Last Thursday, 26th October, RTE Primetime covered the ‘Freeman’ movement. You can view that episode here. While interviewees supportive Freeman ideology expressed confidence in the Freeman legal theories, the other interviewees expressed concern that vulnerable people were receiving misguided and dangerous legal advice that would greatly exasperate the conditions of those in already dire situations.
In this article we will look at the country where these ideas first developed, the US, and look at a selection of representative court cases where Freeman ideas have been put forward. Despite the optimism espoused by Irish adherents of Freeman ideology regarding their upcoming test case, US Court history records that the ideology has an extremely poor track record when facing the legal system.
Table Of Contents
- History And Ideology Of The Freeman
- Freeman Ideology vs US Courts
- Promoting The Freeman Ideology
- Extrapolating From The US Experience
- Current Freeman Activities In Ireland
- In Conclusion
History And Ideology Of The Freeman
It is probably best that we begin by dispelling the biggest misconception regarding the ‘Freeman Movement’, which is to assume that the ‘Freemen’ are united or homogenised. There is a tremendous diversity between different Freeman groups, and there is little or no coordination between those groups. Each operates independently, borrowing or inventing ideas, plans and actions entirely of their own volition.
Freeman ideology is characterised by a peculiar mix of anti-government sentiment and pseudo-legalistic jargon, often expressed under layers of unnecessary linguistic complexity. It must be emphasised that there is no collection of ideas that have been adopted by all Freeman groups, but usually some subsection of the following typical examples are present:
- Belief that the laws of the land only have force when someone ‘consents’ to them, and that it is possible to simply opt out of society.
- Belief in conspiracy theories against legal and court systems, often involving claims that legal terminology is a deliberately constructed deceit to enslave people.
- Belief that there is a distinction between the flesh and blood form of a person (or natural person) and the legal concept of a person (often called a strawman), the latter often being indicated by writing a name in all capitals.
- Belief that some form of ‘common law’ or ‘natural law’ exists which overrides the laws of the state.
- Belief that the court systems are operated under maritime law.
- Belief that devices such as ‘land patents’, ‘declarations of independence’, ‘trusts, etc., have force in avoiding legal or debt obligations.
- Belief in anti-government conspiracy theories, typically involving claims regarding the abandonment of the gold standard or claims that citizens have been used by government to act as collateral or that government is a private corporation.
- Belief in conspiracy theories involving birth certificates.
Tracing the origins of Freeman ideology leads to the US, but given how the ideology is a collection of ideas that has been added to over time it is difficult to make claim on a definite origin. Early popularisers of the founding ideas appear to include tax protestors (which attempt to use pseudo-legal theories to avoid paying tax) and the Redemption movement. The Southern Poverty Law Center give some background to the Redemption movement:
The Redemption movement is founded upon Elvick’s outer-limits postulation that for every birth certificate issued in the U.S. since the 1936 Social Security Act, the federal government deposits $630,000 in a hidden bank account linked to the newborn American. Redemptionists claim that by executing a series of arcane legal maneuvers, a person may entitle themselves to the $630,000 held in the name of the phantom entity created at their birth, and may then access these funds with “sight drafts” — better known to business owners and prosecutors as “bogus checks.” Elvick also encourages Redemption enthusiasts to harass enemies with phony property liens and IRS reports designed to provoke audits.
Elvick first started spreading his crackpot vision in the 1980s, when he was the national spokesperson for Committee of the States, a white supremacist group Elvick started with William Potter Gale, who had previously founded the Posse Comitatus, a violent anti-Semitic organization.
By 1990, Redemption groups advised by Elvick were active in 30 states and several provinces of Canada, and had tried to pass more than $15 million in bad checks. Elvick was eventually convicted of personally passing more than $1 million in sight drafts, and, in a separate case, of filing fraudulent IRS forms. He spent most of the 1990s in federal prison.
But while he was incarcerated, the Redemption movement lured ever-growing legions of antigovernment extremists with the combined promise of free money and the chance to attack the federal government with paperwork instead of guns.
After Elvick was released, he started holding expensive seminars where he instructed Redemption acolytes. It wasn’t long before he was back in big trouble. Elvick was indicted on multiple felony counts in Ohio in August 2003.
During preliminary hearings, Elvick frustrated court officials by denying his identity, claiming the court had no jurisdiction over him or his straw man, and constantly interrupting with unfathomable questions about procedure. A judge ruled Elvick mentally unfit to stand trial and committed him to a correctional psychiatric facility, where he was diagnosed with an “unclassified mental disorder” and underwent nine months of treatment before facing trial. Elvick then surprised prosecutors by changing his plea to guilty.
Freeman Ideology vs US Courts
While the existence of Freeman ideology, in any of itself, isn’t a cause for concern, the apparently ability for proponents of the ideology to convince members of the public into taking legal cases certainly is – resulting in the person experiencing legal defeat and the associated costs and penalties associated with that. Often such legal cases are taken without any merit, resulting in needless expense and effort on the part of the would-be ‘lay litigator’. The following case, where the litigant attempted to avoid his responsibilities on car insurance and registration, is typical of such frivolous cases:
State of Idaho v David R. Gibson
Gibson next argues that he “has not accepted the [motor vehicle operator’s] license and by not accepting the license, has not consented to be regulated in the Free, and of course, responsible, exercise of his rights of liberty, and the use of his property.” (Emphasis original.) In other words, he contends that he need not obtain liability insurance or register his car unless he first agrees to obtain an operator’s license. Only then, according to Gibson, is a “contract” with the state created, binding him to the laws related to the use of motor vehicles.
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Gibson “entered into” our society when he began to live in it. He has no right to unilaterally withdraw from society, rejecting his obligations to that body, while at the same time retaining the advantages of that society — advantages for which others have sacrificed part of their liberty.
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While our discussion of Gibson’s first two issues has been general, we are inevitably led to these specific conclusions: The laws requiring an operator of a motor vehicle to carry proof of liability insurance in his motor vehicle and to register the motor vehicle annually are valid laws enacted by the state. See, e.g., State v. Reed, 107 Idaho 162, 686 P.2d 842 (Ct.App. 1984). Gibson has a legal duty to obey them.
Sadly, cases like this where individuals try to avoid legal responsibilities through use of Freeman pseudo-legal theories, only to be thrown out by the courts, are all too common. The sheer breadth of argumentation similar to this that has been attempted in US courts is truly staggering. We now give additional illustrative examples of various Freeman arguments that have failed in court – a large number are given to emphasise just how often such have been used, and to illustrate how almost every facet of the ideology has been rejected by the courts.
Plaintiffs argue first that they are exempt from federal taxation because they are “natural individuals” who have not “requested, obtained or exercised any privilege from an agency of government.” This is not a basis for an exemption from federal income tax. See Holker v. United States. All individuals, natural or unnatural, must pay federal income tax on their wages, regardless of whether they received any “privileges” from the government. Plaintiffs also contend that the Constitution prohibits imposition of a direct tax without apportionment. They are wrong; it does not. U.S. Const. amend. XVI; Parker v. Commissioner, 724 F.2d 469, 471 (5th Cir.1984). Finally, plaintiffs’ assertion that money received in compensation for labor is not taxable has been rejected by numerous courts. See, e.g., Davis, 742 F.2d at 172; Simanonok v. Commissioner, 731 F.2d 743, 744 (11th Cir.1984) (per curiam). Cf. United States v. Koliboski, 732 F.2d 1328, 1329 n. 1 (7th Cir.1984). Plaintiffs’ other arguments against the income tax are equally frivolous.
The specification, that the act violates the Thirteenth Amendment by imposing involuntary servitude upon an employer of domestic servants, seems to us far-fetched, indeed frivolous. There is no suggestion, in the law, of the imposition of a servitude, there is merely a requirement that as to the tax due by domestic employees on account of the wages paid them by their employer, the employer must withhold the amount fixed by law and account it to the United States. The enforcement of the act is not the imposition of a servitude. It is the collection of a tax and the enforcement of an obligation, which under settled federal law appellants may be and are lawfully subjected to. From our holding that the taxes and burdens imposed are valid, it must follow that the enforcement of the law imposing them is not, it cannot be, a violation of the Thirteenth Amendment.
North Missouri R. Co v Maguire
Authorities from numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of the Constitution, even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense.
Parker v Commissioner (emphasis added)
Parker maintains that “the IRS and the government in general, including the judiciary, mistakenly interpret the sixteenth amendment as allowing a direct tax on property (wages, salaries, commissions, etc.) without apportionment.” As we observed in Lonsdale v. CIR, 661 F.2d 71 (5th Cir.1981), the sixteenth amendment was enacted for the express purpose of providing for a direct income tax. The thirty words of this amendment are explicit: “The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” The Supreme Court promptly determined in Brushaber v. Union Pacific Ry. Co., 240 U.S. 1, 36 S.Ct. 236, 60 L.Ed. 493 (1916), that the sixteenth amendment provided the needed constitutional basis for the imposition of a direct non-apportioned income tax.
