Employer's gold, silver payroll standard may bring hard time
COINB0Y
Posts: 4,505
May. 26, 2009
Employer's gold, silver payroll standard may bring hard time
'This is a case about money, greed and fraud'
By JOAN WHITELY
LAS VEGAS REVIEW-JOURNAL
Robert Kahre, who owns numerous construction businesses in Las Vegas, is standing trial on 57 counts of income tax evasion, tax fraud and criminal conspiracy. If convicted on most counts, he could live out his life in prison.
But attorney William Cohan paints Kahre as an American "hero" who believes his payroll system helped keep the U.S. monetary system sound, and was also a form of legal tax avoidance.
A self-made entrepreneur, Kahre, 48, paid his workers in gold and silver coin, and said they could go by the coins' face value -- rather than the much higher market value of their precious metal content -- for federal tax purposes. He did not withhold taxes from their wages, and he provided the same payroll system to 35 outside clients, which were other local businesses.
Judge David Ezra is presiding over the criminal trial, which began May 19 in U.S. District Court. Joining Kahre as defendants are his longtime girlfriend, a sister who works in his businesses, and a former business assistant.
Three of the four present defendants were among the nine people tried on similar charges two years ago, but no convictions resulted. In the 2007 trial, four others of the nine defendants, including Kahre's mother, were entirely acquitted. Two individuals were only partially acquitted, but dropped from the indictment that forms the basis for the trial before Ezra.
This time around, the only new defendant is Danille Cline, Kahre's girlfriend of 19 years, and the stay-at-home mother of his four children. The government claims she obstructed the Internal Revenue Service by allowing Kahre to place several homes in her name, thus attempting to conceal his assets.
Cline's former brother-in-law, Thomas Browne, also was indicted this time, for his role as broker in some of the real estate transactions, but has since reached a plea bargain. He is expected to testify against the defendants.
"This is a case about money, greed and fraud." The line appeared on screen in court during the government's opening statement by Christopher Maietta, a trial lawyer from the Washington, D.C., office of the Department of Justice.
According to the government, Kahre and others concocted a fraudulent cash payroll "scheme" and then peddled it to other Las Vegas contractors. Defendants did not report to the IRS any payments made to workers, "either at the true amount or at the bogus amount, ... being the face value of the coin or coins," according to the indictment.
The now-suspended payroll service handled about $114 million over six years, according to court records. Between 17 and 25 percent of that went to Kahre or his workers; the rest went to the 35 client businesses to pay their workers, court records show.
The government did not indict most of the outside businesses or their personnel as co-conspirators with Kahre; although on May 6, Daniel McCartan of Action Concrete, which was one of Kahre's payroll clients, was finally sentenced in connection with a plea agreement reached in December 2006. McCartan received five months in prison and five months of home detention for one count of tax evasion.
Kahre contends his workers had agreed to be independent contractors, so he did not have to withhold taxes for them. His six businesses are in the trades of painting, drywall, tiling, plumbing, heating-cooling and electrical work.
Further, the $50 gold coins and the silver dollars Kahre used for payroll are designated by Congress as legal tender, so people are entitled to value them at their stamped denominations, he also contends. Taken at face value, each defendant's annual coin income placed him below the threshold for filing a federal tax return.
Earlier cases on the question of how to value gold or silver coins have focused on collectible coins that had been pulled from circulation but still have value as property, according to the defense. Kahre used coins minted after 1985, which are allowed to circulate.
"It's not whether what Mr. Kahre did was legal under the law," defense attorney Michael Kennedy told the jury in his opening statement. "It's whether he believed what he did was legal," in the absence of explicit instructions by the IRS -- on its Web site, in its publications or in response to written correspondence from Kahre -- on how to value post-1985 gold or silver coins.
"We're not here to determine if moneys are owed," said Kennedy on behalf of his client, Lori Kahre, who had relied on her brother's tax theory. A tax mistake is different from a tax crime, so the IRS can still use administrative channels to force the defendants to pay back taxes, Kennedy has noted in the past.
A sincere, but mistaken understanding of the tax-filing process is different from adopting a "pretextual" belief system in order to dodge taxes, Ezra acknowledged in court Wednesday.
Cohan described Kahre's payroll system as a "boycott of the Federal Reserve." But when the lawyer attempted to elaborate on Kahre's view that the nation has debased its paper currency by abandoning its former gold standard, Ezra added, "We're not here to convince the jury that the ... (U.S.) monetary system belongs to an international cabal."
Contact reporter Joan Whitely at jwhitely@reviewjournal.com or 702-383-0268.
LINK
Employer's gold, silver payroll standard may bring hard time
'This is a case about money, greed and fraud'
By JOAN WHITELY
LAS VEGAS REVIEW-JOURNAL
Robert Kahre, who owns numerous construction businesses in Las Vegas, is standing trial on 57 counts of income tax evasion, tax fraud and criminal conspiracy. If convicted on most counts, he could live out his life in prison.
But attorney William Cohan paints Kahre as an American "hero" who believes his payroll system helped keep the U.S. monetary system sound, and was also a form of legal tax avoidance.
