Undoubtedly my readers have heard the old idiom, “Damned if you do, damned if you don’t.” This is the dilemma that the Internal Revenue finds itself in with congressional investigations, a criminal investigation launched by Attorney General Eric Holder, and President Barack Obama’s press conference. The basic assumption that utilizing politically sensitive names as a criteria to scrutinize an application for 501(c)(4) status ignores the crime wave of affinity fraud that targets legitimate and honest people who are the targets of criminals posing as “conservatives” or “patriots.”
As I was researching and had actually begun writing this blog, Lawrence O’Donnell started his “Last Word” show on MSNBC talking about how the IRS didn’t do anything wrong and called the controversy (along with Benghazi attacks on the White House) as “faux scandals.” While O’Donnell is attributing the problem to the IRS having taken a wrong turn in interpretation of the law during the Eisenhower administration, I am marveling at how the press is missing a perfectly rational basis for what the motivation of IRS employees is when scrutinizing organizations based upon the policy language in their names. Even the IRS Inspector General has rushed to judgment on this point. IRS Acting Deputy Inspector General Michael McKenney’s 54 page report contains the following:
The mission of the IRS is to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. According to IRS Policy Statement 1-1, IRS employees accomplish this mission by being impartial and handling tax matters in a manner that will promote public confidence. However, the criteria developed by the Determinations Unit gives the appearance that the IRS is not impartial in conducting its mission. The criteria focused narrowly on the names and policy positions of organizations instead of tax-exempt laws and Treasury Regulations. Criteria for selecting applications for the team of specialists should focus on the activities of the organizations and whether they fulfill the requirements of the law. Using the names or policy positions of organizations is not an appropriate basis for identifying applications for review by the team of specialists.
McKenney is wrong. Scrutinizing words like “Patriot” and “Tea Party” are legitimate investigative filters to protect true conservative patriots and true conservative and legitimate “Tea Party” adherents from well known patterns of affinity fraud. If they didn’t properly scrutinize groups like this and honest and well-meaning conservative activists got ripped off by con-men then sure enough, the IRS would be damned because it didn’t.
A Canadian Security Administrators group warns people in one of its bulletins about scams that target anti-tax organizations.
Canadian Securities Administrators
Protecting Your Finances: HOW TO AVOID INVESTMENT FRAUDS AND SCAMS
A scam organizer will often take advantage of anti-tax or anti-government sentiments held by potential investors. The promoter will offer the ability to avoid paying tax and may offer to keep your money outside of Canada where the government won’t be able to touch it. The scheme will usually offer very attractive rates of return – as high as 2% per week, or up to 300% per year. Many times, you will be told to keep the opportunity a secret and not disclose the information to anyone – especially lawyers, accountants, bankers, or representatives of the government.
If you choose to participate in an investment scheme that you know is illegal (i.e. income tax evasion), it is very likely that you may lose all the money you invest. In such cases, there is little or nothing that securities regulators can do to help you recover your money. An illegal $5000 investment to save $700 in taxes may actually end up costing you $5000. [Emphasis added]
http://www.dol.gov/ebsa/pdf/protect_your_finances.pdf
Here are some relevant tidbits from the Anti-Defamation League (ADL).
The Lawless Ones: The Resurgence of the Sovereign Citizen Movement
An Anti-Defamation League Special Report, August 9, 2010
I. Introduction
In the summer of 2010, Americans have witnessed a wave of anti-government sentiment sweeping the country. In the mainstream, this has manifested itself in ways ranging from the spread of anti-incumbent electoral trends to the growth of anti-government movements such as the Tea Party movement.
On the fringes of American society, the growth of anti-government sentiment has helped spawn the proliferation of extreme anti-government conspiracy theories and the resurgence of anti-government extremist groups and movements, most noticeably the militia movement, which has grown from 50 groups or so in 2008 to nearly 200 in 2010.