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Appellant cites Flint v. Stone Tracy Co., 220 U.S. 107, 31 S.Ct. 342, 55 L.Ed. 389 (1911), in support of his contention that the income tax is an excise tax applicable only against special privileges, such as the privilege of conducting a business, and is not assessable against income in general. Appellant twice errs. Flint did not address personal income tax; it was concerned with corporate taxation. Furthermore, Flint is pre-sixteenth amendment and must be read in that light. At this late date, it seems incredible that we would again be required to hold that the Constitution, as amended, empowers the Congress to levy an income tax against any source of income, without the need to apportion the tax equally among the states, or to classify it as an excise tax applicable to specific categories of activities.
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In the foregoing we have addressed and disposed of issues which were not timely raised in the Tax Court and which ordinarily would not be considered upon review. Pokress v. CIR, 234 F.2d 146 (5th Cir.1956). In this case the pressing need to marshal limited judicial resources justifies a slight variance from the rule. By addressing these issues we seek to avoid further purposeless litigation and appeal.The absence of a semblance of merit in any issue raised in appellant’s appeal mandates a repeat of the warning we gave in Lonsdale v. CIR, 661 F.2d at 72, concerning the very claims raised in this case:
“Appellants’ contentions are stale ones, long settled against them. As such they are frivolous. Bending over backwards, in indulgence of appellants’ pro se status, we today forbear the sanctions of Rule 38, Fed.R.App.P. We publish this opinion as notice to future litigants that the continued advancing of these long-defunct arguments invite such sanctions, however.”Our warning has been ignored. We now invoke the sanctions of Fed.R.App.P. 38 and assess appellant with double costs. This time we do not award damages but sound a cautionary note to those who would persistently raise arguments against the income tax which have been put to rest for years. The full range of sanctions in Rule 38 hereafter shall be summoned in response to a totally frivolous appeal.
Defendants’ assertion that the capitalization of their names in court documents constitutes constructive fraud, thereby depriving the district court of jurisdiction and venue, is without any basis in law or fact.
The Saunders argue that the district court lacked jurisdiction to enforce the summonses. In support of their position, they cite The Glide, 167 U.S. 606, 623-24, 17 S.Ct. 930, 936, 42 L.Ed. 296 (1897), which holds that “[t]he maritime and admiralty jurisdiction conferred by the constitution and laws of the United States upon the district courts of the United States is exclusive.” The Saunders apparently interpret this language as limiting the jurisdiction of federal district courts to admiralty and maritime actions. The Saunders also seem to believe that, by issuing a notice of dishonor under the Uniform Commercial Code, they prevent the IRS from characterizing this case as a contract in admiralty or a maritime action, leaving the district court no basis for jurisdiction.
The Saunders reading of The Glide founders. In describing the district courts’ maritime and admiralty jurisdiction as “exclusive,” the Supreme Court excluded state courts from adjudicating either category of lawsuit. The Court did not, by employing the phrase “exclusive,” delimit the bases of federal jurisdiction. To the contrary, Congress has expressly directed federal district courts to hear tax enforcement matters. See 26 U.S.C. §§ 7402(b), 7604(a); 28 U.S.C. § 1340. We have repeatedly confirmed the authority — indeed, duty — of the district courts to adjudicate tax summons cases such as the one being prosecuted here. See, e.g., United States v. Author Servs., Inc., 804 F.2d 1520, 1525 (9th Cir.1986), amended, 811 F.2d 1264 (9th Cir.1987).
Notwithstanding Becraft’s insistence that his argument regarding the inapplicability of the federal income tax laws to resident United States citizens raises numerous complex issues, his position can fairly be reduced to one elemental proposition: The Sixteenth Amendment does not authorize a direct non-apportioned income tax on resident United States citizens and thus such citizens are not subject to the federal income tax laws.[2] We hardly need comment on the patent absurdity and frivolity of such a proposition. For over 75 years, the Supreme Court and the lower federal courts have both implicitly and explicitly recognized the Sixteenth Amendment’s authorization of a non-apportioned direct income tax on United States citizens residing in the United States and thus the validity of the federal income tax laws as applied to such citizens. See, e.g., Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 12-19, 36 S.Ct. 236, 239-42, 60 L.Ed. 493 (1916); Ward, 833 F.2d at 1539; Lovell v. United States, 755 F.2d 517, 519 (7th Cir.1984); Parker v. Commissioner, 724 F.2d 469, 471 (5th Cir.1984); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981). Indeed, in Lovell, one of the more recent cases explicitly rejecting a Sixteenth Amendment argument virtually identical to Becraft’s position in this case, the court sanctioned the pro se appellants for raising this and other federal tax exemption claims on appeal. See Lovell, 755 F.2d at 520. If a claim is sufficiently frivolous to warrant sanctions against a pro se appellant, it unarguably supports the assessment of sanctions against a seasoned attorney with considerable experience in the federal courts.
In reaching the conclusion the Becraft’s petition for rehearing is frivolous, we rely not only on the fact that the argument is in direct conflict with “firmly established rules of law for which there is no arguably reasonable expectation of reversal or favorable modification,” McDougal v. Commissioner, 818 F.2d 453, 455 (5th Cir.1987), but also on the fact that this wholly meritless claim was pressed in a petition for rehearing after this court had already summarily rejected the claim and characterized it as having no basis in law. Thus, the result of the petition for rehearing was even more obvious than the initial appeal.
In this connection, petitioners’ notion that common speech restricts the term “person” to artificial persons is just wrong. “Person” is the generic term; it usually refers to human beings; when it is extended to include other entities, such as corporations, they are included in the definition of person and, to provide clarity and contrast, the term “individual” is applied to human beings.
United States v Sloan (emphasis added)
Like moths to a flame, some people find themselves irresistibly drawn to the tax protestor movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like the moths, these people sometimes get burned. Lorin G. Sloan believed these claims and because he acted upon them now faces four months in a federal prison; there can be little doubt that he has been burned.
Mr. Sloan describes himself as a “blue collar working man” employed by the Fisher Body Division of General Motors at its plant in Marion, Indiana. After studying anti-tax literature he received at meetings of the Sons of Liberty and Patriots for Liberty, two organizations of like-minded tax protestors, Mr. Sloan became adamant in his belief that he was not obligated to pay federal income taxes. Consistent with this new-found conviction, Mr. Sloan did not pay any federal income taxes on his wages for the years 1981, 1982 and 1983 (a total tax due of approximately $8,000.00) and took the affirmative step of filing false W-4 forms to ensure that his “exemption” from the income tax continued.
Because he put this theory into practice, in due course Mr. Sloan was charged with, tried on, and convicted by a jury of three counts of tax evasion, 26 U.S.C. § 7201. The district judge sentenced him to four months imprisonment on one count to be followed by four months of work release. Sentences of two and three years imposed on the other two counts were suspended. In addition, Mr. Sloan was placed on follow-up probation of five years, required to pay his tax deficiency and repay the costs of prosecution, and fined $200,000 (which was later suspended). The execution of Mr. Sloan’s sentence was stayed pending the outcome of this appeal.
Mr. Sloan ostensibly pursues this matter on his own behalf — or perhaps more correctly without trained legal counsel. In any event, he appeared before us personally to argue his appeal. The primary position taken by Mr. Sloan is that he has been unable to learn from any authoritative source — the tax code, the Internal Revenue Service, or the federal courts — the exact statutory provision which imposes upon him a legal duty to file a federal tax return. This position is, no doubt, formulated to show that he did not willfully violate a “known legal duty.” Moreover, in demonstrating to him the existence of this duty, Mr. Sloan insists that our analysis of his obligation to pay the federal income tax be consistent with certain fundamental principles or “standards” which he says he has learned through his studies. Unfortunately, for Mr. Sloan, his “standards” are inapplicable because they have previously been rejected by the federal courts.
One such fundamental and immutable principle, he maintains, is that the revenue laws of the United States do not impose a tax on income. But we have squarely rejected this tax protestor argument before, holding that the Internal Revenue Code imposes a tax on all income, Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir.1986); Lovell v. United States, 755 F.2d 517, 519 (7th Cir.1984), and that wages are income, United States v. Koliboski, 732 F.2d 1328, 1329 & n. 1 (7th Cir.1984).
