Colorado couple win appeal against 64 counts of tax evasion - another win by team Minns

 

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IRS CAPITULATES, RETURNS VEHICLE

By Edward Snook Investigative Journalist

May 30, 2008

NewsWithViews.com

Montrose, Colorado – In my last article, “Attorney Michael Minns Beats IRS, Again.” This riveting expose gave in-depth coverage about the solid defeat inflicted on the IRS by Houston, Texas attorney Michael Minns, the architect of a defense for a Montrose, CA couple, James and Pamela Moran, standing trial on 64 counts of sundry tax crimes. With the acquittal on all counts this reporter issued a challenge to get the Morans’ Jeep back.

This challenge was answered on April 23, 2008, when the Internal Revenue Service (IRS) quietly, and ever so discreetly, capitulated to the trial outcome and returned the Morans’ Jeep, stolen from them by the IRS in 2001. Incidentally, the same year the Jeep was illegally stolen, Minns’ book, “How to survive the IRS” was released by Barricade Press.

Most will only speculate regarding the return of the automobile but this reporter has researched some facts in this case that may shed some light on what did occur to cause the IRS to take the Jeep away from the Morans in the first place. The good news is this vehicle is once again housed under the roof of the Morans’ garage, only after they suffered terribly from the malicious prosecution that reigned down upon them for seven years. This terror included two jury trials in Federal Court and a successful appeal to the 9th Circuit Court of Appeals.

The ordeal began over seven years ago when the IRS, from orders on high, attacked an organization called Anderson Ark Associates (AAA) located in Costa Rica and the United States. The Morans along with many other completely innocent investors were deemed criminals and pursued by abusive IRS agents who were more intent on convictions than of conducting a legitimate investigation and then determining the truth.

In the Morans’ case the indictments were based on a series of misrepresentations initiated by biased Certified Public Accountant, Joseph H. Moschetti, located in Grand Junction, CO, who may have been fearful of losing a client to AAA. He told Criminal Investigative Department (CID) agent Michelle Hagemann (with whom it was disclosed during the Morans’ second trial that he had a personal relationship with) about the organization and she ultimately lead the raid against the Morans’ home and pursued the indictment against these two elderly people. The Morans’ home was assaulted by armed dragoons that broke down their door, confiscated records that could be used in the Morans’ defense and seized a new Jeep, leaving the Morans’ with a ten year old truck, which was considered to be worthless by the IRS.

During the first “now proven false conviction” trial Hagemann gave false testimony against the Morans, leading to a conviction on all 64 counts. Facing a long jail sentence the Morans appealed the convictions based on the premise the judge denied them the right to express their beliefs for participating in the alleged tax scam. It needs to be said, the truth only comes out when dealing with the Internal Revenue Service and the Department of Justice once in a blue moon – and only with the assistance of exceptional legal council, able to counter the deceptions and manipulations of the prosecution, combined with the assistance of unconstitutional court practices, withheld evidence and ridiculous, costly procedures.

However, in the second trial the Morans new counsel Michael Minns grilled Hagemann about her relationship with her now known source, Moschetti. Minns repeatedly asked Hagemann about being escorted to a AAA meeting in Grand Junction by Moschetti, and why she gave him her private home phone number, usually guarded by agents, resulting in her admission that he was her personal tax preparer. Hagemann did have the faint decency to admit that it would be inappropriate if in fact the CPA was getting a finders fee reward for turning the Morans over to the IRS. She added that if it came up she would refer it to someone else since the relationship she shared with Moschetti would have created a conflict of interest. The bottom line is this – Moschetti had Hagemanns’ home phone number, he was calling her a lot, he offered to let her bug his office phone and listen in on his clients and he went with her to a meeting where the Morans spoke, (assisting Hagemann in concealing her “undercover” status) with another client of his who he didn’t inform the identity of Hagemann to. The US~Observer’s strong opinion is that Moschetti is an undercover agent of the IRS and like a majority of agents, he and Hagemann openly practice out and out deception and literal entrapment. In short – they both “live a lie.” Those naïve customers that employ Moschetti as their CPA had better hope that he isn’t taping their conversations and turning those tapes over to the IRS.

