The public welfare demands that constitutional cases must be decided according to the terms of the Constitution itself, and not according to judges’ views of fairness, reasonableness, or justice.
— Justice Hugo L. Black ( U.S. Supreme Court Justice, 1886 – 1971).
More evidence suggesting that the indictment against Michael Ioane and Steven and Louise Booth is a sham. We’re still asking, where is the Oath or affirmation, as the fourth amendment requires?
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
See the article below by Dan Meador.
Proper Federal Indictment Procedure
By Dan Meador (Rev. 1, April 14, 2000)
People across the country have called for research concerning Federal
indictments and how to defend against or attack them. So far as I can tell,
there probably hasn’t been a legitimate Federal indictment in the last two
or three decades. Consequently, nearly all Federal criminal prosecution
should be aborted and verdicts vacated, with the effect of defendants and
prisoners being discharged. Therefore, this memorandum is timely.
I haven’t completed research to support each position with case law, but the
basic flaws in Federal prosecution default subject matter jurisdiction. If a
court lacks subject matter jurisdiction, the action, judgment, or whatever
is void, it is a nullity, so where there is a judgment, it should be
vacated. Lack of subject matter jurisdiction can be raised at any time
without time limit. Rule 60 of the Federal Rules of Civil Procedure is the
key to opening old civil or criminal cases. Rule 12(a) & (b) of the Federal
Rules of Criminal Procedure should be used for pre-trial motions. Lack of
subject matter jurisdiction can be attacked within the existing action, or
by an independent action, i.e., via extraordinary writs, including habeas
corpus, writ of error coram nobis, writ of prohibition or whatever. See
particularly, 28 U.S.C. §§ 2201 et seq. for declaratory judgment, and 28
U.S.C. §§ 2241 et seq., for the original writ of habeas corpus. Motions
within an existing case where there is already judgment should be styled
“Motion to Vacate Judgment”, or within an active case, a simple motion to
In the course of this memorandum, I will use the phrase “subject matter
jurisdiction” to the point readers will probably be sick of it, but this is
the key to the Federal prosecution riddle. The basic jurisdictional elements
are jurisdiction over the person and jurisdiction over subject matter.
Venue, or territorial jurisdiction, is also a consideration, but isn’t
treated exhaustively in this discourse.
When working within Federal rules of procedure, it is important to know that
the rules preserve constitutionally secured rights. Authority for the
Supreme Court to promulgate rules of procedure is at 28 U.S.C. § 2072, and §
2072(b) preserves rights: “(b) Such rules shall not abridge, enlarge or
modify any substantive right.”
Federal rules of civil and criminal procedure preserve constitutionally
secured rights. Therefore, it is necessary to know and understand the three
Amendments that govern Federal criminal prosecution. The Fourth, Fifth and
Sixth Amendments follow:
Amendment IV: The right of the people to be secure in their persons, houses,
papers, and effects, against unreasonable searches and seizures, shall not
be violated, and no Warrants shall issue, but upon probable cause, supported
by Oath or affirmation, and particularly describing the place to be
searched, and the persons or things to be seized.
Amendment V: No person shall be held to answer for a capital, or otherwise
infamous crime, unless on a presentment or indictment of a Grand Jury,
except in cases arising in the land or naval forces, or in the Militia, when
in actual service in time of War or public danger; nor shall be compelled in
any criminal case to be a witness against himself, nor be deprived of life,
liberty, or property, without due process of law; nor shall private property
be taken for public use, without just compensation.
Amendment VI: In all criminal prosecutions, the accused shall enjoy the
right to a speedy and public trial, by an impartial jury of the State and
district wherein the crime shall have been committed, which district shall
have been previously ascertained by law, and to be informed of the nature
and cause of the accusation; to be confronted with the witnesses against
him; to have compulsory process for obtaining witnesses in his favor, and to
have the Assistance of Counsel for his defence.
The first thing to understand is that all Federal courts, including the
Supreme Court, are courts of limited jurisdiction. So-called common law
jurisdiction over contracts, historically recognized common crimes, etc., is
reserved to courts of the several States within their respective territorial
borders. The Tenth Amendment imposes this limitation:
Tenth Amendment: The powers not delegated to the United States by the
Constitution, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.
If a power is not enumerated in the Constitution, primarily in Article I §
8, Federal government lacks subject matter jurisdiction within the Union.
This provides the framework for what is known as the “arising under clause”
at Article III § 2, clause 1 of the Constitution:
Section 2. The judicial Power shall extend to all Cases, in Law and Equity,
arising under this Constitution, the Laws of the United States, and Treaties
made, or which shall be made, under their Authority.
View the Constitution as a corporate charter. It enumerates powers of the
Government of the United States, with those powers distributed among three
departments or branches, the legislative, executive and judicial. Except in
very rare and limited cases, one branch cannot exercise power of another.
This is called “separation of powers doctrine.” Each of the powers
enumerated, regardless of what branch it is enumerated for, must be set in
motion by legislation, the legislation being in the form of a “statute” or
law. This is specified at Article I § 8, clause 18:
[The Congress shall have Power] To make all Laws which shall be necessary
and proper for carrying into Execution the foregoing Powers, and all other
Powers vested by this Constitution in the Government of the United States,
or in any Department or Officer thereof.
Coming to grips with Article I § 8.18 in the context of the “arising under
clause” at Article III § 2.1 sheds light on United States judicial power and
understanding of “due process of law.” Unless a law vests authority in
Federal administrative agencies, or the courts themselves, courts of the
United States do not have subject matter jurisdiction. And in nearly all
cases, the law is complex, not simple. In other words, in very few instances
does any given statute stand alone. Tax law serves as an example. United
States v. Menk at 260 F.Supp. 784 articulates the point:
“It is immediately apparent that this section alone does not define the
offense as the defendant contends. But rather, all three of the sections
referred to in the information – Sections 4461, 4901 and 7203 – must be
considered together before a complete definition of the offense is found.
Section 4461 imposes a tax on persons engaging in a certain activity;
Section 4901 provides that payment of the tax shall be a condition precedent
to engaging in the activity subject to the tax; and Section 7203 makes it a
misdemeanor to engage in the activity without having first paid the tax, and
provides the penalty. It is impossible to determine the meaning or intended
effect of any one of these sections without reference to the others.”
Any of the crimes listed in Chapter 75 of the Internal Revenue Code (§§ 7201
et seq.) such as failure to file, failure to withhold, and the like, is not
a stand-alone statute. In order to prosecute the Government must (1)
identify a taxing statute, and (2) prove application of a liability statute,
before a penalty statute is applicable. Without the first two elements, a
Federal court lacks subject matter jurisdiction to impose a penalty, whether
civil or criminal. This principle applies to nearly all Federal penalty
statutes, whether relating to tax, commerce, securities or anything else.
Without a preexisting liability to perform or refrain from any given
activity, a Federal penalty statute doesn’t apply. Unless all elements are
in place, the Department of Justice, U.S. Attorney or whatever has failed to
meet threshold criteria for burden of proof, with the effect being that the
Federal court lacks subject matter jurisdiction.
Although I’m not going to get into the subject in this memorandum, it is
also necessary for a department or agency of Federal government to prove
standing. For instance, the Department of the Interior doesn’t have
authority to enforce revenue laws. If an agency isn’t vested with authority
by law, it lacks standing to bring a complaint, so the court lacks subject
matter jurisdiction. We’ll see this in the Code section that specifies who
has authority to make complaints under revenue laws.
I’ll restate the obvious: All courts of the United States are statutory
courts, i.e., courts of limited jurisdiction. Due process of law is
predicated on statutes of the United States that either compel or prohibit a
given activity. The statutory authority is usually complex rather than
simple, i.e., the need for all elements being on the table in order to
establish subject matter jurisdiction.
There is also an additional important element of proof: What is the
geographical application of any given law or set of laws? In Foley Brothers
v. Filardo (1948) 336 U.S. 281, we find that “It is a well established
principle of law that all federal legislation applies only within the
territorial jurisdiction of the United States unless contrary intent
Congress has two distinct characters: Where States of the Union are
concerned, Congress may legislate only within the framework of
constitutionally enumerated powers, but where territory belonging to the
United States is concerned, Congress operates with the combined authority of
state and national governments much on the order of European governments,
and may do whatever the Constitution does not expressly or implicitly
prohibit. Where States of the Union are concerned, Congress’ authority is
restrictive; where the District of Columbia, Puerto Rico, the Virgin
Islands, Guam, American Samoa, the Northern Mariana Islands, and smaller
insular possessions are concerned, Congress has plenary or near-absolute
It may be that Congress exercises a general power enumerated in Article I §
8 of the Constitution, but application is limited to the geographical United
States, i.e., territory belonging to the United States. This, then, is
another element of burden of proof, i.e., proof of subject matter
jurisdiction. The advocate, in this case the Attorney General or U.S.
Attorney, must prove the venue or geographical application of any given
Just because the Constitution enumerates powers United States Government may
exercise doesn’t mean the power has to be exercised. For example, prior to
the Civil War, Congress exercised power to impose direct taxes only twice,
and until after the Civil War, if then, Congress did not vest Federal
courts, including the Supreme Court, with all available jurisdictional
powers enumerated in Article III § 2 of the Constitution. Although it is
beyond the scope of this memorandum, I am convinced that by 1948 virtually
all Federal statutory authority was withdrawn from the Union and ever since
has been applicable only in United States maritime and territorial
We will now turn to essentials of due process of law as prescribed in the
Fourth, Fifth, and Sixth Amendments.
We saw at 28 U.S.C. § 2072(b) that Federal rules of procedure may not
deprive anyone of substantive rights. In a manner of speaking, rights
secured by the Fourth, Fifth, and Sixth Amendments are carved in stone, and
they are cumulative, they are not independent or elective unless someone
knowingly chooses to forfeit one of the specified rights. If one of the
constitutionally secured rights is bypassed, administrative offices,
including the Department of Justice and the U.S. Attorney, and courts of the
United States, lack or lose subject matter jurisdiction. This is the essence
of the Fifth Amendment guarantee that no person shall be deprived of life,
liberty or property without “due process of law.”
Here we see two distinct elements: Not only does there have to be law which
compels or prohibits any given activity, but procedure or process must
conform to that prescribed by the “Constitution and laws of the United
States.” The Fourth, Fifth and Sixth Amendments secure mandatory minimum
requirements of due process.
The Fourth Amendment requirement for probable cause, “supported by Oath or
affirmation,” is the jumping-off point: “… no Warrants shall issue, but upon
probable cause, supported by Oath or affirmation…
Here are two secured rights: There must be an oath or affirmation, a
complaint, that specifies key elements of a crime, and a committing
magistrate must issue a warrant based on the complaint. The complaint is
made in a probable cause hearing. Unless or until these threshold
requirements are met, there can be no Federal prosecution.
