Wednesday, June 27, 2012
Ninth Circuit Rejects Tax Protesters’ First Amendment Claims
By KENNETH OFGANG, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed the fraud and conspiracy convictions of three tax protesters, rejecting the contention they were merely exercising free speech rights in telling paying clients how to avoid paying the Internal Revenue Service.
“We agree that mere advocacy of tax evasion—and nothing more—cannot support convictions for conspiracy or fraud,” Judge Milan D. Smith Jr. wrote for the court. “However, the defendants did far more than advocate. They developed a vast enterprise that helped clients hide their income from federal and state tax.”
The defendants, Lynne Meredith, Gayle Bybee, and Teresa Manharth Giordano were part of a tax protest group called We The People. They were sentenced to prison terms of 121 months, 60 months, and 40 months, respectively, by U.S. District Judge Dean D. Pregerson in Los Angeles in 2005, following a 13-week trial.
Meredith, of Sunset Beach, was convicted of conspiracy, four counts of mail fraud, two counts of using a false social security number, making a false statement in a passport application and five counts of failing to file a tax return. Bybee was convicted of conspiracy and three counts of failing to file a tax return, while Giordano was convicted of conspiracy, four counts of mail fraud, and two counts of failing to file a tax return.
Pregerson, according to a press release issued by prosecutors following the sentencing, said Meredith’s ideas on United States tax laws were “delusional.” He said the defendants were motivated by greed and that they had harmed both the government and the people who paid them for books, seminars, and “pure trusts” that they claimed could shield income from taxation.
That income allowed Meredith to live a lavish lifestyle, according to news accounts, featuring a beachside home, a fleet of classic cars—one of which had a license plate reading ‘TAXREBL”—and a collection of Coca-Cola memorabilia.
A total of eight defendants were charged in the case, and all were convicted. Toni Smith pled guilty before trial, Betty Erickson and Nora Moore were convicted and did not appeal, and Gregory Karl and Willie Watts had their convictions affirmed by the Ninth Circuit in 2008.
In rejecting the defendants’ First Amendment claims, Smith cited United States v. Freeman, 761 F.2d 549 (9th Cir. 1985). The court in that case reversed the defendant’s convictions for counseling violations of the tax laws, saying the jury should have been instructed on a First Amendment defense, but affirmed convictions on 14 charges of aiding and abetting the filing of false tax returns.
In affirming the aiding and abetting convictions, the court reasoned that when advocacy becomes “an integral part of the crime,” freedom of speech is not a defense “even if the prosecution rests on words alone.”
Smith cited evidence that the defendants gave specific advice to paying customers as to letters or forms they could file with the IRS in order to falsely claim they lacked taxable income and fraudulently request refunds. “The defendants did far more than merely encourage” these taxpayers to defraud the government, the judge said, they became active participants in the evasion of taxes.
The panel also rejected Meredith’s claim that there was insufficient evidence that she was willfully false in her request for a new passport.
Meredith claimed that when she applied to replace a passport that was stolen “at the Chicago airport,” she forgot that she had previously replaced a passport that had been stolen in Denver, and therefore made an innocent mistake in checking a box on the application saying she had not previously replaced a lost or stolen passport. But since the incidents occurred less than two years apart, Smith reasoned, jurors were entitled to conclude that Meredith was lying, rather than being forgetful.
Attorneys on appeal were Gretchen Fusilier of Carlsbad for Giordano; Joe Alfred Izen Jr. of Bellaire, Texas, for Meredith; Marcia J. Brewer of Culver City for Bybee; and Assistant U.S. Attorney Jean-Claude André of Los Angeles for the government.
The case is United States v. Meredith, 05-50452.
Copyright 2012, Metropolitan News Company