Quatloos! > Report From Quatloosia > April 2005

Report From Quatloosia

By Tony-the-Wonder-Llama
(April 2005)

It’s April, so it’s tax season and a good time to update the antics of the dozen or so losers who have made their way into our Quatloosers gallery for selling de-tax scams to the unwary and just plain stupid.

Thurston Bell and Rick Haraka

While working at John Kotmair’s Save-A-Patriot, Quatlooser Thurston Bell came up with the theory that the income tax only applies to persons who live in a federal territory, such as Puerto Rico, Guam, or the District of Columbia, and does not apply to ordinary citizens living in such states as Pennsylvania. In other words, if you are a citizen of Pennsylvania, you are not a citizen of the United States for tax purposes. The argument reaches this conclusion because of a bizarre interpretation of the Internal Revenue Code that by its face only applies to Americans living outside the United States.

This theory, known as the 861 theory because of the obscure Code provision on which it is based, has not only been consistently rejected by every court that has wasted the time to consider the argument, but has also resulted in some large $15,000 fines against those who were so stupid as to make the argument.

After years of selling the 861 theory, Bell was finally enjoined by the DOJ, as was Quatlooser Rick Haraka, who also sold the 861 theory through a website called “TaxGate”. When the DOJ demanded that Haraka turn over his client list, Haraka turned the list over, but then later demanded money from his clients to keep him from disclosing their names (which the DOJ already had).

Larken Rose

The third 861 proponent is Quatlooser Larken Rose, who created a mini-CD espousing the 861 theory which he claimed to his followers would bring down the IRS by April 15, 2004. Later, he amended his prediction of the end of the IRS to July, 2004, then to December, 2004, and now has quit making any predictions at all. Indeed, the most desired use of his mini-CD seems to be as Christmas ornaments.

All the while, Larken made himself famous to tax protestors for his internet plea, “Please prosecute me!” Soon enough, the DOJ did exactly that, alleging that Larken and his wife Tessa failed to report or pay taxes on their medical transcription business. Larken and Tessa will head to trial this summer, after filing a continuance to avoid trial this spring.

Interestingly, Larken has lately stated that he will attempt the “willfulness” defense, i.e., he didn’t know that he had any obligation to pay taxes, rather than asserted his beloved 861 argument that he preached for so many years. In the end, even Larken can spot a loser argument.

The XVI Amendment Argument

After serving as a snitch for the Ohio state tax authorities and then later being convicted of fraud in relation to disability payments, Bill Benson spent some time doing research by which he concluded that the 16th Amendment, which relates to the income tax, was never properly ratified. He wrote up his research in a book, “The Law That Never Was”, and then later start selling the “Reliance Defense Package” for $3,500 although every of the numerous courts who have considered this argument have rejected it. Eventually, the DOJ won an injunction against Benson prohibiting him from selling his package, which was probably for naught since even most tax protestors had figured out that it didn’t work anyway.

Eddie Kahn

Quatlooser Eddie Kahn promoted a variety of theories why the average American does not have to pay taxes, such as that the IRS was never properly created by Congress. After being convicted of tax crimes in 1985, Eddie’s new career involved creating counterfeit checks and fake receipts for businesses to send to the IRS. Eddie also sold the hottest tax scam, the Corporation Sole, by which Eddie’s customers would try to convert their families into tax-free churches.

To give his clients comfort that Los Federales would not mess with them, Eddie created a group called “American Rights Litigators” as a dream-teamish strike force ready to enter the courts on behalf of any of his clients and overwhelm the IRS with boxes of legal documents showing that they are all wrong about the constitutionality of the tax code.

Yet, after being both enjoined and indicted by the DOJ for his tax fraud activities, Eddie fled the U.S. and is currently hiding out somewhere in Central America, doubtless running scams there as well. For those of Eddie’s clients who now so desperately need his American Rights Litigators, messages left on their answering machine will be returned, uh, never.

Lynne Meredith

Having converted her career selling various network marketing programs into the author of a series of de-tax books such as “How to Cook a Vulture”, Lynne Meredith made literally millions of dollars selling schlock and pure trusts to the militia fringe. For those of you who don’t know, a Pure Trust is based on the Contract Clause of the U.S. Constitution which says that no state shall impair the sanctity of contract. Lynne took a position that so long as you contracted to do it, the federal government couldn’t interfere.

In addition to the obvious fact that the clause only applies to the states and not to the federal government and that the authority of the federal government to tax is clearly set out in Article I, Section 8 of the Constitution, Lynne claimed that if you put assets into a Pure Trust that it would be forever free from state or federal government lawsuits or taxation or whatever. Taken to its logical conclusion, Lynne’s position is that so long as you contracted to murder somebody, you couldn’t be prosecuted under the Contract Clause.

