Tax Protester Faces Justice Dept.

AS VEGAS, Aug. 15  Can a man be held in contempt of court and jailed for selling copies of public records?

Irwin Schiff, the nation's best-known proponent of the idea that people are not required to pay income taxes, has put that provocative question to Lloyd D. George, a federal district judge who held a hearing here on Thursday on a Justice Department request that Mr. Schiff be put behind bars for civil contempt.

On June 16, Judge George issued an injunction ordering the 75-year-old Mr. Schiff, who has twice gone to prison for tax offenses, to stop promoting his "zero tax return," which he says allows anyone to legally list no income and so pay no taxes. At least 5,100 such returns have been filed in recent years, the Internal Revenue Service says, costing the government $51 million in taxes and tying up law enforcement resources needed to pursue the filers.

Judge George also ordered Mr. Schiff to stop selling his $38 book, "The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes." Judge George found the book to be false commercial speech that incites people to evade taxes, although, contrary to Mr. Schiff's assertion that the book had now been banned, the court did not prohibit its sale by people unconnected to him.

Five days later Mr. Schiff certified to the court that he was obeying the injunction, which also required him to post it prominently on his Web site.

But the Justice Department says he has flouted the order, noting that he continues to assert on that site that zero income tax returns are legal. In addition, he provides only a link there to the injunction.

Among the Justice Department's other evidence is a $150 "Commemorative Injunction Packet," which went on sale at his Web site after the order was issued.

The packet includes a copy of Mr. Schiff's 2002 tax return, showing zero income, and his statement to the I.R.S. explaining his theory that no individual has income under federal law, which, he says, defines income as corporate profit.

The packet consists of the chief documents from the case before Judge George. For those not inclined to wade through Mr. Schiff's book, with its miasma of theorizing and digressions, it offers a crisp zero-tax-return distillation, written for the court by Evan Davis, a lawyer in the Justice Department's tax division.

Since Mr. Schiff already owes millions of dollars in taxes, the government says fining him would be insignificant and has asked that he be jailed instead and that two associates of his, Cindy Neun and Larry Cohen, each be fined $5,000 a day until they, too, comply with the injunction.

Though the government cites a variety of evidence, Mr. Schiff has tried to place the focus of the case on the fact that his packet is made up of public records.

"The government wants to jail me for selling documents you can walk into the courthouse and buy copies of for 50 cents a page," he said after the hearing on Thursday, surrounded by three dozen supporters he had pulled together on a day's notice.

Told of Mr. Schiff's tactic, Prof. Eugene Volokh, who teaches First Amendment courses at U.C.L.A. Law School, said the public-document argument would not shield the defendant if he was inciting people to commit crimes.

"If indeed what Schiff is doing is illegal commercial advertising  fraudulent commercial advertising  it doesn't matter if he fraudulently advertises using the public record," Professor Volokh said. "If the issue is incitement to commit a crime, it doesn't matter if he quotes from the public record. The real question is whether the content of the speech is protected, not so much the source."

Mr. Schiff routinely applies the word "criminal" to federal judges, including Judge George. His lawyer, Michael Stein, a First Amendment specialist, said jailing someone for selling public documents  or for expressing views about federal judges, whatever the merits of those views  would set a dangerous precedent.

Tax Protester Faces Justice Dept.

(Page 2 of 2)

"The most clearly protected speech is the public debate about what is happening in our court system," said Mr. Stein, who also plans to appeal the court order. "This injunction is very broad, so broad that it basically prohibits Mr. Schiff from saying what he believes."

Mr. Stein said the Justice Department was not acting simply on the ground that Mr. Schiff's zero tax idea is unprotected false commercial speech. Rather, he said, Mr. Schiff "is being prohibited from saying anything about the tax laws that is contrary to what the Justice Department says those laws say."

A notice of appeal from the order prohibiting Mr. Schiff and those acting in concert with him from selling "The Federal Mafia" has been filed with the United States Court of Appeals for the Ninth Circuit, said Allen Lichtenstein, general counsel of the American Civil Liberties Union's Nevada chapter. That chapter, as well as the American Booksellers Association, the American Publishers Association, the American Library Association and the writers' group PEN, will join in asking the appeals court to vacate the order, Mr. Lichtenstein said.

On Thursday, some of the dozens of people who had turned out in support of Mr. Schiff chuckled at how he had used public records to continue his assault on the legitimacy of the tax system.

"He's a real troublemaker, isn't he?" said one of them, who declined to identify himself.

In interviews, many of those supporters described the federal government as a criminal organization systematically destroying economic opportunity for all but the elite and using the tax code to undermine what they called a right to not have their labor taxed.

Mr. Schiff's appearance at the hearing, held in a dark-paneled courtroom, brought seven bailiffs and two plainclothesmen, although the supporters were all polite and orderly.

Judge George began the proceeding with an unusual address lasting nearly 20 minutes. He indicated that he had received letters from many people denouncing him for the injunction and that some, in crude language, characterized him as lawless.

He explained that as a trial court judge, he was bound by the decisions of the Ninth Circuit and the Supreme Court, and that in finding that Mr. Schiff's zero tax return amounted to tax evasion, he had been following the precedents of those higher courts.

The hearing on Thursday had not been scheduled until Tuesday, and so, because Mr. Stein said he had been hired only Wednesday night and needed time to develop a defense, Judge George set a new hearing for Sept. 4.

Mr. Stein said he expected that his client would be jailed after that hearing, a view that Mr. Schiff said he unhappily shared.

David Cay Johnston's article.
Published in the New York Times August 16th 2003
*Personal note I believe the last line of the article on the 2nd page and the 10th paragraph on first page are lies!
Both pages are presented here.
To view the actual NY Times article, go to their web site and search Irwin Schiff.
The Contempt of court hearing.
Irwin Schiff with David Cay Johnston in front
of the court house on August 14th, 2003

Back to top