Benson Enjoined, But No Customer Lists?

[LPC]

On 12/17, the new judge assigned to the injunction case against William Benson (who is, coincidentally, the same judge threatened by Michael Henry) finally issued an opinion and order granting the US motion for summary judgment, finding that William Benson was selling an abusive tax shelter and had reason to know the materials he was selling were false or fraudulent.

The memorandum opinion is too long to reproduce here, but the peculiar part is that the judge *denied* the US request for an order requiring Benson to turn over lists of customers.

The Government seeks as part of its injunctive relief an order requiring Benson to turn over a list of the names and addresses of customers that purchased the Reliance Defense Package or another version of the package. Benson argues that he should not have to turn over the list because it would violate his First Amendment right to association. Benson also argues that to require him to provide the customer list would force him to give up his right to remain silent in violation of his Fifth Amendment rights. However, we need not resolve these constitutional issues since the Government has not shown that the request for the customer list is appropriate injunctive relief in light of the claims and allegations in this case. A significant concern raised by the Government’s request is the rights and welfare of the customers of Benson. The sole basis provided by the Government for its request for the disclosure of the customer list is the need of the Government to ensure that the customers paid their taxes. (Reply 9). The Government indicates that it intends to investigate the customers to make sure that they have properly paid their taxes. (Reply 9). Benson’s customers, however, violated no laws simply by purchasing the Reliance Defense Package or related package. Nor can it be assumed that Benson’s customers did not pay their taxes merely because they purchased the Reliance Defense Package or related package. The Government itself in arguing that Benson has distributed fraudulent and misleading information to his customers has depicted the customers as victims of Benson. The Government also alleges that the customers were victimized, stating that “Benson’s customers have been harmed . . .because his customers have paid him significant sums for worthless advice. . . .” (Compl. Par. 15). The Government has not provided a compelling reason why Benson’s customer list should be disclosed and the customers be investigated and scrutinized by the Government solely because they bought the Reliance Defense Package or related package.

The customer list is not related to preventing future misconduct by Benson. The Government is bringing the instant action to prevent Benson from further marketing the Reliance Defense Package and inciting others to disobey the federal tax laws. The Government has made clear that its main concern in bringing this action is to enjoin Benson from future conduct and “end his scheme” since United States taxpayers “will continue to lose money as long as Benson is operating.” (Mem. Dis. 14). Obtaining Benson’s prior customer list would not necessarily facilitate such a goal. Nor should Benson’s customers, who the Government itself depicts as victims, be branded as potential co-conspirators with Benson and tax cheats solely because they bought the Reliance Defense Package or related package. Of course, if the Government encounters any customer of Benson who violated tax laws, the Government would be in the right to take action against such individuals. The request by the Government for the customer list is beyond the scope of Benson’s wrongdoing in the instant action, and absent a compelling reason given by the Government for its disclosure, the request cannot be granted. The other aspects of the injunctive relief sought by the Government are reasonable and sufficient to deter Benson from continuing his illegal tax scheme. Therefore, based on the above, we grant the Government’s motion for summary judgment and grant the request for injunctive relief except for the production of the customer list.

[grixit]

Victory!

[Judge Roy Bean]

I happen to concur with the Judge's opinion.

There's way too much "guilt by association" wafting through our society already.

[Imalawman]

I happen to concur with the Judge's opinion.

There's way too much "guilt by association" wafting through our society already.

I sympathize with your statements, but in this case, its not as if the IRS will base their case against the taxpayers for simply being on the list. If they haven't cheated on their taxes, then they have nothing to fear. On the other hand, if they've cheated on their taxes, what right do they have to argue that it was unfair as to how they got caught?

Simply being on a list does nothing to create a tax liability, however, acting on the material you received would. I think it is legitimate that the IRS simply be able to cross check the names on a list against their tax returns to see if they've been honest. If you don't cheat on your taxes and you like to look at anti-tax literature, nothing will ever come of the appearance of your name on a list.

[Quixote]

Maybe the judge is not fond of hypocrisy.

The Government itself in arguing that Benson has distributed fraudulent and misleading information to his customers has depicted the customers as victims of Benson. The Government also alleges that the customers were victimized, stating that “Benson’s customers have been harmed . . .because his customers have paid him significant sums for worthless advice. . . .” (Compl. Par. 15).

I think the government shed too many crocodile tears over Benson's marks. It would appear that the judge couldn't wrap his brain around the idea that Benson's customers are both victims and potential criminals.

[SteveSy]

I happen to concur with the Judge's opinion.

There's way too much "guilt by association" wafting through our society already.

I sympathize with your statements, but in this case, its not as if the IRS will base their case against the taxpayers for simply being on the list. If they haven't cheated on their taxes, then they have nothing to fear. On the other hand, if they've cheated on their taxes, what right do they have to argue that it was unfair as to how they got caught?