A self-made entrepreneur, Kahre, 48, paid his workers in gold and silver coin, and said they could go by the coins' face value -- rather than the much higher market value of their precious metal content -- for federal tax purposes. He did not withhold taxes from their wages, and he provided the same payroll system to 35 outside clients, which were other local businesses.
Judge David Ezra is presiding over the criminal trial, which began May 19 in U.S. District Court. Joining Kahre as defendants are his longtime girlfriend, a sister who works in his businesses, and a former business assistant.
Three of the four present defendants were among the nine people tried on similar charges two years ago, but no convictions resulted. In the 2007 trial, four others of the nine defendants, including Kahre's mother, were entirely acquitted. Two individuals were only partially acquitted, but dropped from the indictment that forms the basis for the trial before Ezra.
This time around, the only new defendant is Danille Cline, Kahre's girlfriend of 19 years, and the stay-at-home mother of his four children. The government claims she obstructed the Internal Revenue Service by allowing Kahre to place several homes in her name, thus attempting to conceal his assets.
Cline's former brother-in-law, Thomas Browne, also was indicted this time, for his role as broker in some of the real estate transactions, but has since reached a plea bargain. He is expected to testify against the defendants.
"This is a case about money, greed and fraud." The line appeared on screen in court during the government's opening statement by Christopher Maietta, a trial lawyer from the Washington, D.C., office of the Department of Justice.
According to the government, Kahre and others concocted a fraudulent cash payroll "scheme" and then peddled it to other Las Vegas contractors. Defendants did not report to the IRS any payments made to workers, "either at the true amount or at the bogus amount, ... being the face value of the coin or coins," according to the indictment.
The now-suspended payroll service handled about $114 million over six years, according to court records. Between 17 and 25 percent of that went to Kahre or his workers; the rest went to the 35 client businesses to pay their workers, court records show.
The government did not indict most of the outside businesses or their personnel as co-conspirators with Kahre; although on May 6, Daniel McCartan of Action Concrete, which was one of Kahre's payroll clients, was finally sentenced in connection with a plea agreement reached in December 2006. McCartan received five months in prison and five months of home detention for one count of tax evasion.
Kahre contends his workers had agreed to be independent contractors, so he did not have to withhold taxes for them. His six businesses are in the trades of painting, drywall, tiling, plumbing, heating-cooling and electrical work.
Further, the $50 gold coins and the silver dollars Kahre used for payroll are designated by Congress as legal tender, so people are entitled to value them at their stamped denominations, he also contends. Taken at face value, each defendant's annual coin income placed him below the threshold for filing a federal tax return.
Earlier cases on the question of how to value gold or silver coins have focused on collectible coins that had been pulled from circulation but still have value as property, according to the defense. Kahre used coins minted after 1985, which are allowed to circulate.
"It's not whether what Mr. Kahre did was legal under the law," defense attorney Michael Kennedy told the jury in his opening statement. "It's whether he believed what he did was legal," in the absence of explicit instructions by the IRS -- on its Web site, in its publications or in response to written correspondence from Kahre -- on how to value post-1985 gold or silver coins.
"We're not here to determine if moneys are owed," said Kennedy on behalf of his client, Lori Kahre, who had relied on her brother's tax theory. A tax mistake is different from a tax crime, so the IRS can still use administrative channels to force the defendants to pay back taxes, Kennedy has noted in the past.
A sincere, but mistaken understanding of the tax-filing process is different from adopting a "pretextual" belief system in order to dodge taxes, Ezra acknowledged in court Wednesday.
Cohan described Kahre's payroll system as a "boycott of the Federal Reserve." But when the lawyer attempted to elaborate on Kahre's view that the nation has debased its paper currency by abandoning its former gold standard, Ezra added, "We're not here to convince the jury that the ... (U.S.) monetary system belongs to an international cabal."
Contact reporter Joan Whitely at jwhitely@reviewjournal.com or 702-383-0268.
LINK
0
Comments
When the wealthy and corporations avoid taxes by intended or unintended loopholes, that's called tax planning. When the non-wealthy do the same thing and follow the law as written, it's called tax avoidance or fraud. Seems to me the govt should close the loophole and take the bogus $50 value off the 1 ounce coin. Since we aren't even on a gold standard what purpose is this intended to serve? Just call it 1 oz. gold and leave it at that. Then the contractor in question and all his employees/self employed contractors would have a recordable income 20X larger.
roadrunner
That's how the coins would fit into our tax system right now.
I think the government is trying to take both sides of the tax issue - on one hand, they want to penalize the workers inordinately because their "cost basis" in those coins is very low, resulting in a high level of tax on regular earnings. On the other hand, the government wants to nail the employer who is trying to avoid paying payroll taxes altogether, and who is merely using the face value stamped right into the coins to play with the tax rate table.
His payroll plan doesn't make any economic sense, because on his own books he would have losses all over the place on the purchase vs. the disbursement of the coins. He might buy a 1/2 oz. AGE for $500 and issue it in payment for wages at $25 face. So, his books would show a $475 capital loss just for that one worker for the week, not even considering the tax threshold issue.
