David v. Goliath

[Boxcar]

My only regret is that the suit isn't for a hell of a lot more money! Oh yeah, one other regret is that chances are many that you'll never find this story in the mainstream press or if you do, it would be one or two paragraphs buried in the back of the paper somewhere. This is why I subscribe to Sierra Times News (www.sierratimes.com).

Here's the scoop:

$500 Billion Class Action
Lawsuit Filed Against the IRS
( Lawsuit Filed for Civil Rights
Violations of 5000 Senior Citizens)
Michael Vallone 05.15.01
----------------------

Palos Hills, Illinois - May 15, 2001

Two national membership organizations
providing estate planning help, announced
today that they have filed a 500 billion
dollar class action lawsuit against the
Internal Revenue Service and approximately
50 individual IRS agents. The suit charges
violations of the civil rights of some
5500 members of the organizations, most of
whom are senior Americans. The information
was released by the two organizations,
Heritage America and The Aegis Company,
through their Executive Director, Michael
Vallone.

The suit stems from a raid on the offices
of the organizations conducted by the IRS
on March 31, 2000. On that date
approximately 30 armed IRS agents entered
the Palos Hills, Illinois offices of
Heritage America and The Aegis Company.
The IRS agent in charge, Robert Kuschel,
served a search warrant for a company
named "Aegis Financial Group". The suit
alleges this company has no relationship
whatsoever to either Heritage America or
The Aegis Company.

In fact, Mr. Vallone reports that Aegis
Financial Group was a corporation of which
he was a partial owner from 1996 to 1998,
and that Aegis Financial Group was an
Indiana licensed mortgage brokerage firm
which operated exclusively in Indiana and
had no business dealings whatsoever with
Heritage America or The Aegis Company.

Nevertheless, based on this warrant the
IRS agents raided the offices of Heritage
America and The Aegis Company. The suit
alleges that upon entering the offices of
the companies, the agents proceeded at gun
point to separate the staff into separate
rooms and interrogated them for as long as
two hours without ever reading them their
rights or informing them they were not
required to provide information.

The IRS then proceeded to carry off all
the companies records which included the
paper and computer records of their
members. This material contained the
names, addresses and phone numbers of all
the past and present members of Heritage
America and The Aegis Company. It also
contained financial information and the
private estate planning information of
these people including copies of their
Wills, trusts, and other estate planning
documents such as Powers of Attorney and
Living Wills. The suit also states that
almost one year after the first raid, on
March 29, 2001, the IRS performed a second
raid in similar fashion on the offices of
a representative of Heritage America and
The Aegis Company, a Mr. Homer Richardson.
Once again, the search warrant served on
Mr. Richardson stated it was to procure
documents associated with "Aegis Financial
Group". Mr. Richardson states he has never
had any association whatsoever with Aegis
Financial Group.

Mr. Vallone has said he thinks this attack
on Heritage America and The Aegis Company
is part of a four year campaign the IRS
has been waging against trusts. Both
Heritage America and The Aegis Company
have provided its members with services to
set up trusts for estate planning,
business planning and tax planning. The
Aegis Company has provided educational
material and services for its members
regarding a type of trust that the IRS
Regulations calls a "Business Trust" (26
C.F.R. §301.7701-4(b)). Mr. Vallone has
stated, "These types of trusts are
completely legitimate.

They are used by many of the major mutual
funds in the United States, such as
Fidelity Magellan, Kemper, and Nuveen.
However, they can also be used by small
business owners. The IRS has recognized
this in their own regulations.
Unfortunately, many companies have
improperly promoted the use of business
trusts, and so the IRS has stepped in to
crack down on the abuse of these trusts.

"What is completely unacceptable is the
manner in which the IRS has gone after
what they perceive are abusive trusts.
They have demonstrated absolutely no
discretion whatsoever. It is
unconscionable that the IRS would call a
business trust an "abusive trust" when
they have recognized it as a legitimate
entity in their own regulations since
1965.