As another cornerstone of his position, Mr. Sloan cites Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984), for the proposition that the tax code provisions establishing an income tax are an unlawful agency interpretation of a statute because the Congress clearly did not intend to impose a tax on income. His argument, of course, is based on the false premise described above. Congress lawfully enacted the Internal Revenue Code and the Internal Revenue Code lawfully imposes a tax on income. See, e.g., Coleman, 791 F.2d at 70; United States v. Studley, 783 F.2d 934, 940 (9th Cir.1986); Wheeler v. United States, 744 F.2d 292, 293 (2d Cir.1984); Koliboski, 732 F.2d at 1329. Thus, the prosecution of persons for tax evasion under federal criminal law presents no issue of deference to an agency’s interpretation of federal statutes.
Also basic to Mr. Sloan’s “freedom from income tax theory” is his contention that he is not a citizen of the United States, but rather, that he is a freeborn, natural individual, a citizen of the State of Indiana, and a “master” — not “servant” — of his government. As a result, he claims that he is not subject to the jurisdiction of the laws of the United States. This strange argument has been previously rejected as well. “All individuals, natural or unnatural, must pay federal income tax on their wages,” regardless of whether they requested, obtained or exercised any privilege from the federal government. Lovell, 755 F.2d at 519; cf. Studley, 783 F.2d at 937 (Studley’s argument that “she is not a `taxpayer’ because she is an absolute, freeborn and natural individual … is frivolous. An individual is a `person’ under the Internal Revenue Code.”). Moreover, the tax code imposes a “direct nonapportioned [income] tax upon United States citizens throughout the nation, not just in federal enclaves,” such as postal offices and Indian reservations. United States v. Collins, 920 F.2d 619, 629 (10th Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 2022, 114 L.Ed.2d 108 (1991) (citing Brushaber v. Union Pacific R.R., 240 U.S. 1, 12-19, 36 S.Ct. 236, 239-42, 60 L.Ed. 493 (1916)). Mr. Sloan’s proposition that he is not subject to the jurisdiction of the laws of the United States is simply wrong.
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The real tragedy of this case is the unconscionable waste of Mr. Sloan’s time, resources, and emotion in continuing to pursue these wholly defective and unsuccessful arguments about the validity of the income tax laws of the United States. Despite our rejection of Mr. Sloan’s legal analysis of the tax laws, we are not unmindful of the sincerity of his beliefs. On the other hand, we are less sure of the sincerity of the professional tax protestors who promote their views in literature and meetings to persons like Mr. Sloan, yet are unlikely ever to face the type of penalties incurred by him. It may be that our decision will not alter Mr. Sloan’s views regarding the tax laws of this country, for he has stated that if we affirm his conviction without applying the law as he understands it, our decision will be “a sham to which I WILL NOT SUBMIT.” It may also be that serving his sentence in prison will not alter Mr. Sloan’s view. We hope this pessimistic assessment is incorrect.We AFFIRM the conviction of Lorin G. Sloan on all counts.
Promoting The Freeman Ideology
It is natural, after reading about Mr. Sloan’s negative court experience, to ask how this ideology is promoted and what makes these ideas so attractive to those who try enacting them. By way of an illustrative example we give Dave Champion’s essay titled ‘Debunking IRS Lies’ as a downloadable pdf.
It is certainly easy to fathom why such argumentation, and the associated relief from paying tax, would prove alluring to the reader. The parsing of legal terminology, particularly doing so in a manner completely inconsistent with the context such terminology was originally invoked, is a common practice within Freeman ideology. In effect the reader is being offered the dream of being able to opt out of the US tax system, through use of a Freeman-concocted system of linguistic contortions and pseudo-legal gymnastics. Such was the dream that the unfortunate Mr. Sloan tried to grasp before the courts brought him back to earth with a bang. It is interesting to note that the author, Mr. Champion, has never tried to put any of his ideas into practice. The same, rather depressingly, cannot be said for others who share his ideology. Specific examples of court cases (in addition to those previously cited) where arguments made in the essay have been rejected include:
United States v Thomas
(On the claim that “no US court has ever determined that the 16th Amendment was, in reality, properly ratified“)
Thomas is a tax protester, and one of his arguments is that he did not need to file tax returns because the sixteenth amendment is not part of the constitution. It was not properly ratified, Thomas insists, repeating the argument of W. Benson & M. Beckman, The Law That Never Was (1985). Benson and Beckman review the documents concerning the states’ ratification of the sixteenth amendment and conclude that only four states ratified the sixteenth amendment; they insist that the official promulgation of that amendment by Secretary of State Knox in 1913 is therefore void.
Benson and Beckman did not discover anything; they rediscovered something that Secretary Knox considered in 1913. Thirty-eight states ratified the sixteenth amendment, and thirty-seven sent formal instruments of ratification to the Secretary of State. (Minnesota notified the Secretary orally, and additional states ratified later; we consider only those Secretary Knox considered.) Only four instruments repeat the language of the sixteenth amendment exactly as Congress approved it. The others contain errors of diction, capitalization, punctuation, and spelling. The text Congress transmitted to the states was: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Many of the instruments neglected to capitalize “States,” and some capitalized other words instead. The instrument from Illinois had “remuneration” in place of “enumeration”; the instrument from Missouri substituted “levy” for “lay”; the instrument from Washington had “income” not “incomes”; others made similar blunders.
Thomas insists that because the states did not approve exactly the same text, the amendment did not go into effect. Secretary Knox considered this argument. The Solicitor of the Department of State drew up a list of the errors in the instruments and — taking into account both the triviality of the deviations and the treatment of earlier amendments that had experienced more substantial problems — advised the Secretary that he was authorized to declare the amendment adopted. The Secretary did so.
Although Thomas urges us to take the view of several state courts that only agreement on the literal text may make a legal document effective, the Supreme Court follows the “enrolled bill rule.” If a legislative document is authenticated in regular form by the appropriate officials, the court treats that document as properly adopted. Field v. Clark, 143 U.S. 649, 12 S.Ct. 495, 36 L.Ed. 294 (1892). The principle is equally applicable to constitutional amendments. See Leser v. Garnett, 258 U.S. 130, 42 S.Ct. 217, 66 L.Ed. 505 (1922), which treats as conclusive the declaration of the Secretary of State that the nineteenth amendment had been adopted. In United States v. Foster, 789 F.2d 457, 462-63 & n. 6 (7th Cir.1986), we relied on Leser, as well as on the inconsequential nature of the objections in the face of the 73-year acceptance of the effectiveness of the sixteenth amendment, to reject a claim similar to Thomas’s. See also Coleman v. Miller, 307 U.S. 433, 59 S.Ct. 972, 83 L.Ed. 1385 (1939) (questions about ratification of amendments may be nonjusticiable). Secretary Knox declared that enough states had ratified the sixteenth amendment. The Secretary’s decision is not transparently defective. We need not decide when, if ever, such a decision may be reviewed in order to know that Secretary Knox’s decision is now beyond review.
United States v Drefke
(Rejecting the sophistry over the word ‘taxpayer’)
Drefke argues that taxes are debts which can only be incurred voluntarily when individuals contract with the government for services and that those who choose to enter such contracts do so by signing 1040 and W-4 forms. By refusing to sign those forms, Drefke argues he is “immune” from the Internal Revenue Service’s jurisdiction as a “nontaxpayer.”
This is an imaginative argument, but totally without arguable merit. 26 U.S.C. § 1 imposes upon “every” individual a certain rate of income tax depending upon their amount of taxable income. 26 U.S.C. § 6012 states that unmarried individuals having a gross income in excess of $4,300, and married individuals entitled to make joint returns having a gross income in excess of $5,400 “shall” file tax returns for the taxable year. Considering Drefke’s gross income for 1979 and 1980, he was clearly required to file tax returns for those years.
26 U.S.C. § 6151 states that when a tax return is required to be filed, the person so required “shall” pay such taxes to the internal revenue officer with whom the return is filed at the fixed time and place. The sections of the Internal Revenue Code imposed a duty on Drefke to file tax returns and pay the appropriate rate of income tax, a duty which he chose to ignore.
Economy Plumbing & Heating Co v United States
(Mr Champion quoted from this case, but did so deceptively and out of context. The full context is given here to show the deception, and how the court case was referring to the right of those who overpaid tax to be eligible for reclaim – something Mr Champion left out.)
In support of the foregoing conclusions, we wish to point out and emphasize that Congress has established a well-defined and comprehensive administrative system for the recovery of overpaid taxes by taxpayers. All taxpayers who have overpaid their taxes are within this system and must follow the appropriate procedures and regulations, including the timely filing of claims for refunds for overpayment of taxes, if they are to have the benefits of the system. On the other hand, persons who are not taxpayers are not within the system and can obtain no benefit by following the procedures prescribed for taxpayers, such as the filing of claims for refunds. For example, there have been many cases where parties have sued to enjoin the assessment or collection of their moneys to pay the taxes of another, notwithstanding Section 263 of the Internal Revenue Code of 1939 (26 U.S.C. § 3653 (1952 ed.)) that provided that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.”[2] The courts have allowed these suits because the parties filing the suits were not taxpayers and were outside the revenue system of which the above statute is a part. See Long v. Rasmussen, 281 F. 236 (D.Mont.1922); Rothensies v. Ullman, 110 F.2d 590 (3d Cir.1940); Raffaele v. Granger, 196 F.2d 620 (3d Cir.1952); and Bullock v. Latham, 306 F.2d 45 (2d Cir.1962). In Long v. Rasmussen, the court said:
* * * They [the revenue laws] relate to taxpayers, and not to nontaxpayers. The latter are without their scope. No procedure is prescribed for nontaxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. * * * [Id. 281 F. at 238.]