We will use Federal tax law as an example. At 18 U.S.C. § 3045 we find
authorization for who may set the criminal prosecution process in motion via
an affidavit of complaint:
“Warrants of arrest for violations of internal revenue laws may be issued by
United States magistrates upon the complaint of a United States attorney,
assistant United States attorney, collector, or deputy collector of internal
revenue or revenue agent, or private citizen; but no such warrant of arrest
shall be issued upon the complaint of a private citizen unless first
approved in writing by a United States attorney.”
This Code section needs an amount of qualification: Whoever makes the
affidavit of complaint must have personal knowledge. In other words, an U.S.
Attorney cannot make the affidavit of complaint unless he was personally
involved with the investigation process and has hands-on involvement with
securing and examining evidence.
Our concern is whether or not the Federal Rules of Criminal Procedure
preserve this constitutionally secured right. We find that they do. Rule 3
of the F.R.Crim.P. is specific:
“Rule 3. The Complaint
“The Complaint is a written statement of the essential facts constituting
the offense charged. It shall be made upon oath before a magistrate judge.”
We then go to Rule 4, “Arrest Warrant or Summons Upon Complaint”.
Rules 3 through 9 of the Federal Rules of Criminal Procedure preserve the
proper procedural sequence of the Fourth, Fifth and Sixth Amendments. If any
portion of any of these rules, i.e., of any of the three amendments, is
defective, Courts of the United States lose subject matter jurisdiction.
Before continuing with what should happen, I’ll review what normally
The first most people know of a Federal investigation is when they receive a
“summons” in the mail, with something akin to an “indictment” attached, or
they are arrested on a warrant with an indictment attached. Occasionally a
U.S. Attorney, the Criminal Division of the Internal Revenue Service, the
FBI or another Federal agency will notify the target of an investigation,
and sometimes the target will be offered the opportunity to testify to a
grand jury. However, whether arrested or summoned, the target’s first court
appearance is at the alleged arraignment after the grand jury has supposedly
issued an indictment. At the hearing, the defendant is asked to enter a
plea. If the defendant refuses to enter a plea, the presiding magistrate,
usually a United States Magistrate Judge, enters a plea for him. After that
ritual, the U.S. Magistrate Judge will either set or deny bond.
Where is the affidavit of complaint, probable cause hearing, et al? Has the
defendant had the opportunity to examine witnesses and evidence against him,
call his own witnesses and present contravening documentary or other
evidence? As we will see, current Federal prosecution practice for all
practical purposes trashes Fourth, Fifth, and Sixth Amendment due process
rights, and it employs the services of quasi-judicial officers who don’t
have lawful authority to do what they’re doing. In sum, current Federal
prosecution practice amounts to a criminal conspiracy among administrative
and judicial officers.
Federal criminal prosecution must begin with the affidavit of criminal
complaint required by the Fourth Amendment and Rule 3 of the Federal Rules
of Criminal Procedure. Without the affidavit of complaint, courts of the
United States do not have subject matter jurisdiction, so whatever ensuing
verdict, judgment and/or sentence there might be is a nullity, it is void
and should be vacated.
We then go to Rule 4, the warrant issued subsequent to the probable cause
hearing. Warrants for seizure and/or arrest must issue following, they
cannot issue without a probable cause hearing.
The Federal courts are presently relying on Rule 9(a), “Warrant or Summons
Upon Indictment or Information”. Rule 9(a), in relative part, stipulates
that, “Upon the request of the attorney for the government the court shall
issue a warrant for each defendant named in an information supported by a
showing of probable cause under oath as is required by Rule 4(a), or in an
indictment … More than one warrant or summons may issue for the same
defendant … When a defendant arrested with a warrant or given a summon
appears initially before a magistrate judge, the magistrate judge shall
proceed in accordance with the applicable divisions of Rule 5.”
They then jump to Rule 10, the arraignment, rather than dropping back to
Rule 5, as Rule 9 specifies. Rule 5 is “Initial Appearance Before the
Grand juries have certain investigative powers. If in the course of
investigating a cause of action that is lawfully before them, grand jury
members may find evidence sufficient to recommend additional charges, or
name additional defendants, by way of presentment. However, if the original
complaint against the primary defendant for a specific offense is not before
it, the grand jury has no basis for initiating an investigation. There must
be original probable cause determined by a committing magistrate, with the
finding of probable cause being predicated on the antecedent complaint.
We’re going to use Rule 6(b)(1) to demonstrate this point:
“(1) Challenges. The attorney for the government or a defendant who has been
held to answer in the district court may challenge the array of jurors on
the ground that the grand jury was not selected, drawn or summoned in
accordance with law, and may challenge an individual juror on the ground
that the juror is not legally qualified. Challenges shall be made before the
administration of the oath to the jurors and shall be tried by the court.”
The right to challenge grand jury array (composition) and individual jurors
is antecedent to individual jurors being administered the oath required
prior to a grand jury being formally seated. The government attorney and the
defendant, or the defendant’s counsel, both have the right to challenge
array and disqualify grand jury candidates prior to the grand jury being
seated. If this right has been denied, there is a simple solution at Rule
“(2) Motion to Dismiss. A motion to dismiss the indictment may be based on
objections to the array or on the lack of legal qualification of an
individual juror, if not previously determined upon challenge. It shall be
made in the manner prescribed in 28 U.S.C. § 1867(e) and shall be granted
under the conditions prescribed in that statute. An indictment shall not be
dismissed on the ground that one or more members of the grand jury were not
legally qualified if it appears from the record kept pursuant to subdivision
(c) of this rule that 12 or more jurors, after deducting the number not
legally qualified, concurred in finding the indictment.”
Rule 6(c) requires the grand jury foreman to record the vote, then file a
letter or certificate of concurrence with the clerk of the court.
If the original defendant or his counsel did not have the opportunity to
challenge the grand jury array (composition selection process) and
individual grand jurors prior to the grand jury being seated, they’re all
disqualified as the qualification process is among the defendant’s
constitutionally secured due process rights. By consulting Chapter 121 of
Title 28 generally, and 28 U.S.C. § 1867 specifically, we find that there is
no distinction in the voir dire examination and other jury qualification
process for grand juries or petit trial juries:
“(a) In criminal cases, before the voir dire examination begins, or within
seven days after the defendant discovered or could have discovered, by the
exercise of diligence, the grounds therefor, whichever is earlier, the
defendant may move to dismiss the indictment or stay the proceedings against
him on the ground of substantial failure to comply with the provisions of
this title in selecting the grand or petit jury.”
If a defendant doesn’t know a grand jury is investigating him, he doesn’t
have the opportunity to challenge the grand jury array, or individual grand
jurors. Consequently, he has been deprived of substantive due process, which
is expressly prohibited by 28 U.S.C. § 2072(b).
We have an adversarial judicial system. All parties to any given action, the
government included, stand on equal ground. The system isn’t set up for
convenience of the government. Government always has the burden of proof,
whether in civil or criminal matters. The defendant has the right to
challenge the qualifications and competency of everyone involved in the
prosecution process, inclusive of grand and petit jurors selected from
“peers” who ultimately have responsibility for determining indictable
offenses and/or final liability. If and when government personnel deprive
the Citizen of any of these rights, constitutionally secured due process of
law is abridged. In that event, courts lose subject matter jurisdiction.
Now consider Rule 6(f), F.R.Crim.P.
“(f) Finding and Return of Indictment. An indictment may be found only upon
concurrence of 12 or more jurors. The indictment shall be returned by the
grand jury to a federal magistrate judge in open court. If a complaint or
information is pending against the defendant and 12 jurors do not concur in
finding an indictment, the foreperson shall so report to a federal
magistrate judge in writing forthwith.”
This section of Rule 6 specifies foundation necessities: Federal government
may prosecute felony crimes only on a valid affidavit of complaint that has
been presented in a probable cause hearing (Rules 3 & 4). Only corporations
can be prosecuted via “information.” Rule 6(f) preserves the antecedent
affidavit of complaint and probable cause hearing in the second sentence:
The grand jury may proceed only on “complaint” or “information” that has
previously been formally processed. Additionally, if the grand jury issues
an indictment, the return must be made in open court to a magistrate judge.
The return should appear on the case docket, and a transcript of the hearing
should be available. A return of an indictment is the same as the petit
trial jury return of a verdict.
In practice, any given grand jury returns several indictments at once.
However, when we understand the indictment process, it is clear that the
grand jury pool may be held over for several months, but any given grand
jury is empanelled to consider only one charge or set of charges in related
cases. To date, we haven’t found where an indictment for any single case or
set of related cases has been returned in open court, and a transcript of
the proceeding made available.
Rule 8 governs limits of the reach of any given grand jury, Rule 8 being
“Joinder of Offenses and of Defendants.”
During any court or jury session, any given juror might sit on one or more
grand or petit juries, but each jury has limited subject matter
jurisdiction. Where the grand jury is concerned, it may proceed only from an
original complaint where probable cause has been found to issue additional
indictments and/or name additional defendants where the crimes “are of the
same or similar character or are based on the same act or transaction or on
two or more acts or transactions connected together or constituting parts of
a common scheme or plan.” (Rule 8(a)) Rule 8(b) specifies criteria for
naming additional defendants.
Here is where our reservation of rights in Rule 9(a) comes in: “When a
defendant arrested with a warrant or given a summons appears initially
before a magistrate judge, the magistrate judge shall proceed in accordance
with the applicable subdivisions of Rule 5.”
We will first consider Rule 5(b) and the first portion of Rule 5(c):
“(b) Misdemeanors and Other Petty Offenses. If the charge against the
defendant is a misdemeanor or other petty offense triable by a United States
magistrate judge under 18 U.S.C. § 3401, the magistrate judge shall proceed
in accordance with Rule 58.
“(c) Offenses not Triable by the United States Magistrate Judge. If the
charge against the defendant is not triable by the United States magistrate
judge, the defendant shall not be called upon to plead…
What is now known as the United States Magistrate Judge was originally a
national park commissioner. The name of the office has changed, but the
nature of the office hasn’t. This is an administrative, not a judicial
office. It’s equivalent to what used to be the police court magistrate.
Today the only offenses triable by a United States Magistrate Judge are
traffic violations and other misdemeanor and petty offenses committed on
military reservations, in national parks and forests, etc., under
regulations promulgated by the Department of Defense and the Department of
the Interior. Don’t capture wild burrows and mustangs in national parks
without a permit as that is a misdemeanor offense triable by a United States
United States Magistrate Judges in the several States have “venue”
jurisdiction solely over offenses committed on Federal enclaves where United
States Government has exclusive or concurrent jurisdiction ceded by one of
the several States. And as Rule 5(c) specifies, they cannot even ask for,
much less make a plea for a defendant charged with a felony crime. This
prohibition is effective under Rules 5, 9, 10 & 11. When and if a United
States Magistrate Judge asks for or makes a plea for a defendant in a felony
case, he has usurped power vested in Article III judges of the United
States. When this quasi-judicial officer exceeds authority Congress vested
in him by law, the United States loses subject matter jurisdiction and there
are grounds to pursue lawful remedies, both civil and criminal. Government
officials, regardless of capacity, enjoy the cloak of immunity only to the
outer reaches of their lawful authority. The notion of blanket judicial or
any other absolute immunity is nothing more than a convenient fiction.
