U.S. v. Marsh
| Decision Date | 27 May 1998 |
| Docket Number | 96-10289,96-10292,96-10291,Nos. 96-10287,96-10288,96-10293,s. 96-10287 |
| Citation | 144 F.3d 1229 |
| Parties | -2161, 49 Fed. R. Evid. Serv. 692, 98 Daily Journal D.A.R. 5481 UNITED STATES of America, Plaintiff-Appellee, v. Phillip MARSH, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Marlene MARSH, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Douglas CARPA, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Jill SPENCER, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Darrell SPENCER, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. John CAMPION, a/k/a Joseph Coltrane, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
William A. Cohan, La Jolla, CA, for defendant-appellant Phillip Marsh.
Shari L. Greenburger, Serra, Perelson Law Firm, San Francisco, CA, for defendant-appellant Marlene Marsh.
Henry G. Wykowski, Henry G. Wykowski & Associates, San Francisco, CA, for defendant-appellant Jill Spencer.
Michael Stepanian, Jai M. Gohel, San Francisco, CA, for defendant-appellant Darrell Spencer.
Arthur Pirelli, San Francisco, CA, for defendant-appellant Douglas Carpa.
George C. Boisseau, Santa Rosa, CA, for defendant-appellant Joseph Coltrane.
Albert S. Glenn, Asst. U.S. Atty, Chief, Appellate Section, Sandra Teters, Thomas Carlucci, Assit. U.S. Atty, San Francisco, CA; Frank P. Cihlar, Atty, Tax Division, U.S. Dept. of Justice, Washington, DC, for plaintiff-appellee.
On Appeal from the United States District Court For the Northern District of California; Vaughn R. Walker, District Judge, Presiding.
Before: NOONAN and THOMAS, Circuit Judges, and PREGERSON *, District Judge.
Phillip Marsh and his five co-defendants appeal their convictions of conspiring to defraud the United States by impeding the collection of federal income taxes and their convictions of related crimes. They also appeal their sentences, which, as to Phillip Marsh total a term of imprisonment of 17 1/2 years, as to his wife Marlene a term of 14 years, and as to the other defendants lesser but still substantial periods of prison.
Phillip Marsh was the founder in 1990 of The Pilot Connection Society, often self-identified by its acronym TPCS. Marsh's enterprise offered its customers the elusive and enchanting prospect of untaxing themselves. The verb "untax" entered the language in political conflict in England over a formidable tariff on foreign grain and denoted political action by the government . "Untax," as used in the present context, means freeing oneself from any legal obligation to pay any income tax, federal or state.
To achieve this exceptional state, TPCS offered an "Untax Package." The package included Phillip Marsh's The Compleat Patriot, the Constitution of the United States, Psalm 91, and a photograph of Phillip and his wife suitable for framing. It also included "Very basic untax documents and their instructions." Among them were a form letter to be sent to the District Director of the Internal Revenue Service stating that the quondam taxpayer had recently found out that the director had been "attempting to extort money" from him and demanding that he justify his jurisdiction by a certified copy of the director's designation of authority from the Secretary of the Treasury. The letter was not to be xeroxed and was to be handwritten because "[i]t takes 3 to 5 times as long to read hand written material as it does to read typed material--anything to slow the IRS down!" Another form letter, to be similarly copied by hand, informed the district director that the taxpayer was not a person under the director's jurisdiction.
The Untax Package included another form by which the taxpayer revoked income tax returns previously signed by him and "cancelled" his signature on such returns. This form was to be retyped by the taxpayer, eliminating the Pilot Connection letterhead, and to be notarized. The theory of the revocation and cancellation, as explained in the Untax Package, was that the IRS would use earlier returns to prove that the taxpayer was aware of his obligation to file and pay. The revocation and cancellation would, so the Untax Package suggested, eliminate this easy evidence of the taxpayer's wilfulness in now refusing to file and pay. The reason that the taxpayer could so readily remove himself from the taxpaying rolls was, according to TPCS, that "income tax is voluntary." (SER 32.) If you didn't want to pay it, you didn't have to.
