Tax Protesters BEWARE – Uncle Sam’s After You! DOJ Announces Tax Defier Program

Millions of hard-working Americans take time out of their hectic schedules to perform a time-consuming and often arduous task of filing federal income tax returns. 130 million Americans voluntarily engage in this ritual every year. These individuals participate because they know that with the privileges that the United States has given them come the responsibilities and obligations of citizenship. Former Supreme Court Justice Oliver Wendell Holmes’ saying states it best: “Taxes are what we pay for a civilized society.”

Yet, I don’t know how many times on this blog I have reported the conviction of those who somehow believe that you don’t have to file and pay your taxes. They site obscure sections of the internal revenue code or claim that filing and/or paying taxes is unconstitutional. For a time they get by with their crime and most find themselves on the wrong side of the law and often in prison.

Well…times are changing. On April 8th, Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division, announced the creation of the National Tax Defier Initiative or TAXDEF. The purpose of this initiative is to reaffirm and reinvigorate the Tax Division’s commitment to investigate, pursue and, where appropriate, prosecute those who take concrete action to defy and deny the fundamental validity of the tax laws.

According to the news release, this initiative is aimed at stopping those tax defiers who do not meet their federal tax obligations and seek to transfer those obligations to their neighbor’s back.

The tax defier is not someone who has a legitimate or factual dispute about the amount of tax due. The tax defier is not someone who is merely exercising his or her First Amendment rights to challenge the tax policy choices that Congress has made. Instead, the tax defier is someone who rejects the legal foundation of the tax system, despite decades of legal precedent upholding the system’s constitutional and statutory validity, and who takes specific and concrete action to violate the law.

It is this tax defier conduct, which results in fraudulent claims, frivolous returns and bogus schemes, that threatens the foundation of our tax system and must be vigorously countered. This activity not only wastes limited governmental investigative, administrative and judicial resources, but it also fundamentally undermines the public’s confidence in the fairness of the tax system.

The TAXDEF initiative will:

o Strengthen and expand coordination among the Tax Division, IRS and US Attorneys’ offices to ensure that both criminal and civil enforcement tools are fully considered and utilized.

o Leverage expertise and resources to enable agents and attorneys across the country to efficiently detect, investigate and where appropriate, prosecute tax defiers, viewing enforcement from a national rather than regional or local perspective.

o Expand our efforts to enjoin tax defier activity. Since 2001 the Tax Division has obtained over 300 civil injunctions against tax promoters and preparers, over a third of which directly involved tax defier activity. Injunctions are a powerful method of stopping the promotion of tax defier activity at the earliest possible moment. We estimate that we have collected over $600 million in tax as a result of our efforts.

o Maximize our use of technology to detect, develop and prosecute cases. The explosion of the Internet in the last decade has greatly facilitated tax defier activity and turned what was once a paper–based local or regional enterprise into a click and download national operation. Our response must take full advantage of ongoing changes in technology.

o Alert and educate the public to the falsity of tax defier claims and publicize the consequences of tax defier conduct. Simply stated, we want to pull back the curtain and show the public that the promoters of these schemes are not wizards imparting the secrets of a “tax-free universe” but are nothing more than garden variety hucksters and modern day snake oil salesmen peddling tax evasion schemes.

As I have said in many blog entries, Every choice has a consequence. It is clear that the government is tired of dealing with the tax protester community. While folks like Wesley Snipes dodged the criminal bullet, those who were promoting the scheme he subscribed to did not and they will face prison time.

Speaking nationally on white collar crime and business ethics, it appropriate that the government pool their resources to encourage and enforce compliance. Going to prison because of a flawed belief that you don’t have to file or pay taxes is a real shame. And, I know, as I spent time in federal prison with people who had that belief. Oh, by the way, they are out and paying taxes today!

Comments are welcome!

Prison, White Collar Crime and the Aftermath for Families – A Must Read For Those Facing Prison for White Collar Crime

Let’s say you have convicted and await sentencing or perhaps have been sentenced. You understand that you will be facing time, perhaps substantial time, in prison. Your life will never be the same. But just as important, if not more important, neither will the lives of those who, through family or choice, are connected to you

First, as an inmate, you will find your new environment much different than the world you came from. More than likely, in their past, you lived a life of intensity. To clarify, “intensity” doesn’t denote good or bad, rather “intensity” means that it was anything but common. Regardless of the reason, the choices you made are choices that will have profound and far-reaching consequences.

Years past, somehow whether you are willing to accept it or not, in your own way, you were in the midst of choices that earned you a prison sentence. You did not elect to obey the law. Perhaps funds, which should have been sent to the IRS were diverted and used in a manner that was inappropriate. Perhaps, you participated in some form of mortgage fraud. Perhaps, you embezzled money. Whatever the crime, we as readers may never know. The question, however, beyond your fate as you prepare to go into prison, is what will happen to those who are left behind in freedom?