US Tax Code 26 USC § 61 – Gross income defined
(Quoted here to show that, since gross income includes wages, Mr Champion’s argumentation regarding wages is invalid)
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
United States v Raymond
(Addressing claims that citizens are under no obligation to pay taxes)
Raymond and Bernhoft are active members of the U.S. Taxpayers Party and were the chief participants in a business known as Morningstar Consultants (“Morningstar”). Between January and June of 1996, Morningstar ran a weekly advertisement in a local Wisconsin newspaper under the caption “Just Say No.” The Just Say No advertisement contained the following statements: 1) “Federal, State & Social Security Taxes are Voluntary;” and 2) “The Internal Revenue Service has no Statutory Authority to: Compel you to file a Tax Return, Require withholding from your paycheck, Levy or Lien your property, Audit your Books & Records.” This advertisement was part of an effort by Morningstar to market the “De-Taxing America Program” (the “Program”).
The Program consists of three volumes of materials. These materials contain information presenting the view that, among other things, the federal income tax is unconstitutional and that persons who are not federal employees or residents of the District of Columbia are not legally required to pay federal income tax. In addition to providing information regarding general tax-protest principles, the Program includes several forms and instructions to guide the purchaser through the process of “de-taxing.” Purchasers are informed that if they complete the materials and directions in the Program they will be “withdrawn” from the jurisdiction of the federal government’s taxing authorities and the social security system and will no longer be required to pay federal taxes.
…
In that advertisement, the appellants made the representations that payment of income tax is a voluntary activity and that individuals cannot be legally compelled to file tax returns or submit to tax investigations or penalties. The advertisement directed readers to contact Morningstar Consultants “for more information” regarding these assertions. Upon contacting Morningstar, callers were encouraged to purchase the De-Taxing America Program, and several individuals in fact purchased the Program from the appellants.The statements appellants made in the Just Say No advertisement are clearly false representations concerning the government’s authority to tax its citizens. See, e.g., United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir.1993) (stating that the argument that an individual is a sovereign citizen of a state who is not subject to the jurisdiction of the United States and not subject to federal taxing authority is “shop worn” and frivolous); United States v. Sloan, 939 F.2d 499, 500-01 (7th Cir.1991) (same); Coleman v. Commissioner of Internal Revenue, 791 F.2d 68, 70-72 (7th Cir.1986) (stating that the assertions that the federal income tax is not a tax on all income, that wages are not income, and that a tax on wages is unconstitutional are “tired arguments” that are “objectively frivolous”); Kile v. Commissioner of Internal Revenue, 739 F.2d 265, 267-68 (7th Cir.1984) (noting the “universal and longstanding rejection” of the argument that wages are not subject to income tax and that the federal income tax is unconstitutional). These statements made in conjunction with the sale of the Program operated as false assurances that refusing to pay taxes in accordance with the Program’s instructions is a lawful activity for which the government has no legal authority to punish Program subscribers. As the district court noted, the appellants are intelligent men. Bernhoft has recently graduated from the University of Wisconsin Law School. Raymond has run his own business for twenty years and was the U.S. Taxpayers Party’s candidate for the United States Senate. We attribute to both appellants a basic knowledge of the law such that they should reasonably be aware that their personal belief that paying taxes is a voluntary activity does not represent the current state of the law. Therefore, we conclude that the statements the appellants made in the Just Say No advertisement were representations concerning the tax benefits of purchasing and following the De-Taxing America Program that the appellants reasonably should have known were false.
While these legal citations are bordering on the excessive, we feel it is necessary to post them to elucidate just how thoroughly, robustly and extensively argumentation such as Champion’s have been rejected by the courts. The litany of people that have fallen foul of the courts in their attempts to use argumentation such as Champion’s must be emphasised. While some proponents (such as Roger Elvick discussed previously) have the courage of their convictions to put try their ideas into practice (and, inevitably, incur the wrath of the courts), many do not – profiting from the sales of their written works and advertising revenue while other poor fools, drunk on Freeman ideology and a dream literally too good to be true, take the risks and suffer the consequences.
In the internet age the capacity for the spread of ideas is, if you’ll pardon the unintentional pun, virtually limitless. The ideas of folks like Champion, Elvick and others are easily adapted and spread by others. It appears there are no shortage of willing volunteers to try these ideas, and Freeman adherents are keen to promote any ‘successes’. A typical example of promoting a ‘success’ is this thread from a Freeman forum, featuring the following video:
It is difficult to understand why the video is held up as a ‘success’ given that the liability order sought by the council was issued irrespective of the Freeman shenanigans. Sadly, this video is not unrepresentative of Freeman court experiences. In one particular case from Canada, judge Rooke was so incensed at the antics of a Freeman litigator that he wrote a comprehensive 185 page judgement analysing such tactics in depth, intending it to be a resource against such tactics in future cases. We quote a portion here, recommending the full decision as a valuable source of information on Freeman ideology and tactics:
A critical first point is an appreciation that the concepts discussed in these Reasons are frequently a commercial product, designed, promoted, and sold by a community of individuals, whom I refer to as “gurus”. Gurus claim that their techniques provide easy rewards – one does not have to pay tax, child and spousal support payments, or pay attention to traffic laws. There are allegedly secret but accessible bank accounts that contain nearly unlimited funds, if you know the trick to unlock their gates. You can transform a bill into a cheque with a stamp and some coloured writing. You are only subject to criminal sanction if you agree to be subject to criminal sanction. You can make yourself independent of any state obligation if you so desire, and unilaterally force and enforce demands on other persons, institutions, and the state. All this is a consequence of the fact gurus proclaim they know secret principles and law, hidden from the public, but binding on the state, courts, and individuals.
And all these “secrets” can be yours, for small payment to the guru.
These claims are, of course, pseudolegal nonsense. A judge who encounters and reviews OPCA concepts will find their errors are obvious and manifest, once one strips away the layers of peculiar language, irrelevant references, and deciphers the often bizarre documentation which accompanies an OPCA scheme. When reduced to their conceptual core, most OPCA concepts are contemptibly stupid. Mr. Meads, for example, has presented the Court with documents that appear to be a contract between himself, and himself. One Mr. Meads promises to pay for any liability of the other Mr. Meads. One owns all property, the other all debts. What is the difference between these entities? One spells his name with upper case letters. The other adds spurious and meaningless punctuation to his name. Mr. Meads (with punctuation) is the Mr. Meads who appeared in court. He says the Mr. Meads (all capitals) is the one who should pay child and spousal support.
So where is that Mr. Meads (all capitals)? At one point in the June 8 hearing Mr. Meads said that Mr. Meads (all capitals) was a “corporate entity” attached to his birth certificate. Later, he told me that the other Mr. Meads was a “person” – and that I had created him! Again, total nonsense.
The bluntly idiotic substance of Mr. Mead’s argument explains the unnecessarily complicated manner in which it was presented. OPCA arguments are never sold to their customers as simple ideas, but instead are byzantine schemes which more closely resemble the plot of a dark fantasy novel than anything else. Latin maxims and powerful sounding language are often used. Documents are often ornamented with many strange marking and seals. Litigants engage in peculiar, ritual‑like in court conduct. All these features appear necessary for gurus to market OPCA schemes to their often desperate, ill‑informed, mentally disturbed, or legally abusive customers. This is crucial to understand the non-substance of any OPCA concept or strategy. The story and process of a OPCA scheme is not intended to impress or convince the Courts, but rather to impress the guru’s customer.
Mediaeval alchemy is a helpful analogue. Alchemists sold their services based on the theatre of their activities, rather than demonstrated results, or any analytical or systematic methodology. OPCA gurus are modern legal alchemists. They promise gold, but their methods are principally intended to impress the gullible, or those who wish to use this drivel to abuse the court system. Any lack of legal success by the OPCA litigant is, of course, portrayed as a consequence of the customer’s failure to properly understand and apply the guru’s special knowledge.
Caselaw that relates to Gurus, reviewed below, explains how gurus present these ideas in seminars, books, websites, and instructional DVDs and other recordings. They provide pre‑prepared documents, which sometimes are government forms, and instruct how to fill in the necessary information that then produces the desired effects. Gurus write scripts to follow in court. Some will attempt to act as your representative, and argue your case.
