation
pursuant to section 212(c) of the INA. To qualify for such relief,
an alien was required to show that he (1) was a lawful permanent
resident of the United States, (2) had an unrelinquished
domicile of seven consecutive years, and (3) had not committed
an aggravated felony for which he had served a term of at least
five years. See 8 U.S.C. section 1182(c) (1994). If the
alien met these requirements, the Attorney General had the
discretion to waive deportation.

Rankine v. Reno, 319 F.3d 93, 95 (2d Cir.), cert. denied sub nom. Lawrence v. Ashcroft, 124 S. Ct. 287 (2003). But in 1996,

Congress enacted first the Anti-Terrorism and Effective Death
Penalty Act ("AEDPA"), which limited eligibility for relief
under section 212(c), see AEDPA, Pub.L. No. 104-132, section
440(d), 110 Stat. 1214, 1277 (1996), and then the Illegal
Immigration Reform and Immigrant Responsibility Act . . . which
repealed INA section 212(c) completely, effective April 1, 1997.
See IIRIRA, Pub.L. No. 104-208, section 304(b), 110 Stat.
3009-546, -597 (1996). Section 212(c) relief was, in effect,
replaced by a new form of relief called "cancellation of
removal," 8 U.S.C. section 1229b, which allows the Attorney
General to cancel removal proceedings for a class of resident
aliens that does not include those convicted of an aggravated
felony. In removal proceedings commenced after April 1, 1997,
therefore, resident aliens convicted of an aggravated felony are
no longer eligible for any form of discretionary relief from
deportation.

Id. at 95-96.

B. Standard of Review

[26] Whether the repealed section 212(c) may be applied to an alien convicted of an aggravated felony based on criminal acts that took place before the repeal is a question of law that we review de novo. Domond v. U.S. INS, 244 F.3d 81, 84 (2d Cir. 2001).

C. Retroactivity

[27] We held in Domond that the repeal of section 212(c) "imposes no new legal consequences on aliens . . . whose criminal conduct pre-dates AEDPA, but whose convictions came after AEDPA's enactment. It is the conviction, not the underlying criminal act, that triggers the disqualification from section 212(c) relief." Id. at 85-86 (internal quotation marks omitted). We said that "it cannot reasonably be argued that aliens committed crimes in reliance on a hearing that might possibly waive their deportation." Id. at 86.

[28] The Supreme Court subsequently addressed a related question in INS v. St. Cyr, 533 U.S. 289 (2001). It held that section 212(c) relief, though repealed, "remains available for aliens . . . whose convictions were obtained through plea agreements and who, notwithstanding those convictions, would have been eligible for section 212(c) relief at the time of their plea under the law then in effect." Id. at 326. The Court reasoned that "[g]iven the frequency with which section 212(c) relief was granted in the years leading up to AEDPA and IIRIRA, preserving the possibility of such relief would have been one of the principal benefits sought by defendants deciding whether to accept a plea offer or instead to proceed to trial." Id. at 323 (footnote omitted). The Court observed that it could "consider an alien's reasonable reliance on the continued availability of discretionary relief from deportation when deciding whether the elimination of such relief has a retroactive effect." Id. at 324.

[29] Subsequently, two judges of the United States District Court for the Eastern District of New York each urged us to reconsider our holding in Domond in light of St. Cyr. See Mohammed v. Reno, 205 F. Supp. 2d 39, 39 (E.D.N.Y.) (Gleeson, J.) (following Domond, but stating that "Domond is at odds with controlling case law of the Supreme Court"), stay pending appeal vacated, 309 F.3d 95 (2d Cir. 2002); Beharry v. Reno, 183 F. Supp. 2d 584, 591 (E.D.N.Y. 2002) (Weinstein, J.) ("Domond . . . should be reconsidered as the courts interpret and develop the Supreme Court's more recent immigration rulings and the requirements of international law."), rev'd sub nom. Beharry v. Ashcroft, 329 F.3d 51 (2d Cir. 2003).

[30] We have reconsidered Domond's viability in light of St. Cyr in several cases, and in each concluded that Domond remains good law despite St. Cyr. See, e.g., Khan v. Ashcroft, 352 F.3d 521, 525 (2d Cir. 2003); Beharry v. Ashcroft, 329 F.3d 51, 63 (2d Cir. 2003); Mohammed v. Reno, 309 F.3d 95, 103 (2d Cir. 2002); accord Swaby v. Ashcroft, --- F.3d ---, ---, 2004 WL 193576, at *4, 2004 U.S. App. LEXIS 1569, at *15-*17 (2d Cir. Feb. 3, 2004); Rankine, 319 F.3d at 102; Dias v. INS, 311 F.3d 456, 458 (1st Cir. 2002) (per curiam), cert. denied, 123 S. Ct. 2574 (2003); Chambers v. Reno, 307 F.3d 284, 286 (4th Cir. 2002); Armendariz-Montoya v. Sonchik, 291 F.3d 1116, 1121-22 (9th Cir. 2002), cert. denied, 123 S. Ct. 2247 (2003).

[31] Rankine is directly on point. We held there that "the repeal of section 212(c) relief does not have an impermissibly retroactive effect when applied to" an alien against whom the INS commenced formal removal proceedings after the passage of AEDPA and IIRIRA, but who was convicted of an aggravated felony for criminal conduct that occurred before the passage. Rankine, 319 F.3d at 102. We reasoned that St. Cyr did not directly govern Rankine's outcome because the former case involved a petitioner who pleaded guilty before the repeal of section 212(c), while the latter involved petitioners who pleaded not guilty, proceeded to trial, and were convicted before the repeal of section 212(c). Id. at 99./3/ This difference was material in two ways:

First, none of these petitioners [who proceeded to trial]
detrimentally changed his position in reliance on continued
eligibility for section 212(c) relief. Unlike aliens who entered
pleas, the petitioners made no decision to abandon any rights
and admit guilt -- thereby immediately rendering themselves
deportable -- in reliance on the availability of the relief
offered prior to IIRIRA. The petitioners decided instead to go
to trial, a decision that, standing alone, had no impact on
their immigration status. Unless and until they were convicted
of their underlying crimes, the petitioners could not be
deported. . . .

Second, the petitioners have pointed to no conduct on their
part that reflects an intention to preserve their eligibility
for relief under section 212(c) by going to trial.

Id. at 99-100. Because Rankine and its reasoning squarely govern Evangelista's challenge, we conclude that denial of section 212(c) relief to Evangelista is not impermissibly retroactive./4/ Evangelista therefore does not qualify to apply for a waiver of deportation.

CONCLUSION

[32] For the foregoing reasons, we conclude that the district court properly dismissed Evangelista's petition for a writ of habeas corpus. The judgment of the district court is affirmed.

FOOTNOTES

/*/The Honorable John R. Gibson, of the United States Court of Appeals for the Eighth Circuit, sitting by designation.

/1/The Illegal Immigration Reform and Immigrant Responsibility Act of 1996, Pub. L. No. 104-208, Div. C, 110 Stat. 3009-546, "realigned the vocabulary of immigration law, creating a new category of 'removal' proceedings that largely replaces what were formerly exclusion proceedings and deportation proceedings." Gerald L. Neuman, Habeas Corpus, Executive Detention, and the Removal of Aliens, 98 Colum. L. Rev. 961, 966 (1998); see also Mohammed v. Reno, 309 F.3d 95, 96 (2d Cir. 2002) (referring to the change in nomenclature). We nonetheless use the terms "deport" and "deportation" from time to time in this opinion as well-worn colloquialisms for "remove" and "removal," respectively.

/2/Evangelista does not contest the BIA's finding that his crime caused revenue loss to the government exceeding $ 10,000, as required by 8 U.S.C. section 1101(a)(43)(M)(ii).

/3/The only difference between Rankine and the instant case is that in Rankine, the petitioners were convicted before the passage of AEDPA or IIRIRA, see Rankine, 319 F.3d at 96, while Evangelista was convicted after the passage of AEDPA and IIRIRA. If anything, that means that the petitioners in Rankine had a stronger case than Evangelista has, so the holding of Rankine must apply to him.

/4/In his reply brief, Evangelista urges for the first time that he could show detrimental reliance on repealed section 212(c) because he could have, but did not, file an administrative motion for a discretionary waiver of deportation before the repeal of the waiver for aggravated felons. At oral argument, the government replied that this argument is not properly before us because it was made for the first time in Evangelista's reply brief. The government continued that on the merits, Evangelista had no reliance interest because he did not file such a motion and, moreover, because he could not file such a motion until he became eligible for deportation upon his conviction, which postdated the repeal of waiver for aggravated felons. We do not consider the merits of Evangelista's argument, because "[w]e will not consider an argument raised for the first time in a reply brief." See United States v. Yousef, 327 F.3d 56, 115 (2d Cir. 2003).

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2004-02-25T09:34:00.000-08:00

Another day, another bad day for tax protestors. This Paytriot kept trying to sell Pure Trusts -- which have never worked to save even $0.01 of tax BTW -- got fined, and will now sit in jail to ponder the error of his ways. A couple of years ago, Dorothy Henderson got 14 years for selling Pure Trusts and her husband got 11 years, and at least they were smart enough to quit selling after they were caught in their criminal activity. This guy was just stupid and may spend a lot more years in the slammer.

United States v. Randall B. Jarvis, et al., Civil No. 03-6005-
CV-SJ-GAF (W.D. Mo. Sept. 26, 2003)

UNITED STATES OF AMERICA,
Plaintiff,
v.
RANDALL BRIAN JARVIS, A/K/A "CHRISTOPHER MICHAELSON" AND
"JOSIAH RICHARDS," D/B/A ORDER OF JESUS CHRIST'S DISCIPLES;
THE ORDER OF CHRISTIAN DISCIPLES; THE CHURCH OF JESUS CHRIST
DISCIPLES; AND CHRISTIAN DISCIPLES INTERNATIONAL,
Defendant.