Those, who may be connected to you are free to speak and often are quick to point fingers as they find themselves embroiled in their own set of consequences – consequences which are tied either directly or indirectly to what You did. They have their own set of questions, emotions and needs and often find that You are now – no longer – able to be there to help. They are left to figure out how to survive in this new world – a world they surely would not have consciously wanted.

Often some of the first questions are, “What was their motive?” Again, we may never know. Each convicted felon, more than likely, was making choices for different reasons. Over the years I have observed many who made choices defined as white collar crime and who found themselves convicted. The magnitude of the crime is generally irrelevant. The motive behind the crime varies, but the bottom line is it becomes lying and theft in its purest form.

Do you suppose that any of these, now convicted felons, some well educated, would have ever said, “I can’t wait to grow up to become a liar and a thief.” Not a chance would be my guess. Certainly, I had no concept that I would ever utter those words. Yet, much like many who read this, there came a point when I had to face my partners, my family and sadly, and most importantly, my wife and speak those words. That was the saddest day of my life. I am labeled a convicted felon because of the choices I made.

Much like those who are convicted or their families who read, I made choices that I never expected would have the consequences they had. No one would have ever picked me out of a high school yearbook as most likely to be in prison! Yet, 13 short years ago I was facing prison. Unlike some, I was allowed to self-report. Many are not given that privilege and hence find the process more difficult do to immediate incarceration with no bond.

As some background, I grew up in a single parent home as my father died of diabetic complications when I was two. My mother did not have a high school degree, so there were only certain jobs that she could do with little education. Yet, she was a great mother, full of love and encouragement. I recall many times she told me, “Son, do not be concerned with our station in life. Get a good education and know that – YOU CAN BE SOMEBODY.”

I never forgot those words – “You can be somebody.” I took them to heart. While we didn’t have much money, we always seemed to have our needs met. In high school I recall living in what today would be called “the projects.” Most of the people there saw it as a one-way ticket to nowhere. I, on the other hand, never saw the limitation. It was a place to live. If I wanted to be “somebody” I could and never felt the limitation of poverty. Perhaps, though, those years had more of an effect than I have given them credit. Perhaps.

After college and a master’s degree, my career blossomed, much like I suspect that the careers of many who have been convicted of white collar crime. I suspect that all were well respected by their families and those who were around them. They, like I, had the trappings of success – position, influence, power and money.

Interestingly enough, I have found that most people who come into success find it comforting and pleasurable to share their success. Helping out those less fortunate whether family or friends can provide immense satisfaction. Speaking from personal experience, not only was doing good positive, but it boosted my ego – I felt more a “somebody” when I was able to share the wealth. And, mind you, those who received were pleased with the generosity spread their way. Of course, in my case, much of the new found success was shared with close family. Improving their lives provided joy and subconsciously bolstered my ego as I was perceived as more a “somebody.”

Speaking candidly never did anyone whom I helped, have a clue that my generosity was from ill-gotten means. I recall on instance where my mother-in-law was confronted by one of her dear friends who questioned my rapid success. They suggested that something was wrong. They were right. Yet, the nature of people is to believe in their best, and my mother-in-law believed in me. To an independent observer it was clear that something was amiss, as most people don’t have such a meteoritic rise. Yet, my mother-in-law, a recipient of my generosity, was too close to the situation to have a clue. She defended me – to some extent at the cost of her friendship with the other person.

Years later, I was faced with admitting I was a liar and thief. The friend was right and to her credit never rubbed it in the face of my mother-in-law. Both were saddened by my choices and how I disappointed those who surrounded me. In the end, my mother-in-law became my ex-mother-in-law as my wife could not bring herself to stay in the marriage. Once trust is broken it is hard – and sometimes impossible – to rebuild.

Not to dismiss my last comment, it is not unusual to find that marriages fail when substantial trust is broken. Not only does the spouse, especially if they are clueless about the crime, find him or herself violated because of broken trust, but everyone changes when faced with the pressure of prosecution and especially incarceration. Prison changes people. Rarely does a person enter prison and come out the same person. Prison can be a place for introspection, as it was for me, but there are personal changes that one faces. While the spouse is faced with life in many different ways, the inmate is different upon exit and often those changes are catalysts for the failure of the marriage. In my case it was trust or lack thereof.

What happened after it became public – my crimes that is? First, beyond the legal issues, which resulted in prison – enough said, my family and I had to deal with the aftermath. This is where those connected to you who read are today. My close family was angry with me, but more importantly they wanted to find someone to blame. It had to be someone’s fault. My mother wanted to blame my wife. After all she thought, if she hadn’t had the need for such an extravagant lifestyle I wouldn’t have been “forced” to make the choices I made. My mother-in-law wanted to blame my mother for a poor upbringing and my partners in my former accounting firm. In her mind, they should have known better than to let me get by with the theft…and they should have paid me more. I recall her saying, “Surely they could have just paid it off and swept it under the table.” And, my wife blamed anyone she could point a finger at.