Simply being on a list does nothing to create a tax liability, however, acting on the material you received would. I think it is legitimate that the IRS simply be able to cross check the names on a list against their tax returns to see if they've been honest. If you don't cheat on your taxes and you like to look at anti-tax literature, nothing will ever come of the appearance of your name on a list.

What a slippery slope you walk upon. That can be used without limit because no limit is defined. At what point does that "if you've done nothing wrong you have nothing to worry about" end?

Remember the government makes laws not necessarily because they are fair or just but simply because they think you are not competent enough to do it right yourself or possibly because they just want more of your paycheck to pay for one of those things. The government could make a law tomorrow that infringes on your liberty or is very unjust that hardly anyone with common sense would agree with.

Why not investigate you because of the books you buy, the types of food you eat, the cars you drive or who you vote for? In fact why not just monitor every single transaction and thing you do because you could potentially do something wrong? Certainly the U.S. would be far more secure if the authorities could search for crimes rather than having them reported or discovered through the normal methods. After all if you've done nothing wrong then you have nothing to worry about, right?

[Dr. Caligari]

Steve:

The court agreed with you. I guess you will no longer assert that all courts are corrupt and take orders from the IRS because their paychecks come from taxes.

(Happy new year, BTW.)

[SteveSy]

Steve:

The court agreed with you. I guess you will no longer assert that all courts are corrupt and take orders from the IRS because their paychecks come from taxes.

(Happy new year, BTW.)

I never said ALL courts are corrupt, a lot of them are, especially the federal courts.

btw, they only partly agreed with me. IMO its absurd to enjoin him considering they won't and can't prove he's promoting known false and/or fraudulent documents. Just because the arguments may not work to win a court case doesn't mean the documents are wrong especially considering the court has made it clear it won't allow the documents to be proven or disproved in a court of law.

[Famspear]

Here we go again, Steve. In Steve's view, the courts won't "allow" Benson to "prove" his case. This is circumlocutory cant for: "The courts will not rule the way SteveSy wants the courts to rule."

Fortunately for the republic, we are not bound by SteveSy's twisted vision. The United States District Court for the Northern District of Illinois ruled that Benson's "Reliance Defense Package" (including Benson's Sixteenth Amendment non-ratification argument), which Benson sold to customers via the internet, constituted a "fraud perpetrated by Benson" that had "caused needless confusion and a waste of the customers' and the IRS' time and resources." Memorandum Opinion, p. 14, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division.

The court stated: "Benson has failed to point to evidence that would create a genuinely disputed fact regarding whether the Sixteenth Amendment was properly ratified or whether United States Citizens are legally obligated to pay federal taxes." (bolding added)

The court stated that "the undisputed evidence shows that Benson had actual knowledge that the information in the Reliance Defense Package was false or fraudulent." Memorandum Opinion, p. 10, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division. The court ruled that "Benson's position has no merit and he has used his fraudulent tax advice to deceive other citizens and profit from it" in violation of section 6700 of the Internal Revenue Code. Memorandum Opinion, p. 22, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division. The court granted an injunction prohibiting Benson from promoting the theories in Benson's "Reliance Defense Package," which the court referred to as "false and fraudulent advice concerning the payment of federal taxes." Memorandum Opinion, p. 9 & p. 20, Dec. 17, 2007, docket entry 106, United States v. Benson, case no. 1:04-cv-07403, United States District Court for the Northern District of Illinois, Eastern Division.

It is a continuing source of amusement to me that people like SteveSy will strain to encourage or support the dishonesty of people like Benson, who has continued to try to mislead people and has continued to try to profit handsomely from that dishonesty.

For example, as of 27 December 2007, Benson's web site still states: "After serving time in federal prison for not paying his United States income taxes, Bill Benson still does not pay income taxes and yet our federal government chooses not to arrest him. Why? Because now he can use this book, which he has written : 'THE LAW THAT NEVER WAS' in his defense." See caption near Benson's picture at bottom of web page, from http://www.thelawthatneverwas.com/new/home.asp (bolding added). Benson's web site entry tends to leave the false impression that Benson wrote his book AFTER his conviction, and that had Benson written his book BEFORE his conviction and used it in his own defense, he could have stayed out of prison. Benson does not disclose that he wrote the book before his arrest and conviction, and that he actually used the arguments in his defense -- unsuccessfully -- in the criminal tax prosecution that resulted in his prison term.

[Evil Squirrel Overlord]

Steve:

The court agreed with you. I guess you will no longer assert that all courts are corrupt and take orders from the IRS because their paychecks come from taxes.

(Happy new year, BTW.)