TPCS also advised its members to resort to "alternative banking," that is, to pay everything by cash or postal money order, or to join something called the National Commodity and Barter Association and use "warehouse banking," or to have some trusted associate open an account for one in the Another practical precaution the TPCS member was advised to take, in order to assure that his emancipation from taxation was effective, was to file W-4s with his employers claiming as many exemptions as he had thousands of dollars of income. For example, if he earned $30,000, he was to file a W-4 claiming 30 exemptions. The member was assured by TPCS that there was no limit to the number of exemptions he could lawfully claim. (SER 342.) No mention was made of any duty to have a reason for claiming an exemption.
associate's name, or to establish, with TPCS's help, an "offshore trust." The reason for adopting one of these alternative styles of money management was that if you opened a checking or savings account you agreed "that the money belongs to the bank from that moment on," with the implication that the bank would surrender the money on levy by the IRS. (SER 36.) Members were provided with forms, to be recopied and notarized, of revocation of bank signature cards. (SER 35.)
Untax Packages, the contents sometimes different in unessential detail, were sold by TPCS for a price that varied for the occasion. At the start the price was over $6,000. (SER 8.) The price announced in January 1993 was "$2,100 or 10% of your existing tax problem (if any), whichever is higher." (SER 380.) As of January 31, 1990, TPCS had only three purchasers of the Untax Package. By December 31, 1993, TPCS recorded 3,848 purchasers and income from them of $7,638,625. (SER 19.)
TPCS had ordinary members who did not purchase the Untax Package but who did pay $45 for membership. By the end of 1993 there were 12,617 in this category. (SER 19.) They received TPCS's magazine, The Connector. The magazine carried the subtitle "The Voice of Freedom" and ran a facsimile of an American flag as its logo. Its pages repeated at their foot the mantra of the Society, "Income Tax Is Voluntary!" The Connector informed its readers that there was no law making anyone liable for income tax.
TPCS had a cadre superior to that of mere members, constituted by those admitted to the status of Associate Member. An Associate Member had the right to sell the publications of TPCS. He paid $10,000 to acquire the franchise and the confidential instructions on marketing that accompanied the franchise. By December 31, 1993, there were 730 persons who had been admitted to this advanced status. Apparently some associates got a discount, for the total paid by them recorded in the Society's books was $5,281,010. (SER 19.)
Phillip Marsh conceived the idea of TPCS. His wife Marlene joined him in marketing it. Together they traveled the United States soliciting the purchase of memberships and Untax Packages and speaking at seminars and conferences intended to promote TPCS. Marlene's daughter, Jill Spencer, was an Associate Member and the office manager, in the latter capacity opening and distributing mail sent to TPCS, logging cash received and responding to some customer complaints. Her husband Darrell was also an Associate Member. He became TPCS's General Manager, overseeing staff and publications, revising the Untax Package, and writing in his own name in The Connector, to explain why paying income tax was optional.
A family operation, TPCS was aided by Joseph Coltrane, alias John Campion, and by Douglas Carpa. Coltrane was the National Coordinator of the TPCS sales force. Carpa was not a TPCS member but from approximately May 1991 to June 1992 assisted the marketing of memberships in TPCS by putting together trusts in which TPCS members might hope to hide their assets from the IRS. He offered his drafts of trust instruments only to those who purchased the Untax Package. He assured members that his trusts were "old and cold" and would work to cure even preexisting problems with the IRS because the trusts would be predated to a time before an IRS lien.
In its publications TPCS asserted that it was not a tax protester movement, that it did not deny the constitutionality of the Internal Revenue Code, and that it did not maintain that Congress lacked the power to tax income. TPCS simply taught that Congress had not exerted that power and that the IRS was "a private corporation" engaged in lawless efforts to extract money from Americans TPCS was aware that the IRS challenged its view of the law, an awareness reinforced by the rejection that TPCS's Untax Package received when put into practice by members. The IRS by 1991 was aware of TPCS and alert to its raison d'etre. In February 1992 an affidavit filed by IRS Special Agent Diane Messer characterized TPCS as an "illegal tax protester organization" and sought a search warrant authorizing the seizure of documents pertaining to TPCS and to Phillip and Marlene Marsh. The search was to be carried out at the Marshes' home, which they used as the Society's headquarters. Pursuant to the warrant, a comprehensive seizure was made of the correspondence, computers, and file cabinets of the Society.
not obliged to pay. TPCS...
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