My wife was mostly concerned with what other people would think. How would she be perceived? It’s obvious that the one committing the fraud paints those around him or her with a broad brush of guilt. She didn’t want people to think that she condoned my actions. She didn’t want people to accuse her of contributing in any way to what I did. I embarrassed her as my choices – now public – changed out status in the community and social status is important to some people. It was to me at the time, although when I had to come clean (mind you it wasn’t by choice) status was the least of my concerns. Then it was survival.

In former blogs on this subject it is crystal clear that the pain associated with the criminal choices made by white collar criminals as is expressed through the comments made by others. But a word of caution, when you point the finger at someone else, notice – THREE ARE POINTING BACK AT YOU. I say that so that perhaps, in a moment of quiet, you might reflect on how you truly feel and what you could have done to prevent this unfortunate outcome. Mind you, NO ONE, other than you had complete control. It was your choice(s), made many years ago, that brought you to where you are today. You made them and you will ultimately pay the supreme price.

So where from here? That, to those who read this, is the best question of all. First, it takes time to heal and healing only comes to those who want it. For years there are those who hang on to “victim hood” like it is a badge hard fought and earned and never find healing. Many who have read the former blogs have expressed themselves with little kindness. I understand. Expression of anger is a process and begins healing; yet, it also fosters more hurt, which requires more healing. Consider what you say, whom you blame, and why blaming someone is necessary. All, who are interested, have suffered. Suffering will stop when you elect to see reality for what it is and move on.

Second, it’s impossible to move forward with out accepting responsibility. Today, while I acknowledge that I am a convicted felon, I live a happy and fulfilled life. The title “convicted felon” is meaningless to me. It holds no value. I am the result of the choices that I make daily. I become “somebody” when I recognized that being somebody is not a reflection of the cars I drove, the home I lived in or the position I had. Being “somebody” was a function of the lives I touched while here on this earth. We each come to earth for a reason. Through a series of bad choices I found mine and am better for the experiences I have had.

But, back to accepting responsibility, if you are connected to the white collar criminal then you, too, will likely learn to accept the responsibility you have had in the drama that has unfolded. As an example, my ex-mother-in-law did. She came to understand, that while she did nothing wrong, she expected a great deal from me and, while the choices were MINE, she contributed to the pressure I felt. In no way was it her fault. Yet, hindsight being 20/20, she later told me that she wished that she had never accepted the gifts (of sorts) that I lavished on her. She stated with tears in her eyes, that she loved me just the way I was and that the money she received was meaningless in comparison to the pain she felt when I drove away on a Sunday from my former home to report to prison. Her heart ached for years.

Even my ex-wife (a person with whom I have an excellent relationship today) has learned that status isn’t everything. Those friends she had years ago – her true friends – stuck by her side and are there today. Likewise, those who bolted were never true friends anyway. Today, she is well respected for who she is, for the work she does as an educator and for the excellent job she has done in rearing our children. She has earned respect far beyond what any amount of money could have ever provided. She, today, is loved for who she is, not what she has.

Lastly, and most importantly, healing comes through forgiveness. The word “forgiveness” is easy to say and hard to do. In my life, many have forgiven me. I have, in order to earn that, made myself easy to forgive. I have opened my life – bore my soul – and exposed my weaknesses, believing that God’s purpose would somehow shine through my ego and become worthwhile and apparent to others. I found that as long as I fought – trying to make myself right – I blocked the healing power of forgiveness. But beyond me, I found that those who forgave found healing in themselves. They were able to let go of their anger, resentments and victim mentality. The power that forgiveness brings is incredible.

As I close, while my ego would like to slap the hands of those who make hurtful comments, I understand that the experience that each of you are going through. Yes, they may be the ones who will face years in prison, but those who have been touched by them – either directly or indirectly – are dealing with their own issues and demons.

Let me say – the road ahead will not be easy. You will likely have a prison sentence and, the longer it is the more likely the substantial change. You will likely feel isolated, alone, hurt and in pain. Holidays won’t be the same and to many your presence will be missed. Most will find that your lifestyles may change – that’s to be expected. That, in and of itself, isn’t easy. Further, many will find it strange to talk to you, as they will only be allowed to make collect calls. And, it’s possible that your final place of incarceration won’t be near, making visits difficult. The game has changed and all will have to learn to adapt. But, this is a process and healing is possible.

The choices you make today, and tomorrow and the next day, are the choices that will shape your life in the future. Every choice has a consequence and YOU control, by your choices, the future life you live. Make your choices wisely and know that, just like mama said, “You can be somebody!”

As a former white collar criminal I consult with those convicted and their families in order to help them understand what to expect and how to cope with this new found life experience. Change found through conviction and incarceration is a life experience that most have no way to prepare for and no resources to help with. Having been through the process and succeeded on the other side, I work with individuals, families and groups to help understand, (1) the process, (2) what to expect and (3) methods of coping so that the outcome can yield positive results.

For information on how I might be able to help you or your family, feel free to contact me at chuck@chuckgallagher.com