Mannatech on 20/20

[wserra]

Somebody pointed out that the US federal income tax system is based on "voluntary compliance."

If so, has anyone ever taken on the IRS and won?

What Judge Roy posted is certainly right. However, let me answer your specific question directly:

On that basis? Not once. If anyone tells you differently, ask him/her what case, post it here, and you'll get the straight story.

[Nikki]

Somebody pointed out that the US federal income tax system is based on "voluntary compliance."

If so, has anyone ever taken on the IRS and won?

What Judge Roy posted is certainly right. However, let me answer your specific question directly:

On that basis? Not once. If anyone tells you differently, ask him/her what case, post it here, and you'll get the straight story.

Au contraire.

People take on the IRS and win on a regular basis. There are literally thousands of Tax Court cases which find for the petitioner(s) and not the Commissioner.

However, in every single one of those cases, the petitioner has complied with the law and the relevant administrative procedures and has not advanced a single frivolous argument.

The only wins accorded to tax evaders, protestors, or petitioners advancing frivolous arguments are their avoidance of the full-monty $25,000 sanctions.

[wserra]

Somebody pointed out that the US federal income tax system is based on "voluntary compliance."

If so, has anyone ever taken on the IRS and won?

What Judge Roy posted is certainly right. However, let me answer your specific question directly:

On that basis? Not once. If anyone tells you differently, ask him/her what case, post it here, and you'll get the straight story.

Au contraire.

Mais oui.

[Stinky McGurk]

Well, if you guys are finished talking all that fancy Latin stuff...

Somebody pointed out that the US federal income tax system is based on "voluntary compliance."

If so, has anyone ever taken on the IRS and won?

What Judge Roy posted is certainly right. However, let me answer your specific question directly:

On that basis? Not once. If anyone tells you differently, ask him/her what case, post it here, and you'll get the straight story.

I'm probably going to regret getting into a discussion about legal wrangling with a judge and an attorney, it's not my area of expertise, but Wes asked to point out a case where anyone ever taken on the IRS and won.

Well, I sure you're aware of this one...

Local attorney acquitted on federal income tax charges
Cryer stopped filing income taxes more than 10 years ago

"The court could not find a law that makes me liable or makes my revenues taxable," Cryer said. "The Supreme Court has ruled that the government cannot impose an income tax on anything but the profits and gains. When you work for someone you give your service and labor in exchange for money, so everything you make is not profit or gain. You put something into it."

http://www.shreveporttimes.com/apps/pbc ... 7707130321

That sounds like a case where somebody beat the system.

Nest-ce pas?

But then again, you'll probably argue that hasn't anything to do with "voluntary compliance."

C'est la vie.

[wserra]

OK, here's the short answer.

This was a criminal case. Criminal tax prosecutions have an element called "wilfullness". This means that it is a defense that someone had a "good faith belief" that he did not have to pay taxes. Once in a blue moon - three times that are common knowledge, Cryer, Long, Kuglin - someone will raise a reasonable doubt to a jury that s/he had such a good faith belief. Much, much more often (see the TP forum here for many examples) the jury will have no problem convicting - as was the case with the Mannatech distributor. Yes, it certainly seems unlikely that a lawyer (Cryer) would have such a "good faith belief", but (trust me) juries sometimes do strange things.

So not only does "voluntary compliance" have nothing to do with it, contrary to Cryer's braying the jury made no such determination that no law required him to pay taxes. Did the OJ Simpson acquittal prove that there's no law against killing people? Cryer's jury had a reasonable doubt as to Cryer's belief, and nothing more. The question as to the actual state of the law wasn't even before them.

In fact, Cryer's own lawyer agreed that he will be (civilly) assessed for the taxes, interest and penalties, and if he doesn't pay will have his property liened and his income levied. So he risked going to jail and got lucky, faces a future of penury, and is absolutely wrong about the law. Other than that, he's a prince among men.

[wserra]

Back to Mannatech: BloggingStocks' Zac Bissonnette is back on the case with "Mannatech (MTEX): Still making money because people are still stupid" and his comment on the resignation of CEO Sam Caster.

I gotta read this guy more.

[wserra]

Mannatech - already in trouble due to a pending investigation by the Texas AG - fired its auditor, Grant Thornton (following the lead of fellow snake-oil peddler USANA). According to various reports, Grant Thornton had demanded that Mannatech remove chairman Sam Caster, or they would quit.

Auditor says chairman gotta go, and company fires auditor? Nothing to see here, folks. Move along. Nothing to see.