Rule 5(c), second paragraph, also stipulates that, “A defendant is entitled
to a preliminary examination, unless waived, when charged with any offense,
other than a petty offense, which is to be tried by a judge of the district
We’re going to continue with this subsection, but it is useful to understand
the term “magistrate judge” as opposed to “United States Magistrate Judge”
or “United States magistrate judge.”
The President of the United States is the nation’s highest “magistrate.” In
other words, the “magistrate” is a ministerial, not a judicial office. All
lawful judges function in a magistrate capacity when they preside at
probable cause hearings, initial appearances and the like. In a sense, this
is an “extra-judicial” capacity that within proper context can be vested in
or exercised by administrative or judicial officers. The United States
Magistrate Judge is an administrative office with quasi-judicial capacity
limited to specific subject matter, where the “district judge” of the United
States is vested with the full range of United States judicial authority,
i.e., his extra-judicial capacity as magistrate judge extends to Federal
offenses of all stripes.
Essentials of the preliminary hearing or examination are prescribed at Rule
5.1(a) of the Federal Rules of Criminal Procedure:
“(a) Probable Cause Finding. If from the evidence it appears that there is
probable cause to believe that an offense has been committed and that the
defendant committed it, the federal magistrate judge shall forthwith hold
the defendant to answer in district court. The finding of probable cause may
be based upon hearsay evidence in whole or in part. The defendant may
cross-examine adverse witnesses and may introduce evidence…
Now we go back to Rule 5(c), second paragraph:
“A defendant is entitled to a preliminary examination, unless waived, when
charged with any offense, other than a petty offense, which is to be tried
by a judge of the district court. If the defendant waives preliminary
examination, the magistrate judge shall forthwith hold the defendant to
answer in the district court. If the defendant does not waive the
preliminary examination, the magistrate judge shall schedule a preliminary
examination. Such examination shall be held within a reasonable time but in
any event not later than 10 days following the initial appearance if the
defendant is in custody and no later than 20 days if the defendant is not in
custody, provided, however, that the preliminary examination shall not be
held if the defendant is indicted or if an information against the defendant
is filed in district court before the date set for the preliminary
If a defendant is joined to an indictment under Rule 8, he has the right to
a preliminary hearing under Rule 5.1. This assures his opportunity to
challenge witnesses and present evidence before being subjected to the trial
process. The right is particularly important where government prosecutors
routinely play “let’s make a deal” to secure incriminating testimony from
We will now summarize indispensable or “substantive” elements of Federal
The criminal prosecution process may commence if and only if there is an
affidavit of criminal complaint submitted under oath in a probable cause
hearing. (Rule 3, F.R.Crim.P.)
A committing magistrate judge must issue a warrant or summons after finding
probable cause. (Rule 4, F.R.Crim.P.)
The defendant may be arrested and “returned” by the appropriate Federal
authority. (Rule 4, F.R.Crim.P.)
The defendant then has an initial appearance at which he is asked to enter a
plea, and bond, if any, is set. If the offense is a felony offense, a United
States Magistrate Judge may not ask for or enter a plea. The defendant is
entitled to a preliminary hearing unless an indictment or information
(against a corporation) is returned prior to a preliminary hearing. In the
event that the defendant is “joined” by a grand jury under Rule 8 and has
not previously been arrested, the Federal criminal prosecution process
begins here, and the defendant is entitled to a preliminary hearing. (Rule
If the defendant exercises his right to a preliminary hearing, he has the
opportunity to cross-examine adverse witnesses and he may introduce his own
evidence, whether the evidence is via witnesses or is documentary in nature.
(Rule 5.1, F.R.Crim.P.) The preliminary examination may be bypassed only in
the event that the defendant waives the right, or indictment issues
subsequent to the initial appearance.
The defendant, or his counsel, has the right to challenge array of the grand
jury pool and voir dire individual grand jury candidates prior to the grand
jury being sworn in. (Rule 6(b), F.R.Crim.P. & 28 U.S.C. § 1867).
In the course of its investigation, based on an affidavit of complaint and
the finding of probable cause, a grand jury may by “presentment” issue
additional indictments and/or join additional defendants in compliance with
provisions of Rule 8, F.R.Crim.P.
The grand jury must return indictments in open court, and the grand jury
foreman must file a letter or certificate of concurrence with the clerk of
the court. (Rule 6(f), F.R.Crim.P.)
A warrant or summons may issue against additional parties joined to an
original complaint under provisions of Rule 8 subsequent to grand jury
deliberation and return of indictment in accordance with Rule 6. (Rule 9,
After all previous conditions are met, as applicable, a defendant may be
arraigned and called on to plead. (Rules 10 & 11, F.R.Crim.P.)
From my research, it appears that the Department of Justice and United States Attorneys are convening grand juries under auspices of the “special grand jury” provisions in Chapter 216 (§§ 3331-3334) of Title 18. However,
this is misapplication of law as special grand jury investigation authority
extends only to criminal activity involving government personnel, and the
grand jury is limited to issuing reports. Defendants and prospective
defendants are afforded the opportunity to rebut or correct the reports
prior to public release. Although evidence unearthed by the special grand
jury may be used as the basis of criminal prosecution, the special grand
jury does not have indictment authority.
It appears that the first steps toward securing secret indictments were
taken during prohibition days to shield grand jury members from reprisal.
Although secret indictments were and are patently unconstitutional, the
extreme remedy in the midst of highly volatile and dangerous circumstance
was rationalized in the midst of what amounted to domestic war with
organized crime. Unfortunately, as other such rationalizations, those who
found the extraordinary process convenient incorporated it as routine
Rule 60(b) of the Federal Rules of Civil Procedure preserves causes to
challenge judgments. They are as follows:
Mistake, inadvertence, surprise, or excusable neglect;
Newly discovered evidence which by due diligence could not have been
discovered in time to move for a new trial under Rule 59(b);
Fraud (whether heretofore denominated intrinsic or extrinsic),
misrepresentation, or other misconduct of an adverse party;
The judgment is void;
The judgment has been satisfied, released, or discharged, or a prior
judgment upon which it is based has been reversed or otherwise vacated, or
it is no longer equitable that the judgment should have prospective
Any other reason justifying relief from the operation of the judgment.
The rule then specifies, “The motion that shall be made within a reasonable
time, and for reasons (1), (2), and (3) not more than one year after the
judgment, order, or proceeding was entered or taken. A motion under this
subdivision (b) does not affect the finality of a judgment or suspend its
operation. This rule does not limit the power of the court to entertain an
independent action or relieve a party from a judgment, order, or proceeding,
or to grant relief to a defendant not actually personally notified as
provided in Title 28, U.S.C. § 1655, or to set aside a judgment, for fraud
upon the court. Writs of coram nobis, bills in the nature of a bill of
review, are abolished, and the procedure for obtaining any relief from a
judgment shall be by motion as prescribed in these rules or by an
There are two keys in Rule 60(b). First, Rule 60(b)(4), where the “judgment
is void,” opens the door to vacating a judgment at any time, and second, the
void judgment may be attacked “by motion as prescribed in these rules or by
an independent action.”
A judgment is void where the court lacked subject matter jurisdiction. The
court lacks subject matter jurisdiction when and if the administrative
agency has proceeded without statutory authority, or the administrative
agency has deprived the defendant of substantive due process rights. Where
the court lacked subject matter jurisdiction, the judgment is void; it has
no lawful effect, so it should be vacated. The defendant may proceed by
motion at any time, without the encumbrance of time limitation, or may
initiate collateral attack via the extraordinary writs, i.e., an independent
In response to a recent story, on June 6, 2006, about 15 armed agents from the Fresno, California Office of the IRS stormed the home of Michael and Shelly Ioane under the pretense of a lawful search warrant.
Having knowledge of IRS corruption, Mr. Ioane demanded a copy of the alleged search warrant. Immediately after reviewing it, Mr. Ioane determined that it was VOID on its face and demanded that the IRS leave. When they refused, Mr. Ioane asked to call his Attorney, which they allowed; however, Mr. Ioane actually called 911 and requested assistance.
Approximately 5 minutes later several Atwater Police Officers responded. The Officers gave various instructions to the IRS agents and informed Ioane that, although the warrant appeared suspicious, he, Mr. Ioane, would have to deal with the matter by filing a civil suit.
About four hours later the agents left the home; although they left a list of many of the items taken regarding various clients and Mr. Booth, they did not disclose over $30,000.00 in wholesale jewelry, which was taken. Mr. Ioane has reported this theft to Treasury Inspector General for Tax Administration; however, as of today the property has not been recovered or accounted for.
Pending before the United States district court, is case number 07-cv-0620, whereas Mr. Ioane and his entire family have sued the United States and IRS for the illegal raid. On September 23, 2008, district Judge Anthony Ishii, denied in part and granted in part the governments motion to dismiss. The most relevant counts were denied.
Shortly after the court denied the government’s motion to dismiss, threats of criminal prosecution began and the government moved to stay the civil action, since they felt that they were being taken advantage of. Assistant US Attorney G. Patrick Jennings, specifically and directly intimated that if Ioane didn’t drop his lawsuit he would be prosecuted criminally.
Attorney Richard I. Fine Speaks Out on Judges, Corruption, Circumstances
Excerpts from a Full Disclosure Network Interview http://blog.fulldisclosure.net/2009/03/jailed-attorney-speaks-out-on-judges.html
March 3, 2009
LESLIE: You’ve been up against some formidable challenges. But none quite like the one that’s facing you today. Would you say that tomorrow’s (contempt hearing before Judge David Yaffe) is — how would you compare that to all of the challenges you’ve had before this?
RICHARD FINE: Well, tomorrow’s hearing is interesting because the challenges that I’ve had before are basically challenges that we can say work within a functioning system. And when I was getting all of this money back and so forth, I was dealing with a system that was functional. I mean, you have a case, you go into a court; it either gets settled, you win it or you lose it, and you’re dealing with a system that has integrity. Tomorrow’s case, or the case that we have now, is dealing with a dysfunctional system because of the fact that this is now pure politics and retaliation. We are dealing now with a judge who took money from the County of Los Angeles, who then made an order that I should pay money to the County of Los Angeles, holds me in contempt for refusing to answer questions about my personal assets to force me to pay that money, and now wants to send me to jail because I’m in contempt for not obeying his illegal order, which was illegal because he took illegal money from the County. We’re dealing with a dysfunctional system and a judge that is dealing with political retaliation. So we’re not dealing in a justice system anymore. We’re dealing with what some people would call a third-world country; we’re dealing with all the things that America condemns about other countries. That is what we have in this courtroom tomorrow. So I wouldn’t say that it’s really a comparison. We aren’t dealing in a system that this country was set up to operate.