Release Date: NOVEMBER 12, 2003

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
(St. Joseph Division)

CIVIL CONTEMPT ORDER REMANDING DEFENDANT, RANDALL BRIAN JARVIS,
TO THE CUSTODY OF THE UNITED STATES MARSHAL

[1] On September 26, 2003, a hearing was held to determine Defendant's compliance with this Court's July 1, 2003 Permanent Injunction Order. After the hearing, this Court found Randall Brian Jarvis in contempt of the July 1, 2003 Permanent Injunction Order and ordered him to pay a coercive fine of $ 500 per day beginning on September 26, 2003 and ending when Jarvis purged himself of the contempt. This Court further stated that it would order coercive incarceration of Jarvis if he continued to defy the Court by failing to purge himself of contempt and if the monetary sanction reached $ 7,500.

[2] After reviewing the Motion and Declaration filed by the United States, as well as the Court's records, this Court finds as follows:

A. The fines imposed by this Court's September 26, 2003 Order
have exceeded $ 7,500; and

B. Jarvis remains in contempt of this Court's July 1, 2003 Order
because he has not (1) provided to all persons or entities for
whom he has, since 1999, sold trust packages, provided tax
advice, organized trusts, developed sham ministries, and/or
prepared or provided trust documents, based on the sham
transactions described in the Complaint, a copy of (a) this
Order and (b) a copy of the complaint. In addition, Jarvis did
not file with the Court within 15 days of September 26, 2003 a
certification signed under penalty of perjury that he sent the
mailing described above; and (2) turned over to the United
States all records in his possession or to which he has access,
that identify (a) the persons or entities to whom Defendant gave
or sold, directly or indirectly, any materials related to his
abusive trust scheme, and (b) the persons or entities who
purchased or used any other tax shelter, plan, or arrangement
that Defendant has promoted or otherwise been associated with.

[3] Accordingly, IT IS ORDERED that the United States Marshal arrest and detain Randall Brian Jarvis until such time as the Court determines that Randall Brian Jarvis has purged himself of the contempt by complying with the Orders of this Court, or until further Order of this Court.

Date: November 12, 2003

/s/ Gary A. Fenner
Gary A. Fenner, Judge
United States District Court

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2004-02-24T20:16:00.000-08:00

Another day, another bad day for tax protestors. But a good article in The Salt Lake Tribune entitled "IRS Taking the Gloves Off" which descirbes the improvements the IRS has made in procedures and information process so as to root out nonfilers and other tax cheats and either make them pay their fair share or else prosecute them.

IRS Taking The Gloves Off

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2004-02-19T06:14:00.000-08:00

Here's some more on the Basuel case. Looks like everybody who helped Basuel is headed towards Club Fed also for aiding and abetting. That's kind of an important point: If you are even working for somebody who is running a tax scam, then you can now expect to go to jail too -- and you're probably not the one who made all the money running the scam.

U.S. Department of Justice
United States Attorney
District of Hawaii
--------------------------------------------------------------------------------
PJKK Federal Building (808) 541-2850
300 Ala Moana Blvd., Room 6-100 FAX (808) 541-2958
Honolulu, Hawaii 96850

February 12, 2004
For Immediate Release

P R E S S R E L E A S E

A federal grand jury in Honolulu, Hawaii, returned a 148-count indictment today against five employees of RB Tax Service, RICHARD JAMES BASUEL, RICHARD JAMES BASUEL II, DINA GRACE NAUI CALEDA, ROSALINDA I TAMAYO (fka Rosalinda DeGuzman) and VIVIAN WAI WON SOONG with tax-related offenses. Each defendant was charged with one count of conspiracy to defraud the United States by obstructing the function of the Internal Revenue Service in the collection of tax. In addition to the conspiracy charge, BASUEL was charged with 46 counts, BASUEL II with 21 counts, CALEDA with 26 counts, TAMAYO with 24 counts, and SOONG with 30 counts of willfully preparing false tax returns and aiding and abetting in the preparation of false tax returns.

According to United States Attorney Edward H. Kubo, Jr., the indictment alleges that between January 25, 2000 and April 5, 2000, BASUEL, BASUEL II, CALEDA, TAMAYO and SOONG prepared and submitted false 1997, 1998 and 1999 federal tax returns on behalf of their clients, knowing they were fraudulent and false as to a material matter.

The indictment alleges that all five return preparers promoted a "new way" of preparing tax returns to their clients in which they disguised income earned in Hawaii as foreign earned income. In most instances, application of their "new way" of preparing returns resulted in a reported adjusted gross income of zero and a refund of all of the client's federal tax withholdings.

BASUEL, BASUEL II, CALEDA, TAMAYO and SOONG, according to the indictment, caused in excess of 900 false returns to be filed and falsely claimed in excess $4,000,000 in federal tax refunds from the United States government.

If convicted on the conspiracy count, each defendant faces a maximum penalty of five years in prison and a fine of $250,000. Each count charging the willful preparation of false tax returns carries a maximum penalty of three years in prison and a fine of $250,000. The precise sentence, if convicted, will be determined pursuant to the U.S. Sentencing Guideline.

United States Attorney Kubo cautioned that an indictment is merely an accusation, and the defendants are presumed innocent unless and until proven guilty.

The case was investigated by the Honolulu Office of the Internal Revenue Service, Criminal Investigation. The prosecution is being handled by Assistant U.S. Attorney Leslie E. Osborne, Jr.

2004-02-18T19:00:00.000-08:00

Speaking of the 861 argument, the DOJ shut down Jack Cohen of Tacoma, Washington, for running a Paytriot scam based on this goofy theory. The 861 argument has been argued time-after-time-after-time and it never, ever wins. Yet morons keep buying 861 kits and junk from the Paytriots who sell it, not telling their marks the truth about 861's history of fines and sanction for those dumb enough to try to rely on it.

FOR IMMEDIATE RELEASE
WEDNESDAY, FEBRUARY 18, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

JUSTICE DEPARTMENT ACTS TO SHUT DOWN TAX SCAM PROMOTION

Tacoma, Washington Man Alleged To Promote Fraudulent Tax Scheme

WASHINGTON, D.C. - The Justice Department today filed suit in the U.S. District Court in Tacoma, Washington, asking the court to bar Jack Cohen of Tacoma from selling allegedly illegal tax schemes. The civil injunction suit alleges that Cohen, through his website, www.taxax.org promotes a fraudulent tax scheme which falsely states that American citizens who receive income from sources within the United States are not required to file federal income tax returns or pay federal income taxes.

The government’s court filing notes that Cohen’s position, also known as the “U.S. Sources argument” or the “Section 861 argument” (after the tax-law provision it misinterprets), has repeatedly been rejected by federal courts.

“Time and again, federal courts have rejected the so-called Section 861 argument as frivolous,” said Eileen J. O’Connor, Assistant Attorney General in charge of the Justice Department’s Tax Division. “People who sell or participate in these illegal schemes risk serious consequences, including substantial civil penalties, and, where appropriate, criminal prosecution.”

According to the suit filed today, Cohen sells his customers a “package” that falsely states that only income from foreign sources must be reported on federal income tax returns. Other packages Cohen allegedly sells include a “W-4 Killer,” for “employees who wish to stop the withholding process,” and a “Custom Letter Pack,” which purports to “reverse the government’s presumption that we are ‘taxpayers’ pursuant to the Code....”

The suit alleges that Cohen’s newest package consists of forms employees can use to threaten lawsuits against employers who refuse their requests to stop federal income tax withholding.

A Texas man, Dick Simkanin, was convicted of tax crimes last month in connection with his failure to withhold federal income taxes from employees’ pay. Simkanin faces a statutory maximum sentence of 129 years imprisonment and millions of dollars in fines. He is scheduled to be sentenced on April 30, 2004. Information on that case is available at http://www.usdoj.gov/usao/txn/PressRel04/simkanin_convict_pr.html.

The Justice Department has also obtained many injunctions against promoters of the “U.S. Sources” or “Section 861” argument. Information on those cases can be found at:

http://www.usdoj.gov/tax/04_tax_061.htm

http://www.usdoj.gov/tax/03_tax_128.htm

http://www.usdoj.gov/tax/03_tax_267.htm

http://www.usdoj.gov/tax/02_tax_352.htm

http://www.usdoj.gov/opa/pr/2002/February/02_tax_055.htm

http://www.usdoj.gov/opa/pr/2002/March/02_tax_184.htm

Information on the Justice Department’s Tax Division can be found at http://www.usdoj.gov/tax/.

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2004-02-18T18:21:00.000-08:00

Another day, another loss for the tax protestor movement. This time the so-called "861 argument" wen down in flames as a Larken Rose acolyte was convicted of 11 counts of aiding and abetting tax fraud and will doubtless never see freedom since he is 62-years old already and faces at least a decade in prison. While Larken says that he is about to release a new mini-CD that will try to promote his theory, he keeps ignoring that the 861 argument has not only lost but also been ridiculed in dozens of cases and there is absolutely no reason to believe that it will ever prove to be a viable defense to criminal tax fraud charges. Sorry, but this dog has been proven time-and-time-and-time-again not to hunt.

Tax preparer guilty of fraud, theft charges

By Curtis Lum
Honolulu Advertiser Staff Writer

A Circuit Court jury deliberated for about four hours yesterday before finding a 62-year-old man guilty of multiple counts of tax fraud.

Richard J. Basuel was found guilty of 11 counts of attempting to evade taxes, 11 counts of aiding or abetting the filing of false or fraudulent tax returns, and one count of first-degree theft. Basuel faces up to 98 years in prison and fines of more than $2 million when he is sentenced by Circuit Judge Michael Wilson on May 12.

