Federal Fraud in the Kahre Case

[GoldandSilverEagles]

Federal Fraud in the Kahre Case
by Jacob G. Hornberger

As Christopher Maietta, the Justice Department prosecutor in the current trial of Las Vegas businessman Robert Kahre, was making his opening statement, the following sentence appeared on a screen inside the courtroom: “This is a case about money, greed and fraud.”

(Absolutely! The greed and fraud of the federal government.)

The case is certainly about money, because it involves Kahre’s use of gold coins and silver coins issued by the U.S. government to pay his workers.

(His workers were Independent Contractors.)

The case is likely about greed as well, given that most people in life, including no doubt attorney Maietta himself, prefer more money to less.

Regarding Maietta’s claim that the case is about fraud, the facts would indicate that the perpetrator of the fraud isn’t Kahre but rather the U.S. government itself.

(Bingo! ~ And more specifically it's about "M.a.p." ~ Money, agenda, power.)

Under the law, fraud involves the intentional misrepresentation of a material fact, with the intention that it be relied upon, to the detriment of the victim.

Based strictly on newspaper accounts of the case, it seems that the important facts in the case are undisputed. The U.S. government issues gold and silver coins in various denominations and publicly represents that they are legal tender at face value. Kahre enters into agreements with his workers to pay them with the coins at face value. The face value of the coins significantly reduces the taxable income of the workers, placing them beneath the minimum income threshold for filing income-tax returns.

The IRS gets upset. It says that Kahre’s workers should have reported the fair market value of the coins as their income rather than the face value of the coins. If the fair market value had been reported, they would have had to file income tax returns and pay taxes on the income.

(Ok, how about I start reporting only 5-6 cents, (the cost of the paper, ink, and man power of making one FRN,) on every one hundred dollar FRN I earn! Sounds like a good deal to me!)

Yet, it would seem that at no time did Kahre misrepresent any material fact, either to his workers or to the IRS. In fact, it would seem that he has been up front and truthful the entire time with what he has been doing. While the IRS is obviously upset with what he did, it is difficult to determine how the facts sustain a finding of fraud.

But can the same be said of the government? I don’t think so. It seems to me that the facts indisputably establish that U.S. officials have defrauded Kahre and every other American. Here’s why:

The government has affirmatively represented to the American people that the gold coins and silver coins it has issued can be used as legal tender at their face value. Moreover, the government leads people into believing the truthfulness of that representation through actual conduct.

Let’s assume that a person owes the IRS the sum of $1,000 in taxes. He decides (stupidly) to pay the taxes in gold coins and silver coins having a face value of $1,000 but a fair market value of $10,000 in Federal Reserve Notes.

In other words, the taxpayer could go out and sell the coins for $10,000, use $1,000 to pay his taxes, and pocket the other $9,000. Instead of doing that, he simply sends the coins to the IRS.

Would the IRS refund to the taxpayer the difference between the fair market value of the coins and the face value of the coins? Of course not. The IRS would say, “This guy is incredibly stupid to use these gold and silver coins to pay his taxes, and we don’t have to refund anything because these coins are legal tender under the law.”

How can we be confident that U.S. officials would not issue a refund and instead simply accept the coins at face value (as Kahre’s workers did)? Several years ago, Kahre filed a civil lawsuit in federal court against U.S. officials. He used gold or silver coins to pay the filing fee, at their face value, notwithstanding the fact that the market value of the coins was much higher. Did the court personnel refund the difference between the fair market value of the coins and the face value? No! They kept the coins and issued no refund, obviously figuring that the coins were legal tender at face value (as Kahre’s workers did).

Thus, the government not only represents that its coins are legal tender at face value, its very own conduct lulls people into believing the truthfulness of that representation and relying on it.

Why don’t the Feds simply amend the tax code to provide that U.S. gold and silver coins cannot be used as legal tender for payroll purposes? Because that would shed light on what the Federal Reserve has done to debase its paper money over the past several decades, enabling them to effectively defraud Americans of a sizable portion of their incomes without raising taxes. It’s much more important to U.S. officials to maintain the charade of gold and silver coins as legal tender and then prosecute Americans who innocently trust that their government’s representations are true.

http://www.fff.org/blog/jghblog2009-06-26.asp

[Joey Smith]

Kahre will not be able to get a single, accredited constitutional, tax, or legal scholar to agree with him -- because he's flat wrong!