LESLIE: Tomorrow when you go into court, Judge Yaffe is going to make a — he’s going to give you a sentence; is that it? He’s already found you in contempt?
RICHARD FINE: Yes. He’s — he’s found me in contempt for refusing to answer questions from a commissioner about an illegal order that he has made. And he wants to sentence me to jail until I answer those questions. Now, I have gone to the Court of Appeal with what is known as a writ of habeas corpus, which means “bring in the body,” and I have asked the Court of Appeal to enter a stay stopping Judge Yaffe from doing anything. I haven’t heard yet, as of today, whether they’ve entered that stay or not. If they enter the stay, Judge Yaffe is dead in his tracks. If they don’t enter the stay, then I’ll go into the California Supreme Court, and if the California Supreme Court doesn’t enter the stay, then I’ll go into the United States District Court. Sooner or later, I will win. Whether I win before he sends me to jail, I don’t know. But that — that is what we are dealing with.
LESLIE: Tell us how this all started.
RICHARD FINE: Well, this — this all started in a very innocent type of way. It started back in 1999, and in 1999, I brought a lawsuit called John Silva vs. Garcetti — Gil Garcetti, Los Angeles District Attorney. And that lawsuit was based upon the fact that John Silva had paid money as part of his divorce — child support money. And child support money was being paid into the Los Angeles because the County of Los Angeles, as you know, collects child support money. Now, what we found out is that he had paid his child support money in, but the child support money wasn’t going to his wife. The County was not distributing it. And the County wasn’t distributing about $14 million of child support money. What the County was doing is, the County was taking this money in and it was holding it. Now, there’s a law that says that the County must distribute the child support money within six months or give it back to the father. And they will only give it back to the father if they can’t find the wife or the children. Now, in John’s case, he knew where his wife was, and he knew where the children were, because his wife was friendly. You know, he was giving the money to the County support system; the County wasn’t giving it to his wife. His wife knew that the money was going in, so she was cooperating with us, and we found out that all these other women and children were not getting their money.
So I sued the County to have this money distributed. The County answered and told me how much money was there, where the accounts were. All they had to do was distribute it. They were refusing to do it. I went into court, and we got to the end of the trial. The County moved to dismiss, and the judge dismissed the case. And I was astounded. And I went up into the appeal, and after the trial was over and before I filed my first brief, I found out that the judge, Judge James C. Chalfant, had received money from the County Los Angeles. That’s how it started. That was one case.
The second case that it started out with was the case that I mentioned earlier about the County of Los Angeles taking money from the environmental fees, and in that case — that was a case called Amjadi and Lacaoehs vs. the Board of Supervisors of County of Los Angeles. And I was brought into that case to get that money out of the general fund of the County of Los Angeles and into a special fund. And I won that. I got the case, you know, got the special fund established. I got $11 million that they still had in the general fund put into the special fund. I got the fees frozen for three years until that $11 million was used up, and then when it came time to get the attorneys fees, Judge Kurt Lewin, who was the judge in the case, refused to award the attorneys fees, saying that I was representing a County union, and unions shouldn’t sue the County. And in addition to that, that unions were always in negotiations with the County for wages. And therefore what the union was really doing, had really brought the case, not to help the public, but really for its own benefit. Well, I also found out that Judge Lewin was getting money from the County. And to pay the attorneys fees, the attorneys fees would be coming out of these funds, which was County funds.
LESLIE: When you talk about these judges getting money from the County, how is it that money is coming to them? For what purpose? Under what..?
RICHARD FINE: Okay. What — the — to answer your question, the way that the money comes from the County to the judges is that every year, the County, as part of its budget, under what is known as Trial Court Funding — if you look in the budget, you’ll actually see this under Trial Court Funding, you will see money going to the judges, and that money in this particular year is approximately $20 million, or $46,370-some-odd per judge. Now, how it started was, back in 1988, the County of Los Angeles, decided, through its Board of Supervisors, that they wanted to pay judges — and these are their — somewhat their exact words — to attract and retain qualified judges and qualified candidates to sit as judges in this — meaning L.A. — County. And that was their reason. Now, they knew — and we actually — I actually have a copy of the document — they knew at that point in time that they couldn’t do this. They knew that to do this was illegal because under the California Constitution, under what is known as Article 6, Section 19 of the California Constitution, only the State legislature could prescribe the compensation of the judges.
RICHARD FINE: There’s a document in November of 1988 which was written by the — at that point, the County Counsel to Frank Zolin who was the Clerk of the Courts, and it actually went from the County Counsel to the Clerk of the Courts, explaining these things. So the L.A. Superior Court actually got this document. In that document, it said that the Attorney General had given the opinion that this could not be done, and so what the County Counsel tried to rationalize is, he said, “Well, this part of the Constitution really only meant salaries and it didn’t mean compensation,” so they’re gonna try and get around it in that way. They knew they were doing wrong. They also knew that the Attorney General had given opinions that you couldn’t pay this money as part of a statute as compensation for judges. So they knew right then and there that what they were doing was wrong. The other thing that they knew is that if you’re giving the money to attract people as candidates for judges, judges are elected officials — they’re State elected officials under the California Constitution. We vote for a Superior Court judge every six years. So if you’re going to be giving money to a judge to attract him to be a candidate, you’d be giving money to his political campaign, and that would be a gift of public money to a private individual, and that would be a violation of Article 16, Section 6 of the California Constitution.
LESLIE: How much was this money that they were giving them?
RICHARD FINE: It turns out that at that point in time they were giving them about 27 percent of their salary, and back in ’88 I’m not sure what the salary was, but it was probably, maybe around $20,000-some a year. Now it’s doubled to $46,000 a year.
LESLIE: So would they be able to give that kind of money as a campaign contribution?
RICHARD FINE: As a campaign contribution in 1988, they wouldn’t have been able to give that amount of money to a judge because the campaign contribution limits the State to $1,000 per candidate.
LESLIE: So would you say, then, that basically the County was buying judges?
RICHARD FINE: The bottom line of it is yes, because the only reason that the County could be giving this money — the only underlying reason — is that the County had — had cases in front of these judges. The County is a major litigant in the California courts, and it’s the same thing as if Tony — the fictional Tony Soprano had been giving money to the judges. In fact, the County has an average, as far as normal cases are concerned — when I say “normal,” that’s excluding child custody cases, that’s excluding criminal cases — just taking your regular cases. The County has about 700-800 new cases a year in the Superior Court. So when the County is giving this money, the underlying thought, in my opinion, is that the County wanted to influence the judges to decide the cases in the County’s favor. Now, this thought of mine actually came true because we have documents from the County Counsel to the Board of Supervisors that show that in the year 2005 and in the year 2006 and 2007, not one case that was decided by an L.A. Superior Court judge was decided against the County of Los Angeles. So basically nobody won in that period of time. And for the year 2008 — 2007, 2008, in that fiscal year, the documents are a little bit more vague, and possibly two cases were decided by a judge against the County of Los Angeles. But that was about the most. So that gives you the effect of the monies.
LESLIE: Now, you made that statement, “That gives you from the beginning of the payments with respect to the payments,” but you’ve only cited 2005, 2006, 2007. You don’t know what the win/loss ratio was from 1988 to 2005?
RICHARD FINE: There — there are no documents that I know of that tells me the win and loss ratio from the years in between, because the only documents that I have been able to pick up are the ones that started in 2005. Now, the County may have internal documents that were not published or that have not been made public that might have — might tell us what’s happened in the previous years. And I don’t know if the court is keeping internal documents as to what has happened on the various cases. Somebody actually — if somebody wanted to go in and do the survey, you could go into the court system and take every case where the County of Los Angeles is named as a defendant and then go in and look to see what happened in the cases and whether it was a judge decision or a jury decision. That would be a fairly large project, but one could do that. And because you’re looking at from 1988 to, say, 2005, you’re looking at approximately 17 years of cases, and 700, you know, cases per year. So you’re looking at maybe 13,000-some-odd cases. It would take a little bit of time for someone to do the survey and dig up the records. But you could actually find out the exact number.
LESLIE: Now, you have given us the background of why you’re coming into this hearing tomorrow. It’s basically because of the predicament that the judges are in. What happened, legislatively, at the State level to change the future for the judges?
RICHARD FINE: Well, what happened at the State level is very interesting, and this is somewhat involved with the State Bar proceeding against me also. On February 1st — and it actually was e-mailed in on February 2nd — I filed a Federal complaint against the L.A. Superior Court judges, in particular Judge Yaffe, who is involved in tomorrow’s hearing, uh, Judge Bruguera, who is the judge that dismissed the cases regarding Marina del Rey where we, the people in the County of Los Angeles have lost approximately $1 billion of income from the developers in Marina del Rey that should have come to the County, and against Supervisors Antonovich, Knabe and Molina, who voted in favor of the development of the Del Rey Shores project here in Marina del Rey, while receiving contributions from the developer, Jerry Epstein, within a 12-month period of time. And then also against the State Bar judge, Richard A. Hahn, who made the decision recommending that I be disbarred, while in fact he sat on the Board of Governors of the Special Olympics of Southern California that had received $30,000 in contributions from L.A. County. So that was — and I filed this complaint with the Justice Department on February 2nd of 2009. I gave a copy of that complaint, as part of my State Bar case, to the California Supreme Court, on February 2nd.
On February 11th, the Judicial Council — Senator Stein — President Pro Tem of the State Senate, Darryl Steinberg, introduced a bill called Senate Bill SBX2 11 into the State Senate, which stated that all the judges and all the government officials and all the governments that were involved with any activity of judges receiving money from counties received immunity from civil liability, criminal prosecution, and disciplinary action.
LESLIE: Now, why haven’t we heard anything about this?
RICHARD FINE: Well, let me just trace it — before we get to that, let me just trace how this came about so you understand the whole story. The next thing that happened is that the — this — my complaint — it is my belief, and I think I’m correct in this — went from the California Supreme Court to the California Judicial Council, because the Chief Justice of the California Supreme Court is the Chairman of the Judicial Council. The bill that I just mentioned, according to its legislative history, came from the California Courts Administrative Office. The Court Administrative Office is located in the Judicial Council. So it was written in the Judicial Council. It went from the Judicial Council to Darryl Steinberg’s office. It was voted on by the State Senate three days later — February 14th — and passed. It was passed by the State Assembly one day after that, February 15th, and it was signed by Governor Schwarzenegger as part of the budget package on February 20th. And that answers your question as to why you didn’t hear about it, because it came up as part of the budget package, and as part of the budget package, every — all the news media and everything else were basically looking on the fact that there’s a budget that was passed, and nobody looked at the fact that they had sneaked through this bill that gives these judges immunity. And also the bill says that even though the previous payments are illegal because there was a case called the case of Sturgeon vs. the County of Los Angeles, that held that the payments to the judges are unconstitutional, and the bill recognizes this, and then the bill says, “Well, future payments can be made from the County.” So what happened is that the bill admits that the payments were illegal, gives the judges and these other people immunity for their actions of having received the payments, the supervisors the immunity for having given the payments, and immunity for everything that occurred with respect to these payments.