Basuel prepared state tax returns for clients in 2000 and 2001 and claimed their wages were not subject to taxation under state and federal law, the state attorney general's office said. Basuel is a "devotee" of Larken Rose, a tax protester who produced a video that misinterprets the Internal Revenue Code and holds that wages are not taxable, the attorney general said.

The attorney general said Rose's argument has been debunked by courts nationwide. Hawai'i has excluded the misinterpretation of the code from applicability under state law.

A federal grand jury last week indicted Basuel and four other employees of a tax service on charges of obstructing the Internal Revenue Service. The indictment says the five promoted a "new way" of preparing returns for clients, disguising income earned in Hawai'i as foreign earned income and reporting adjusted gross income of zero.

2004-02-17T10:12:00.000-08:00

Here's an interesting news item that just got picked up that deals with one of Schiff's zeroincomefilers. Schiff and his gang like to claim that the zerofilers have not had any losses, but here is yet another one. Somebody is hosting an anti-Schiff blog and here is the article on Schiff's follower:

COLUMBIA

Ex-state trooper pleads guilty to tax fraud

A former state trooper has been ordered to pay more than $800 in fines and back taxes and may avoid a jail sentence after pleading guilty to filing a false tax return, the state Attorney General's office said.

Mark T. Bolick's one-year jail sentence would be suspended to three years probation once he pays court fees and $300 of a $1,000 fine. The balance of the fine would be suspended.

Judge Lee S. Alford also ordered Bolick to pay $507 in restitution to the S.C. Department of Revenue.

Bolick, 39, of Rock Hill, indicated that he had earned no taxable income on 1999 tax return and claimed a refund of $502. An investigation showed that he had earned $19,239.30 that could be taxed and owed $507 in taxes.

http://www.myrtlebeachonline.com/mld/sunnews/news/local/7483055.htm

2004-02-17T07:19:00.000-08:00

Tuesday starts off early with news that Eddie Kahn's offices were raided on Monday. Eddie caters to the very stupid tax protestors, and apparently has never met a theory that he didn't like. Looks like Eddie is trying to push himself off as a Minister, which many of the promoters have tried to do over the years. Bill Conklin tried to do this for years, just as one example. One of the mega-nuts in the TP movement, Chris Hansen from the San Diego area, also tries to push himself off as a minister, but his profanity-laden posts give away his true spirituality.

Orlando Sentinel

Treasury agents raid office in Mount Dora

A lawsuit said a ministry sells tax programs showing how to hide income.

By Martin E. Comas | Sentinel Staff Writer
Posted February 17, 2004

MOUNT DORA -- Federal agents with the U.S. Treasury Department have searched a second-story office suite at 440 S. Donnelly St., carrying out boxes filled with documents and computer equipment, Mount Dora police said Monday.

Shop owners in the area said the office is run by Guiding Light of God Ministries, headed by Eddie Kahn and his wife, Kathleen, of Sorrento.

Because of Monday's federal holiday, federal officials were unavailable for comment.

In December, the Justice Department filed a lawsuit against the couple and several others, saying the group has been selling fraudulent tax programs through the ministry, showing customers how to hide income and assets to avoid paying federal taxes and how to obstruct IRS investigations.

The group, according to the lawsuit, also sold counterfeit checks to pay taxes, plus harassing letters to the IRS. Federal investigators estimated 11 checks totaling more than $2.2 million were sold.

Last August, Kahn transformed his business, called American Rights Litigators, into the Guiding Light of God Ministries. The Justice Department said the ministry was a business, indistinguishable except in name from American Rights Litigators. The organization, according to the suit, is also led by Milton Hargraves Baxley II, a lawyer in Gainesville, and Bryan Malatesta, a certified public accountant in Cleburne, Texas.

The Kahns did not return phone calls Monday.

According to his Web site, Eddie Kahn says he does not operate a business, but a Christian ministry, described as a corporation with more than 4,000 clients. His Web site stated that the IRS is not a lawful organization and that taxes do not finance the U.S. government, but are diverted to the International Monetary Fund.

On Monday, a receptionist at the Mount Dora office would not comment on the lawsuit or on the ministry.

2004-02-16T18:41:00.000-08:00

Well, it's Monday and a National Holiday so the courts are closed, so there's not much news today. Anonymous rumor has it that the Lynne Meredith trial is going very badly for Lynne, and that some of her co-defendants are trying to cut deals with the U.S. Attorney behind the scenes. But who really knows? Anonymous rumors are worth what is known about the author, meaning zero. Yet, there is something about the Meredith case that smells like "slam dunk" for the U.S. Attorney's office.

Gene Chapman says that he is fed up with the tax protestor movement, and is starting to think that all the tax protestors care about is not paying taxes. Ding! Ding! Ding! We have a winner. Gene seems like a really good guy, but he is very gullible and has been taken in hook, line and sinker by the gurus who are using him to keep their scams alive so that they can sell their books and tapes and junk. Hopefully, Gene will continue to see the light.

Oh, yeah, one tax protestor has been hauled back to the U.S. to face tax evasion charges. Check out of the following story. Another day, another bad day for tax protestors . . .

Ex-Boca chiropractor faces tax charge

By Mary McLachlin, Palm Beach Post Staff Writer
Saturday, February 14, 2004

WEST PALM BEACH -- The long arm of the Internal Revenue Service stretched across the United States, then to Canada, the West Indies and all the way to Australia to snag a former Boca Raton chiropractor and radio show host wanted for tax evasion.

Living in Brisbane, Queensland, Bruce Eric Hedendal was known as Dr. Erik Hedendahl, and he had an office, a Web site and another radio show promoting holistic and chiropractic care.

Hedendal fled the United States in 2000 after a federal grand jury indicted him on charges of not paying $180,000 in income taxes from 1993 to 1995.

The IRS says he tried to hide his income and assets in sham tax-exempt trusts bought from John Philip Ellis, a Royal Palm Beach man who was convicted of tax fraud conspiracy in 2001.

With penalties and interest, Hedendal, 56, now owes the government $742,000, Assistant U.S. Attorney Steve Carlton said at the chiropractor's arraignment in federal court Friday. Hedendal pleaded not guilty to three counts of tax evasion, each carrying a maximum sentence of five years in prison and a fine of $100,000.

"He's clearly a flight risk," Magistrate Linnea Johnson said, and ordered him held without bail.

IRS agent David Keyes and U.S. Marshals Ram Ganesh and Glen Wilder made the 27-hour flight to Australia two weeks ago to retrieve Hedendal, who had been hopping around the globe for years.

Hedendal moved to Durango, Colo., in 2000 after a bitter and costly divorce in which he was ordered to pay his ex-wife $10,000 a month alimony and $4,000 a month support for four of their five children.

When he was summoned to face the tax evasion charges, he fled to Vancouver, British Columbia, then to the West Indies island of Grenada and finally to Brisbane, according to the government.

Hedendal owes his ex-wife more than $100,000, according to court records.

When Australian police arrested him on a traffic offense last June, they found he had false passports and identification cards showing him as a Canadian citizen named Ian Douglas Gillies. He was released in October, then arrested and held on a U.S. warrant until he could be extradited.

Carlton, the prosecutor, said police seized computer records showing Hedendal had offshore accounts in Latvia, the Channel Islands and the Cayman Islands. At one time, he had assets of $400,000.

The IRS has been tracking Hedendal and other purchasers of so-called tax-exempt or common law trusts since the prosecution of Ellis and five of his associates in 2001. Ellis promoted the trusts as legal ways to shield property, assets and income from taxation.

Ellis maintained that the IRS was an illegal agency and that wage and property taxes were unconstitutional. He also said Florida was not part of the United States and that federal laws applied only in Washington, the Virgin Islands, Guam and Puerto Rico.

Ellis is serving 10 1/2 years for conspiracy to commit tax fraud and obstructing a grand jury investigation. His co-conspirators received lesser sentences.

Ellis created and sold common law trusts to golf course designer Theodore McAnlis, who was found guilty of tax evasion last year and sentenced to serve more than 10 years in federal prison. McAnlis put his property and money in the common law trusts.

McAnlis, of Palm Beach Gardens, had a notable career designing golf courses, including work on Doral Country Club's Blue Monster in Miami.

As for Hedendal, he set up a trust he named Alternatives to Medicine, with himself and his mother as trustees, and gave it 95 percent ownership of International Nutrition, a dietary-supplement business that Hedendal claimed had $2 million in sales in 2000.
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2004-02-12T18:39:00.000-08:00

Today was another bad day for tax protestors. Yet another Guru has gone down, this time "Judge" John Rizzo, along with his wife Carol Rizzo, who used to appear at seminars sponsored by the Institute of Global Prosperity which sold Pure Trusts and other de-tax nonsense. In fact, Rizzo was only a municipal court "judge" who heard parking ticket disputes and suchlike, and who had no experience, education or training in federal income taxation or constitutional law. Nonetheless, he opined to many suckers about his perception of the alleged illegality of the tax laws, and morons nationwide believed him. Looks like he will get a decade or more in prison, which considering his age may be tantamount to a life term.

FOR IMMEDIATE RELEASE
THURSDAY, FEBRUARY 12, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

SELLERS OF BOGUS TAX ADVICE PROGRAM
PLEAD GUILTY TO TAX CHARGES

WASHINGTON, D.C. - Two Arizona residents pled guilty today to charges they failed to report income earned from a widely marketed tax seminar program, Assistant Attorney General for the Tax Division Eileen J. O’Connor, U.S. Attorney for the District of Arizona Paul K. Charlton and Internal Revenue Service Criminal Investigation Chief Nancy J. Jardini announced.