When gurus do appear in court their schemes uniformly fail, which is why most leave court appearances to their customers. That explains why it is not unusual to find that an OPCA litigant cannot even explain their own materials. They did not write them. They do not (fully) understand them. OPCA litigants appear, engage in a court drama that is more akin to a magic spell ritual than an actual legal proceeding, and wait to see if the court is entranced and compliant. If not, the litigant returns home to scrutinize at what point the wrong incantation was uttered, an incorrectly prepared artifact waved or submitted.
Extrapolating From The US Experience
General Freeman Group Activity
If it is possible to extrapolate from the American (and, to a lesser extent, Canadian) experiences, then we can expect a handful of poor souls to try some of this argumentation within the Irish court system – and the ensuing similar lack of success. The trend in the US is that the actual promoters of this ideology, and particularly those who profit through books and lecturing, tend not be the ones taking the risks in a court of law. It seems, rather unfortunately, that it is the customers of such books and lectures that fall on their swords in this manner.
Violent acts by Freeman related groups have been extremely rare, although Canadian police say “…those who espouse the ideology have been involved in numerous violent encounters with law-enforcement and government employees in the United States and, to a lesser extent, in Canada.” One particularly disturbing act, covered by Tony Ortega due to the fringe involvement of a Scientology public relations director of their Las Vegas Celebrity Center, featured a plot to kidnap a policeman. The plan was to hold the policeman in a makeshift jail, convict them in a ‘sovereign court of law’ and then execute them for crimes against civil rights. Nathan Baca’s video report is here.
Cases involving violence, however, are extremely rare, and such incidents have tended to have a prior root cause before the adoption of Freeman ideology. When violent acts have occurred, as with the ‘Sovereign Citizen’ kidnap plot, the groups involved tended to have pre-existing ties with extremist ideologies. Freeman ideology can be adopted by any persons and groups, and that existing anti-government extremists would adopt such isn’t surprising. An illustrative example of this is in how already-extremist anti-government groups in the US have simply borrowed Freeman terminology and concepts, and any extremist acts cannot realistically be attributed to Freeman ideology due to pre-existing extremism. A hypothetical example in Ireland would be a paramilitary group adopting the Freeman language – the tendency towards violence would have been, in this hypothetical, already present and could not be attributable to any Freeman ideology.
In general, other than wasting court time in the manner discussed previously, Freeman groups tend to engage in peaceful protest and other similar forms of non-violent activism such as sit-ins. Most activity has revolved around discussion on Freeman-related internet forums, and other ‘educational’ activities that involve circulating Freeman materials and lectures.
Freeman Trust & Debt Forgiveness Scams
The US experience does raise concerns over the proliferation of several fraudulent schemes that make use of Freeman pseudo-legal thinking, almost all of which are targeted at those who find themselves in financial difficulty. Such schemes typically promise its victims to be able to clear their debt if they follow a specific set of legal manoeuvres, although to date none of these schemes have prevailed in any court of law. For the purposes of this article, we will examine the exploits of the Dorean Group as an illustrative example of such schemes. We have chosen this example for its similarities in legal theory to some of the Irish cases we discuss below.
As detailed in Household V Lambeth, “This [Dorean Group] scheme operated to fraudulently remove valid deeds of trust and mortgages given to lenders as security for residential loans.” In accordance with advice given to him by the Dorean Group, defendant Lambeth “recorded a quitclaim deed with the Guilford County Register of Deeds. This deed purported to transfer all of Lambeth’s rights and interest in the Lambeth Property to defendants Heineman and Johnson, as Trustees of the ‘Lambeth Family Trust.’ The transfer was made without notice to or the consent of Household [Lambeth’s mortgage holder]”.
The court elaborated as follows:
On or about 23 April 2004, Heineman and Johnson [the Dorean Group actors], as the purported Trustees of the Lambeth Family Trust, mailed Household [Lambeth’s mortgage holder] 38 pages of documents purporting to be part of a “Private International Remedy Demand Number HMS-042304-JEDL” (“Administrative Demand”). The Administrative Demand purported to, among other things, create a self-executing agreement whereby Household automatically appointed Heineman as “attorney-in-fact” for Household, and authorized Heineman and Johnson to prepare and record all necessary documents for “proper reconveyance” of the Lambeth Property if Household, within 10 days, did not rebut “point for point” a so-called “Affidavit of Truth” contained therein. Household did not respond to the Administrative Demand.
On or about 3 August 2004, the Dorean Group fraudulently cancelled the Household Deed of Trust by recording fraudulent documents with the Guilford County Register of Deeds. First, without Household’s authorization, the Dorean Group recorded a document captioned “Substitution of Trustee,” representing that Heineman was the “attorney-in-fact” for Household Mortgage Services, and further purporting to substitute Lambeth as Trustee under the Household Deed of Trust. Immediately thereafter, the Dorean Group fraudulently recorded a so-called “Full Reconveyance” wherein Heineman, as the purported Trustee for Household under the Household Deed of Trust, represented that (i) all sums secured by the Household Deed of Trust had been paid, and (ii) the Household Deed of Trust and the Household Note had been surrendered to the Trustee for cancellation. Both statements were false. The Full Reconveyance also purported to reconvey the estate to the Lambeth Family Trust. The Substitution of Trustee and the Full Reconveyance are hereinafter referred to as the “Unauthorized Cancellation.”
Sadly for Lambeth, the above pseudo-legal manoeuvring to eliminate his mortgage via transfer of property to this ‘Lambeth Family Trust’ did not succeed: “By Order and Judgment entered 28 August 2006, the General Court of Justice, Superior Court Division for Guilford County, held that the Household Deed of Trust was fraudulently cancelled and should be reinstated as a lien on the Lambeth Property.” As noted in the footnotes: “The court also granted summary judgment in favor of Household Realty Corporation and against Lambeth in the sum of $486,177.66, with interest thereon, representing the outstanding principal and, interest on the Household Note.”
More detail about Dorean Group operations can be found in North Carolina State Bar v Erickson, which upheld attorney Paul Erickson’s disbarment from practicing law. The court described the Dorean Group’s operations thusly:
The Dorean Group operated websites on which it represented that, in exchange for substantial payments by a homeowner, the Dorean Group would help the homeowner eliminate his or her mortgage without the homeowner being required to pay the underlying debt. This scheme, often referred to as a “mortgage elimination” scheme, was based on a theory known as the “vapor money” theory. Proponents of the “vapor money” theory believe that when a bank loans money to a borrower, the promissory note the borrower executes in exchange is the equivalent of “money” he or she is giving to the bank. See Barber v. Countrywide Home Loans, Inc., 2010 WL 398915 (W.D.N.C. Jan. 25, 2010) (unpublished). Proponents contend the bank then deposits the “money” — the promissory note — into the borrower’s account, lists it as an “asset” on its ledger entries, and loans the money back to the borrower, so there is no enforceable debt. Id. This theory, holding in essence that “no enforceable debt accrues to a lender that funds loans through checks or wire transfers rather than through cash, has been repeatedly rejected by courts across the country.” Jiramoree v. HomEq Servicing, ___ F. Supp. 2d ___, 2009 WL 605817, *1, 2009 U.S. Dist. LEXIS 21908, *3 (C.D. Cal. Mar. 9, 2009) (unpublished).
In the Dorean scheme, after the homeowner paid a fee of between $1,000.00 and $3,000.00 to the Dorean Group, the homeowner would convey by quitclaim deed the title to his or her residence to a “family trust” that named Heineman and Johnson as the trustees. Heineman and Johnson, as “trustees,” would then submit a “presentment package” of documents to the homeowner’s mortgage lender. One document in the presentment package created a self-executing agreement whereby the lender automatically appointed the trustees attorney-in-fact for the lender and authorized the trustees to prepare and record all necessary documents for “proper reconveyance” of the residence if the lender did not rebut within 10 days claims asserted in another document, also included in the package, entitled “Affidavit of Truth.”
The presentment package also contained a fictitious bond that purported to satisfy the mortgage. In order to cash the bond, the lender was required to prove that the lender’s loan was valid to the satisfaction of Heineman and Johnson. The presentment package contained as well excerpts from books with illustrative cartoons, together with a “Report from Certified Public Accountant,” in which a man identified as Todd Ellis Swanson purported to certify the scheme as a legitimate way to cancel one’s mortgage debt. As this Court stated in a previous case dealing with the Dorean scheme, “[t]o characterize [the presentment package] as bizarre and absurd would be an understatement.” Household Realty Corp. v. Lambeth, 188 N.C. App. 545, 552, 656 S.E.2d 336, 341 (2008). When the lender inevitably failed to respond to the presentment package, the trustees would file the fraudulent substitution of trustee, cancel the deed of trust, and record with the register of deeds “a full reconveyance” to the homeowner.