Now, to take this a step further, the effect of this is that every Superior Court Judge in every county in Los Angeles, with the exception of San Francisco County, Yono County, and Mendocino County, has received these payments. So all of these judges are tainted. Every Court of Appeal Justice who had previously been a Superior Court Judge has now been given immunity for all of their actions as being Superior Court Judges, so they are tainted. On the California Supreme Court, you have the Justice Corrigan, who was a former Alameda Superior Court Judge, Justice Chin, who was a former Alameda Superior Court Judge, and one other justice whose name slips my mind, who is a former — Moreno, I believe it is — who is a former Los Angeles Superior Court judge. All of them are tainted because of these payments.
LESLIE: Are we talking about Moreno on the Supreme Court?
RICHARD FINE: Yes. The last three men — people that I mentioned are justices — Associate Justices of the California Supreme Court. So three of the seven Associate Justices of the California Supreme Court are tainted. You then had the tainting going to the Chief Justice of the California Supreme Court, Justice George, who’s the Chairman of the Judicial Council, who wrote the bill, and Justice Baxter, who is the — the Chairman of the Committee of the Judicial Council that wrote the bill. So we end up with five of the justices of the California Supreme Court who are tainted. Now, you ask why are these people tainted? Because another thing that happened is that this bill is personal to the judges. This bill is not helping the judicial system of California. This bill says that all of these judges can continue getting the money which is personal to them because the money goes from the County to the judge. It doesn’t pass through the State of California. It’s personal money going from the County to the judge, and it gives immunity, personal immunity, to all of these people. So what the Judicial Council did is, the Judicial Council took our public money and wrote a bill for the personal benefit of these individuals. Then the Judicial Council spent public money on its lobbyist to go in and lobby for this bill. So you have the tainting of these two supreme court justices. So effective five out of the seven supreme court justices at this point in time are tainted by this action. And the result of this is that by legislation — and I repeat, by legislation, the California Judicial System has been legislated to have been corrupt and to have committed illegal acts and to have been given immunity for the commission of those illegal acts.
LESLIE: Wow! So the legislature itself has basically condemned them as guilty?
RICHARD FINE: Absolutely. They condemned them as being guilty by one, say, that the payments were unconstitutional, and by affirming the decision of — the Sturgeon (vs. L.A. County Board of Supervisors) decision. And then by going through and taking the second step and giving them immunity.
LESLIE: Now, when you say “immunity,” are we talking about retroactive?
RICHARD FINE: Retroactive immunity. The immunity is retroactive all the way up to the — as it says in the bill, the effective date of the bill. And the effective date of the passage of the bill was February 20, 2009. However, that brings us to a new problem: And that means that these judges who are sitting in office today are still biased, because the money that they got up to February 20th from these counties is biasing them for any decision that they make on February 21st. So basically every judge that is dealing with a decision of a county, on February 21st, is being influenced by the money that he got or she got on February 19th. So we do not have an unbiased judiciary in the State of California at the present time, with the exception of the judges who did not receive the money, which you —
LESLIE: Are there any?
RICHARD FINE: Yes. Once again, that’s Yolo County, Mendocino County, and San Francisco County, and any judge that might be sitting on the California Supreme Court or on the Court of Appeal that did not receive this money. That is what — that is what is left in the California judicial system at the present time.
LESLIE: Let me ask you: Do you believe that the individual judges are aware of what they’ve been doing is illegal?
RICHARD FINE: Absolutely. There’s no question that they knew that it was illegal. These people aren’t like you or I, you know, that are unaware of the law. These are judges. These are people that are supposed to uphold the law. They have a code of judicial ethics that makes them liable and makes them aware that they have to uphold the integrity of the court. They have to obey the laws of the California. They have taken an oath to obey the law of the State of California. They have taken an oath to obey the law — the Constitution of the United States of America and the laws of the United States of America. And under Article 6, Clause 2 of the United States Constitution, they are bound to obey the law, the Constitution of the United States and the laws of the United States. There is no question whatsoever that they knew that they were taking illegal money. None whatsoever. They knew the California Constitution; they knew that the Constitution said that only the State could prescribe their compensation; they knew that they’re State-elected officials; they knew that they’re State employees; they knew that they weren’t working for the County; and they knew that this money was illegal. And they took it. No way that they can get around that. And that’s why I filed the complaint with the U.S. Department of Justice, because they violated the Federal law of what is called the implied or intangible right to honest services, and that’s 18 United States Code, Section 1346, because the case law that holds is that when a judge takes money from an individual — or even a government — and then does not disclose it, he violates that particular code section. And he violates it by the fact that he is not giving honest services to his employer, which is We the People, or the State of California. And he’s not giving those honest services because we’re paying him a salary to go in and do his job as a judge. And what the judge is doing is, the judge is taking money from another source to do the job, and the judge is not disclosing it, because none of these judges have disclosed this money on what is called their Form 700, Statement of Economic Interest, which requires them to disclose any income from another source. And they — they wouldn’t have to disclose the income if it came from the County for expenses to go to a convention or something else. But because this is compensation that they’re getting, they had to disclose it. They didn’t disclose it. And I had called the Political Reform Commission — the Fair Commission on Political Reform, and I asked them about this and they said, “No, nobody’s disclosing it.” And then I checked on these judges. I checked on Yaffe. He didn’t disclose it. And I checked on — you look on the Form 700 on any Supreme — and of the three Supreme Court judges — justices. They didn’t disclose it.
So none of these judges are disclosing this income. So consequently, they’re violating the Political Reform Act, they’re violating the Federal law of the implied or intangible right to honest services. And by doing that, they are sitting in another position. They’re violators. They’re violating a criminal law. Now, that is a reason why the legislature gave them immunity. It’s the reason why the Judicial Council wrote that immunity in — because the Judicial Council knew that they couldn’t save them from the Federal law violations, but at least they could save them from the State law violations.
LESLIE: Well, let me ask you — I mean, this is just astounding. It’s — it’s just astounding. How can our government possibly deal with this when it’s so widespread?
RICHARD FINE: Oh, it’s very simple. I mean, it’s just like dealing with a single judge that took a bribe. Back in — and I’ll give you the precedent for it. Back in the 1970s, you had a number of judges getting involved in doing illegal activities in Illinois, and it was called the Greylord Cases. I think it might have been 30 or 40 judges. I don’t remember the exact number. Government came in, they prosecuted the judges, got the judges out. So here we’re dealing with maybe 1,600 or 1,700 judges. You know, the number doesn’t really make that much difference, you know. It’s the same violation. The legislature has already said that the violation occurs, so you go in and just prosecute the people.
LESLIE: Now let me ask you: You mentioned the Greylord Case, I guess. Tell me, what type of bribery were those judges getting? Were they getting being bribed by government officials?
RICHARD FINE: The bribery there, I think, was — I think it was private, you know, private individuals. But here the analogy exists because the County of Los Angeles, as far as being a party to a lawsuit, is the same as you or I. You know, just because they’re the County of Los Angeles, it doesn’t make them any different from you or I, because the employer of the judges is the State of California. And this is where a lot of people seem to get confused. They seem to think that because it is the County, that the County seems to have some sort of a right to be able to pay the judges. The County doesn’t have any more right to pay the judges than you or I, because when you look at the government of California, the government of California is the State. It is not the County. The State of California has three parts to it: It has the executive, which is the governor and the governor’s office; it has the legislative, which is the State Senate and the State Assembly; and it has the judicial branch, which are the courts, or is the courts, depending upon how you want to look at it, as one thing or lots of courts. Those are the three branches of the State government.
The County of Los Angeles is a subdivision. It is an independent entity, and it is not a governing branch of the State. So consequently, when the County comes into court, it comes in in the same way that you or I come into court. When you sue the State of California, you are suing the State of California with its permission to be sued because it’s part of the government that you’re suing. When you’re suing the County of Los Angeles, you’re suing it with its permission as a county, but you’re suing it in a court that is run by the State, because the County of Los Angeles doesn’t have any courts. We don’t have any county courts anymore. There isn’t the county judicial system that is existing.
LESLIE: Didn’t we have at one time?
RICHARD FINE: At one time we had a municipal court system that was existing, but all that has been unified into a State court system at the present time. So everything now is under the State, and so the County does not have any rights with respect to anything in the State system. And in fact as a litigant, the County never did have any rights greater than you or I.
LESLIE: Let me ask you: You’ve described the judges and their illegal actions — their knowingly illegal actions. What about the County? Who instructs the County? Are the supervisors liable?
RICHARD FINE: The immunity— the answer to that question is yes. According to — interestingly enough, according to the immunity that was given, the immunity goes to the government entity, which the immunity goes to the County, and the immunity goes to the government employees and government officials. So the immunity actually went to the County and it went to the Supervisors.
LESLIE: Is that possible that they could get away with this?
RICHARD FINE: Well, the — the answer is yes. They — they have gotten away with it. Now, there might be some questions as to whether, under the United States Constitution, you can grant immunity, you know, for past — whether a State can grant immunity for past acts. But the State is only granting immunity under the State’s powers. Remember, this immunity is not going to the — any United States law. It is only dealing within the State. So what we still have — and I’m gonna jump a subject here with you — is that you as a litigant still have your rights, your First Amendment rights to petition the government to redress grievances is still existing, and in fact that right has been infringed upon. And your 14th Amendment right to due process has been infringed upon.
So if I can take you one step further in saying what can be done? Every case in which one of these judges has ruled against you, as an individual, or you had a problem with the County, can now actually be overturned, because of the fact that they’ve legislated this immunity and they’ve given them the immunity for this bad act or for this illegal act. We have what is known as a writ of quorum nobis. And the writ of quorum nobis says that if there’s a new fact that has come in to show that what’s happened with the case, you can now come in and say, “Look, I want my case overruled and I want my case redone.” So that is a side effect of this legislation. For every person that had a case that went bad under one of these judges, come in on the writ of quorum nobis and ask to have the case re-heard. That’s one of the things that can take place.
LESLIE: And that’s a case that involved the County?
RICHARD FINE: That is a case that involved the County. Now, to give you an idea of how wide that can be, that can deal with eminent domain, that could deal with any kind of a homeowner case, that could deal with child custody cases. If a county was involved in any type of a custody case or any type of a case with children or children’s services, and the County paid the Children’s Services Department or if the County gets involved with support payments, or if the County gets involved in a divorce case and suddenly the County’s brought in as part of the child custody with respect to an evaluation or something and the judge is following that, you can get that case overturned because the judge could be biased in looking at what the County did in deciding the custody situation. So you have all of these cases that can go in and get overturned at this particular point in time.
LESLIE: Let me ask you: You’ve been dealing with this for some time now, and I know you’re always thinking ahead of what could happen. You’re prepared for the hearing tomorrow. You’ve taken action here to try to head it off — your being incarcerated, if you possibly can. But what if — what if you’re successful with your Federal complaint? How does this situation get reconciled? You said 1600 judges could be prosecuted. What would that mean?