John J. Rizzo and wife Carol A. Rizzo pled guilty to felony charges of conspiracy and to charges of willfully failing to file their income tax return. Rizzo also pled guilty to felony charges of willfully aiding and assisting in the preparation of a false income tax return and perjury before the grand jury.

“Unscrupulous tax scam promoters aggressively market a variety of fanciful schemes purporting to eliminate tax liability,” said Assistant Attorney General O’Connor. “People who promote or participate in such schemes are risking serious civil penalties, and when appropriate, criminal prosecution.”

The defendants admitted, in their plea agreements that from 1999 to 2001, Mr. Rizzo was a prominent vendor with the Institute of Global Prosperity (IGP). At seminars hosted by IGP, Mr. Rizzo promoted the Millennium 2000 Reliance Defense Program (M2K) package to thousands of people at offshore seminars and resulted in more than $4 million in sales. At an earlier court hearing, as reflected in a videotape made available to the court, Mr. Rizzo appeared at these seminars wearing judicial robes and portrayed himself as a judge and an expert on tax law.

The Rizzos also admitted Mr. Rizzo sold each M2K package for approximately $2,300.00. Additionally, they admitted they provided materials and documentation that purported to prove, among other things, that one could lawfully stop filing income tax returns and cease having income taxes withheld from personal wages based upon the long-rejected notion that the Sixteenth Amendment to the Constitution had not been legally ratified.

They further admitted they concealed the income earned from the sales of M2K packages during the period 1999 through 2002, by using a variety of dishonest and deceitful means, including the use of offshore bank accounts and third-party merchant accounts to conduct credit card sales. The Rizzos have been in pre-trial detention for the past ten (10) months.

In December 2003, Cheryl Cully, a co-defendant in the case, pled guilty to a felony charge of obstruction of justice and a charge of willfully failing to file her 2001 income tax return. Ms. Cully faces maximum potential sentences totaling six (6) years’ imprisonment, fines totaling $500,000 and liability for the costs of prosecution. Ms. Cully is scheduled to be sentenced before Judge Silver on March 29, 2004.

“The IRS continues to aggressively enforce tax laws in order to ensure a strong American economy and that all taxpayers pay their taxes,” said Nancy Jardini. “These defendants used a myriad of arguments and abusive financial arrangements to evade taxes. In this case, unlawful offshore banking used for the purpose of evading the payment of taxes has been unmasked by the financial investigative efforts of IRS special agents.”

Rizzo faces a maximum potential sentence of fourteen years in prison, ten years of supervised release, fines totaling $1,000,000, as well as liability for the costs of prosecution. Mrs. Rizzo faces a maximum potential sentence of six years in prison, fines totaling $500,000 and liability for the costs of prosecution. Judge Roslyn O. Silver of the U.S. District Court for the District of Arizona has scheduled sentencing for September 27, 2004.

Assistant Attorney General O’Connor thanked Tax Division trial attorneys Edward Groves, Larry Wszalek and Mark Odulio for prosecuting the case. She also thanked the special agents of the Internal Revenue Service whose assistance was essential to the successful investigation and prosecution of the case.

More information about the Justice Department’s Tax Division can be found at <>.

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2004-02-12T17:55:00.000-08:00

To nobody's surprise, Steven Swan was convicted of all 18 counts today. Swan used to be one of Schiff's biggest cheerleaders and followers, until they had a major falling-out. There is a lesson in this: Don't follow your guru over the cliff. Maybe he should have argued that he was insane like Schiff is now doing?

All,

On March 5, 2003, I was indicted in New Hampshire
on 18 felony counts of violations of the internal
revenue laws. Count 1 was a violation of 26 USC
7212(a) Interfering with the Administration of the
Internal Revenue Laws; Counts 2 and 3 were violations
of 26 USC 7206(1) Filing False and Fraudulent Tax
Returns for Amended Zero Returns I filed in 1997 for
tax years 1993 and 1994; and Counts 4 through 18 were
for preparing false tax returns for others in
violation of 26 USC 7206(2). Only one of these tax
returns was prepared after I renounced Irwin Schiff's
income tax theories in early 2002.

My trial started on Friday, February 6th with the
Government presenting its case, but everyone went home
at 1:00 p.m. because of a snow and ice storm. I was
representing myself without an attorney, although
Standby Counsel had been appointed for me because I am
indigent.

The Government resumed its case on Monday morning,
calling many IRS witnesses (including an undercover
agent who had attended one of my seminars in March of
2001) and 6 of my former clients, who had been granted
immunity from prosecution. (Prior to trial, the
Government had informed me that it might call upon 11
of my former clients to testify.) When I
cross-examined my former clients, each one of them
testified that I had never given them the slightest
indication that I did not truly believe what I had
told them at my seminar and thereafter. I was trying
to make the point to the jury that I had not willfully
violated the law at the times charged in the
indictment because I never believed that there was a
law making the income tax mandatory.

In the mid-afternoon of Tuesday, February 10th, I
began presenting my case to the jury. On Wednesday
morning, the judge allowed me to play the entire
video-tape of my 2-hour income tax seminar which was
recorded in 2000. In the seminar, I presented nothing
but Irwin Schiff's income tax theories.

The judge also let me introduce into evidence
Schiff's books "The Federal Mafia", "The Great Income
Tax Hoax", and "How Anyone Can Stop Paying Income
Taxes"; the transcripts, notes, and exhibits from
Schiff Audio Reports 1 through 7: Schiff's Audit, Lien
and Levy, and W-4 Packages; the Tax Court Tool Kit; my
voluminous notes of Schiff's radio shows; etc.

On Wednesday afternoon, the Government
cross-examined me until about 5:00 p.m. This morning
(Thursday), the Government and I presented our closing
arguments to the jury. The judge then gave Jury
Instructions and the jury went into deliberation. Two
hours later, the jury came back with its verdict.

Even though I had argued for two days that I had
not willfully and intentionally violated the internal
revenue laws because I did not believe that there were
any laws making the income tax mandatory, and that I
did not believe that the returns which I had filed for
myself and which I had prepared for others were false,
the jury found me guilty on all 18 counts. I asked the
judge to poll the jury members individually, which he
did. They all stated that they agreed with the
verdict.

I have been out on personal recognizance bail
since March of 2003 because I am not a flight risk
(since I don't have any money) and because I am not a
danger to the community. After the jury was
discharged, the judge determined that I am still
eligible to remain free on personal recognizance bail
until my sentencing.

My sentencing will take place on May 19, 2004, at
which time I will be given free room and board by the
Government, probably for a number of years. 5, 7, 9,
11? I don't know how many, but I think that it will be
somewhere in that range.

I thought that some of you might want to know
about this.

Sincerely yours,

Steven A. Swan
www.stevenswan.com
www.zeroincometax.com

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2004-02-12T15:35:00.000-08:00

Looks like Irwin has finally thown Cindy Neun out, after Cindy let slip that Irwin was really just trying to defraud the court into believing that he is insane, instead of actually being insane. Well, Cindy has been drinking the Koolaid along with Irwin, and it has ended up in a Grand Jury investigating her as well as Irwin. She'll probably spend some time in the slammer, along with wasting a big part of her life, because of her association with "Mr. Big". What a Soap Opera! This just highlights the fundamental ridiculousness of the whole tax protestor movement, such as it is. After David Cay Johnston's story, a good part of the nation is laughing at these buffoons.

From: Cindy Neun
Date: Thu Feb 12, 2004 2:27 pm
Subject: Help, Please.

Dear Group,

When I attempted to explain last week about the so-called “insanity defense” on the Fraud Penalties, that it was really a deep seeded belief and so fraud cannot apply, a suggestion of Irwin’s attorney Mr. Cohan where the Courts have ruled that there can be no fraud when this belief exists, Irwin was livid with me for commenting at all on his case. So, I called the Chancellor to have him delete the email I posted. I did not save a copy.

Since then, David Cay Johnston has reported twice that I said the defense is a ruse in that email when I did not say that.
Now Irwin has broken up with me based upon the reports of David Cay. I guess he believes that I was his slave for 5 years just to set him up to destroy his life by writing to you. Now, I will be homeless unless I receive a miracle. Irwin wants a copy of the email I sent out. I do not know why he wants it, perhaps he wants to use it as evidence against me in a Court of Law. If anyone has saved it, please forward it to Irwin. ischiff@earthlink.net
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2004-02-11T08:31:00.000-08:00

David Cay Johnston, the Pulitzer-prize winning writer for the New York Times, covered the Schiff appeal before the Ninth Circuit. The issue surrounding whether or not Schiff should be allowed to profit from the sales of his book, the content of which was characterized as "nonsense" by one of the judges (well, duh), has been completely overshadowed by the affidavit of Schiff's psychiatrist that he is totally insane (well, duh). It just doesn't get any better than watching the Schiff camp try to wriggle and spin, spin, spin, spin their explanation of why their Guru, their "Mr. Big", has lost his marbles, isn't playing with a full deck of cards, or in the words of Jed Clamplett, "that boy just ain't right in the head".

And to think that Bob Schulz just had Irwin Schiff as a guest speaker at his conference. Bob sure know's how to pick'em!

Judges Skeptical of U.S. Efforts to Ban a Tax Book

February 11, 2004
By DAVID CAY JOHNSTON

SAN FRANCISCO, Feb. 10 - Two federal appeals court judges on Tuesday repeatedly expressed skepticism about the government's effort to ban the sale of a book that purports to show people how they can legally stop paying income taxes, a theory that one judge called nonsense.

The two judges on the United States Court of Appeals for the Ninth Circuit, William A. Fletcher and Arthur L.
Alarcon, were even more skeptical about whether the author, Irwin Schiff of Las Vegas, can be required to give the Internal Revenue Service a list of everyone who bought his book, "The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes."