The Household V Lambeth case is the same cited earlier. The court continues, referencing this earlier case while providing more details, as follows:
When Erickson was first introduced to the Dorean scheme at a meeting with the Dorean Group in June 2004, he expressed his personal skepticism about the plausibility of the scheme and discussed with other attorneys present at the meeting the possibility of being subjected to sanctions for filing legal documents propounding the scheme. Indeed, on 28 June 2004, Erickson learned that Todd Ellis Swanson was being investigated by the South Carolina Board of Accountancy.
Despite his admitted personal misgivings about the plausibility of the scheme and his knowledge of Swanson’s investigation, Erickson began representing clients of the Dorean Group. The first “mortgage elimination” case in which Erickson was involved was that of J.E.D. Lambeth. In May 1997, Lambeth borrowed $249,237.00 from First National Bank of Reidsville (“FNB Reidsville”). The Lambeth loan was evidenced by a promissory note and secured by a deed of trust upon real property located in Reidsville, North Carolina. FNB Reidsville assigned the note and deed of trust to FNB Southeast. In March 2004, Lambeth created the Lambeth Family Trust, naming Heineman and Johnson as trustees and granting them power of attorney to prosecute and defend any and all claims against the trust. On 25 March 2004, Lambeth recorded a quitclaim deed transferring the property to Heineman and Johnson as trustees of the trust.
On 23 April 2004, the Dorean Group sent a presentment package to FNB Southeast. When FNB Southeast did not respond, Heineman signed a document entitled “Specific Power of Attorney” purporting to appoint himself as attorney-in-fact for FNB Southeast. Heineman also signed a document entitled “Substitution of Trustee” in which Heineman falsely represented that he was attorney-in-fact for FNB Southeast and appointed himself substitute trustee under the deed of trust. Heineman signed a third document entitled “Full Reconveyance” that falsely represented that the holder of the underlying indebtedness had been paid in full, that the holder of the underlying debt had requested that the substitute trustee indicate on the public record that the deed of trust had been surrendered for cancellation, and that the deed of trust was therefore cancelled.
On 12 August 2004, FNB Southeast filed a civil action in Rockingham County Superior Court against Lambeth, the Lambeth Family Trust, Heineman, and Johnson to collect on the promissory note. FNB Southeast sought judgment for the principal and interest owed on the note and an injunction restraining Lambeth, Heineman, and Johnson from taking any action to limit, impair, hinder, or eliminate FNB Southeast’s rights under the note and deed of trust. Erickson represented Lambeth, the Lambeth Family Trust, Heineman, and Johnson in this proceeding.
On 12 August 2004, Judge Melzer A. Morgan, Jr. entered a temporary restraining order (“TRO”). In doing so, Judge Morgan pointed out to Erickson that his clients’ position was extremely unusual and reminded Erickson that Rule 11 delineated what pleadings could be filed without incurring Rule 11 sanctions. Judge Morgan also warned Erickson that he might refer the matter to the state Attorney General’s office.
In violation of the TRO, Heineman subsequently recorded the “Substitution of Trustee,” the “Full Reconveyance,” and the “Specific Power of Attorney” in the Rockingham County Registry. The DHC found that Heineman did so “for the purposes of misleading the public, misleading the court and misleading a person doing a title search of the property into believ[ing], in error, that there was no existing lien against the property.”
On 17 August 2004, a foreclosure hearing was held to foreclose on the deed of trust securing the Lambeth note. Erickson represented Lambeth in this proceeding and falsely represented to the trial court that the deed of trust had been cancelled and that the foreclosure action could not proceed, relying on the fictitious bond and the same arguments made to and rejected by Judge Morgan five days earlier. Erickson relied on the “Substitution of Trustee,” the “Full Reconveyance,” and the “Specific Power of Attorney” as support for his arguments despite knowing those documents were false.
The DHC found that when Erickson made those arguments, he knew they were fraudulent and frivolous and that he relied on the false documents with “the intention of misleading the court” and “for the purpose of inducing the court to dismiss the foreclosure proceeding and for the purpose of preventing foreclosure of the deed of trust.” Moreover, the DHC found that “Erickson made these legal arguments with knowledge that the arguments were not supported by law or fact or by a good faith argument for the extension or modification of existing law.”
Erickson filed pleadings on behalf of Heineman and Johnson in the Lambeth lawsuit and prepared the pleadings for Lambeth, who filed them pro se. All of these pleadings asserted that based on the “vapor money” theory, the debt evidenced by the promissory note was invalid. The DHC found that “[a]ny attorney licensed in North Carolina would recognize that these defenses and counterclaims were entirely frivolous.”
At the time Erickson filed these pleadings, he was aware that several courts in other jurisdictions had expressly ruled that the theory on which they were based was not supported by law or fact or by a good faith argument for the modification of law and that the theory was frivolous. In fact, at the time Erickson filed the pleadings in October 2004, no court in the United States had accepted the “vapor money” theory as valid. On 22 February 2005, the trial court entered judgment for FNB Southeast on the promissory note and entered an order imposing Rule 11 sanctions on Erickson for filing frivolous pleadings.
It seems that Erickson had applied the same legally-unsound Dorean Group tactics to areas other than mortgages. His participation in the operations of ‘Debt Relief Services’ is described by the court:
Around that same time, Erickson also became involved with an organization known as Debt Relief Services (“DRS”), which purported to be a company in the business of helping clients manage and resolve their credit card debt. Erickson had an arrangement pursuant to which DRS would pay any fee at the rate of $50.00 per hour for any client referred to Erickson by DRS who did not pay him. On 30 June 2004, Erickson agreed to represent the Braswell family in connection with their liability on a $15,000.00 credit card debt with BB&T. The Braswells had never disputed their liability for that debt. When BB&T sought payment on the account, however, DRS counseled and encouraged the Braswells to challenge the debt.
DRS and the Braswells sent BB&T a settlement agreement purporting to reflect a settlement of the credit card debt despite the fact that BB&T had never agreed to the settlement set forth in the document. This document was similar to the self-executing documents used in the Dorean Group scheme. The settlement agreement did not call for BB&T’s signature, but instead stated that BB&T could reject the settlement by refusing and returning a $10.00 check which would be sent to BB&T by separate letter. The Braswells sent BB&T the $10.00 check, but it did not contain a legend indicating that it was tendered in full payment of the $15,000.00 credit card debt. Erickson later asserted the frivolous position in pleadings that BB&T had accepted the $10.00 as full satisfaction of the $15,000.00 debt.
BB&T filed suit in Rutherford County District Court against the Braswells on 14 May 2004 to recover the outstanding balance on the credit card account, but the case was later transferred to Cleveland County. On 14 August 2004, Erickson prepared various documents for the Braswells to file. Although Erickson’s verified answer to the State Bar’s complaint specifically denies that he did so, Erickson’s client records show he did in fact prepare those documents and had the Braswells file them pro se.
In their responses to interrogatories, the Braswells stated they could not respond to the lawsuit until BB&T provided voluminous documentation relating to the history of the account. Prior to retaining DRS’ and Erickson’s services, the Braswells had never challenged the accuracy of the charges or payment credits on the account. In fact, the Braswells’ response to BB&T’s request for admissions, prepared by Erickson, admitted all charges on the account. The Braswells, however, in their responses to the request for admissions, denied the legitimacy of the debt on the grounds that the finance charges were fraudulently calculated. Prior to retaining the services of DRS and Erickson, the Braswells had never challenged the accuracy of the finance charges on any monthly statement.
On 19 August 2004, Erickson made a formal appearance in the lawsuit on behalf of the Braswells. Erickson contended that BB&T lacked standing to maintain the action because BB&T had assigned the indebtedness to a third party. Neither Erickson nor the Braswells presented any evidence that BB&T had assigned the debt. The Braswells were unsuccessful in defending the lawsuit.
However, the legal sleight-of-hand described above is only half of the Dorean Group operation. Having ‘freed’ the debt obligation by utilising the newly formed Trust, the property owner was then advised to take out a second loan. The court in Frances Kenny Family Trust v World Savings Bank lay out the scam in full (emphasis added at the end):
This “vapor money” case arises out of an elaborate Internet scam orchestrated by plaintiffs Scott Heineman and Kurt Johnson upon distressed homeowners on the verge of losing their homes. At least fifteen such cases were filed in this district. Nine cases were assigned to the undersigned. Each is frivolous and was filed in bad faith on the theory that no enforceable debt accrues from a lender that funds a loan through wire transfers rather than through hard cash. This alone would warrant an award of attorney’s fees and costs. Disturbing allegations, however, have been made by defense counsel that, if true, suggest mail and wire fraud, as set forth below. This matter thus warrants the attention of the United States Attorney as well as the State Bar of California with respect to plaintiffs’ counsel, Thomas Spielbauer.