An idiotic defense, by an idiot.

[Judge Roy Bean]

Kahre will not be able to get a single, accredited constitutional, tax, or legal scholar to agree with him -- because he's flat wrong!

An idiotic defense, by an idiot.

But as demonstrated in the prior mistrial, some members of a jury may not see it that way.

I think enough people harbor distrust for the inscrutable absurdity that the tax code has become that they might want a chance as a juror to make a statement, telling Washington that being too clever invites being too clever.

That's the beauty of the jury system. By and large, they're not accredited constitutional, tax or legal scholars and their significance and importance is the only thing that protects us all from the possible tyranny of accredited constitutional tax or legal scholars.

The reality of life is a lot of those accredited constitutional, tax and legal scholars have given us an all-too-easily corruptible system that is perceived (rightly so, IMHO) as something very wealthy people can take advantage of while for the average Jane or John Doe it's something to be feared and loathed.

I think their creative "loophole" defense is well grounded in terms of the gamesmanship that has been engendered in the tax code over the years. A jury might be willing to accept the posit that "Hey, Mr. IRS, you make up the game and write the rules, you have to be ready to face the challenges that you may not have thought of."

[GoldandSilverEagles]

Kahre will not be able to get a single, accredited constitutional, tax, or legal scholar to agree with him -- because he's flat wrong!

An idiotic defense, by an idiot.

"An idiotic defense, by an idiot"...lol...Ah, we have a comedian in the forum...
...you make me laugh... LOL

If I didn't know better I'd guess that you work for the irs, or as a prosecutor for the US Dept of Justice, you blow smoke just like they do.

You claim he's "flat wrong" but conveniently neglected to state why.

And your legal foundation for him being "flat wrong" is.....

[Gregg]

Kahre enters into agreements with his workers to pay them with the coins at face value.

Ah, but he's not paying them at face value now is he? If he is, would the workers be willing to accept an equal "face value" amount for their work in Federal Reserve Notes?

I didn't think so.

[Paul]

The IRS gets upset. It says that Kahre’s workers should have reported the fair market value of the coins as their income rather than the face value of the coins. If the fair market value had been reported, they would have had to file income tax returns and pay taxes on the income.

(Ok, how about I start reporting only 5-6 cents, (the cost of the paper, ink, and man power of making one FRN,) on every one hundred dollar FRN I earn! Sounds like a good deal to me!)

Just another @#%@ moron who doesn't understand the difference between cost an value. How many tax denier arguments are based on the simple falacy that what Shakespeare did with paper and ink costing the equivalent of a few bucks has a totally different value from what any of them could do (or, I have no problem admitting, what I could do) with the same materials.

[GoldandSilverEagles]

Kahre enters into agreements with his workers to pay them with the coins at face value.

Ah, but he's not paying them at face value now is he? If he is, would the workers be willing to accept an equal "face value" amount for their work in Federal Reserve Notes?

I didn't think so.

And why should they? When offered to choose between the two tenders, why should they choose FRN's over gold and silver legal tender?

Kahre contracted with his workers as independent contractors (IC's).
That being the case, one needs to look at this from that POV, as opposed to his workers being hired on as employees.

From the POV of the IC, I would prefer to be paid in a government recognized legal tender that appreciates in value (Gold and Silver Eagles, "GaSE" for short...lol) instead of a legal tender that continually depreciating in value (FRN's...aka "foolsgold").

Not only that but I believe in saving at least 10% of everything I make. Now which of these two legal tenders retains their value better?

How the hell can you, or anyone else in this ego driven forum spite someone/anyone who has found what appears to be a legal loop-hole for drastically reducing one (income) tax liability?

"But...ah...ah...gold and silver coins are so-o inconvenient to carry around! They weigh so-o dam much, and it's so-o much easier and more convenient to carry around and spend my cash, checkbook, and cc's, you are so stupid GaSE!"

Difficulty is an excuse that history never accepts.

[GoldandSilverEagles]

The IRS gets upset. It says that Kahre’s workers should have reported the fair market value of the coins as their income rather than the face value of the coins. If the fair market value had been reported, they would have had to file income tax returns and pay taxes on the income.

(Ok, how about I start reporting only 5-6 cents, (the cost of the paper, ink, and man power of making one FRN,) on every one hundred dollar FRN I earn! Sounds like a good deal to me!)