There were other agents that participated in the conspiracy against the Morans. One such agent was CID agent James Dowling (undercover name – Jim Mitchell). His testimony in the first trial was well orchestrated by the prosecution and not challenged by the defense attorneys. Minns did not commit these errors in the second trial. During the questioning Dowling stated that he no longer worked directly for the IRS but that he worked for another entity and was contracted out to the government indirectly. Interestingly, when Minns asked him if that entity was in any way similar to Blackwater USA, a private intelligence and security firm, the court ruled the question out of order and struck it from the record. Minns is not convinced that the jury struck it from their minds or the pool of evidence. Dowling testified in the first trial that he did not accept the hospitality of AAA to stay at a Costa Rican Bed and Breakfast while attending an educational conference, but instead, fearing for his life due to the dangerous people involved with AAA, stayed at a hotel alone. In the second trial, after very tenacious and professional questioning by Minns, his story changed. Dowling, a married undercover IRS special agent finally admitted that he shared a room with his undercover co-agent and partner, not his wife, Diane Taggert (undercover name – Diane Target). I wonder which partner slept in the bathtub. According to the Morans, James being a Viet Nam veteran and former minister and his wife Pamela, the church organist, Sunday School teacher and cookie-baking homemaker, Taggert dressed provocatively in short hot pants, so much so that many of the conference’s more religious attendees were uncomfortable. This testimony gave the second jury a better understanding of who Dowling really is, contributing in part to the acquittal.


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The Morans got a release of lien on their home March 28, 2008 (immediately after the verdicts were read) but the Jeep was still held hostage. To better understand why this was so, one must understand the IRS mechanisms for fear mongering. The IRS lost their “unconstitutional” seizure rights when the Morans walked out of the Seattle courtroom innocent of all 64 stacked felony charges. The IRS was also notified that Minns would file suit for the return of the Jeep yet they dragged their feet in returning the car. In addition, when the IRS attacked the Morans the stories made national headlines describing how the agency was breaking up the largest tax scam in history. In fact the conviction of the Morans is still on the IRS website. Since the acquittal, the story is non-existent in the media.

Attorney Minns had an interesting perspective on this phenomenon and to why the Jeep was not returned right away. “I have two guesses that are probably based on the truth. First, the story of the Morans’ acquittal was blacked out in the main stream media with the exception of the US~Observer and her sister news outlets that possess a huge reader base. Second, the IRS has an extraordinarily successful public relations department. They are always timely when broadcasting their indictments, arrests and convictions of those they target. However, when they lose a case, such as this rare defeat, silencing the media becomes a high priority for damage control. News of convictions always precedes April 15th but news of an acquittal is held up until after tax day when the public is not heeding IRS warnings. That was obviously the IRS’s intent in stringing the Morans along for four months.

Another point the IRS would like kept from the public is the cost of holding the Jeep for seven years. Over those years the Jeep was driven to Denver, then to the auction block, removal from the block when the Morans won the appeal, back to the auction block prior to the second trial last December when the odds of an acquittal were stacked against the Morans and finally back to storage upon the successful outcome of the last trial. Average rates for forced storage exceed $50 a day, times approximately 2,555 days, for a storage bill exceeding $125,000. Add to this total; interest, cost of starting the engine once a month and transportation, the cost to the taxpayers is probably over $240,000. Even if the government got a discount on these expenses it’s fair to say the cost far outweighed the value of the Jeep.