…
Plaintiffs Scott Heineman and Kurt Johnson use the Internet to advertise to distressed homeowners, e.g., borrowers who are critically behind on their mortgage payments, that they have a way to “eliminate your mortgage.” They advertise that “[t]here is now a PROVEN legal and moral way of eliminating your mortgage while adding $50K to your pocket.” The main premise is that no enforceable debt accrues from a lender that funds a loan through wire transfers rather than through hard cash. This is the so-called “vapor money” theory. The way in which Heineman and Johnson “eliminate your mortgage” is described in their website at http://www.ccresource.net.[1]The process begins when the homeowner creates an online account with Capital Creation Resource (CCR), owned and operated by plaintiffs. With a username and password, the homeowner accesses plaintiffs’ website and completes an online application. The website also requests that the homeowner prepare and sign a promissory note as well as a loan agreement for the encumbered property. The homeowner then sends these documents to plaintiffs with a cashier’s check “of $3,000 [to eliminate a] 1st mortgage, and $1,500 [to eliminate] a second mortgage or home equity line of credit.” Once this initial fee is received, Heineman and Johnson set up a Family Estate Amenable Complex trust in the homeowner’s name, i.e., the Frances Kenny Family Trust. Heineman and Johnson name themselves the trustees. Title to the homeowner’s property is transferred to the trust.
Now in charge as trustees, Heineman and Johnson approach the bank or lending institution that lent the homeowner the money to purchase the property. They make a “Presentment” to the bank in the form of “a cash-backed bond in double-amount of the promissory note.” The “bond” is allegedly “a valid, rated instrument backed by a $120 Million Letter of Credit against the Assets of an 85-year old, $800 Million Swiss Trust Company.” This is essentially an offer to the lender to satisfy the borrower’s indebtedness. The alleged “bond,” however, is a ploy. The website explains to the homeowner that:
“The bank can keep the bond as payment based upon the following certain condition: The Lender must validate the debt. In other words, the Lender must PROVE a legitimate and valid loan was given.
If the Lender accepts the bond and cashes it without providing the necessary documentation regarding the validity of the loan, the Lender agrees that the Client/Trust has been damaged 10 times the amount of the bond. Cashing and acceptance of the bond is acceptance of these conditions. (Remember, the Lender really never loaned you anything).”In addition to the “bond,” Heineman and Johnson hire “Trustee lawyers” to “begin the legal process by sending out a legal complaint in the form of a CPA Report that outlines 40 or more different federal laws that have been violated in the `lending process.'” The lending institution thereafter has a certain time frame within which to respond to the complaint. Purportedly, the homeowner will be notified by plaintiffs’ legal team when the loan is “satisfied.” The homeowner’s “lender may or may not let [you] know or acknowledge this.”
Once the loan is satisfied, “re-financing begins.” The homeowner is told to “refinance [his] property at the maximum loan to value ratio possible” with a new lender. The alleged “purpose of this new re-financing is for you, the client, to compensate the Provider and CCR.” Heineman and Johnson are the “Provider.” They run CCR. The proceeds from this new loan are disbursed as follows: “The Provider receives 50%. CCR receives 25%. You, the client, receives the other 25%.” This entire process takes “5-7 months in most cases.” And, “[t]he end result is that the [homeowner] gets free and clear title to the home and a good amount of cash in hand.”
Plaintiffs, however, perpetrate a fraud to “satisfy” the original indebtedness.[2] One of the documents Heineman and Johnson present to the bank or lending institution is entitled a “power of attorney.” This document demands that the lender sign and thereby acknowledge that it has given the homeowner “vapor money” in exchange for an interest (via a deed of trust) in the subject property at the time of financing. A provision of this “power of attorney” provides that the lender’s “silence is deemed consent.” When the lender fails to respond, plaintiffs execute the power of attorney. They then sign a deed of reconveyance reconveying the lender’s security interest in the property to Heineman and Johnson. The forged power of attorney and the deed of reconveyance are duly recorded at the county recorder’s office. The county’s records thus show a power of attorney from the lender granting Heineman and Johnson the right to sign the deed of reconveyance and the reconveyance from the original lender. The title seems clear and unencumbered. The lender is unaware of the maneuver.
Plaintiffs then turn around and from an unsuspecting new lender seek a loan to refinance the property. When the new lender conducts a preliminary title search, it discovers the power of attorney and deed of reconveyance, both of which appear to have been validly executed. From the new lender’s point of view, the property appears to be unencumbered. And it is thus willing to refinance the property. Assuming that a refinancing loan of $200,000 is obtained, the proceeds are disbursed according to plaintiffs’ agreement with the borrower (i.e., fifty percent to Heineman and Johnson, 25 percent to CCR and 25 percent to the borrower). Plaintiffs clear at least $150,000. The remaining $50,000 supposedly goes to the borrower, who, of course, has the obligation to repay all $200,000.
At the conclusion of this process, the borrower is in even worse condition than when he or she first looked to plaintiffs for debt relief. Two lenders believe that they have valid security interests in the subject property. When the homeowner defaults on both loans, both lenders commence foreclosure proceedings. In response, Heineman and Johnson, as trustees, file a bankruptcy petition on behalf of the borrower or file suit alleging that no enforceable debt accrued from either lender because the loans were funded through wire transfers rather than cash. Fifteen such lawsuits were filed in this district on such a “vapor money” theory.[3]
Whether it is folks like the Braswell family who get involved over credit card debt, or folks like Joyce Lambeth who get involved in the type of scam described immediately above, the result is inevitably the same – to be saddled with the extra costs associated with legal defeat on top of the debts they already owed. Such people are the true victims in all of this, being subjected to needless financial cost by believing the flights of fancy offered by such Freeman legal advice.
In the present cases, however, the peddlers of this questionable legal advice did get their comeuppance. Paul Erickson and Thomas Spielbauer (attorneys who helped file the fraudulent cases) were disbarred from practicing law. Heineman and Johnson, of the Dorean Group, were indicted (you can download the indictment here in PDF format) and sentenced to 21 years and 25 years respectively for orchestrating “a mortgage elimination scheme whereby fraudulent documents were recorded as part of their clients’ titles to make it appear as though mortgage lenders’ secured interests in the properties were canceled when, in fact, the corresponding mortgage and home equity loans had not been fully repaid..”
It is interesting to note that Heineman and Johnson, throughout their trial, continued to assert Freeman ideology in their defence. For example (full court order in PDF is here):
Defendants Dale Scott Heineman and Kurt F. Johnson request to be set free and to be dismissed as defendants because they spell their names “Dale Scott Heineman” and “Kurt F. Johnson,” whereas the indictment sometimes spells their names with only upper-case letters, i.e., “DALE SCOTT HEINEMAN” and “KURT F. JOHNSON.” Heineman and Johnson alternatively ask for an evidentiary hearing on their identities or for an order declaring that they are the defendants and requiring the indictment to be amended to change the capitalization style. The disagreement over capitalization provides no basis for any of the relief requested. The requests for relief are DENIED.
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Defendants vigorously have persisted in this “misnomer” argument since they first appeared before the Court. It is a creative endeavor based on a formalistic but fanciful distinction. The emptiness of this argument must be clear by now.
Such was their persistence in using Freeman ideology that the court ordered a mental examination. From United States v. Heineman:
The Court finds that defendants Heineman and Johnson, who have refused counsel thus far, have made multiple statements that give reason to believe they may suffer from a mental disease or defect that renders them mentally incompetent to the extent that they are unable to understand the nature and consequences of the proceedings against them, to conduct properly their own defense or to assist potential counsel in their defense — or at least the record might suggest incompetence to an appellate court. See 18 U.S.C. 4241(a). Among these statements by defendants Heineman and Johnson are those suggesting they believed that they were in communication with Jesus and that he had told them he was burning down three judges’ homes.
Current Freeman Activities In Ireland
In Ireland at present, similar to the US, the vast majority of Freeman-related activities have been confined to online discussion boards (some of which have been linked below). Much of the discussion appears to be fuelled by the anti-government anti-bank sentiment and feeling of political disenfranchisement. This is understandable given the economic impact that has followed the collapse of the ‘Celtic Tiger’, particularly the pressure many have experienced due to budget austerity measures. We don’t foresee any Irish Freeman groups taking up violence unless a given group already has ties to violent activities (eg: paramilitary groups).
Unsound Legal Theories
However, we do have concerns that would-be adherents of the Freeman ideology might find themselves on the road to legal hurt should they attempt to enact any of their legal theories in a court of law. Some examples of failed attempts in the UK to use these legal theories are described in this newsletter of the Judiciary of England & Wales. Most ‘lay litigants’ who use the Freeman ideology in the courts, particularly after things don’t quite go their way, tend to think better of their decision. We observed this occur with Brian Hade:
Then Brian was brought forward and seemed to have some kind of coaching. This correspondent was informed that some American with a ‘Freeman’ disposition was coaching him. He seemed like a rabbit in the lights and spoke in a hackneyed manner. Brian Hade spoke about not breaking any law and being a law abiding citizen. The judge tried to make clear to him the dimensions of our democratic system and tried to give him a kind of abc to assist him to be able to see that he was flagrantly breaking the law. He did not seem to wish to be represented and so the judge gave him an extended lunch break to reach a decision as to his response.