"Worse yet, the manner in which they have
attacked companies promoting business
trusts has demonstrated gross negligence
and rampant abuse of their power.
Supposedly, they have investigated our
involvement with business trusts since
1996, yet they attack us with a search
warrant in the name of a completely
unrelated company. If they are so inept
that they don't even know what company
they are investigating, how can anyone
have any confidence in their
determinations?

"Furthermore, their absolute rape of the
privacy rights of more than five thousand
Americans - most of whom have never even
heard of a business trust - is another
example of the terrorist tactics of a
government agency whose abuse of power
demands severe retribution."

The class action lawsuit contains 11
separate counts of violations of Title 42
of the United States Code for deprivation
of civil rights, and an additional count
under Title 18 which charges that the IRS
and its agents violated the federal
racketeering laws.

The 56 page complaint was filed on May 8,
2001 in the Southern District of Illinois,
case #01-289GPM. The attorney for Heritage
America, The Aegis Company and their 5500
members is Stephen McIlwain of
Albuquerque, New Mexico.

[andicap]

Without knowing the details of this story and passing judgement pro or con on the IRS, it is a shame that the IRS abuses that have been documented in recent years overshadows the real need for the IRS: to crack down on real tax cheats.
The upshot: negative publicity cripples the IRS so that people who real need to be punished (the Mark Riches of the world) go free because the IRS lacks the manpower or improperly uses the manpower that it has.

More effective use of tax collections from those who really owe taxes reduces taxes for the rest of us. Unfortunately, the IRS is tough to police and like most authority groups with little oversight, sometimes abuses its powers.

andicap

[QUOTE] posted by andicap:

>>Without knowing the details of this story and passing judgement pro or con on the IRS, it is a shame that the IRS abuses that have been documented in recent years overshadows the real need for the IRS: to crack down on real tax cheats.
The upshot: negative publicity cripples the IRS so that people who real need to be punished (the Mark Riches of the world) go free because the IRS lacks the manpower or improperly uses the manpower that it has.

>>More effective use of tax collections from those who really owe taxes reduces taxes for the rest of us. Unfortunately, the IRS is tough to police and like most authority groups with little oversight, sometimes abuses its powers.

I disagree with a few of your sentiments. Firstly, the IRS, historically, has gotten _very little_ negative publicity out of the mainstream press. The liberal ragsheets, such as the NY Times, Washington Post, LA Times, Chicago Tribune, etc. more often than not paint the IRS in nice soft tones -- in fact, nearly to the extent that it's the agency that's being abused by the taxpayers! In short the mainstream press has been for the most part sympathetic toward the IRS.

Secondly, I read a very interesting commentary recently on the income tax system (now I'm sorry that I didn't post it here) that basically said that our tax system literally lends itself to all manner of loopholes which favor the
wealthy, and it begs and cries out to the "darker side" of all us to cheat! The system itself is perceived by very many to be unfair, unjust and biased toward the rich and to corporations, thus this fact alone is enough to induce many to be less than honest with the government when it comes to declaring income or paying taxes.

But in addition to these two little items (as if these weren't sufficient disincentives to play square with the IRS, the IRS itself is correctly perceived as a behemoth stuck in such deep quaqmire of its own bureaucracy and the complexities of an all but incomprehensible tax code that the agency has a FAIL rate of nearly 50% when it comes to providing correct tax information to taxpayers. But the ultimate slap in the face to the taxpyers in these "bad information" situations is that the IRS glibly absolves itself of all responsibility and still holds the taxpayer as being ultimately responsible to get the tax code right, and the taxpayer is accountable to the agency even under penalties and fines to do so.

Given these very serious deficiencies of the IRS, which are spawned, of course, by the current tax system, is there any wonder at all that the agency is held in less than high esteem by very many, if not most, taxpayers? Therefore, in my opinion, we DON'T NEED an agency like the IRS. What we do need, however, is a completely new and fair tax system that is consumption-based -- one that won't be biased toward the rich and toward corporations, and one in which "all" will have to pay their fair share of taxes, that is, if they ever hope to buy any new goods or services.

Boxcar