RICHARD FINE: It’s very simple because when you get down to the bottom line of things, solutions are very, very simple. Let’s assume that 1,600 judges are prosecuted. These 1,600 judges either resign or they get impeached. Now, let’s assume that they don’t resign and they try and stay in office, and let’s assume that the state legislature doesn’t impeach them. So you now have 1,600 judges who are under indictment who stay in office. Every one of these judges is going to come up for re-election because the judges come up for re-election every six years. So they are rotating into re-election as of now. One thing that the public does: The public looks at the judge who’s sitting in office, the public sees the judge is sitting in office — votes him out. So what would happen is that the only thing that would keep an illegal judge in is public apathy. Real simple. If the public is so lazy that they’re going to let a judge who they know has taken bribes stay in office, then that judge is gonna stay in office. If the public decides, “Look, we don’t want someone that’s taken illegal money to be in office,” they’ll vote ’em out. That would take from now until six years from now dealing with any judge that got elected during the last election. So that would take you six years.
A more pro-active thing that could happen is that the legislature could go in and pass a bill saying that we want to have an emergency election, and every judge that has received money across the entire California system — Superior Court judges, Appellate Court judges who are elected every 12 years, and California Supreme Court judges, who are elected every 12 years — are now up for re-election. We could do that within 30 days. Because you have Superior Court judges. Anyone can run for office. On California’s Appellate Court judges, you vote ’em “Yes” or “No.” There’s only one person on the ballot. So the guy’s name is on the ballot. You either vote “Yes” to keep him or you vote “No” to get rid of him. California Supreme Court judge, exactly the same thing. “Yes” to keep ’em, “No” to get rid of ’em.
That would clean up the system. It would actually clean up that system within a 30-day period of time. Then what would take place as far as all the Superior Court judges are concerned, the 1,600, you would have new Superior Court judges that would be elected, and the only thing that you have left is, you would have the Court of Appeal justices and the Supreme Court justices where new appointments would have to be made. And those appointments would be sitting until the next election, normal election for that office. Now, the appointments would be made by the governor. The governor now has a problem because the governor isn’t going to be able to appoint anyone who had received this money. They wouldn’t be able to pass the scrutiny. So we would end up getting new Supreme Court justices who did not receive the money, and we would be getting Court of Appeal justices who did not receive the money. And we’d have a clean system.
LESLIE: Well, you are definitely doing what it takes to bring this to a head, but even almost — what — two, three weeks after this momentous bill passed giving the judges immunity, admitting that they’re criminals and giving them immunity, nobody knows about it. Is the news media complicit in this?
RICHARD FINE: I think it’s beginning to get to the news media now. I think what happened is that, number one, the news media first of all probably didn’t understand it. That’s probably the first thing. And second of all, by not understanding it, they didn’t pick up on it. Now that it is beginning to get out, the media will start picking up on it and I have a very firm belief in the American news media. It’s like — it’s the pack method. Once it begins to get out, then the media will pick up on it because once one person starts publishing it, then the rest will publish it because they don’t want to be behind it. Whether they were complicit or not, I don’t know. I personally do not believe in conspiracy theories. And I don’t believe in conspiracy theories because of the fact, first of all, it is very difficult to maintain a good conspiracy over a long period of time. Self-interest will destroy any conspiracy over any extensive period of time. And second of all, I believe in the “stupid theory,” and that is that most people are just too dumb to be able to maintain a conspiracy. I mean, what you really have is, you have mistakes more than you have conspiracies. To put together a good conspiracy really takes a lot of effort, and I’ll give you the example of OPEC.
There’s no question OPEC is a conspiracy. None whatsoever. But the OPEC members cheat on each other every day of the week, so the only thing that keeps the OPEC crisis going is not the OPEC members. They go out and set their prices in Vienna all the time. They then cheat on their prices, and the only people that are keeping their prices going is the buyers. It’s the fact that the buyers are willing to pay their prices that’s keeping OPEC going. It’s not the fact that the OPEC people are setting the prices and adhering to them. They’re cheating on themselves. It’s the fact that you’ve got Mobil and Exxon and these other people that are going in there, that are willing to pay the prices, that will keep the conspiracy going. And so it takes two types of people in order to keep a conspiracy going. It takes one, the people to be able to put the thing together; and second of all, it takes the second group of people to be able to go along with it. And so therefore, I don’t think there is a, you know, a, quote “media conspiracy.” There might — you know, you might have a certain amount of perceived fear, and I think that this exists in a lot of places. I think people perceive a fear and therefore are unwilling to do things. You’ll — you can call it self-restraint, which is a nice way of putting it.
Copyright 2009, Full Disclosure Network
UNITED STATES TAX COURT
MICHAEL S. IOANE,
SHELLY J. OLSON-IOANE,
Petitioner, Docket Nos. 9903-06L
COMMISSIONER OF INTERNAL REVENUE,
PETITIONERS’ TRIAL BRIEF
TABLE OF CONTENTS
ISSUES TO BE DECIDED…………………………………………………………………………… 1
PROPOSED FINDINGS OF FACT…………………………………………………………………. 2
POINTS RELIED ON…………………………………………………………………………………… 6
AUTHORITIES & ARGUMENT……………………………………………………………………….. 8
1. Respondent’s ‘Unreported Income’ Claims Regarding The Income of Acacia Corporate Management, Inc, And Its Related Trusts, Are Barred By Res Judicata Or Collateral Estoppel Since A Bankruptcy Court Has Already Ruled That This Corporation (And Its Related Trust Entities) Is The ‘Nominee or Alter Ego of Gerald and Ona Lindsey’……………….. 8
2. Respondent’s ‘Unreported Income’ Claims Are Barred By Res Judicata Or Collateral Estoppel Since It Already Assessed The Tax Against Other Various Entities On The Exact Same Income It Is Asserting As ‘Unreported Income’ to Petitioners…………………………………… 11
3. Respondent’s Submission of Third-Party Tax Information Violates IRC §6103(a), And The Court Should Not Be A Party To Such Violations Of Law…………………………………… 13
4. Respondent Had The Burden Of Proving Unreported Income And Tax Deficiencies, But Failed To Sustain That Burden…………………………………………………………………….. 14
5. Respondent Did Not Sustain Its Burden of Production Showing Petitioners Are Liable for The Penalty(s) Under IRC §6651(a)(1)……………………………………………………….. 15
6. Respondent Did Not Sustain Its Burden of Production Showing Petitioner is Liable for The Penalty Under IRC §6654(a)………………………………………………………………. 15
7. Petitioners Should Be Allowed All Denied Deductions Since Respondent Seized Petitioners Records And Has Refused to Return Them…………………………………………….. 16
TABLE OF AUTHORITIES
Bull v U.S., 295 U.S. 247 (1935)…………………………………………………………………. 11
Franchise Tax Board of California v. USPS, 467 U.S. 512 (1984)………………………. 11
Helvering v Taylor, 293 U.S. 507 (1935)……………………………………………………….. 14
In re Los Gatos Lodge, Inc., 278 F.3d 890 (9th Cir. 2002)…………………………………. 10
In re Mason, 709 F.2d 1313 (9th Cir. 1983)……………………………………………………. 10
In re Pardee, 193 F.3d 1083 (9th Cir. 1999)…………………………………………………… 10
Karme v CIR, 673 F.2d 1062 (9th Cir 1982)……………………………………………………. 14
Portillo v. C.I.R., 932 F.2d 1128 (5th Cir. 1991)………………………………………………. 14
Siegel v. the Federal Home Loan Mort. Corp., 143 F.3d 525 (9th Cir. 1998)………….. 10
United States v. Philatelic Leasing, Ltd., 601 F.Supp. 1554 (S.D.N.Y. 1985)…………. 16
Weimerskirch v. C.I.R., 596 F.2d 358 (9th Cir. 1979)………………………………………. 14
Williams v CIR, 123 TC 144 (2004)……………………………………………………………… 15
IRC §6103(a)………………………………………………………………………………………….. 13
IRC §6651(a)(1)………………………………………………………………………………………. 15
IRC §6654(a)………………………………………………………………………………………….. 15
IRC §6654(d) …………………………………………………………………………………………. 15
IRC §7491(c)………………………………………………………………………………………….. 15
Saltzman, IRS Practice And Procedure…………………………………………………………. 11
This case involves asserted deficiencies and penalties for the following amounts and periods:
Year(s) Deficiency: §6651(a)(1) §6654
2002 $2,104,868 314,754.30 420,973.60
2003 $457,468 —— 91,493.60
The basis for all these claims is Respondent’s assertion of unreported income that belongs to other entities, for which they filed tax returns claiming the income, and for which assessments have already been made against them. Trial of this case began on January 7, 2008 and concluded January 18, 2008 in Reno, Nevada before Judge Robert Wherry. Petitioner appeared in person. Respondent appeared through counsel, Wesley Wong and David Sorenson.
The evidence in this case consists of a stipulation of facts under Rule 91(f), admissions made by Respondent, and various testimony and exhibits admitted at trial.
ISSUES TO BE DECIDED
The following issues remain to be decided:
1 Whether Respondent’s ‘Unreported Income’ Claims Regarding The Income of Acacia Corporate Management, Inc, And Its Related Trust DBA’s, Are Barred By Res Judicata Or Collateral Estoppel Since A Bankruptcy Court Has Already Ruled That This Corporation Is The ‘Nominee or Alter Ego of Gerald and Ona Lindsey’.
2 Whether Respondent’s ‘Unreported Income’ Claims Are Barred By Res Judicata Or Collateral Estoppel Since It Has Already Assessed The Tax Against Other Various Entities On The Exact Same Income It Is Asserting As ‘Unreported Income’ to Petitioners.
3 Whether The Court Should Allow Respondent To Submit Evidence In Violation of IRC §6103(a).
4 Whether Respondent Sustained Its Burden of Proving Unreported Income, And Any Tax ‘Deficiency’.
5 Whether Respondent Sustained Its Burden of Production Showing Petitioners Are Liable For The Penalty(s) Under IRC §6651(a)(1).
6 Whether Respondent Sustained Its Burden of Production Showing Petitioners Are Liable For The Penalty(s) Under IRC §6654(a).
7 Whether Petitioners Should Be Allowed All Denied Deductions Since Respondent Seized Petitioners Records And Has Refused to Return Them.
PROPOSED FINDINGS OF FACT
1 Petitioners timely filed a tax return for the year 2002. (Stipulation, ¶3, Exh 3-J).
2 Petitioners timely filed a tax return for the year 2003. (Id, ¶4, Exh 4-J).
3 The ‘Notice of Deficiency’ in this case was issued from the Oakland, California office of the IRS dated March 1, 2006 for the years 2002-2003, and was addressed to Petitioners at their Nevada address. (Id ¶2, Exhibit 2-J).