As an old Park Ranger used to do... Anytime someone complained, "I pay your salary", he would reach in to his pocket and pull out a penny and give it to the person and say, "Here is your portion of my lifetime wages with interest."

[LPC]

I think the government shed too many crocodile tears over Benson's marks. It would appear that the judge couldn't wrap his brain around the idea that Benson's customers are both victims and potential criminals.

That's possible.

I think it was a newbie mistake. The judge has only been on the bench for four years and probably doesn't know much about tax law.

Given the broad investigatory powers of the IRS under section 7601 and 7602, it is difficult to believe that the IRS should not have the power to get customer lists in this kind of case. The IRS has made a showing comparable to the requirements of a "John Doe" summons under section 7609(f), and the court should use its equitable powers to grant the relief requested rather than force the IRS to initiate a new summons procedure.

I expect to see a motion for reconsideration and, if the motion is denied, an appeal.

[LPC]

Why not investigate you because of the books you buy, the types of food you eat, the cars you drive or who you vote for? In fact why not just monitor every single transaction and thing you do because you could potentially do something wrong?

Oh NO! The sky is falling! The sky is falling!

[Judge Roy Bean]

... If you don't cheat on your taxes and you like to look at anti-tax literature, nothing will ever come of the appearance of your name on a list.

Right.

[Famspear]

SteveSy wrote:

What a slippery slope you walk upon. That can be used without limit because no limit is defined. At what point does that "if you've done nothing wrong you have nothing to worry about" end?

[ . . . ]

Why not investigate you because of the books you buy, the types of food you eat, the cars you drive or who you vote for? In fact why not just monitor every single transaction and thing you do because you could potentially do something wrong? Certainly the U.S. would be far more secure if the authorities could search for crimes rather than having them reported or discovered through the normal methods. After all if you've done nothing wrong then you have nothing to worry about.

Steve, your argument is in the form of a fallacy called the "imaginary horrible" (as LPC noted, "the sky is falling"). Essentially, your argument is that the IRS should not have access to Bill Benson's customer records -- which relate solely to his fraudulent tax scheme -- to determine whether any of his customers are cheating on their Federal income taxes because that would somehow mean that the government would then have the power to "just monitor every single transaction and thing you do because you could potentially do something wrong" as you put it.

You are wrong.

Fortunately, government power is limited, even under section 7602 relating to administrative summonses (the procedures under which, as LPC has pointed out, the government might now avail itself in Benson's case). Section 7602 provides (in part):

(a) AUTHORITY TO SUMMON, ETC. --For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary is authorized --

(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;

(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary may deem proper, to appear before the Secretary at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and

(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.

(b) PURPOSE MAY INCLUDE INQUIRY INTO OFFENSE. --The purposes for which the Secretary may take any action described in paragraph (1), (2), or (3) of subsection (a) include the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws.

(bolding added).

Internal Revenue Code section 7604 provides (in part):

(a) JURISDICTION OF DISTRICT COURT. --If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, records, or other data, the United States district court for the district in which such person resides or is found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data.

(b) ENFORCEMENT. --Whenever any person summoned under section [ . . . ] 7602 neglects or refuses to obey such summons, or to produce books, papers, records, or other data, or to give testimony, as required, the Secretary may apply to the judge of the district court [ . . . ] for an attachment against him [against the summoned person] as for a contempt. It shall be the duty of the judge [ . . . ] to hear the application, and, if satisfactory proof is made, to issue an attachment, directed to some proper officer, for the arrest of such person, and upon his being brought before him to proceed to a hearing of the case; and upon such hearing the judge [ . . . ] shall have power to make such order as he shall deem proper, not inconsistent with the law for the punishment of contempts, to enforce obedience to the requirements of the summons and to punish such person for his default or disobedience.

The power granted to the Secretary (i.e., to Internal Revenue Service personnel) is broad. The United States Supreme Court has, however, defined the contours and limits of the power by imposing four specific burdens on the IRS:

1. The IRS must show that the investigation will be conducted pursuant to a legitimate purpose;

2. The IRS must show that the inquiry may be relevant to the purpose;

3. The IRS must show that the information sought is not already within the IRS's possession; and

4. The IRS must show that the administrative steps required by the Internal Revenue Code have been followed.

--see generally United States v. Powell, 379 U.S. 48, 57-58 (1964).

Yes, Steve, there is always a danger that government personnel will abuse their power -- and sometimes they do. And the relevancy standard under Powell is fairly broad. But the statute does impose limitations, and the courts enforce those limitations. For example, see United States v. Weiss, 566 F. Supp. 1452, 83-2 U.S. Tax Cas. (CCH) paragr. 9479 (C.D. Calif. 1983) (indictment against taxpayer dismissed with prejudice where Internal Revenue Service was guilty of governmental misconduct and institutional bad faith in failing to follow procedures).