While in Denver for business after April 15th the Morans were asked to pick up the Jeep. They declined to take possession after inspecting the car and finding a dead battery, tires with cracking sidewalls, cracked wiper blades and a cracked windshield. Telling the IRS, “We want our property back but would you drive this car with these tires over the mountains in snowy conditions?” The attendant at the storage yard agreed with Morans’ assessment, and again when Jim Moran stated to IRS agents, “So don’t you think at the very least, since you aren’t going to apologize, that you should deliver the jeep back to our home in Montrose where it was confiscated?”

On Wednesday April 23, 2008, the Jeep was delivered back to a Montrose dealership with a new battery but still outfitted with cracked tires, a cracked windshield and deteriorated wipers. Also, absent when the Jeep was handed over was agent Michelle Hagemann, the pistol packing mama, who seized the Morans’ Jeep under the threat of armed force. The two sheepish agents that were present denied having anything to do with the original raid.

The IRS/CID agent remarked to the Morans’ attorney that he was puzzled. “How did they win all 64 counts? Just one count would let the IRS keep the jeep.” Minns gave Jim’s and Pam's response: "They were innocent." Hard for any government agent to fathom while working in a society where people are deemed guilty until proven innocent.

Now the Morans are trying to return to a normal life visiting family and friends, while thanking God, their renowned attorney Michael Minns, Minns’ daughter, attorney Rain Minns and their Seattle, WA attorneys Peter Mair and Jon Zulauf for their victory.

In retrospect, the public should be fully aware that many Americans who were involved with AAA are currently sitting in a prison cell with their lives completely ruined simply because of the lack of a competent attorney like Michael Minns.

And most Americans still believe they live in a “free” country!...

Edward Snook's Note: One very unique and important defense tactic used by Minns was to ask the various CID agents if they had taken classes given by the IRS on how to be effective witnesses and thus sway unsuspecting jurors. Minns knows that taking such a class is a requirement for all CID agents and he also knows that jurors want to hear the straight truth, not an acting job by dangerous and abusive agents of the IRS. It would behoove all attorneys who represent clients in tax cases to expose this fact in their criminal tax cases.

2008 - Edward Snook - All Rights Reserved

Edward Snook is 20-plus year investigative journalist, with a college major in criminal justice and the publisher of US-Obsrver newspaper. 541-474-7885

E-Mail: ed@usobserver.com   

Website: us-observer.com

 

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The New York Times

 

 

2 Ex-I.R.S. Lawyers' Licenses Suspended for Misconduct

By DAVID CAY JOHNSTON

Published: August 21, 2004

 

The law licenses of two former Internal Revenue Service lawyers have been suspended for two years after a federal court ruling last year that they defrauded the courts so that the I.R.S. could win 1,300 tax shelter cases.

W. Kenneth McWade was suspended by the Oregon Supreme Court in an order dated Aug. 10 and released yesterday by the Oregon State Bar.

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Four months ago Arkansas officials suspended the license of William A. Sims.

The United States Tax Court has also suspended both lawyers for two years, and the I.R.S. director of practice has suspended them indefinitely.

The suspensions followed complaints brought by Michael Louis Minns, a Houston lawyer who represented 124 of the tax shelter buyers, most of them airline pilots. One buyer is seeking a $6 million refund.

The Federal Court of Appeals for the Ninth Circuit in San Francisco found in January 2003 that the lawyers had defrauded the court by making a corrupt deal with a few of the pilots who bought tax shelters in the 1970's and 1980's. Under the deal, no tax-collection actions in regard to the shelters would be taken against these pilots in return for testimony that would hurt the others.

The court called this "extreme misconduct" and asked why the I.R.S. had not disciplined the lawyers, each of whom was paid a $1,000 bonus for his work on the cases.

Mr. Minns then asked the I.R.S. in which state each was licensed so that he could seek their disbarment. The I.R.S. refused, saying disclosure of their law licenses would violate their confidentiality.

In fighting suspension, the two lawyers filed papers contending that they had acted properly.

Mr. McWade, reached at home in Hawaii, said, "I guess the court has decided that Oregon lawyers are not entitled to due process." Mr. Sims did not respond to voice mail and e-mail messages.