As stupid as it sounds, the tax protestors bought in to Lynne’s theory like crazy – up to an estimated $8 million worth of books, tapes and Pure Trust kit sales. This got Lynne a beachfront mansion in Seal Beach, California, and a collection of expensive cars. It also got her an ankle collar.

Defiant after being indicted for tax fraud and caught with fake passports, Lynne vowed that she would hire the best attorneys and destroy the DOJ at trial. As tax protestor gurus typically do, Lynne talked big about how she would tell the jury “the truth”, but when of course the time came she took the Fifth. After a full month of trial, the jury convicted Lynne of nearly all counts and the judge immediately deemed her to be a flight risk (doubtless because of the fake passports) and ordered her incarcerated.

Lynne will probably be sentenced shortly before tax day, as an example to those stupid enough to follow her lead. She can expect somewhere between 10 and 20 years in Club Fed, with no sunset walks on the beach.

“Judge” John Rizzo

And then there was Quatloser John Rizzo, known widely throughout the tax protestor movement as “Judge” John Rizzo because he was the one jurist within the whole United States to stand up and proclaim that the income tax was unconstitutional. Of course, Rizzo’s “judgeship” consisted of him being a low level magistrate in Arizona who primarily heard parking and speeding ticket matters, and he had never even gone to law school.

None of this kept Rizzo from pitching his “Millennium Package” by which he promised a tax-free existence, or from participating at events hosted by Global Prosperity Group – one of the most notorious tax scams of all time.

Indicted along with his wife who apparently also participated in his schemes, Rizzo and his wife plead guilty to tax evasion and conspiracy and are awaiting sentencing. Rizzo faces up to 14 years for his offenses.

Irwin Schiff

Finally we come to Irwin Schiff, arguably the most high-profile of all the de-tax gurus. Over the years, Irwin has come up with a lot of theories as to why nobody has to pay tax, but the past result of these theories is that Irwin was convicted of tax evasion and twice spent time in jail, and also had his property subjected to federal tax liens that he has been unable to shake.

Irwin has been so brash about his schemes that he even opened “Freedom Book Store” in Las Vegas to sell his junk, and he appears on just about every radio program needing a kook to keep their listener ratings up. And Irwin doesn’t let down, arguing forcefully that Congress in drafting the Internal Revenue Code simply forgot to make anybody liable for the tax, and that nobody has any “income in the constitutional sense” whatever that means.

Irwin’s latest ploy has been to sell kits that purport to allow his followers to live a tax-free existence by filing their income tax, but simply putting a big “0” for taxable income no matter how much money they actually made. This has become known as the “Zero Return” and a small band of Schiffites have turned this into a psuedo-cult with the “ZIFheads” (zero income filers) regularly holding meetings to discuss the best way to utilize Schiff’s method.

Ah, but if only it worked for Schiff himself. After preaching for years that the government was afraid to indict him (again), the DOJ finally re-indicted Schiff and a few cohorts for tax evasion and conspiracy, and they are currently awaiting trial. This time, the odds are, Schiff will get a sufficiently long sentence that the old man will die in prison – thus ending a living monument to the stupidity and futility of tax protesting.

Joe Banister

Quatlooser Joe Banister’s claim to fame was that he was a former IRS-CID agent who began selling de-tax books and videotapes, and also attempted to build his CPA practice by giving advice on how not to pay taxes to various businessmen in the Northern California area.

One of Banister’s client was a guy by the name of Al Thompson, who ran Cencal Aviation which produced pilot supplies. Based on Banister’s advice, Thompson refused to pay taxes or withhold from his employees. Thompson also asserted a variety of theories of his own, such as that “AL THOMPSON” (spelled in large caps) was not the same person as “Al Thompson” for purposes of responding to IRS inquiries.

Eventually, Thompson was indicted by the DOJ for tax evasion and was caught after a brief car chase near Redding, California. He is currently in jail awaiting trial. Banister, who was earlier disbarred before practicing before the tax court, was also indicted and also faces trial on a variety of charges. Banister is currently pleading for donations from fellow tax protestors to help fund his defense.

And More Will Come

Chasing the promoters who sell de-tax kits is like spraying the weeds: No matter how many you get, they will still come back in a few weeks. Such has been the case with the foregoing group of losers, as even before their new bracelets had snapped shut there were new promoters out fighting for their market share. So long as some people are willing to believe these theories against all odds, there will be a market for what we refer to as paytriot junk. And I will keep writing summaries of the latest and greatest de-tax gurus to head to the joint.

And that’s how I see it from Quatloosia.