[wserra]

A few early Saturday morning numbers from Mannatech's Q3 10-q: at the end of Q3 2006, they had 536,000 active (i.e., those who bought anything) distributors; at the end of Q3 2007, 575,000. That's a 7.3% increase. Not too bad, right? Then you read on: of those 575,000, 196,000 are new in that last year. That means that only 379,000 of the 536,000 were still there - a loss of 157,000, or about 30% in one year.

Do you think that each year 30% of Mannatech's sales force make their fortunes and retire to Bimini? Or do you think that they belatedly figure out that they haven't made a dime and are not going to make a dime?

Too bad they had to pay to reach enlightenment.

[wserra]

The end is in sight. The handwriting is on the wall. The fat lady is warming up. There's a balrog in the woodpile.

Mannatech in its Q2 8-K reports large losses, based on North American sales down by nearly one-third and (the kiss of death for a pyra^H^H^H^H MLM) difficulty recruiting. The new CEO (see above on the old CEO, Sam Caster) blames "litigation with the Texas attorney general" for its difficulties, which is something like Willie Sutton blaming the FBI. It couldn't have anything to do with all of those claims about your stuff curing cancer, could it?

As long as we're looking at the 8-K, it shows that Mannatech paid its approximately 550,000 "active" "associates" and "members" a total of $84M over the six months ending 6-30-08. Now, they neither define nor break down the numbers on "associates" and "members", so we can't be sure what they mean. Assuming that 50% of that number are distributors - it's likely far more than that, making the numbers that much worse - that means that active distributors averaged about $300 for those six months.

Don't make the down payment on that vacation home quite yet.

[wserra]

Remember how (if not, read above) Grant Thornton, Mannatech's auditor, recommended that Mannatech fire its chairman, Sam Caster, and instead they fired Grant Thornton? Well, they just received a Wells notice from the SEC over that issue. (A "Wells notice" is basically a notification from the SEC that they intend to pursue civil action.) The Forbes story is here.

Let's see, now: losing money, distributors dropping like flies, Texas AG investigation, SEC enforcement action. Other than that, they're doing great.

[wserra]

The beat goes on, with another horror story of people believing the nonsense Mannatech puts out. This time the victim is an eleven-year-old girl.

A sick girl suffered brain damage after her father refused to take her to hospital because he distrusted conventional medicine, a court has been told.

The 11-year-old had been suffering from a heart infection for two weeks before her parents finally took her to hospital, the Brisbane District Court was told on Tuesday.

She was gravely ill when she was admitted to Toowoomba Base Hospital in September 2006.

Her temperature was 42 degrees celsius, she had been hallucinating and was weak, pale and could no longer walk.

The court was told her mouth was peeling, black and clogged from the alternative medicine her 45-year-old father had been giving her in extremely high doses.

The doctor who finally examined the 11-year-old told the court the girl was as "sick as the sickest person I've ever seen in my 35 years as a doctor".

Prosecutor Belinda Merrin said it was the father's distrust of conventional medicine that had caused him to delay seeking treatment.

Instead, he had been relying on the glyconutrient dietary supplement Mannatech to cure his daughter.
....
She spent some time in a coma after surgery because of bleeding on the brain, and it was a year before she was eventually allowed to go home.

She now uses a wheelchair and has severe, ongoing cognitive and fine motor skills problems.

It would have been nice had Greg Abbott, the Texas AG, actually followed up on the investigation he began a year and a half ago over claims exactly like this. However, it is beginning to appear that, once he got his headlines, things go on the back burner. The original press release seems to be both the first and last word.

[Burzmali]

How can they get Mannatech on something like that? Mannatech tells its people not to make that claim, while the salesmen will promise anything to make a sale.

[wserra]

How can they get Mannatech on something like that? Mannatech tells its people not to make that claim, while the salesmen will promise anything to make a sale.

Because law enforcement need not credit what they say, rather than what they do. If there is evidence that Mannatech knows of particular distributors making claims such as the ones discussed here, and does nothing, then one can infer that they tolerate (or even encourage) such claims. See, e.g., Palmer v. Thompson, 403 U.S. 217 (1971); Adickes v. S. H. Kress & Co., 398 U.S. 144 (1970).

Once again, it's all about that famous Iran-Contra phrase, "plausible deniability".

[Burzmali]

How can they get Mannatech on something like that? Mannatech tells its people not to make that claim, while the salesmen will promise anything to make a sale.