The two men left the I.R.S. after their conduct came under scrutiny.

 

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January 19, 2003

I.R.S. Defrauded Tax Court, a Judge Rules

By DAVID CAY JOHNSTONT
he Internal Revenue Service committed fraud by brokering secret deals with two airline pilots to let them escape taxes in return for testifying against 1,300 other pilots who bought into the same tax shelters, a federal appeals court ruled Friday.

The Ninth Circuit Court of Appeals in San Francisco said that the remedy for this "extreme misconduct" by the I.R.S. was to give all of the pilots the same corrupt deal that one of the pilots got.

That pilot, John R. Thompson, settled his taxes from the shelter for a dime on the dollar, but actually paid nothing, court papers show. Instead, Mr. Thompson received a $60,000 refund through falsified tax returns prepared with the help of the I.R.S. That money paid his legal fees. He also pocketed $20,000 in interest, court papers show.

The ruling will require the I.R.S. to pay tens of millions of dollars in tax refunds, interest and legal fees, said Michael Louis Minns, a Houston tax lawyer who represented some of the pilots. One pilot, who paid the disputed taxes more than two decades ago and then took the I.R.S. to tax court, is due about $6 million, Mr. Minns said.

Some pilots, who did not pay the taxes, will receive nothing, but will have tax liens removed from their homes, Mr. Minns said.

An I.R.S. spokesman, Terry L. Lemons, said yesterday that the agency had no comment.

The case involves tax shelters sold in the 1970's and early 1980's by Henry Kersting, who was a German U-boat commander in World War II. He sold tax shelters from his Honolulu office until he died three years ago.

The I.R.S. uncovered this Kersting scheme, which involved fabricating debt that clients could deduct on their tax returns. In 1981 it disallowed the deductions and sent bills to 1,300 pilots for additional taxes and penalties.

The appeals court said that rather than try the case honestly, two I.R.S. lawyers made a secret deal with Mr. Thompson and a second pilot that let them escape taxes in return for giving testimony favorable to the I.R.S.

"The taxpayers have clearly and convincingly demonstrated fraud on the court and are entitled to relief," the judges wrote, noting that the fraud continued through two separate trials in tax court. "The I.R.S. had an opportunity to present its case fairly and properly."

Judge Michael Daly Hawkins criticized the I.R.S. for not taking serious action against its lawyers, Kenneth W. McWade, who tried the case, and his supervisor, William A. Sims. The court said the two lawyers "defiled the sanctity of the court and the confidence of all future litigants."

The I.R.S. "has done little to punish the misconduct and even less to dissuade future abuse," Judge Hawkins wrote.

He noted that both lawyers received $1,000 bonuses from the I.R.S. for their work in the case. They also received two week suspensions, after which Mr. McWade retired. Mr. Sims continues as an I.R.S. lawyer.

Mr. McWade and Mr. Sims, in testimony, insisted that they had behaved properly at all times.

Mr. Minns says that he wants both men disbarred, but cannot find a record of their law licenses. He said he wrote to the I.R.S., which replied that it was unaware of where they are licensed either, but noting that it only looked in a public directory of lawyers and not in its own files.

The court said it would be unfair to let the pilots escape the taxes they owed just because of the fraud by the I.R.S. So, instead, it directed the Tax Court to give each pilot a settlement "on terms equivalent to those provided in the settlement agreement" with Mr. Thompson.

 

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IRS:   Pilots get favorable ruling after nearly three decades of fearing taxes

Pilots come out on top in legal battle with IRS


Houston Business Journal - Friday, Jan. 31, 2003

by Monica Perin - HBJ staffwriter

[Houston} Retired Continental Airlines pilot Bob Bowersox of Houston says he's been living in fear of the Internal Revenue Service for the past 28 years.

For Bowersox and 1,300 other pilots and their families, that ordeal is finally over.

