Posted on 11/09/2002 8:40:35 AM PST by ppaul
The Justice Department this week moved on several fronts against tax evasion and the promotion of evasion schemes. Such moves had become so rare in recent years that promoters boasted about not paying taxes and won clients with claims that the government's not coming after them proved that taxes are voluntary. The most significant development came in Las Vegas, where an eight-year prison sentence was imposed on Max C. Tanner, 55, a former Internal Revenue Service lawyer who evaded $2 million in taxes on profits from a stock swindle. Mr. Tanner, who was taken directly to prison, was also fined $3.2 million and ordered to forfeit $1.2 million in assets. Mark Lytle, the federal prosecutor, called it "a significant sentence for a white-collar crime."Mr. Tanner ran a scheme out of the Empire State Building to sell 1.8 million shares of stock, at up to $9.37 a share, in Maid Aide, which turned out to be a one-woman cleaning service in Las Vegas. He funneled the money through Canada to the Cayman Islands to evade all taxes. Mr. Tanner asserted that despite his work for the I.R.S., he sincerely believed that he was not required to pay taxes. A jury rejected that defense a year ago, and Mr. Tanner told Judge Kent Dawson in Federal District Court yesterday that he suffered from an emotional disorder, mitigating his responsibility for the crimes.
The Justice Department also sought injunctions against promoters of tax evasion schemes in Tampa, Fla.; Newark and Nashville and moved closer to obtaining such injunctions in Cincinnati and Harrisburg, Pa. In Denver, a federal grand jury handed up indictments for selling tax evasion schemes against three men, one of whose clients has already been sentenced to prison for tax evasion.
Of the five civil injunction cases, the most significant was filed in Tampa against Carel A. (Chad) Prater of Nokomis, Fla.; an associate, Richard W. Cantwell; and his many businesses, including Goldcoast Enterprises, Tax Escape Service and Family Values International. Clients paid Mr. Prater as much as $20,000 for advice on how to not owe taxes, advice the Justice Department said was "worthless, even harmful" and had cost the government at least $18 million in taxes.
Mr. Prater, 64, has contracts with at least 956 clients to pay him $3.6 million, the suit filed in Federal District Court in Tampa said, citing documents obtained in a March 7 raid by I.R.S. agents. His contracts are based on the 861 position, named after a tax code section; the claim is that most Americans do not owe tax unless they work for foreign-owned companies.
Mr. Prater uses the title "doctor," but acknowledged under oath this year that he had not received a doctoral degree for his studies of the movements of golfers, as he had claimed. He has a long criminal history, according to The Ledger, a Lakeland, Fla., newspaper that said public records show convictions since 1983 for possession of cocaine for sale, insurance fraud, credit card fraud, violation of probation and domestic violence. An associate of Mr. Prater said he had no comment.
Mr. Prater has also worked closely with David Bosset of Clearwater, Fla., whom the same federal court has already ordered to stop promoting similar schemes. Mr. Bosset sought clients by displaying a $21,916 I.R.S. refund of taxes that he had withheld from his employee paychecks. In an interview, however, Mr. Bosset said that he did not return this money to his workers, but instead pocketed it. The I.R.S. said it issued the refund by mistake.
Part of the Prater scheme, the Justice Department said, was filing documents with county clerks that purportedly eliminate tax obligations. In Sarasota, Fla., at least 1,295 such affidavits have been filed.
Karen E. Rushing, the clerk of the state circuit court in Sarasota, said that she was aware that the filings were used to promote tax evasion, but said that "for the most part Florida clerks have no authority to refuse anything" presented for filing. Ms. Rushing said that she had not sought a legal opinion on whether she could refuse to file the Prater affidavits and that she did not intend to raise the issue with the Florida Legislature.
In Newark, the Justice Department sought a federal court injunction on Thursday against Richard Haraka, a Clifton, N.J., resident who owns the Taxgate.com Web site. The department contends Mr. Harakas has been interfering with enforcement of the federal tax laws and promoting the 861 position. Mr. Haraka did not respond to an e-mail message requesting comment.
The government filed suit earlier against Thurston P. Bell, who uses that Web site to promote his version of the 861 position. In Harrisburg, Pa., on Tuesday, a federal judge again delayed the government's request for an injunction to stop him and retrieve his client lists. In Denver, a federal grand jury indicted three men on Tuesday on charges involving what the government says is an offshore tax evasion scheme that hid $9 million in taxable income. Paul D. Harris and Lester R. Retherford, both of Colorado, and Robert N. Bedford of Florida, operating through Tower Executive Resources, charged a $50,000 fee to small-business owners to set up shell companies in the Turks and Caicos Islands intended to evade taxes, the indictment said. Efforts to contact the three men were unsuccessful.
One client, John Mikutowicz, 51, of Mashpee, Mass., the owner of AGM Marine Inc., which builds piers and bridges in New England, has been convicted of tax evasion and false filing. In September, he was sentenced to a year and a day in prison, but is contesting the sentence.