Michael Stein of Las Vegas, the lawyer for Mr. Schiff and his bookstore, Freedom Books, said that however wrong Mr. Schiff's arguments might be they were protected under the First Amendment. He compared Mr. Schiff's theories to those of abolitionists who opposed slavery in the first six decades of the 19th century. And, Mr. Stein said, giving the I.R.S. a list of those who bought the book "would have a major chilling effect" on dissent and free speech.

Mr. Schiff, 75, who has twice served prison sentences for tax crimes, is appealing an order issued in July by Judge
Lloyd D. George of Federal District Court in Las Vegas that bars Mr. Schiff and two others from selling the book. The appeals court stayed the order while it is being challenged. Under the order, anyone other than the three is free to sell the self-published $38 book.

In a separate case in Las Vegas, where the Justice Department is trying to collect $2.5 million in taxes,
interest and penalties, Mr. Schiff has filed papers by his psychiatrist, who concluded that Mr. Schiff is insane and holds a deluded belief that he alone can properly interpret the tax laws.

Mr. Schiff's girlfriend, Cindy Neun, has sent Mr. Schiff's supporters an e-mail message saying the insanity claim is a ruse intended to escape penalties on the unpaid taxes.

During the 40-minute hearing in San Francisco, Judith A. Hagley, a Justice Department lawyer, said past rulings established that "the First Amendment does not protect fraud."

Judge Fletcher, who said that the legal theories in the book were "nonsense" and "a sure way to get in trouble"
with the I.R.S., frequently interrupted Ms. Hagley. "Tell me why this is fraud," the judge asked.

Ms. Hagley said people who bought the book and followed its advice would face penalties for filing frivolous tax returns or worse.

"They market it as a how-to book," she said, reading from literature that says the book "is the starting point to legally stop paying taxes." Promotional materials say that it "explains the procedures used by thousands to legally stop paying income taxes."

Ms. Hagley said that because that contention was obviously untrue, an assertion that the judges agreed with, then the book was fraudulent.

Judge Fletcher pressed his question several ways and then observed that "the book contains nonsense - why is that fraud on the person who buys it?"

As the arguments proceeded in San Francisco, across the country in Concord, N.H., one of Mr. Schiff's former acolytes, Steven A. Swan of nearby Manchester, was on the witness stand in his criminal trial on 18 charges of obstructing the tax laws, filing false tax returns and helping others prepare false returns.

Mr. Swan testified that he sincerely believed he was obeying the law in filing returns showing zero income because he read "The Federal Mafia" and other books by Mr. Schiff. The Supreme Court has held that anyone who sincerely believes they do not have to pay taxes cannot be convicted of crimes that require a criminal intent, though they can be found guilty of lesser tax crimes and can be forced to pay the taxes.

In San Francisco, after the hearing, Mr. Schiff said the appeals proceeding was unfair.

"My lawyer can't argue the merits," he said. "No lawyer is allowed to argue the validity of my beliefs because he will be sanctioned for making frivolous arguments."

Mr. Schiff's lawyer, Mr. Stein, interrupted his client to state that "the validity of your beliefs isn't an issue," adding that there is no right or wrong to political views.

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2004-02-10T14:30:00.000-08:00

Looks like another CPA is going down for promoting Pure Trusts. These guys made a lot of money promoting the AEGIS trusts, but it was just pure tax evasion. Now, the guy is 48 and won't be able to act as a CPA anymore. In the short run, lots of free money, but in the long run an awfully bad decision.

________________________

For Immediate Release

February 6, 2004

DEFENDANT SENTENCED FOR ROLE IN TAX EVASION SCHEME

Tampa - On February 6, 2004, United States District Judge Richard A. Lazzara, sitting in Tampa, Florida, sentenced MICHAEL J. MARICLE, age 48, of Palm Harbor,

Florida, to a term of imprisonment of thirty (30) months upon his conviction of two counts of aiding in the preparation and filing of false income tax returns, in violation of Title 26, United States Code, Section 7206(2).

MARICLE, a Certified Public Accountant in Clearwater, Florida, pled guilty to those two charges on March 5, 2003. He pled guilty to assisting two different tax payer clients in filing false income tax returns which disguised large sums of income which those tax payers had earned in 1998. MARICLE had prepared their tax returns in connection with his role as a promoter of the AEGIS system, a scheme which entailed the use of abusive trusts in order to hide income and evade the payment of income taxes.

In addition to his sentence of imprisonment, MARICLE was ordered to assist the Internal Revenue Service in the computation and collection of all taxes due and owing on the part of his two clients.

This case was prosecuted by Jay L. Hoffer, Assistant United States Attorney, Deputy Chief, Special Prosecutions Section of the Tampa Division. This case was investigated by the Internal Revenue Service - Criminal Investigation Division.

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2004-02-10T13:46:00.000-08:00

Looks like the cooperation agreement between the IRS and the states is swinging into high gear. While this is aimed at those who use corporate tax shelters, the odds are good that this information sharing will pick up a lot of nonfilers and zerofilers also. The states are sometimes better at going after tax protestors than the IRS. For instance, the State of California is prosecuting Nick Jesson for tax evasion where the IRS didn't seem to have much interest. Poor Nick had better realize that going to Club Fed is infinitely preferable to going to San Quentin. Looks like he miscalculated though.

IR-2004-19, Feb. 10, 2004

IRS, STATES MOVE FORWARD IN FIGHT AGAINST ABUSIVE TAX AVOIDANCE

WASHINGTON - Internal Revenue Service officials announced today that they have started sharing leads on more than 20,000 taxpayers engaged in abusive tax avoidance with tax agencies in 45 states, the District of Columbia and New York City. The IRS also announced today the latest results of another effort to combat abusive tax avoidance, the Offshore Voluntary Compliance Initiative (OVCI).

The sharing of leads was the first large transfer of information under the terms of the new IRS-state partnership unveiled in September. More than 20,000 audit leads and other information have been shared with the states, and more information will be shared in the future.

"Combating the use of abusive tax avoidance schemes by high-income individuals and others is a top enforcement priority," said IRS Commissioner Mark W. Everson. "Coordinating our casework and sharing leads with the states is an important way to extend the reach of the IRS and help the states."

Under the terms of the partnership, IRS and the cities and states coordinate efforts to address common compliance concerns in the area of Abusive Tax Avoidance Transactions (ATAT) by working in tandem and avoid repeating each other's efforts.

"The states and the IRS routinely share information, but the ATAT program presents us with an exceptionally fertile opportunity to help one another," said Stephen M. Cordi, Deputy Comptroller for Maryland and president of the Federation of Tax Administrators, an association of the tax agencies in all states, D.C. and New York City. "These abusive shelters are hidden through many layers of business transactions and money shifts. Each agency may have a few pieces of that puzzle but by working together we can fit it all together for the benefit of taxpayers."

The initial leads transferred to states involved scams using offshore transactions, abusive trusts, employee leasing, home-based businesses, employment taxes and other tax-avoidance schemes. The IRS, states and cities will subsequently share information on any resulting tax adjustments from the audits allowing them to piggyback on the results of each other's work. The process allows the agencies to leverage resources by greatly decreasing the possibility of two or even three tax agencies performing a lengthy examination of the same taxpayer.

The cities and states that have signed partnership agreements and that received information include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York City, New York State, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin.

The IRS also announced today the latest results of its Offshore Voluntary Compliance Initiative (OVCI). More than 1,300 taxpayers applied to OVCI and so far the initiative has yielded more than $170 million in taxes, interest and penalties to the U.S. Treasury. In addition, the effort led to obtaining the names of 479 scheme and scam promoters. Nearly half of these promoters were previously unknown to IRS investigators.

Under the terms of this 2003 initiative, taxpayers came forward, amended their returns, paid taxes, interest and penalties and furnished the IRS with information regarding the person who promoted the offshore arrangements to them. Interested persons had from January 14 to April 15, 2003 to step forward. If accepted by OVCI, eligible taxpayers could avoid criminal prosecution and some penalties.

State governments will also benefit from OVCI under existing information-sharing agreements. State tax administrators will be able to make use of the information voluntarily given by taxpayers to the IRS.

"Our coordinated efforts will continue to serve as a catalyst to strengthen overall tax administration at the federal, state and local levels," said IRS Small Business/Self-Employed Commissioner Dale F. Hart. "This effort maximizes our efforts to stretch our resources as we continue to combat the proliferation of abusive tax transactions and schemes."

New York and California tax officials praised the ongoing partnership.

"Working with the IRS and other states, New York has stepped-up efforts to identify and prosecute companies and individuals who promote or engage in abusive tax shelter schemes," said New York State Department of Taxation and Finance Commissioner Andrew S. Eristoff. "The information-sharing process under the partnership will allow us to save resources and accelerate our efforts."

"With federal and state officials cracking down on illegal tax shelters for multi-millionaires, Californians will be better assured that everyone pays their fair share," said State Controller and Franchise Tax Board Chair Steve Westly.

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2004-02-10T10:50:00.000-08:00

The new IRS boss says he is getting serious about tax cheating, and will be going after more tax scam promoters as well as tax shelters.

IRS Auditing to Get Tougher under New Boss

Publication: San Jose Mercury News, Calif.
Date: Feb 8, 2004
Author: Mark Schwanhausser
---------------------------------------------------------------------

Feb. 8--The Internal Revenue Service's new boss has revised the tax-collection agency's mission: to be kinder, gentler -- and tougher.

Saying that cheating has jumped alarmingly since the IRS sacrificed enforcement to make the agency more taxpayer-friendly in the '90s, new commissioner Mark W. Everson is heading into his first tax-filing season determined to reverse plunging audit rates, beef up enforcement and scare tax cheats straight.