Just another @#%@ moron who doesn't understand the difference between cost an value. How many tax denier arguments are based on the simple falacy that what Shakespeare did with paper and ink costing the equivalent of a few bucks has a totally different value from what any of them could do (or, I have no problem admitting, what I could do) with the same materials.

Shakespeare didn't deal in legal tender. Nor did Shakespeare mass produce his artwork unlike how the federal reserve issues into mass circulation, as well as continually depreciating their FRN's.

You cannot claim the same for Shakespeare artwork and be accurate.

Very poor comparison. Piss poor comparison.

Was the Supreme Court in 1877 composed of #$%^ morons because they don't agree with you either?...

The Courts Have Said: “A Dollar Is A Dollar.” In Thompson v. Butler, 95 U.S. 694, 696 (1877) (here), the United States Supreme Court stated: “A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference between them.”

[Brandybuck]

If I were the IRS I would shut myself down. But imagining that I don't, I might decide to let this one go though... and collect on the income when they cash in their gold. If they use their $20 gold coins as the equivalent of $20 bills, then let them. Let them buy a dinner for one gold coin, fill up their gas tank with one gold coin, etc. But if the sell their $20 gold coin for $100, then they need to pay taxes on their $980 profit. Ditto for anyone who can manage to sell a $20 paper FRN for $1000.

[LegalEagleMan]

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

The whole reason for weights and measures to be a fixed standard is to avoid confusion.
A dollar is a dollar and is a $. That is the whole purpose.
Now I don't care what the standard is, but you have to have a standard.

What is a dollar? I did see someone write to their Congressman who than forwarded I believe to the Congressional Research and they basically came back with a dictionary definition. If I remember correctly it even said it could not be a promissory note.

Here it is:

Here is what the Congressional Research Service told Senator Ensign’s office to send me concerning the definition of what a dollar is:

Bouvier’s Law Dictionary, 1856 Edition
DOLLAR, money. A silver coin of the United States of the value of one hundred
cents, or tenth part of an eagle.
2 . It weighs four hundred and twelve and a half grains. Of one thousand parts,
nine hundred are of pure silver and one hundred of alloy. Act of January 18,
1837, ss. 8 & 9, 4 Sharsw. Cont. of Story’s L. U.S. 2523, 4; Wright, R. 162.

But remember that we must also look at the Black’s Law definition recommended by the Congressional Research Service. My favorite that the CRS recommended was:

Blacks Law Dictionary, 7th Edition (current edition)
(No definition for “dollar” or “cent” found)

What? Thank goodness the Congressional Research Service also sent Ballentine’s Law Dictionary, 3rd Edition (1969) definition:

dollar. The legal currency of the United States ; State v Downs, 148 Ind 324, 327 ; the unit of money consisting of one hundred cents . The aggregate of specific coins which add up to one dollar. 36 Am Jlst Money A§ 8. In the
absence of qualifying words, it cannot mean promissory notes, bonds, or other evidences of debt. 36 AM Jlst Money A§ 8.

The Congressional Research Service also was kind enough to send the definition of what a Federal reserve note and a Federal Reserve Note is/are (yes it did make me wonder why they included two different spellings):

Black’s Law, Second Pocket Edition (1996)
Federal Reserve Note
Federal reserve note. The paper currency in circulation in the United States.
The notes are issued by the Federal Reserve Banks, are effectively non-interest-bearing promissory notes payable to bearer on demand, and are issued in denominations of $1, $5, $10, $20, $50, $100, $500, $1,000, $5,000, and $10,000.

I don't care what the standard is, just tell everyone what it is.
If you have to determine the "fair market value" of something, in what is the question?

There is no making sense of this, you basically would have to put on a big tinfoil hat.

[Judge Roy Bean]

Shakespeare didn't deal in legal tender. Nor did Shakespeare mass produce his artwork unlike how the federal reserve issues into mass circulation, as well as continually depreciating their FRN's.

You cannot claim the same for Shakespeare artwork and be accurate.
...

"Shakespeare artwork?"

[GoldandSilverEagles]

Shakespeare didn't deal in legal tender. Nor did Shakespeare mass produce his artwork unlike how the federal reserve issues into mass circulation, as well as continually depreciating their FRN's.

You cannot claim the same for Shakespeare artwork and be accurate.
...