[SteveSy]

SteveSy wrote:

What a slippery slope you walk upon. That can be used without limit because no limit is defined. At what point does that "if you've done nothing wrong you have nothing to worry about" end?

[ . . . ]

Why not investigate you because of the books you buy, the types of food you eat, the cars you drive or who you vote for? In fact why not just monitor every single transaction and thing you do because you could potentially do something wrong? Certainly the U.S. would be far more secure if the authorities could search for crimes rather than having them reported or discovered through the normal methods. After all if you've done nothing wrong then you have nothing to worry about.

Steve, your argument is in the form of a fallacy called the "imaginary horrible" (as LPC noted, "the sky is falling"). Essentially, your argument is that the IRS should not have access to Bill Benson's customer records -- which relate solely to his fraudulent tax scheme -- to determine whether any of his customers are cheating on their Federal income taxes because that would somehow mean that the government would then have the power to "just monitor every single transaction and thing you do because you could potentially do something wrong" as you put it.

First off it's not a fraudulent tax scheme. The government refuses to prove whether his information is invalid or not. It's typical of the government to just force the issue when it knows it can't win legitimately.

Second, simply reading documents should never imply guilt or possible guilt. And lastly the government always abuses its powers, it has, as do all governments, a long history of showing this is the case. Every single empire known to man has eventually succumb to tyranny and corruption. This is why we have a constitution because it was well known the government needed to have defined limits and could not be left to its own to do the right thing.

Besides, your argument is nonsense because you're seeing if someone is cheating on their taxes simply because they read something. That's like reviewing people's tax returns who support Ron Paul, which sadly enough I'm almost positive is something you would support.

[Imalawman]

That's like reviewing people's tax returns who support Ron Paul, which sadly enough I'm almost positive is something you would support.

Ooh, good idea. Hello increased state revenue!!!!

[Quixote]

First off it's not a fraudulent tax scheme. The government refuses to prove whether his information is invalid or not. It's typical of the government to just force the issue when it knows it can't win legitimately.

Benson's information was shown to be invalid in his earlier trial. If it not been, Benson wouldn't need to market his nonsense as a reliance defense. A reliance defense is needed only if the defendant committed the act underlying the crime with which he is charged, but is arguing that he lacked the mental state necessary to make the act a crime. If Benson were right, failing to file a return would not be a crime, so no reliance defense would be necessary. By marketing his silly theory as a reliance defense, Benson is admitting that the IRC is valid, but that his theory is just plausible enough that his customers can might get away with pretending they believed it.

Second, simply reading documents should never imply guilt or possible guilt.

Or course it implies possible guilt. Breathing implies possible guilt, which is a pretty low bar. More to the point, reading documents about how to commit a crime and get away with it implies plausible guilt. Most people do not think about ways to evade the income tax. All people who evade the income tax thought about evading the income tax. There is, therefore, a positive correlation between people thinking about tax evasion and committing tax evasion. Before you decide to misread the above as stating there is a cause and effect relationship at work, read it again. All I'm saying is that the percentage of likely tax evaders among Benson's readers is higher than the percentage of likely tax evaders among the general population.

[Quixote]

Besides, your argument is nonsense because you're seeing if someone is cheating on their taxes simply because they read something. That's like reviewing people's tax returns who support Ron Paul, which sadly enough I'm almost positive is something you would support.

Just because tax protesters support Ron Paul doesn't mean that Ron Paul supporters are likely to be tax protesters. At least half the voters in Brazoria County (including, I suspect, my cousin Phil, have voted for him for years, but I doubt many of them are tax protesters.

A better analogy would be investigating the readers of "Build Your Own Meth Lab for Fun and Profit."

[SteveSy]

Besides, your argument is nonsense because you're seeing if someone is cheating on their taxes simply because they read something. That's like reviewing people's tax returns who support Ron Paul, which sadly enough I'm almost positive is something you would support.

Just because tax protesters support Ron Paul doesn't mean that Ron Paul supporters are likely to be tax protesters. At least half the voters in Brazoria County (including, I suspect, my cousin Phil, have voted for him for years, but I doubt many of them are tax protesters.

A better analogy would be investigating the readers of "Build Your Own Meth Lab for Fun and Profit."

No that's not a better analogy, it's not even remotely close.

There is no reason to believe every person who reads his documents is a tax protester anymore than every person who supports Ron Paul is a tax protester. You and others are simply basing is on the fact that they might be tax protesters. In fact the argument is more valid concerning Ron Paul. More tax protesters support Ron Paul than read Benson's documents.

[Disilloosianed]

I'm going to agree with Stevesys here, even though I hate to think of all those wingnuts getting away. I didn't like the idea of the PATRIOT ACT provision that allowed the raiding of patron's library usage, either, though.