Honest taxpayers are likely to have more reasons to cheer than to fret about such tough talk. IRS audit rates have plunged dramatically the past decade, and Everson says they might not ever rebound to previous levels. Everson also pledges that putting more cops on the beat won't set back improvements in taxpayer service that earned it a reputation as the "kinder and gentler" IRS.

But the new tone could rattle the IRS's top targets: wealthy tax cheats, tax-evading corporations and crooked tax preparers.

"You do need that trooper under the bridge every few miles...to deter those folks who would willfully violate the speed limits and to convince others driving lawfully that those who break the law will pay the price," said Everson (whose name is pronounced EVE-er- son). "You can't let people feel like chumps if their neighbor down the street is getting away with something."

Critics remain skeptical, however. Audit rates and other enforcement activity have plummeted so low, they say, that the statistics have nowhere to go but up. The agency still needs to upgrade its computer systems. And the IRS continues to struggle to attract, train and retain top-notch auditors.

"No matter how aggressive you want to be, if you don't have the horses you can't do it," said Robert E. McKenzie, a tax attorney with Arnstein & Lehr in Chicago.

But nine months into Everson's five-year term there's mounting evidence that his get-tough growl could have bite:

-- In headlines, the agency has launched pilot audits aimed at offshore tax shelters, the earned-income credit fraud and other suspect tactics. For one, the IRS has selected two dozen corporations to examine how they handle stock options, deferred executive compensation and a variety of other executive pay practices. In addition, the agency has launched more than 100 examinations of tax-shelter promoters, seeking lists of investors it can target.

-- In court, the IRS is taking on prominent accounting and law firms that marketed tax-shelter schemes, including KPMG, BDO Seidman and Jenkens & Gilchrist. And last month, it succeeded in disbarring San Jose certified public accountant Joseph R. Banister, a former IRS criminal investigation agent who advised clients that income taxes are unconstitutional.

-- And behind the scenes, Everson has moved to reshape the IRS. In January, he unveiled a plan to close or consolidate a number of back-office functions and use the savings to hire more auditors and collection officers. In December, he appointed a tough-minded watchdog to police unscrupulous accounting firms and tax preparers, and doubled that department's budget. And last year, the IRS reached an important pact with California and 41 other states to coordinate the hunt for tax-shelter cheats.

It's too soon to measure the impact of such moves statistically. But many tax-industry experts report that the IRS is ratcheting up audits slightly, chasing unpaid tax bills harder and getting stingier with taxpayers who claim they can't afford to pay their full bills.

"The pendulum has swung in the other direction," said Claudia Hill, a Cupertino tax preparer and editor in chief of the Journal of Tax Practice & Procedures. "The IRS left a lot of money on the table. They've started that process up again."

Everson's new attitude reflects the changing political climate and increased need for tax revenues, experts say. In contrast, the previous commissioner, Charles Rossotti, was charged with focusing a demoralized agency on taxpayer service during a flush economy. Enforcement scaled back in the wake of withering congressional hearings into IRS abuses, the passage of a taxpayer "bill of rights" and an order to root out overaggressive auditors and collection agents. Rossotti's restructuring also focused the shrinking agency on organizational charts, not tax cheaters.

Everson lauds the reforms under Rossotti. Still, he said, "that drawdown happened at exactly the wrong time" because it opened the door to Enron-style scandals, an explosion of tax-shelter scheming and a new wave of taxpayers who are willing to risk playing audit roulette.

Amid the upheaval, enforcement plunged. The odds that an individual taxpayer would endure a face-to-face audit dropped 76 percent from 1992 to 2002, according to the most recent figures the IRS has released to Transactional Records Access Clearinghouse. Audit rates for wealthy taxpayers with at least $100,000 of income plunged from 2.9 percent to 0.38 percent.

Saying that wealthy golfers are more likely to get hit by lightning than be prosecuted by the IRS, tax attorney McKenzie joked, "God is a better shot than the IRS."

Moreover, the agency's three favorite collection tools fell into relative disuse after the congressional reforms in 1998, IRS statistics show. The number of liens fell off 38 percent by 2002. Levies plunged 75 percent. And the seizure of assets all but stopped
-- dropping 97 percent from nearly 11,000 in 1995 to just 364 in 2002.

But the statistic that bothers Everson more than most comes from an IRS opinion survey of taxpayer attitudes. In 2003, more than one of every six taxpayers said they think it's OK to cheat on their taxes, up from one in nine just four years earlier.

"That's a very dangerous trend line," Everson said. "You can't sustain that kind of increase and still fund the government or not suffer a very real erosion of the law."
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2004-02-09T21:10:00.000-08:00

No news today, which means a day without more bad news for tax protestors. There are, however, a couple of good trials starting this week. First, Lynn Meredith goes to trial in Los Angeles. She used to run multi-level marketing scams before she started tax scamming. Instead of taking her money and helping people, she bought a beachfront house and a collection of expensive cars. Some of her close supporters have already been convicted. She is very high profile, and it will be a true pleasure to watch her go down and get hit with a really long prison sentence. Second, Steve Swan goes to trial somewhere in Pennsylvania. Swan is a Schiff acolyte who has since freaked out and now believes that he is being persecuted because he "discovered" from the comfort of his apartment that 9/11 was really a massive Jewish conspiracy, and not because he committed tax evasion all those years. Swan used to be Schiff's biggest cheerleader, but now he's sued Schifty in federal court claiming that Schifty is (as we all know) a total fraud. Actually, Swan is so crazy that he's probably a candidate for the Cheek defense a/k/a "I'm too stupid or mentally ill to understand that I owe taxes" -- which ironically is the defense that "Mr. Big" is trying to assert these days, with his own attorney calling him "delusional".
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2004-02-08T17:49:00.000-08:00

Looks like Gene Chapman has started another fast, and every time he does it seems like he puts on at least 10 lbs. or more. Personally, I think that people mis-hear what he is saying. They think Gene is saying "Fast" when in fact he is saying "Fast Foods" since it looks like he always sneaks a few Big Meals in there somewhere. Or maybe its just the Tax Protestor Koolaid that has so much sugar in it. Plus, the guy tries to participate in so many fasts that it is difficult to keep up with exactly what he is fasting for. This time it is to free Fidel Castro or something like that. Note to Gene: Concentrate your efforts on one topic! Another note to Gene: Nobody takes your fasts seriously if you don't go through with the first one, you know, to the death! I wish more tax protestors would go to Cuba, because then they could see what it is really like not to have freedom. The TP's We-R-Slaves tripe is so ridiculous, especially when it is considered that AT ANY TIME they could leave and head for the Mexican border or Canada -- whoever heard of a "slave" who was totally 100% free to leave at any time (and in fact, everybody else would be better off if they DID leave)?!?!? Anyhow, we'll see how many pounds Gene puts on during this fast, hope for him that it's not as much as the last one.
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2004-02-07T09:55:00.000-08:00

Here is a zero-filer who is going to jail for 41 months. Wonder if it was worth it to this policeman to lose his job, lose his other business, spend three-and-a-half years in jail, and come out a convicted felon and probably unemployable (at least in the security business)?

Dumb, dumb, dumb, decision ... but such are the zero income filers.

__________________

LATEST NEWS
8:53 AM EST Friday
Ex-cop sentenced for tax evasion
A former Miami-Dade Police Department police officer was sentenced to 41 months in prison, followed by three years of supervised release, on each of six counts of attempting to evade and defeat tax, to be served concurrently, the U.S. District Attorney's office said.

The government also said William Bernard Oertwig Jr. must pay a $50,000 fine.

Oertwig has been in federal custody since a jury convicted him in August for failing to claim any taxable income from 1996 through 2001.

The government said Oertwig, a 28-year veteran of Miami-Dade Police Department and owner of Intercontinental Electronic Security Systems, a burglar alarm installation and monitoring company, filed false Forms W-4 with Miami-Dade County for each of the relevant years, stating he was exempt from any withholdings.

Thereafter, the government said, he filed frivolous and false tax returns to the Internal Revenue Service purporting to owe zero income for those six years.

"Additionally, Oertwig placed all of his assets in numerous abusive trusts, in an effort to conceal them from the Internal Revenue Service," the government added.

Anita J. Gay, an assistant U.S. attorney, and Jeffrey A. Neiman, a trial attorney for the Tax Division of the Department of Justice, prosecuted the case.
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2004-02-07T09:22:00.000-08:00

Get a load of this winner! You really have to wonder just how stupid tax protestors can be . . .

____________________________

RENO CARPENTER PLEADS GUILTY TO ATTEMPTING TO INTERFERE WITH THE IRS

RENO - - A self-employed carpenter in Reno, Nevada, pleaded guilty today to the felony offense of attempting to interfere with the administration of Internal Revenue Service (IRS) laws, announced Daniel G. Bogden, United States Attorney for the District of Nevada and Eileen J. O'Connor, United States Assistant Attorney General of the Department of Justice Tax Division.

RONALD C. KRINER, age 60, of Reno, has admitted in his Plea Memorandum that on or about September 8, 1998, and January 15, 1999, he obstructed the due administration of the federal tax laws by submitting two fictitious "sight drafts" to the IRS Service Center in Ogden, Utah. The fictitious "Sight Drafts", in the amounts of $750,000 and $14,250,000, respectively, appeared to be an actual security or other financial instrument issued under the authority of the United States, and the "sight drafts" were signed by the defendant, purportedly on behalf of the United States. In submitting the fictitious sight drafts, RONALD KRINER endeavored to obstruct or impede the administration of the tax code because he did not owe such tax liability to the IRS, and his acts prevented the IRS from determining his true tax liability.