"Shakespeare artwork?"

picky, picky, picky, picky, picky, picky...lol

"Art is the process or product of deliberately arranging elements in a way that appeals to the senses or emotions. It encompasses a diverse range of human activities, creations, and modes of expression, including music and literature. The meaning of art is explored in a branch of philosophy known as aesthetics."

http://en.wikipedia.org/wiki/Art

Well it easy to see that you spend most of your time in the left hemisphere. j/k

[Number Six]

The IRS gets upset. It says that Kahre’s workers should have reported the fair market value of the coins as their income rather than the face value of the coins. If the fair market value had been reported, they would have had to file income tax returns and pay taxes on the income.

(Ok, how about I start reporting only 5-6 cents, (the cost of the paper, ink, and man power of making one FRN,) on every one hundred dollar FRN I earn! Sounds like a good deal to me!)

Just another @#%@ moron who doesn't understand the difference between cost an value. How many tax denier arguments are based on the simple falacy that what Shakespeare did with paper and ink costing the equivalent of a few bucks has a totally different value from what any of them could do (or, I have no problem admitting, what I could do) with the same materials.

Shakespeare didn't deal in legal tender. Nor did Shakespeare mass produce his artwork unlike how the federal reserve issues into mass circulation, as well as continually depreciating their FRN's.

You cannot claim the same for Shakespeare artwork and be accurate.

Very poor comparison. Piss poor comparison.

Was the Supreme Court in 1877 composed of #$%^ morons because they don't agree with you either?...

The Courts Have Said: “A Dollar Is A Dollar.” In Thompson v. Butler, 95 U.S. 694, 696 (1877) (here), the United States Supreme Court stated: “A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference between them.”

I'm agreed with you in theory GaSE, but practicality, which every judge uses to adjudicate hard issues in a country of roughly 300 million people who are (selfishly) trying to live, thrive and prosper, has determined why laws are as they are. I spent some time exploring the "paytriot" world and witnessed both good and bad. If they were to tell their stories of why they were so resentful to have adopted their absolute positions, I'm sure it would be enlightening. I went to the "porcfest", being held this weekend, a couple of times to see what sort of life experience could be learned there. I had a half ounce eagle stolen as I was attempting to do a display of modern and numismatic gold at "Porcfest". Maybe I should have pulled out a Ruger and blown the guy away, but then I would have gone to jail. I figured that in God's sight he mad made himself my debtor, which is his encumbrance. There are some decent idealistic folks in the "patriot" movement, but there are also career criminals.

As to the law of how gold and silver should be counted for tax purposes, I think we're beating a dead horse here. Judges have looked at this issue, and it is extremely tedious to examine all the intracacies of the law in this case. When the government was trying to figure out what price to stamp on the gold and silver, and platinum eagles--they had to put some number on them, that was not intended to be binding legally, as was true in every country when the coins were circulating not just as bullion but as money. Canada mirrors the US in dollar valuations, a lot of countries put no money value on their coins. Citizens who have tried to use dollar signs on the coins for tax purposes have all failed in whatever country, and the legal reasoning is available on the internet.

If Kahre's IC's made more than the legal threshold--is it still $600?--as self-employed people on current market in G/S/P from whatever country minted, taxes are due based upon the law.

[GoldandSilverEagles]

I'm agreed with you in theory GaSE, but practicality, which every judge uses to adjudicate hard issues in a country of roughly 300 million people who are (selfishly) trying to live, thrive and prosper, has determined why laws are as they are.

I think it would be more accurate to say that judges make decisions based upon maintaining the security of their careers, politics, payoffs, and the fact that they want to stay alive.

I spent some time exploring the "paytriot" world and witnessed both good and bad.

I agree. And that's one factor I like about my experiences here in this forum, I've learned to ask for verifiable "proof" (i.e. case law) when Patriots make claims.

I associate with both groups. I feel both groups are extreme in their own way(s) and as such I do not believe either side has all the "answers". I feel a healthy "answer", for me any way, lies somewhere in between the two extremes, thus I consider the input of both sides.

There are some decent idealistic folks in the "patriot" movement, but there are also career criminals.

The same can be said for the diversity of folks outside the Patriot movement.

As to the law of how gold and silver should be counted for tax purposes, I think we're beating a dead horse here. Judges have looked at this issue,

And until something is firmly carved into tax law by Congress, I'm sure they will continue.