In Cincinnati, a federal magistrate on Thursday recommended that a district judge issue an injunction barring Robert Welti, a certified public accountant in Ripley, Ohio, from preparing tax returns citing the 861 position or using abusive trust schemes. Mr. Welti charged $2,400 for each tax return using bogus trusts in Belize, at a total cost to the government of $3 million, the Justice Department said in court papers. Mr. Welti did not respond to a message left at his home.
In Nashville, the Justice Department sought an injunction to stop Thomas Edward Settles, a lawyer from Murfreesboro, Tenn., from "creating multiple sham entities" for clients to evade taxes. Mr. Settles did not respond to messages at his office.
The Justice Department has not made any move against four leading advocates of the 861 position who boast about not paying taxes. Larken Rose, a Philadelphia medical transcriptionist, has dared the Justice Department to indict him for not paying taxes since 1997. Two California businessmen — Al Thompson, owner of Cencal Aviation in Lake Shasta, and Nick Jesson, owner of N.T.D. Electronics in Huntington Beach — who do not withhold taxes from their workers' paychecks, say that the government does not act against them for fear of exposing the tax laws as a hoax. Dick Simkanin, owner of Arrow Customs Plastics in Bedford, Tex., who also does not withhold, sued Attorney General John Ashcroft last year and vowed to destroy with fire any government officials who move against him.
Mr. Tanner ran a scheme out of the Empire State Building to sell 1.8 million shares of stock, at up to $9.37 a share, in Maid Aide, which turned out to be a one-woman cleaning service in Las Vegas.These guys have been seemingly able to amass fortunes in relatively short periods of time. Where and how do they find so many suckers to give them money?
They're taking down the crooks and con artists with regularity, but they can't seem to touch Larken Rose. Certainly if they could do so, they would have by now, after five years of nonpayment of the income tax. They know where he lives, and they have all the letters he's sent to them. They tried to shut down his website in October of 2001, claiming it was an "abusive tax shelter," but they couldn't pull it off.
So, perhaps there is something to this "861 position" that they're not admitting, and that they're unwilling to seriously respond to.
Did I wake up in another country this morning? Sorry, but this just doesn't sound like America (not that I haven't in the past been very critical of delayed justice in this country, but I had gotten accustomed to that phase they call the "trial").
The dot coms operated on the small principle this is a very old scam that idiots never get wise to. One born every minute.
They're taking down the crooks and con artists with regularity, but they can't seem to touch Larken Rose. Certainly if they could do so, they would have by now, after five years of nonpayment of the income tax.
As long as he does not file returns, he's on a perpetual hook. DOJ generallly does not move against a person like Rose until statute of limitations clock has nearly run out to assure maximum evidence of Willfulness.
You will note the folks under prosecution in the article have stolen money from others and have sold fraudulent schemes to their victims. They are the first level and primary targets for the DOJ.
Larken Rose has not directly taken money from anyone to my knowledge, thus is not in the same class.
Looking over his website and material I would say the IRS investigators are collecting overwhelming evidence of the "Willful" part of failure to file or pay a tax. Time is in the favor of the IRS in this as long as Rose does not file a tax return he is on the hook. They can take their time with him, and look at finances and actions of anyone in contact with him for possible investigation as well.
There is no requirement that the DOJ has to move against someone they have in their sights when they are providing usable evidence against themselves in contact with IRS investigators. Rose doesn't appear to be going anywhere, and is a potential mine of contacts for the IRS to go after.
Note that Thurston Bell picked up on 861 scheme from Larkin Bell, not vice versa, and it's Bell who has is neck in the nose for the present round of prosecutions and suits.
By the way DOJ determines when it's time to prosecute, not the IRS. IRS are just overblown accountants and investigators operating by cookbook. DOJ is who Larkin should be worrying about
People like Bob Schulz do not propose "scams", "schemes" or "loopholes". Schulz simply asked the government to debate the income tax in public and answer questions in an open forum. Congressmen Ron Paul and Roscoe Bartlett first committed to sponsor such a debate and even got commitments from DOJ, IRS and Treasury. Then the people's representatives bolted, the government reneged on its promise and lied to Schulz about it. So much for Paul's Liberty Caucus and his pledge to "abolish the IRS".
So much for Paul's Liberty Caucus and his pledge to "abolish the IRS".Now that the Republicans control the government, we should be pushing that priority full steam, don't you think?
The alternative is to being civil suit in the federal district court to contest the law and actually bring the controvercy into direct confrontation. I note that the 861 proponents are not doing this and have infact declined clear opportunity last year to bring there defence before the supreme court. If 861 argument is so substantive where is the caselaw supporting it. There are more than enough folks out there wanting to be rid of paying the income tax going to extensive ends paying tax consultants, lawyers etc. to find such outs and apply them.
Nothing at all using the 861 argument as a defense has ever been viable in the courts, though many have lost trying to use that argument even in jury trials as opposed to appellate argument.
Sorry, the 861 folks have been pushing that hogwash for over 15 years now. Larkin Rose is just a new comer to the game claiming it for his own, as others have done. All that can be said for for the argument is that raising and using the argument at administrative level provides the prosecution with more ammunition in establishing the willful part of failure to file a return or pay the tax.
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