Three Houston attorneys last week won an extraordinary case against the IRS, two of whose attorneys were found to have committed fraud in order to trump up a multimillion-dollar tax case against the pilots.

In a decision that fully upheld the arguments of the Houston attorneys, the Ninth Circuit Court of Appeals in San Francisco said the two IRS attorneys committed "a fraud on both the taxpayers and the tax court" and in so doing they "defiled the sanctity of the court," according to the court's ruling.

Houston attorney Michael Minns represented 127 of the pilots, including Bowersox and Continental pilot Richard Hongsermeier, also of Houston, who was named as a petitioner in the nearly three-decades-long case.

"It's a huge case," Minns says. "Most tax cases deal with one family. There are 1,300 families in this case, and all of them had their lives, their pensions and their homes up for grabs. They will now get their freedom."

The case dates back to the 1970s, when hundreds of airline pilots invested in business ventures launched by a Honolulu banker, Henry Kersting.

Bowersox invested in several of the businesses, including a car leasing company that was about to go public when the IRS began investigating the tax deductions that the pilots had claimed on their investments.

"The partnerships were legitimate companies," says Bowersox. "And back in the late '70s you could write off interest deductions for virtually any loan."

But the IRS issued "wholesale denials of all those deductions, and they slapped us with penalties and then interest on the penalties," he says.

The pilots took the case to U.S. Tax Court, which initially ruled that the pilots did owe the taxes plus interest.

But what the tax court and the pilots and their attorneys didn't know was that the two IRS attorneys had secretly cut a settlement deal with two of the pilots.

Those two pilots, along with Hongsermeier, were the only ones whose cases actually went to court. The rest of the 1,300 pilots had agreed to be bound by the outcome of those three pilots' cases.

The IRS attorneys sought the secret settlements because, according to Minns, they were worried that they would lose the case.

In exchange for the two pilots' cooperation on the witness stand, the IRS attorneys were found to have doctored the tax return of pilot John Thompson to reduce the amount he owed the IRS and cover his attorneys' fees.

But the full details of the secret settlements are just now being uncovered after the appellate court ruled that all the pilots should get the same deal that Thompson got.

"Now they'll fool around deciding what I really owe," Hongsermeier says.

But he expects it will be "something I can bear," whereas before, "I would have lost my house, my car, everything. No one can pay 25 years of penalties and interest."

Hongsermeier, like many of the pilots, is a military veteran, having served 12 years in the U.S. Navy plus 35 with Houston-based Continental.

"We're not against the government or paying taxes," he says. "We're not protesters. We thought the deductions were legitimate and we contested the IRS."

Bowersox says paying attorneys continuously for three decades "has cost a huge amount of money."

"We'll never get that back," he says.

Hongsermeier believes the size of the group was the only thing that kept them going and enabled them to ultimately prevail.

Minns, too, says the case was unusual because of its size and because of the strong ruling by the appellate court against the IRS.

In fact, this week the chief counsel for the IRS, John Williams, said he "fully concurs" with the Ninth Circuit's "outrage" over the "fraud and tainted testimony" in the case, which he said "threaten fundamental democratic principles." Williams' comments seem to signal that the IRS will not appeal the case further.

Williams said he sent a copy of the decision to all IRS lawyers with a memo telling them that the "pernicious conduct" of the IRS attorneys in this case must be admitted and never repeated.

He also said he would apologize to the Ninth Circuit for the conduct.

Houston attorney Henry Binder, who along with local attorney Joe Iven also represented pilots in the case, says he was "thrilled" by the circuit court's ruling.

"When you see the checks and balances in the system work and you see the judiciary holding the executive administrative agency to account, just as James Madison set it up in the 18th century - that's moving," Binder says.

For Bowersox and the rest of the pilots, last week's decision marked the end of a long, torturous road.

"I may start going to my mailbox again," Bowersox says.  

mperin@bizjournals.com * 713-960-5910

2003 Houston Business Journal