If convicted, KRINER is facing up to three years imprisonment and a $250,000 fine. The actual sentence, however, will be dictated by the United States Sentencing Guidelines, which take into account a number of factors, and will be imposed at the discretion of the Court.

KRINER, who had been detained since November 5, 2003, was released on bond pending sentencing, which is set before U.S. District Judge Howard D. McKibben at 9:00 a.m. on February 20, 2004.

The case is being investigated by Special Agents of IRS Criminal Investigation in Nevada and prosecuted by Department of Justice Tax Division Trial Attorneys Mark T. Odulio and Nicholas D. Dickinson.
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2004-02-07T08:32:00.000-08:00

Looks like Jim Davies is under investigation. He is an Irwin Schiff flunkie who runs the OLSOS, better known as the "Online Scam of Schiff". It will be fun watching Jim Davies go down, as well as all the other Schifty-ites.
_______________________

From: CJ
Date: Thu Jan 22, 2004 4:10 pm
Subject: Jim Davies Under Investigation!

Apparently Mr. Jim Davies the creator of "OLSOS - On Line School of Schiff" has been notified he is under investigation for Promoting illegal & Abusive Tax shelters in violation of 26 USC 6700 and 6701. He has been called in for a February 11th, 2004 meeting where he is to bring a complete & full list of all his Client's names.
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2004-02-07T07:46:00.000-08:00

Thurston Bell has been permanently enjoined from running his 861 argument scam, and has turned over his client lists as well. There will be a lot of people there cursing his name, since he didn't put up any fight to handing over his client lists, and of course probably all of his "clients" now face serious fines up to $25,000 and possible prosectution for tax evasion. Of all the de-tax theories, the 861 argument is one of the dumbest and has had a 0.0000% success rate against the IRS. The other big 861 promoter, Rick Haraka a/k/a Rick Bryan, also turned his client list over to the DOJ, but only after trying to extort his clients to send him money for a legal defense. Ah, the industry of Paytriotism.
______________________

UNITED STATES,
Plaintiff
v.
THURSTON PAUL BELL,
Defendant

Release Date: JANUARY 29, 2004

Published by Tax AnalystsTM

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

(Judge Conner)

ORDER

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:

[1] By Order dated January 10, 2003, the court preliminarily enjoined defendant Thurston Bell ("Bell") from promoting the frivolous "U.S. Sources" argument. (See Docs. 90, 91). Presently before the court is the plaintiff's motion to convert the preliminary injunction into a permanent injunction. (Doc. 94). The court received extensive oral and documentary evidence in connection with the motion for preliminary injunction. (See, e.g., Doc. 83). Bell now asserts that "[t]here exists a dispute as to material fact, given Defendant's reliance on the guarantees of his First and Fifth Amendment rights, interests and entitlements." (Doc. 177 at 3). However, Bell has failed to identify a single issue of fact that stands to be resolved; he simply disagrees with the legal conclusions of the preliminary injunction memorandum and order.

[2] The court is not required to hold a separate evidentiary hearing on a motion to convert when no triable issues of fact exist. See United States v. McGee, 714 F.2d 607, 613 (6th Cir. 1983). It appearing that the parties have no additional evidence to present, the court hereby reaffirms the findings of fact and conclusions of law set forth in the preliminary injunction opinion and order. See United States v. Bell, 238 F.Supp.2d 696, 698-99 (M.D. Pa. 2003).

[3] The Internal Revenue Code, 26 U.S.C. sections 1-9833, provides district courts with jurisdiction "to make and issue in civil actions, writs and orders of injunction . . . as may be necessary or appropriate for the enforcement of the internal revenue laws." Id. section 7402(a). A permanent injunction pursuant to Section 7402(a)(2) requires findings of irreparable injury and inadequacy of legal remedies. United States v. Hollar, 885 F.Supp. 822, 824-25 (M.D.N.C. 1995) (citing Weinberger v. Romero- Barcelo, 456 U.S. 305, 312 (1982); United States v. Ernst & Whinney, 735 F.2d 1296, 1301 (11th Cir. 1984)). For the reasons stated in the court's memorandum opinion of January 10, 2003 (see Doc. 90), the court finds that (1) the following permanent injunction is necessary and appropriate for the enforcement of the internal revenue laws, (2) the balance of harms favors issuance of a permanent injunction, and (3) no other adequate remedy exits at law.

[4] AND NOW, this 29th day of January, 2004, it is hereby ORDERED that the plaintiff's motion for conversion of the preliminary injunction into a permanent injunction (Doc. 94) is GRANTED. It is further ORDERED that:

1. Thurston Bell and his representatives, agents, servants,
employees, attorneys, and those persons in active concert or
participation with him, are permanently enjoined from directly
or indirectly, by means of false, deceptive, or misleading
commercial speech:

a. Organizing, promoting, marketing, or selling (or
assisting therein) the tax shelter, plan, or arrangement
known as "the U.S. Sources argument" (also known as
"the section 861 argument") or any other abusive
tax shelter, plan or arrangement that incites taxpayers to
attempt to violate the internal revenue laws or unlawfully
evade the assessment or collection of their federal tax
liabilities or unlawfully claim improper tax refunds;

b. Further engaging in any conduct subject to penalty under
26 U.S.C. section 6700, i.e. making or furnishing, in
connection with the organization or sale of an abusive
shelter, plan, or arrangement, a statement they know or
have reason to know is false or fraudulent as to any
material part;

c. Further engaging in any conduct subject to penalty under
26 U.S.C. section 6701, i.e. assisting others in the
preparation of any tax forms or other documents to be used
in connection with any material matter arising under the
internal revenue laws and which they know will (if so used)
result in the understatement of income tax liability; and

d. Further engaging in any conduct that interferes with the
administration and enforcement of the internal revenue
laws.

2. Bell may, at his discretion, discontinue the NITE website
(http://www.nite.org). However, if he chooses to continue this
website, or another website referencing NITE, he shall
permanently display this order and the court's memorandum of law
dated January 10, 2003 (Doc. 90), on said website.

3. Bell shall mail to counsel for the United States, at the
address listed on the docket of this matter, one copy of every
federal tax return, amended return, or other document intended
for the IRS that he prepares, or assists in the preparation of,
on behalf of any other person or entity. The mailing shall be
made on the same date the document is mailed to or filed with
the IRS.

4. The United States shall be entitled to conduct reasonable
discovery, including depositions, to monitor Bell's compliance
with this order of permanent injunction.

5. The court finds that Bell has now discharged his obligations
pursuant to paragraph two of the preliminary injunction order
(Doc. 91 paragraph 2; see also Doc. 120) and the discovery
order dated July 15, 2003 (Doc. 119). Accordingly, Bell is
hereby purged of the findings of contempt for previously failing
to comply with these orders. (See Doc. 151).

6. The Clerk of Court shall close this file.

S/ Christopher C. Conner
CHRISTOPHER C. CONNER
United States District Judge
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2004-02-07T07:41:00.000-08:00

The New York Times has picked up the story about Irwin Schiff's claim that he is crazy. Is this funny or what? One of THE primary figures in the tax protestor movement has been publicly declared to be seriously mentally unbalanced. But aren't most tax protestors when you get right down to it? Nearly all of them are societally dysfunctional to one degree or another.
_________________________________

Tax Protester Tells Federal Court That He Is Delusional
By DAVID CAY JOHNSTON

Published: February 7, 2004

OS ANGELES, Feb. 6 - Irwin Schiff, the nation's best-known promoter of claims that no law requires the payment of income taxes, suffers from delusions including a fantasy that he alone can properly interpret the tax laws, according to papers that he had his lawyers file in Federal District Court in Las Vegas.

The filing, made on Jan. 23, is highly unusual, especially in a civil lawsuit. The document asks a judge to deny a summary judgment in favor of the Justice Department that Mr. Schiff owes $2.5 million in income taxes, fraud penalties and interest.

The mental health claim is also a ruse, according to an e-mail message sent on Tuesday to Mr. Schiff's thousands of supporters by his girlfriend, Cindy Nuen.

"We are sick about having to use this defense," Ms. Nuen wrote in her e-mail message. "It is ridiculous."

She wrote that this defense is the only way for Mr. Schiff to escape fraud penalties because, she wrote, his lawyers are "scared" to tell judges that "the income tax law is meritless and frivolous."

Mr. Schiff's personal psychiatrist, Dr. Luis Carlos Ortega of Las Vegas, wrote last year, in notes placed in the court file, that Mr. Schiff has suffered from paranoid delusions about the tax system for decades.

Dr. Ortega attributes the mental illness, after a normal upbringing, to Mr. Schiff's loss of his own money and that of clients of his Connecticut insurance brokerage firm in an oil industry tax shelter decades ago. That shelter turned out to be a Ponzi scheme.

"Mr. Schiff's distorted beliefs" that the tax system is a hoax "appear to have grown out of his business failures," Dr. Ortega wrote.

Mr. Schiff's assertion that he is delusional comes as the United States Court of Appeals for the Ninth Circuit in San Francisco is scheduled to hear oral arguments on Tuesday on whether Mr. Schiff can be barred from selling his book "The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes."

His appeal has drawn support from the Nevada chapter of the American Civil Liberties Union, the American Booksellers Association, the American Publishers Association, the American Library Association and the writers' group PEN.

Mr. Schiff contends that Judge Lloyd D. George of Federal District Court in Las Vegas banned his book, although the order allows anyone to sell the book except Mr. Schiff, Ms. Nuen and an associate.

The order also requires Mr. Schiff to turn over the names of all those who bought the book from him so the Internal Revenue Service can audit them. The I.R.S. says in recent years it has identified more than 5,000 returns reporting zero income, the technique taught in the book, forcing it to spend taxpayer money pursuing these individuals.

