Two on trial accused of not paying income taxes
Say feds have no right to impose collection
Richard Ray Drachenberg and Patricia O’Connor say they are not citizens of the United States and, therefore, the Internal Revenue Service cannot legally tax them.
The couple, longtime residents of Angelica in rural Allegany County, call themselves “New York nationals.”
Federal prosecutors and agents call them something else — tax evaders.
According to the feds, the couple earned more than $700,000 over a 12- year period, didn’t file personal tax returns and didn’t pay a penny in federal income taxes.
A jury will decide whether Drachenberg and O’Connor, both 57, have a legitimate reason for their actions or are merely schemers.
In a trial that began Thursday in Buffalo’s federal court, the couple became the latest Western New York tax protesters to take on the IRS.
According to some tax experts, Drachenberg and O’Connor are part of a growing national movement of people who — for various philosophical or purely financial reasons — refuse to pay taxes.
“Hundreds of thousands” of American tax protesters refuse to pay income taxes each year, estimates David Cay Johnston of Rochester, a Pulitzer Prize-winning author and critic of government tax policies.
The tax protest schemes have become more prevalent with the help of the Internet, and the IRS and the U. S. Justice Department don’t have the staff to catch most of the violators, Johnston said.
The IRS says 734 people were sentenced for federal tax crimes in the agency’s 2008 fiscal year. In Johnston’s view, that’s a tiny percentage of the people who refuse to pay income taxes.
“For every one they catch and prosecute, thousands get away with it,” Johnston, a former New York Times investigative reporter, told The Buffalo News. “The government has a practice called ‘general deterrence’ on white-collar crime, including tax evasions. The people they do catch, they make sure they publicize.”
The amount of income tax that goes uncollected each year because of tax evasion schemes may be in the billions, Johnston said.
Acting U. S. Attorney Kathleen
M. Mehltretter calls Johnston’s position a “slight overstatement,” but she does not entirely disagree with him.
She acknowledges there are more tax evaders than the current staff of government agents and lawyers could possibly prosecute.
Hollywood film star Wesley Snipes is probably the most famous person convicted of tax protest crimes. A federal judge in Florida sentenced him to three years in federal prison last year for failing to pay millions of dollars in taxes.
Snipes was a member of the American Rights Litigators, a Florida-based organization of people who defy federal tax collections. Last August, an East Aurora chiropractor, John Weisberg, was sentenced to 21 months in federal prison for tax evasion. Weisberg, too, was a member of American Rights Litigators.
Federal trial
So far, authorities have not alleged that Drachenberg or O’Connor belong to any particular tax protest organization.
But it is clear that the couple — who are acting as their own attorneys — feel the federal government has no right to tax them.
“We went to [the IRS] in good faith, notifying them that we are not citizens or residents of the United States,” Drachenberg told jurors in his opening statement. “We intend to show you all the things that the government does not want you to see.”
In pretrial court filings, the couple said they do not believe U. S. District Judge Richard J. Arcara has legal jurisdiction in their case. They said they are only taking part in the trial because they are under “threat, duress and coercion” from the government.
They have said they want Secretary of State Hillary Rodham Clinton, Internal Revenue Service Commissioner Douglas Shulman and other top government officials to testify at their trial.
O’Connor is a computer systems consultant and Drachenberg has worked for a cell phone company, according to court papers.
The couple avoided paying more than $217,000 in income taxes by failing to file tax returns and by routing O’Connor’s pay checks through a series of companies that she and her husband managed, according to prosecutors Aaron J. Mango and John E. Rogowski.
“They earned over $700,000 and none of it was taxed,” Mango said, referring to the years 1996 to 2007.
The first witness in the trial was Mark W. McCall, president of Personnel Resources Inc. of Amherst, a professional staffing firm that O’Connor worked for as an independent contractor.
McCall testified that O’Connor told him she wanted all her paychecks made out and sent to an Angelica company called Universal Solutions.
“She was very candid, very honest about it,” McCall said. “She said it was her belief that it was against her Constitutional right to pay taxes.”
Prosecutors hope to prove the couple used Universal Solutions and another company as a ruse to avoid paying income taxes. The government says the couple are American citizens, do live in the United States and are required to pay taxes.
Local prosecutions
Although the number of prosecutions is relatively small, the IRS says it does take a hard
line on tax evasion crimes. The agency regularly issues strong warnings that people could wind up in serious trouble for taking part in tax scams.
“Unscrupulous promoters and their followers have long employed frivolous arguments concerning the legality of the income tax as pretexts to enrich themselves or evade their taxes,” the IRS said in a recent fraud alert about tax schemes.
“Their followers paid a steep price for following bad advice. Some were prosecuted, many more were involved in years of litigation and ultimately had to pay all taxes owed along with penalties and interest. People who are considering involving themselves in these anti-taxation ‘programs’ should consider the consequences.”
Some local tax protesters have paid a price. One was Roger Crumb, a farmer in Chautauqua County who was convicted of filing false tax documents, and sent to prison for six months in 1993. The IRS later took away a farm that was in his family for a century and all 60 of his cattle.
Another was Joseph C. Detillis, a Buffalo tax preparer who told clients that “the best kept secret in America is that wages are not taxable.” He was convicted of 20 felonies and sentenced in 2006 to four years and two months in prison.
And last year, Weisberg, the East Aurora chiropractor, was convicted and sentenced to 21 months in prison and ordered to repay $144,000 in back taxes. Weisberg, who is appealing his prison sentence, got bad advice from people who told him he could beat the IRS, according to his defense attorney, Rodney O. Personius.
Anyone thinking of taking part in one of the tax defiance schemes should go far beyond taking information off the Internet, Personius said.
“You should consult with a qualified accountant and a qualified attorney before you ever go forward with something like that,” Personius said. “Someone you can really trust.”
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