Quatloos! > Report
From Quatloosia > April
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
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.
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
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.
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
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.
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
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.
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
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.