But, just because it doesn't make economic sense doesn't make it illegal, especially when the coins are issued with their denominations right on the coins.
I knew it would happen.
[If the recipients of those payments sell their coins to a dealer for melt or something close to it, they will be the ones who get nailed for a big tax bill, because their "cost basis" is only the face value of those coins, and the remainder of any sale proceeds is all (taxable) profit.
When the US dollar rises in value do you have to pay taxes on the increase in value. A stronger dollar buys more, so there a cost basis. Ya right, try to tax everyone for the value of their legal tender increasing.
I admire the guy for his thinking, and I really like the poetic justice of calling the gov on its own standard.
The owner may be paying $975 for the coin but his absurbly low hourly wage offsets that. Yeah, the books would look funny but it would still all balance out in the end.
roadrunner
He should legally be in the clear, in general, for this "scheme" because he used legal tender coins. Stupid $^^W$^$ gov't thieves.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
Where is the profit earned from wages?
That's (profit) what should be taxed.
And if he wants to pay his employment tax as a percentage of that salary. In gold. At face value.
You can't have your cake and eat it. Using face value of gold coins is a two way street. You can't pick which one you want and claim ignorance at the traffic light.
--Severian the Lame
http://www.lvrj.com/opinion/47141327.html
Forum AdministratorPSA & PSA/DNA ForumModerator@collectors.com | p 800.325.1121 | PSAcard.com
just how the heck would we run the Government?
Come to think of it, perhaps it is better if we do not
actually run a Government.
Camelot
Right now, I am too intimidated to post that question above on the Newspaper’s Comment Section because they will put me on the LIST.
actually run a Government."
Not such a bad idea. We could hire the running of the govt. out maybe like to India and have instead a US board of directors that renews the contract for management every 3 or 4 years. We could vote on the board of directors. Kind of like the board of directors of your home owner association. Hummmmmmmm...that might work!
Taxes are legal. They're constitutional. Article 1, section 8:
Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States
And despite how unbearably stifling they are, people somehow seem to be able to make a good living and even become rich living in this country and playing by its rules. Some people even risk their lives to get here just for the chance to try.
If you pay your workers with paper dollars, pay your taxes with paper dollars.
But pay your workers in gold, pay your taxes in gold. You can't have it both ways, you can't pay your workers with gold and pay your taxes with paper dollars. That's not a mistake. It's not a protest. It's dishonest, it's unlawful, and it's frankly unAmerican.
This guy faces up to 296 years in prison and fines of up to $14 million. I hope they lock him up and throw away the key.
--Severian the Lame
<< <i>
When the wealthy and corporations avoid taxes by intended or unintended loopholes, that's called tax planning. When the non-wealthy do the same thing and follow the law as written, it's called tax avoidance or fraud.
roadrunner >>
The now-suspended payroll service handled about $114 million
$114,000,000 is wealthy in my opinion.
Ray
<< <i>
Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States >>
So the Congress has the power to tax, but you still need to show the law that they passed that actually lays and collects the taxes. Just because you *can* do something doesn't mean you actually *did* do something.
<< <i>
<< <i>
Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States >>
So the Congress has the power to tax, but you still need to show the law that they passed that actually lays and collects the taxes. Just because you *can* do something doesn't mean you actually *did* do something. >>
The argument was valid the first time it was made. Valid, but losing.
Internal Revenue Code of 1939
Internal Revenue Code (TRA) of 1986
The U.S. Congress passed the Tax Reform Act (TRA) of 1986, (Pub.L. 99-514, 100 Stat. 2085, enacted October 22, 1986), and President Reagan signed it into law.
--Severian the Lame
you have to look at 26 CFR S 39.22(a)-1 to see the definition for gross income, which specifies that foreign income of Americans is taxable, US income of nonresident foreigners is taxable, and certain income involved federal possessions is taxable.
If there is no law that specifies that domestic income is taxable for individuals, then it is a mistake to assume that it is taxable.
If you can find this law, you can claim a $1M reward. Here's the link where you can claim your prize. When you claim it - I'll take a cut
I won't get into the details here, but the full argument and evidence is available here,. In the end, I think it's pretty fishy that the IRS refuses to clarify and answer these questions.
For the record, I'm not brave enough to actually do this, I file and pay my taxes like everyone else.
Congress has the authority to tax based on the US constitution. An act of congress passes that authority to the Treasury, which uses its bureau called the Internal Revenue Service to administer and enforce its tax code.
That's the reason nobody will ever be able to claim the $1M. There is no "law". But that doesn't invalidate the codes.
--Severian the Lame
But it does seem pretty solid. I should have studied law
--Severian the Lame
roadrunner
<< <i>$114 MILL is a lot to risk to try and win that $1 MILL bet.
roadrunner >>
What bet? It's a challenge. Find the law and you get the money, that's all there is to it.
we have the best Government
that money can buy. Actually, our
officials are not really bought, they
are merely rented for their term in office.
Then they become lobbyists.
Camelot