Last week a promoter of a competing theory that Americans are tricked into taxes, Thurston P. Bell of Hanover, Pa., complied with a court order to give the I.R.S. a list of his clients, striking a serious blow at the so-called tax honesty movement.

Mr. Schiff, a convicted tax evader, has a large core of dedicated followers, especially in Las Vegas, where he has lived since his second release from prison a decade ago. He has prospered in recent years from sales of his books and lecture fees, but he has also engaged in increasingly rancorous disputes with proponents of competing theories, like the one Mr. Bell marketed, that Americans are tricked into paying income taxes. None of these theories have had any success in court.
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2004-02-07T06:59:00.000-08:00

Clifton Beale got shut down for selling sham trusts known as "Pure Trusts" and a bunch of other names. This is another scam that catches people who want to believe in de-tax theories.

______________________________
FOR IMMEDIATE RELEASE
THURSDAY, FEBRUARY 5, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

FEDERAL COURT IN NEW JERSEY BLOCKS
SHAM TRUSTS AND OTHER TAX SCAMS

Sham Promoter Worked 19 Years For Internal Revenue Service

WASHINGTON, D.C. - The Justice Department today announced that a federal judge in the U.S. District Court for the District of New Jersey has ordered Pennsauken, New Jersey resident Clifton Beale to stop selling trusts and other tax schemes that the Justice Department contends are fraudulent.

The court order, to which Beale consented without admitting wrongdoing, permanently bars him from preparing tax returns for others. It also requires that the defendant post the court order on his website, as well as notify his customers of it in writing. In addition, Beale must provide the Justice Department a complete list of his customers. The order applies to Beale, his affiliated businesses and anyone acting in concert with them.

“The Justice Department is determined to stop the promotion of fraudulent tax schemes,” said Eileen J. O'Connor, Assistant Attorney General for the Justice Department’s Tax Division. “This injunction should help assure people who pay their taxes that those who don't, or who encourage others not to, will not get away with it.”

The complaint against Beale alleges that he and his affiliated business - including Beacon Trust Services, LLC; Lighthouse Estate Planning Trust; Tax Compliance Services, LLC and Clifton Beale Consulting, LLC have promoted schemes using sham trusts and limited liability companies to help customers claim improper tax deductions for non-deductible personal expenses (such as lawn care, utilities and house repairs). According to the complaint, Beale worked in the Internal Revenue Service for nineteen years as a revenue agent and appeals officer.

More information on this case can be found on the Justice Department website at . Donald Dowie, trial attorney in the Justice Department’s Tax Division, represented the United States in this case.

The Justice Department has obtained several injunctions in the past two years against other promoters of sham trust tax scams. Information on those cases can be found at:

Black - <http://www.usdoj.gov/tax/02_tax_355.htm>

Welti - <http://www.usdoj.gov/tax/03_tax_094.htm>

Prescott - <http://www.usdoj.gov/tax/03_tax_332.htm>

Joy - <http://www.usdoj.gov/tax/03_tax_280.htm>

Sweet - <http://www.usdoj.gov/opa/pr/2002/February/02_tax_095.htm>

Mosher - <http://www.usdoj.gov/tax/03_tax_588.htm>

Jarvis - <http://www.usdoj.gov/tax/03_tax_397.htm>

Chung - <http://www.usdoj.gov/tax/03_tax_497.htm>

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2004-02-07T06:55:00.000-08:00

Well, another doctor was convicted of tax evasion. Seems like doctors and computer programmers are always the most likely to be sucked into believing these stupid theories. Anyhow, here's the story:
_________________________

Doctor convicted of bankruptcy fraud, tax evasion

By GEOFF MULVIHILL
Associated Press Writer

February 6, 2004, 6:43 PM EST

CAMDEN, N.J. -- A Vineland doctor who treats the poor for free was convicted Friday on charges that he evaded taxes and committed federal bankruptcy fraud.

Dr. Edward Andujar _ known to his patients as Dr. Eddie _ was cleared on charges that he lied in a 1998 bankruptcy hearing. But he was found guilty by a federal jury of six men and six women of lying on bankruptcy forms and of 22 counts of tax evasion.

Prosecutors said a prison sentence of about four years was likely, though the maximum sentence is 27 years. Sentencing was scheduled for May 14.

In the meantime, U.S. District Judge Freda L. Wolfson ordered that he live with his parents in Vineland and not travel out of state. His wife and four daughters moved to California last year and he had been traveling there on weekends.

Andujar said he intended to appeal his conviction and fight a likely effort by the state Board of Medical Examiners to revoke his medical license.

"How many people out there don't file taxes?" Andujar asked after the verdict was delivered. "This all has to do with some kind of vendetta about the medical center because it treats addicts."

Andujar said between now and his sentencing date he will try to determine the future of his clinic. He said perhaps another physician could take over if any was willing.

Deputy U.S. Attorney Lee A. Solomon rejected the idea that Andujar is a bad businessman who does good for the destitute, including drug addicts and Hepatitis C patients.

"I feel badly for the people who put their faith in somebody who illegally defrauded us as taxpayers," Solomon said.

The three-week trial was at times raucous. Andujar, 48, broke down on the stand one day. His supporters were warned by Wolfson not to threaten others in the courtroom on another day. About two dozen of those supporters were in the courtroom Friday, some shedding tears and some yelling at prosecutors.

Prosecutors said that among the items Andujar failed to report in his 1998 bankruptcy filing was a red 1959 Corvette he owned.

And U.S. Attorney Thomas DiLeonardo showed jurors photographs of a San Diego home Andujar is renting for his wife and four daughters. There was a dispute over the amount the home rents for: Prosecutors said it was $9,000 per month; Andujar said it was $4,000 monthly.

Andujar said his wife and daughters decided to move because they were being harassed over the charges he faced.

He told jurors the house was a place for his family to live if he's convicted.

But last month, Andujar said he was confident he would be cleared and said he had no contingency plans for his clinic.

The Harvard Medical School graduate has a history of financial and regulatory problems.

He's been put on probation twice by the state Board of Medical Examiners for his treatment practices.

The charges on which he was tried grew out of the failure of his chain of southern New Jersey clinics in the 1990s.

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2004-02-06T15:33:00.000-08:00

Irwin Schiff's recent admission of insanity by his attorney continues to dominate the news. Here's what started it:
_______________________________

Posted: Tue Feb 03, 2004 4:17 am Post subject: Schiff Pleads Insanity

--------------------------------------------------------------------------------

An attorney for Irwin Schiff filed a very strange brief on January 21.

The US has sued Schiff for back taxes, penalties, and interest for the income taxes Schiff owes for the years 1979-1985, a total of $2,276,244.78 (in 2001).

The US has moved for summary judgment and Schiff's lawyer has filed a brief in opposition, saying that there exists an issue as to whether Schiff owes the penalities for civil fraud because Schiff may be suffering from a mental disease or defect which prevented him from acting "willfully."

To quote from the conclusion to the brief:

"Based on the prior incarcerations, sanctions, fines, reported decisions rejecting Schiff's theories, Schiff's Deposition Transcripts instanter, revocation of probate transcript, Declaration of William A. Cohan and attached psychological reports rendered by Dr. Ortega and Dr. Barry there exists a genuine dispute as to a material issue of fact precluding summary judgment: i.e., whether Mr. Schiff suffers from a mental disease or defect relevant to the issue of 'willfulness' and/or guilt and/or his liability vel non for civil fraud penalties."

United States v. Schiff, No. CV-S-01-0895 (D.C. Nev. 1/21/2004).

The brief is only 8 pages, but there are almost 400 pages of attachments, including an affidavit from an attorney named William A. Cohan, who has apparently tried to advise Schiff in the past. Some of the highlights of Mr. Cohan's affidavit:

"When confronted with contradictions in his conclusions, Schiff either ignores the challenge or moves on to new exhortations of what the law is and his omniscient 'expertise' on the meaning of income, taxable income, the court's applying the wrong satndard, banking and/or money."

"Schiff's belief system appears to be completely circular: within that system Schiff is right, the government and the courts are wrong and he remains impervious to rational discussion."

"Stints of incarceration for years, IRS levies for hundres of thousands of dollars, substantial sanctions and fines imposed by (1) the Second Circuit for bringing frivolous appeals and (2) the United States Tax Court for presenting groundless and frivolous arguments demonstrate that Schiff's belief system is impervious to negative feed back. Schiff's expectation seems to be that someday the federal courts will experience an epiphany and acknowlege that he has been right all along."

"My attempts at rational discussions with Mr. Schiff have been more difficult than any I experienced with Mr. Marsh." (Mr. Cohan had represented Philip Marsh, the leader of the "Pilot Connection Society".)

"Based on all the foregoing and Occam's razor, I was forced to conclude the Mr. Schiff probably suffers from a severe delusional disorder or other mental disease or defect."

From the report of psychologist Cynthia Barry, Ph.D.: "[T]he diagnosis of Bipolar Disorder is well established and warranted. ... I also believe that there is a concurrent Delusional Personality Disorder. ... In short, Mr. Schiff's behavior is not rational. It is the product of a Delusional Personality Disorder that is not amenable to treatment and is unlikely to remit."

And this is not from the government, but from the lawyers of one the leaders of the "tax honesty movement."

_________________
Dan Evans
Author of the Tax Protester FAQ
evans-legal.com/dan/tpfaq.html

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2004-02-06T15:19:00.000-08:00

Welcome to the Quatloos' Tax Protestor blog. The purpose of this blog is to update the daily failures of the so-called tax protestor movement, including convictions, injunctions, tax court and appellate losses, sanctions, and fines, as well as news about the Paytriots who sell books, CDs and other junk to the sheeple who are dumb enough to buy from them.