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Finally Brian Hade after a great deal of gentle explanation by Justice Gilligan agreed to accept the decision of Justice Ryan. He was hardly enthusiastic, but in the end he in open court agreed to call off the Alsatians and obey the law.
Not all ‘lay litigators’ are so quick to rethink their legal strategy, and often with disastrous results. An illustrative example of the Irish take on the Freeman ideology is the Freeman Guide (downloadable PDF) published by Tír na Saor, which gives a good insight into the concepts that underpin Freeman legal theory. There are several extremely questionable legal advices given in this document which. For example (page 9):
You get a Parking Ticket on your Car. This is an offer of contract stating “Your Vehicle was illegally parked, all Persons found illegally parked must pay a fine of €50 in accordance with Road Traffic Act”. Now we’ve already established that you are not a person, you have a person so how does this Act apply to You, the Man or Woman? It doesn’t! You see, they are not attempting to charge You the Man or Woman, they are attempting to charge the Straw Man or contract with the Company using Commercial Statutes. Because you believe this applies to you, you accept the offer and the liability! However, what you’re not told is- You are not obliged to accept this offer…
Pages 11-12 go to describe the court system from the Freeman perspective, although the advice given has no basis in either law or fact. The advice, when applied, has proven ineffective in Irish courts. Two such examples are ‘Bobby of the family Sludds’, whose “blizzard of legal paperwork could not stave off two motor insurance convictions and a series of fines”, and Francis Cullen, who after stating that he was a private sovereign person who did not consent to being before the court and did not recognise it as having jurisdiction over him was ordered jailed until December (or until such time as he begins to cooperate with the court). Any document recommending the use of such questionable legal tactics is of concern, particularly as (according to the Irish Times) “over 100 cases of Freemen-on-the-Land arguments used in Irish courts this year“. To their credit, the Freeman Guide does note (page 19) that “This is not a way to break to the law and get away with it“, something that the many failed court encounters underline.
An insight into the level of rejection of the Irish legal system by Freeman ideology can be seen in this annotated fine notice:
Potential Scams
In additional to importing the Freeman ideology from the US, it seems that some of the fraudulent Freeman schemes have also made it to these shores. Senator Thomas Byrne, speaking on July 19th of this year, expressed his concerns over such a scheme:
I am seeking a debate on the subject matter of an article in this morning’s edition of the Irish Examiner, which appears under the headline “Debtors protect assets in private trust”. The article in question refers to a scheme being operated out of County Kilkenny which is being accessed by people throughout the country. Said scheme purports to place mortgages into a private trust, thereby removing from the banks their ability to repossess the properties to which they relate. I met one of the promoters of this scheme in Leinster House on Tuesday and, as a result, I am deeply suspicious of the scheme. The promoters charge people €250 to enter the scheme and claim that by using trust law, assets can be put beyond the reach of the banks. The individual I met informed me that the promoters had discovered a flaw in mortgage deeds which allows this to happen. As someone who is very familiar with such deeds and details relating to them, I requested information about this flaw. The promoters refused to divulge the details of the flaw to me. I was also informed that the scheme operates on a referral-only or invite-only basis. This fact is attested to in the article in today’s edition of the Irish Examiner, which also indicates that 600 people have joined the scheme and paid €250 each for the privilege. The promoters actually informed me that the number of individuals who have signed up to the scheme is in the low thousands.
One interesting feature of my meeting with one of the promoters was that I was asked if I am familiar with the New Beginning organisation. I stated that I am familiar with it and that I know many of those who have been involved with that organisation in its various incarnations. I further stated that I am very proud of the work done by New Beginning and that I was glad to have worked with it in respect of a number of issues. The meeting ended when I outlined my relationship with members of New Beginning. As Members are aware, I continually raise the issue of mortgages in the House in the interests of trying to obtain answers for people. If, therefore, someone informs me that they have an answer, I want to discover what it involves. That is why I agreed to the meeting to which I refer. However, the secrecy, the fee involved, the unknown legal basis for what is being done here and the fact that the person I met clammed up when New Beginning was mentioned, have led me to reach the conclusion that this scheme bears all the hallmarks of a scam.
I urge the public to be wary of the scheme and those promoting it. I also urge the Irish Examiner and other media outlets to highlight this matter, about which I have genuine concerns. I have spoken to some experts in this field and they agree with my assessment. I compliment New Beginning which discovered a real loophole two years ago and which was involved in obtaining the relevant judgment in the Dunne case. I understand that none of the mainstream organisations assisting people who are experiencing difficulties with their mortgages endorse the scheme to which I refer.
The RTE Primtime piece made mention of the Rodolphus Allen Family Private Trust and Debt Options Ireland, which orchestrates the activities Senator Byrne refers to. As the Irish Examiner explains “Throughout the summer at least 2,000 people, many of them involved in businesses during the boom, made a last-ditch attempt to remain in control of their debt-laden properties. They did so by putting their faith in a mysterious property trust that it was claimed had found a way to split mortgages from properties themselves.”
One of the interviewees in the RTE Primetime piece, Karl Deeter (who discussed this issue on his blog here), published an example copy of the document people were signing up with (click on the image to open):
The utter legal failure of the Dorean Group’s trust structures to separate debts from the properties against which such debts were secured has been well documented in this article. Given the similarity with this Irish incarnation of practically the same scheme, we would be extremely concerned that people choosing to become involved are setting themselves up a future legal defeat – in the same way folks like Joyce Lambert were burned. The claim of being able to free a property from any liens or mortgages secured upon it, for the small fee of €200 (or whatever price they are currently charging) sounds just too good to be true. The wealth of evidence from US courts should serve as a strong warning against getting involved with what, to use Senator Byrne’s words, “bears all the hallmarks of a scam“.
In Conclusion
We quote from the United States v Sloan case referred to earlier which we feel makes the point clearly: “Like moths to a flame, some people find themselves irresistibly drawn to the tax protestor movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like the moths, these people sometimes get burned. Lorin G. Sloan believed these claims and because he acted upon them now faces four months in a federal prison; there can be little doubt that he has been burned.”
Against a background of recession, and a multitude of people in dire situations eager to reach out and grab any opportunity, we advise everybody to exercise caution and not embark on a dubious legal pursuit that will, almost inevitably, worsen an already bad situation. To paraphrase a comment from the RTE report, when someone is drowning and you tell them a stone will float they may grab it.
The following are examples of Irish-based Freeman groups. Please note that these sites contain a mixture of inaccurate, misleading and outright-false legal advices:
Tír na Saor
Freemen of Waterford
The Sovereign Independent (Now defunct)
We The People
Irish Revolution
The Brehon Law Society
The Common Law Society
Debt Options Ireland
Filed under: Freeman Movement |
Dialogue Ireland 
Hi. I would like to add some clauses from human rights to this argument. I have been persecuted by the Co.Co. over the last 3 years, and have only recently discovered that they, with the collusion of the judges, have been violating sever of my human rights, as well as statute and the Constitution of Ireland.
I intend to sue the county officers and the judges personally and collectively for exceeding their authority.
Every judge has taken an oath to defent the fundamental rights of a human being in a just society. One of those rights, according to t ECJ is that “a person is entitled to respect for his privacy, his home, and his communications. THE STATE INSTITUTIONS SHALL NOT INTRUDE, (except under fairly strict conditions)”
In addition to this, the court of last resort is REQUIRED to register the case pending a hearing. Every court has discretion in applying to the ECJ for guidance, but the last court of appeal MUST do so.
I am seriously considering taking a college course in human rights and constitutional law (if such a course exists). Maybe if enough people expressed an interest, someone would be prepared to teach it. It is sorely needed !
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I’m pretty sure the court cases I cited showed how ineffectual those arguments are in the legal setting…..
I exploded and managed to splatter my tea over my laptop, I just couldn’t stop myself from experiencing an uncontrollable fit of laughter.
Does this mean that the original DCI in Denmark was founded in the 1970’s for the purposes of, forty years later, providing a platform of disinformation for the Irish government? Or is the response of ‘government disinfo’ only used when there is nothing of any substance to be stated in response?
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Which government were you thinking of?
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Was he supposed to?
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You don’t have to be a conspiracy theorist to see clearly that this web site is a deliberate government disinfo set up.
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The writer of this article listed eight ‘beliefs’ of the Freeman movement but did NOT repudiate ANY of them.
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