4 The deficiency notice alleges that income belonging to the following entities is ‘unreported income’ of Petitioners for the years 2002 and 2003: Acacia Charitable Foundation, Charitable Scholarship Foundation, American Federal Trust, First Amendment Publishers. (Id).
5 The deficiency notice alleges that income belonging to the following entities is ‘unreported income’ of Petitioners for the year 2003: Acacia Corporate Management Inc, Paradise Solutions Trust. (Id).
6 According to the IRS’ own witness testimony, Acacia Corporate Management Inc had bank accounts which indicated it was ‘doing business as’ the following entities: Paradise Solutions Trust (Tr at 138:13-17); First Amendment Publishers Trust (Tr at 142:4-8); American Federal Trust (Tr 158:11-17); Acacia Charitable Foundation (Tr 160:1-4). All the various trust accounts were associated and created by the Acacia corporation. (Tr. 510:23 – 511:6).
7 Acacia Corporate Management Inc held and managed funds for other persons and entities, including the various trusts already mentioned in this case. (Tr. 510:2-5).
8 Respondent admits there is nothing in writing to indicate that Petitioners are the owners or have sole control over First Amendment Publishers Trust, Paradise Solutions Trust, or Acacia Corporate Management, Inc. It further admitted it had virtually no bank records concerning Paradise Solutions Trust. (Tr at 459-461). It also admitted it has no personal knowledge concerning any checks, bank statements, or signature cards. (Id at 463).
9 Although many of the checks Respondent presented were made payable to credit card companies, Respondent is not contending those cards were for the personal use of Petitioners. (Tr. 465:13-16). It has “no idea” what the payments to the credit card companies were for, and (because it lacks knowledge) is not contending any credit card charges were merely at the discretion of Petitioners. (Tr. 466:1-14).
10 Respondent has no knowledge of whether any of the exhibits concerning deposits were taxable income events, or whether they were loans, transfers, or merely reimbursements. (Tr. 472:12 – 473:12).
11 Respondent does not know what, if any, business was done by American Federal Trust, Paradise Solutions Trust, Acacia Church, or Acacia Charitable Foundation. (Tr at 482:19-21, 483:1-5).
12 Respondent’s stated reason for assigning all trust income to Petitioners, but disallowing any related trust expenses is because the trust income was not conceded by Petitioners as being their personal income. (Tr. 486:15-22; 489:11-15).
13 Petitioners did not prepare or sign any of the returns for any of the entities of which Respondent claims their income belongs to Petitioners. (Tr. 492:15-22).
14 Respondent has no knowledge of who the trust beneficiaries (owners) may be for any of the various trusts involved, or who any shareholder(s) may be for Acacia Corporate Management, Inc. (Tr. 501:2-8; 510:9-17).
15 During the entire course of this multi-day trial, Respondent failed to present any trust creation/indenture documents, or present any evidence that it even attempted to obtain any such documents. (Entire record). In fact, the auditing agent testified that he never even attempted to summon any such documents from any trustee, trust principals, or trust record custodian, and has never seen any trust documents. (Tr, 504:6-24).
16 Respondent never attempted to summon Petitioners for any information. (Tr. 503:23 – 504:1).
17 Respondent issued a deficiency notice to American Federal Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶4).
18 Respondent assessed income tax against American Federal Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶5).
19 Respondent issued a deficiency notice to First Amendment Publishers Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶7).
20 Respondent assessed income tax against First Amendment Publishers Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶8).
21 Respondent issued a deficiency notice to Acacia Corporate Management, Inc for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶10).
22 Respondent assessed income tax against Acacia Corporate Management, Inc for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶11).
23 Respondent issued a deficiency notice to Paradise Solutions Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶13).
24 Respondent assessed income tax against Paradise Solutions Trust for the same income that it claims as unreported income in the deficiency notice it issued to Petitioners. (Second Request For Admissions and Response thereto, ¶14).
25 On July 30, 2004 the Bankruptcy Court for the District of Ohio entered an order which stated Acacia Corporate Management, Inc was the ‘nominee or alter ego of Debtors Gerald and Ona Lindsey’ exclusively. (Stip. ¶5, Exh. 5-J). No evidence was submitted to indicate this order was ever appealed or disturbed in any manner. (Entire record). Respondent was not only fully aware of this bankruptcy, but was directly involved in it. (Tr 512 -515).
26 Petitioners do not have possession of the records concerning claimed expenses/ deductions because the IRS seized them in a search warrant raid on June 8, 2006, and has refused to return them. (Tr at 54:16-24; p. 62-63; p. 70; p. 86-87).
27 Although Petitioners had the various trust documents in their possession which would show they do not own them, the IRS seized these documents as well on June 8, 2006, and has refused to return them. (Tr at 55:2-7).
28 All documents concerning the preparation of any Petitioner tax returns at issue were given to Mary Fuentes, a tax return preparer. (Tr p. 49 and 68).
29 The IRS agent/auditor in this case never made any inquiry regarding anything on the Petitioner’s returns, and only made requests for documents concerning other entities. (Tr at 88).
30 The IRS agent/auditor in this case never attempted to summon any records from Petitioners concerning their returns. (Tr, at 89).
31 All documents requested during the audit of Petitioners were supplied by both Fuentes and Petitioners. (Tr at 57-58; 63
32 For the year 2002, Petitioners made $12,133 in interest payments to the various other entities identified above.
POINTS RELIED ON
This is a case where Respondent recklessly accuses Petitioners of having unreported income from various entities, even though the income in question was (i) claimed by the various entities on their own returns, (ii) Respondent issued deficiency notices to those entities concerning the exact same income in question here, and (iii) Respondent has assessed the tax on the income in question here against all the other various entities. These assessments are equivalent to judgments, and are binding. They are also subject to principles of res judicata and collateral estoppel against Respondent asserting the tax on the income in question could be owed by someone other than the assessed party. Nonetheless, apparently not satisfied with its assessments (for reasons remaining unknown to Petitioners), Respondent has greedily decided to also assert a deficiency claim against Petitioners based on its claim that the exact same income belonging to the entities somehow belongs to Petitioners. Again, this is even though it has already assessed the tax on the exact same income against the entities.
Respondent is also attempting to outright defy prior findings and orders from a bankruptcy court in 2004 concerning Acacia Corporate Management, Inc. That court held that corporation was solely and exclusively the ‘nominee or alter ego of Gerald and Ona Lindsey.’ Respondent also testified that all the various trust bank accounts involved in this case were dba’s of the corporation, and were created and managed by the corporation (which was involved in the bankruptcy proceeding). Despite this specific ruling of the bankruptcy court, as well as other ramifications of the bankruptcy proceeding, Respondent decided to nonetheless defiantly and groundlessly assert the 2002 and 2003 income of this company, and its related trusts, belongs to Petitioners. Since the bankruptcy court made no such finding, Respondent’s scurrilous claims are barred by res judicata and/or collateral estoppel. If Respondent wanted to make any such assertions, it would have been required to do so in the bankruptcy proceedings.
At trial, Respondent produced 35+ pounds of bank records that belong to the entities, not Petitioners. A few of the checks were signed by Petitioners in their official capacity for some of the entities. Although Respondent certainly had the power to do so, it never even attempted to obtain any trust indentures/documents which would show what sort of trusts were involved or who any grantor(s) might be. Nor did it attempt to obtain any corporate records which would show the owner(s) of Acacia Corporate Management, Inc. But for the icing on the cake, even though it knew of the bankruptcy court order concerning Acacia in 2004, it still decided to recklessly assert the corporate income somehow belongs to Petitioners (forcing both the Petitioners and this Court to waste their resources addressing this groundless claim). Respondent’s claims should be soundly rejected by this Court.
AUTHORITIES & ARGUMENT
1. Respondent’s ‘Unreported Income’ Claims Regarding The Income of Acacia Corporate Management, Inc, And Its Related Trusts, Are Barred By Res Judicata Or Collateral Estoppel Since A Bankruptcy Court Has Already Ruled That This Corporation (And Its Related Trust Entities) Is The ‘Nominee or Alter Ego of Gerald and Ona Lindsey’.
On July 30, 2004 the Bankruptcy Court for the District of Ohio entered an order which stated Acacia Corporate Management, Inc was the ‘nominee or alter ego of Debtors Gerald and Ona Lindsey’ exclusively. (Stip. ¶5, Exh. 5-J). It was also disclosed at trial that Acacia Corporate Management Inc held, created accounts for, and managed funds for other persons and entities, including the various trusts at issue in this case. Despite the fact that Respondent submitted no evidence to indicate this order was ever appealed or disturbed in any manner, it still recklessly asserts the 2002 and 2003 income of this corporation, and its related trust entities, somehow belongs to Petitioners. This is nothing short of absolute defiance of a court’s order, and the res judicata and estoppel effects therefrom. This is especially true for bankruptcy court proceedings.
As this Court will probably recognize, one of the purposes of a bankruptcy is to make a universal resolution of all issues concerning a bankruptcy petitioner/debtor and all its creditors. Because the government will always have tax claims to be handled, they will always be involved in anyone’s bankruptcy proceeding. Respondent admitted it not only had knowledge of the bankruptcy proceeding here, but was directly involved in it.
The bankruptcy proceeding involved Gerald and Ona Lindsey, Acacia Corporate Management, Inc, and Michael Ioane in July 2004 (a time-frame immediately following the 2002 and 2003 tax years at issue in this case). The bankruptcy court ruled that the corporation was the ‘nominee or alter ego of Gerald and Ona Lindsey’ exclusively. Since the corporation held, created accounts for, and managed funds for the various trusts at issue in this case, the bankruptcy court would have had to resolve any and all issues concerning the funds of any of the trusts, including who they may belong to. Respondent has failed to provide any explanation as to how this order would not have preclusive effects against its assertion that either the corporate income, or its related trust entity income, for the years at issue could belong to anyone else other than Gerald and Ona Lindsey.
The doctrine of res judicata applies to bankruptcy court rulings and orders. Siegel v. the Federal Home Loan Mort. Corp., 143 F.3d 525, 528 (9th Cir. 1998) (discussing application of res judicata to bankruptcy proceedings); In re Pardee, 193 F.3d 1083, 1086-87 (9th Cir. 1999) (discussing res judicata effect of plan confirmation in bankruptcy); In re Mason, 709 F.2d 1313, 1315-16 (9th Cir. 1983) (a bankruptcy adjudication is a judgment in rem, a conclusive determination of the debtor’s status in bankruptcy, and res judicata.) It even applies to certain orders which would not even result in a final judgment. In re Los Gatos Lodge, Inc., 278 F.3d 890, 894 (9th Cir. 2002) (discussing bankruptcy court’s order disallowing a claim was res judicata as to whether the claim was ‘allowed’ or ‘disallowed’). There should be no doubt as to the res judicata effect of bankruptcy proceedings in general, or in this case.
