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staff reporter A u.s. department of Justice crackdown on allegedly fraudulent tax schemes has produced injunctions in two high-profile cases. A Las Vegas federal district court all but erased a book that espouses a bogus zero-tax plan. The case, U.S. v. Schiff, No. CV-S-03-0281, sparked a legal battle pitting federal tax law against First Amendment rights. [NLJ, April 28.] The second case, in a federal district court in Macon, Ga., involved a slavery-reparations tax-deduction plan that was enjoined by a federal judge. U.S. v. James, No. 5:03-CV-0113-1 (DF) (M.D. Ga.). The Department of Justice (DOJ) this year has already filed 26 suits seeking to enjoin alleged tax-evasion plans. No such suits were filed in 1999 or 2000; 17 were brought in 2002, six in 2001. “The tax division is focusing on promoters of tax-evasion schemes,” said Eileen J. O’Connor, assistant attorney general for the tax division of DOJ. In Schiff, the defendants relied on the U.S. Supreme Court’s narrowly crafted limitations on the prior restraint of speech. But Judge Lloyd George, in extending the preliminary injunction indefinitely, found that 26 U.S.C. 7408 controlled. The statute authorizes injunctions against promoters of abusive tax schemes. Thus the government only bore the burden of proving the elements of a violation of 26 U.S.C. 6700-promoting abusive tax shelters-by a preponderance of the evidence. Though finding Irwin Schiff’s book, The Federal Mafia, mostly autobiographical because of two pages that advertised his seminars and other materials, George adjudged it commercial speech-”expression related solely to the economic interest of the speaker.” Grounds for suppression Thus, Schiff could be enjoined from distributing the book simply because it was allegedly false or misleading. George also concluded Schiff could be enjoined because the book aided, abetted and incited imminent law-breaking. Schiff, his associates and Freedom Books were represented by Del Mar, Calif., solo practitioner Noel Spaid. The American Civil Liberties Union (ACLU) filed an amicus brief, joined by the Association of American Publishers, the America Booksellers Foundation for Free Expression, the Freedom to Read Foundation of the American Library Association and PEN American Center. Spaid and these organizations took no position on the merits of Schiff’s tax theories. Spaid said the court’s order was “dastardly. It shut Mr. Schiff’s mouth, sewed it up better than an oral surgeon ever could. It’s an insult to the American way of life.” Alan Lichtenstein, Nevada ACLU general counsel, said he was disappointed that “the decision did not give the proper importance to the violation of the First Amendment that came with an injunction prohibiting the distribution of a book . . . and failed to distinguish between inducement in a face-to-face situation and simply writing a book.” Schiff has been convicted twice of tax crimes and has also been civilly sanctioned. Spaid said that Schiff will appeal the order that enjoins 11 activities and forces Schiff to provide the DOJ with contact information on all purchasers of his tax products. Schiff must also mail a copy of the order to each purchaser and prominently post it on his Web sites. The preliminary injunction in the Georgia case squelches a tax plan claiming that African-Americans are entitled to take tax deductions for slavery reparation and segregation. At meetings held in churches throughout the country, Morris James Sr., through his company, National Resource Information Center, allegedly sold more than 6,300 packages promoting the plan. This is the sixth such injunction against black-heritage tax plans that the government has won. “All of the information we get on the purchasers of these kinds of materials we forward to the IRS,” said O’Connor, the tax division assistant attorney general. “They’ll probably examine those taxpayers.” Post’s e-mail address is [email protected].

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