………
People who are angry at government, especially government regulation. Some people develop intense antipathy toward government rules and regulations, from property codes to tax laws. Every unsuccessful encounter with the government simply makes them angrier. Consequently, when they encounter the sovereign citizen movement, with its alleged ways to get around laws and regulations, as well as tools of retaliation against government officials, they find the movement very attractive.
Con artists and people who want “something for nothing.” The sovereign citizen movement is full of theories that promise people quick riches or other seemingly magical benefits, from being able to eliminate a mortgage to be able to hide one’s income in a series of trusts and make it immune to government scrutiny. As a result, the movement appeals powerfully to people who are always seeking a quick buck or something for nothing. It also appeals to con artists and confidence men and women who can use the movement’s theories to create schemes to attract money from the greedy or the innocent alike.
……..
Minneapolis, Minnesota, May 2010: Former Minneapolis police officer Douglas Earl Leiter received a 10 year sentence for his role as the leader of a sovereign citizen/tax protest group called Common Law Venue, which taught people how to use bogus trusts to evade taxes.
Las Vegas, Nevada, March 2010: Jan Lindsey, a retired FBI agent from Henderson, Nevada, pleaded guilty to a felony count of tax evasion for evading $109,000 in personal income taxes. Lindsey was one of four sovereign citizens and tax protesters arrested by the FBI in May 2009 following a three-year investigation into money laundering, tax evasion, and illegal weapons
Nampa, Idaho, February 2010: Fred Covey was convicted for having filed bogus UCC liens against two IRS employees, claiming that they owed him more than $166 million; he had also filed similar liens against the Secretary of the Treasury and against Idaho State Tax Commission employees.
Colebrookdale Township, Pennsylvania, July 2008: The Pennsylvania Department of State ruled fraudulent a $450 million lien placed by sovereign citizen Ira Huntington of Colebrookdale Township against a local official and her husband.
Sanford, Florida, 2008: Sovereign citizens Joel and Donna Brinkle allegedly filed liens on the property of four local officials, in addition to previous liens filed against people ranging from a tow truck company to former president Bill Clinton.
Dane County, Wisconsin, February 2008: Sovereign citizen Bryan D. Hoel was sentenced to a year in jail after being convicted for criminal slander. Hoel had filed a $600,000 bogus lien against a state revenue department investigator who was investigating a state tax case against Hoel. Hoel claimed that his name was trademarked and that the investigator “violated” the trademark by using his name without his permission. Wisconsin has the oldest bogus lien law in the country, as public officials had been repeatedly victimized in the past by members of the Posse Comitatus.
http://archive.adl.org/learn/sovereign_movement/sovereign_citizens_movement_report.pdf
On April 8, 2008 the U.S. Department of Justice announced a nationwide crackdown on bogus investment schemes that preyed on anti-taxers. In just one example cited:
The Oregon suit names Eugene “Gino” Casternovia of Ashland, Ore., and three other individuals. According to the Oregon complaint the defendants operate two businesses in Medford, Ore., Southern Oregon Resource Center Educational Services (SORCE) and Castlenuevo Inc., that work with PQI to promote tax scams involving the use of sham entities to help customers conceal their assets. The defendants also allegedly promote a “disenfranchisement” scam, falsely telling customers that the federal income tax system is voluntary and that customers can opt out of their federal income tax obligations by revoking their Social Security numbers.
“The size and sheer brazenness of the tax defier activities alleged in these complaints are staggering,” said Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division. “Tax defiers sometimes claim to be ‘patriots,’ but those who push bogus tax schemes are nothing more than con artists, and those who pay for these schemes are buying nothing but trouble.” [Emphasis added]
This is not an ideological issue for me. I have frequently written in these pages criticizing left-wing poverty pimps as criminals and thieves. My concern is that my conservative friends be just as protected as others from thieves that would prey on them and well-meaning people who are the obvious targets for the dishonest and the degenerate. As vaudevillian George M. Cohan once warned, “Many a bum show has been saved by the flag.“
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