Despite what should be the obvious res judicata effect of the bankruptcy court order on this case, Respondent nonetheless asserts that the income of Acacia Corporate Management, Inc (and its related trust dba’s) for 2002 and 2003 somehow belongs to Petitioners. This sort of claim would be barred by res judicata from the bankruptcy court order. It should be obvious that if anyone else had any interest in the corporation or its related trust dba’s, the bankruptcy court would have declared so. Since it did not, Respondent cannot now attempt to make arguments contrary to the bankruptcy court’s order. Moreover, because that order came from a bankruptcy court, and bankruptcy proceedings concern a universal resolution of all matters concerning creditors, property of the bankruptcy estate, and all those who may have any interest in it, the order is binding and conclusive on the parties to this case. Respondent’s claim that any of Acacia Corporate Management, Inc’s income could belong to Petitioners is simply barred by res judicata and/or collateral estoppel.
Petitioner also contend this same preclusion would apply to Respondent’s contention that the income of Paradise Solutions Trust, First Amendment Publishers Trust, American Federal Trust, and Acacia Charitable Foundation would be barred. According to Respondent’s own testimony, these entities were merely dba’s of Acacia Corporate Management, Inc. Since these entities were merely dba’s of a company who has already been adjudged in bankruptcy proceedings to be the nominee or alter ego of someone else, Respondent’s contention that the income of any of these entities could actually belong to Petitioners must be rejected out of hand.
2. Respondent’s ‘Unreported Income’ Claims Are Barred By Res Judicata Or Collateral Estoppel Since It Already Assessed The Tax Against Other Various Entities On The Exact Same Income It Is Asserting As ‘Unreported Income’ to Petitioners.
In addition to the above, Respondent’s own assessments against both the corporation and its related trust dba’s, would preclude it from making its claims against Petitioners. In Bull v U.S., 295 U.S. 247, 259 (1935) the Supreme Court held that once an assessment is made, it is “given the force of a judgment”. It conclusion has not changed since then. It stated the same thing in Franchise Tax Board of California v. USPS, 467 U.S. 512, 523-24 (1984) (the assessment is given the force of a judgment, citing Bull v U.S.). Also see Saltzman, IRS Practice And Procedure, ¶10.01 (assessment is formal recording of taxpayer liability; it divides examination and deficiency procedures from collection procedures). Once a judgment is made, it is conclusive as to the parties and issues adjudicated, and also creates res judicata and/or collateral estoppel effects as to the parties and issues. Given that tax assessments are equated with court judgments, they would have to include res judicata and/or collateral estoppel effects. This would mean that once an assessment is made, whoever it is made against is the one who actually owes the tax; no one else would owe it. Petitioners do not see how these properties of a judgment can be escaped for tax assessments when such assessments are equated with court judgments.
In the instant case, Respondent has admitted that the tax on the exact same ‘unreported income’ that Respondent is asserting against Petitioners has already been assessed against the following entities: American Federal Trust, First Amendment Publishers Trust, Acacia Corporate Management, Inc., and Paradise Solutions Trust. Given this fact, Petitioners contend that Respondent cannot avoid the res judicata and/or estoppel effects of those assessments. The tax on the income in question has been adjudged (by Respondent itself) to be owed by and collectible from, someone else, not Petitioners.
Here, Respondent is apparently not just trying to double, triple, or even quadruple ‘dip’, but is apparently seeking a quintuple dip of tax against multiple parties based on the exact same income. Petitioners submit this is simply unprecedented. No such tax claims against multiple parties on the exact same income are authorized anywhere in the tax code. Petitioners have found no case where a tax deficiency claim against one party was ever sustained on the exact same income when the tax had already been assessed against another party. If this Court were to allow this, it would not only be unprecedented, but highly questionable at best.
3. Respondent’s Submission of Third-Party Tax Information Violates IRC §6103(a), And The Court Should Not Be A Party To Such Violations Of Law.
Prior to the start of trial, Petitioner made a motion in limine to exclude any third-party tax information because to allow such would violate the tax information confidentiality provisions of 26 U.S.C. §6103(a), and the Court could be an unwitting accomplice in violating the law. (Tr at 30-32). The Court denied the motion, but appears to have skirted the issue by saying this was not an action under §6103, and that this statute is only aimed at individuals, not courts. During trial, Respondent submitted approximately 35 pounds of third-party tax information into evidence. Petitioner believes the Court should reconsider its ruling on the matter.
While it may be true that §6103 does not directly preclude the introduction of illegal disclosures by Respondent, it is also true that the Fourth Amendment does not directly preclude the introduction of illegally seized evidence. However, such evidence is excluded everyday of the week under the Fourth Amendment. To allow such evidence would foster and encourage government agents to disregard the law. Petitioners submit the prohibition of §6103 is no different. If courts decide to simply allow disclosures of information made in violation of §6103, the law will become virtually meaningless and encourage government agents to simply ignore it. The Court should not be an unwitting accomplice in illegal conduct by the government’s agents. For this reason, the Court should reconsider its ruling, exclude all third-party tax information from evidence, and order it to be sealed to prevent further disclosures due to the fact that those records are now ‘public records’ due to the Court’s own proceedings.
4. Respondent Had The Burden Of Proving Unreported Income And Tax Deficiencies, But Failed To Sustain That Burden
Respondent’s entire deficiency assertion is based on alleged unreported income. Respondent has the burden of proof, at least initially, with respect to claims of “unreported income”. Karme v CIR, 673 F.2d 1062, 1065 (9th Cir 1982), (“[w]hen the Commissioner attempts to include unreported income, the Commissioner should have the burden of proving his case ‘because the taxpayer may face practical difficulties in attempting to refute the Commissioner’s assertion that the taxpayer received unreported income.’); Weimerskirch v. C.I.R., 596 F.2d 358 (9th Cir. 1979) (no presumption of correctness for “unreported income”); also see Portillo v. C.I.R., 932 F.2d 1128, 1134 (5th Cir. 1991) (presumption of correctness does not attach to notice of deficiency pertaining to “unreported income”). With this burden assignment, the burden is not on a taxpayer to show a correct amount of tax (if any). Helvering v Taylor, 293 U.S. 507, 515-516 (1935).
Petitioners submit Respondent failed to carry their burden of proof. As discussed already, their claims were barred by (i) a prior bankruptcy proceeding between the parties, and (ii) Respondent’s own assessments against other parties for the exact same income it claims belongs to Petitioners.
5. Respondent Did Not Sustain Its Burden of Production Showing Petitioners Are Liable for The Penalty(s) Under IRC §6651(a)(1).
Respondent’s deficiency notice also asserted a failure to file penalty under IRC §6651(a)(1). Pursuant to IRC §7491(c), the burden of production is on Respondent when any penalty is asserted. Williams v CIR, 123 TC 144, 152 (2004). Under §6651(a)(1), Respondent was required to produce evidence that (1) Petitioner failed to file a required return, (2) on the date prescribed, and (3) the failure was due to willful neglect and not reasonable cause. Respondent failed to produce any such evidence, and in fact, did not even attempt to address any of these elements. Respondent failed to produce any evidence on even the most fundamental element: failure to file any return. Without this, the penalty of course must fall on its face, and should be rejected for this reason alone. With this failure of evidence, of course, Respondent also failed to satisfy the other two required elements.
6. Respondent Did Not Sustain Its Burden of Production Showing Petitioner is Liable for The Penalty Under IRC §6654(a).
Similar to the above penalty, Respondent also failed to produce evidence in support of its IRC §6654(a) penalty for alleged failure to make estimated tax payments. Respondent failed to present any evidence whatever of any failure to pay any estimated tax at any time or for any period. Moreover, Respondent did not even present any evidence to show what any installment amount may have been. IRC §6654(d) states the installment amount must be computed based on either 90 percent of the tax shown on the return (or 90% of the tax if no return was filed), or 100 percent of the tax shown on the prior year return. As discussed above, however, Respondent presented no evidence of failure to file any returns, and its claims of the alleged unreported income are barred by res judicata.
7. Petitioners Should Be Allowed All Denied Deductions Since Respondent Seized Petitioners Records And Has Refused to Return Them.
At trial, Petitioner Michael Ioane testified without contradiction that the IRS had seized his records in a search/seizure raid which occurred on June 8, 2006, and has refused to return them. Petitioners submit they simply cannot be compelled to satisfy an evidence burden when the opposing party takes sole possession of the records which might satisfy that burden and refuses to return/disclose them. Moreover, a well established principle of evidence should govern this situation: “a litigating party must‑‑of all persons‑‑be knowledgeable of the facts supporting its position, and if it falsifies ‑‑ or seeks to suppress relevant evidence, such conduct may be taken as an admission that the true facts would defeat the position the party is seeking to maintain.” United States v. Philatelic Leasing, Ltd., 601 F.Supp. 1554, at 1565‑66 (S.D.N.Y. 1985).
Here, Respondent seized the relevant records pertaining to Petitioners’ deduction claims, and in effect is suppressing them by refusing to return them to Petitioners (or disclose them to anyone). Respondent’s actions should be taken as an indication that the relevant records would not be favorable to Respondent if they were disclosed.
For the foregoing reasons, Respondent’s determinations should be rejected in full, and a decision entered that no deficiency exists and no penalties are owed. The Court should also consider imposing a sanction against Respondent for its reckless claims which have caused everyone involved to waste their time and resources addressing its claims that were made in contradiction to the ruling of a bankruptcy court, and in contradiction to the assessments that Respondent already made against others for the same tax.
Date: April 7, 2008 Submitted by,
Michael Ioane, Petitioner
CERTIFICATE OF SERVICE
It is hereby certified that a copy of the foregoing document was served on respondent by mailing the same on the below date in a postage paid envelope addressed as follows:
INTERNAL REVENUE SERVICE
Attn: Wesley Wong
110 City Parkway, Suite 301
Las Vegas, NV 89106
Date: April 7, 2008 By:______________________________
 Even assuming Respondent’s assertion of Petitioner’s ‘ownership’ of these entities to be true, since the entities have been assessed, then, as alleged owners of these entities, how could Petitioners have not also been already assessed the taxes in question via assessments against the entities??
 As discussed by Saltzman, the making of an assessment is a very distinct and separate process from making deficiency determinations. Although deficiency determinations may be subject to claims against multiple parties, this would be impossible for income tax assessments because of their ‘judgment’ nature, and because the tax is only imposed on an income transaction once, not multiple times.
 Although Petitioners attempted to bring this issue to the Court’s attention before trial, the Court said the IRS ‘does this all the time’. However, Petitioners have been unable to find any case where an income tax that has already been assessed against one party was allowed to be asserted as a deficiency (and later assessed) against yet another party.
 The Court is requested to take judicial notice of the search raid warrant and inventory, attached as exhibits to this brief.
 At trial Petitioner testified about a ‘casualty loss’ of $49,586,059. (Tr. 50-51). Respondent incorrectly later referred to this as a ‘net operating loss’ (NOL). It was not any NOL. In any event, it may be irrelevant to any deficiency determination since it had no effect in determining any deficiency claim made by Respondent.