When the government was trying to figure out what price to stamp on the gold and silver, and platinum eagles--they had to put some number on them, that was not intended to be binding legally

Why did Congress choose "one dollar" for the silver eagle, "50 dollar" for the one oz gold eagle, and "$100" for the one oz platinum eagle? Did they simply pull those figures out of the air for lack of anything better?

[Number Six]

I would like to hear from Ron Paul on that last point as he was instrumental in the act of Congress that authorized the minting of hard assets in the mid-80's as "commemoratives". My guess is they wanted to provide a nominal "dollar" floor for the coins that they would never fall below.

The larger issue in this case is the uniformity of the tax code, that there are no loopholes to circumvent the tax code.

What's your attitude toward illegal immigration, offshore tax fraud and evasion, derivatives and hedge funds, "ordinary" investments, which many insiders believe are affected by insider trading?--see Floyd Norris' column in yesterday's NYT, which adresses the problem of not regulating parts of the economy that tend to be manipulated.

I believe that practically all these areas of the economy are connected. That the economy cries out for regulation and prosecution of all the other Madoffs out there. And that using the tax code to go after tax criminals from bottom to top might bring the US financial system back to accountability. The alternatives of anarchy and fascism are not particularly inviting. The federal government is also under law and if its employees violate real law they should be subject to prosecution. People have remedies by following the law, by working within the system, that they do not have by putting themselves tragically outside of the law, and suffering unnecessarily as malefactors instead of as agents of reform.

[LegalEagleMan]

I am sorry some serious tinfoil discussion here.
It's very simple. You must have a standard, end of story. When Congressional Research has to send you multiple dictionary definition to figure out what a dollar is, than when an average individual looks at those definition, in no way does it make sense. So basically you go back to this judge said this and this judge said that discussion.

When you can or should be able to redeem FRN into "lawful money" than you have some serious problems. When you tell someone to determine the "fair market value" of something, and you can tell them in what, you have more serious issues. When you are telling people they must keep track of the individual coins and cash to determine "fair market value" on a daily basis you just went from basically a little insane to Jack Torrence level insanity.

The whole thing makes absolutely no sense, I have never seen anything on this issue that makes sense, nor do I suspect I will unless I start drinking some the strange koolaid being served up.

The problem is, you have a dual system but everyone is pretending like their is but one system, well why would anyone want that. Well, the one system ran out of money in the 1930s to fund domestic debts and than ran out to fund international trade in the late 60s, which lead to what Nixon did in 1971. You have a money system according to the Constitution and you have a credit system.

They went after him for one reason and one reason only, to discourage others from doing the same thing.

[Demosthenes]

But as demonstrated in the prior mistrial, some members of a jury may not see it that way.

Kahre's lawyers aren't telling the jury that his face amount vs. FMV theory was correct. They're telling the jury that he had a good faith belief that his theory was correct. The lawyers even tried to explain to the judge last year that their client's mental illness was at fault.

From the defense attorney's opening argument:

KENNEDY: It's not whether what Mr. Kahre did was legal under the law, it's whether he believed what he did was legal ... We're not here to determine if moneys are owed.

Kahre contracted with his workers as independent contractors (IC's).

Actually, only about 17% of the payroll worked for Kahre. The rest of the $114,000,000 payroll was done as a middle man/payroll service. As for the 17% who did work for him as ICs, there were two problems: 1) he violated minimum wage laws if he relied on the face value of the coins, and 2) he violated the state's contractor licensing requirements.

[LegalEagleMan]

Kahre's lawyers aren't telling the jury that his face amount vs. FMV theory was correct. They're telling the jury that he had a good faith belief that his theory was correct. The lawyers even tried to explain to the judge last year that their client's mental illness was at fault.

Of course.

Are you saying it's possible for the jury to determine what units of measure are suppose to be used to determine taxes without jury instructions to that affect?

Either way the whole thing is FUBAR, he is there for one reason and one reason only, to discourage others from doing the same thing.

[LegalEagleMan]

1) he violated minimum wage laws if he relied on the face value of the coins, and 2) he violated the state's contractor licensing requirements.

What other value is he suppose to use?

[Demosthenes]

Either way the whole thing is FUBAR, he is there for one reason and one reason only, to discourage others from doing the same thing.

So what? Deterrence is a factor in every criminal prosecution.

When the DOJ only has the resources to go after a couple hundred tax deniers a year, they have to choose the biggest and flashiest cases. A $114,000,000 annual payroll most definitely qualifies as big and flashy.