Because law enforcement need not credit what they say, rather than what they do. If there is evidence that Mannatech knows of particular distributors making claims such as the ones discussed here, and does nothing, then one can infer that they tolerate (or even encourage) such claims. See, e.g., Palmer v. Thompson, 403 U.S. 217 (1971); Adickes v. S. H. Kress & Co., 398 U.S. 144 (1970).

Once again, it's all about that famous Iran-Contra phrase, "plausible deniability".

I can't imagine that too many juries will buy that, despite Manna-tech telling their sales force not to make the claims, they were encouraging them to make the claims.

I don't know where you are getting your examples, but Palmer v. Thompson, 403 U.S. 217 affirmed the decision that despite appearance of collusion, there wasn't enough evidence to suggest misbehavior. Adickes v. S. H. Kress & Co., 398 U.S. 144 (1970) was remanded, and I don't have the technical skill to find its eventual outcome, but like the prior case, it revolves around a Equal Protection issue involving public officials, and and looks more like a case of the prosecution being sloppy in its case (failing to backup its motion for summary judgment and being overly broad in their application of the concept of a "custom") and the lower courts agreed.

[wserra]

I can't imagine that too many juries will buy that, despite Manna-tech telling their sales force not to make the claims, they were encouraging them to make the claims.

OK, we disagree. I find juries typically quite ready to disbelieve the boss who blames the little guys while playing Sgt. Schultz, especially when what the little guys are doing benefits the boss. Plenty of jurors feel that, at one point or another, they themselves were in the position of the "little guys".

As for the cases I cited: they do in fact stand for the proposition that someone in a position to control the activities of others, and who knows about them but does nothing, can be found to have approved of them. You're right, of course, that the context of those cases is in finding (or, in the case of Palmer, not finding) "state action" - they're just cases I'm familiar with - but the principle is the same. If a party with control countenances violations of law, it can be found responsible for them. If you want non-state-action cases, see Petillo v. State Liquor Authority, 248 A.D.2d 541, 670 N.Y.S.2d 209 (2nd Dept. 1998) (drug sales in liquor store) or Saphir Intern., SA v. UBS PaineWebber Inc., 25 A.D.3d 315, 807 N.Y.S.2d 58 (1st Dept. 2006) (issue of plaintiff's knowledge of defendant's employee's pump-and-dump).

[wserra]

Catching Up on Old News Dept: apparently Mannatech was afraid of what a jury might think of their distributors' activities. They settled the Texas AG's suit for $6M from the company and $1M personally from former CEO Sam Caster. Sources: Dallas Morning News, Texas AG news release. See earlier in the thread about allegations, and discussion between Burz and me over whether Mannatech would be responsible. Caster, of course, has done this stuff before. Needless to say, all the guilty deny wrongdoing; they just had $7M lying around.

In terms of misleading health claims, Mannatech was among the worst. We'll see if they now actually police their distributors.

[Doktor Avalanche]

Yeah, chemotherapy is for chumps.

Got cancer? Just walk it off...with some Mannatech.

[Demosthenes]

Couple face prison in tax case
September 29, 2009

A Central Point couple must go to prison and pay more than $400,000 in back taxes to the government after willfully failing to file federal income tax returns, a judge has ruled.
Kenneth L. Anderson, 63, and Dorothy S. Anderson, 61, were sentenced by U.S. Magistrate Judge Thomas M. Coffin Monday in Medford's U.S. District Court to 14 months in prison. In addition to paying back taxes, they also must file delinquent tax returns.
The couple pleaded guilty in June to two counts of willfully failing to file federal income tax returns for 2004 and 2005, according to a press release from the Department of Justice.
The Andersons had sold Mannatech Inc. health care supplements, both individually and through their corporation, AGK Services, since 1994. The Anderson had not filed tax returns since 1987, the government said, even as they earned more than $1.3 million in commissions between 2002 and 2004.
In response to contacts by the IRS, Kenneth Anderson responded with frivolous letters, failed to respond and failed to appear for scheduled meetings with the IRS, the Department of Justice release said.
After serving their sentence, the Andersons will be on one year of supervised probation.

[Blup]

Never underestimate people's ability and willingness to hurt themselves.

Just as non-alcoholics can't truly understand alchys, people who are unlikely to fall prey to scams are unable to truly understand those who are.

I have a friend who gets caught up in ALL the scams out there. MLM, sovereign cit, religion, etc etc. He also has a long criminal record and has drug and alcohol problems. He's a mess. I'll never understand him, but I do understand that there are people out there who are programmed to self-destruct. There's nothing that can "educate" them out of it.