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Today's Feature Article Friday, August 17,  2001


Al Capone vs. The Federal Mafia

To this day, the IRS still trumpets its trophy bagging of Al "Scarface" Capone as one of its crowning achievements. To quote the article to follow, the IRS "... has used the conviction as a propaganda tool ..." since 1931. They would have you believe that what Elliot Ness and the boys could not accomplish with guns, the tax man dispatched with mere pencils. 

As is often the case, the truth can prove to be a far cry from the propaganda. Bear in mind that tax evasion is a felony offense, while "failure to file" is a misdemeanor which carries far lesser penalties.

IF YOU FILE --

File a return executed under penalty of perjury (the only type of filing the IRS will accept) and you have just testified against yourself, thereby waiving all constitutionally protected rights against self-incrimination under Amendment V.

Also -- generous donor that you are -- you have just eliminated the government's burden of proof as to whether or not you actually had a tax liability (*), or whether the law required you to file a return in the first place (**).

If you lied (i.e., cheated) on the return, you just cooked your own goose. Even if your return is countersigned by a tax preparer, you -- not s/he -- will "do the time" at a Federal Bed & Breakfast. Hey, ... YOU filed and swore that you owed the tax, right? End of story.

(*) Under the Internal Revenue Code (26 USC) in subtitle A, "income tax", the only liability section is 1461 under which the withholding agent is made liable to withhold income tax from certain FOREIGNERS doing business within the 50 States of the Union. No one has yet been able to locate the statutory authorization to withhold income tax from the domestic earnings of a citizen.

(**) Under 26 USC in subtitle F, "Administration and Procedure", the only filing requirement pertaining to returns of income made under subtitle A is section 6012(a), the underlying regulations for which require the individual with qualified FOREIGN sources of taxable income to file. No one has yet been able to locate the statutory requirement for a citizen with solely domestic sources of income to file an income tax return.

IF YOU DON'T FILE --

Don't file a return and the burden of proof remains on the government as to whether or not you had a tax liability, or whether the law actually required you to file a return in the first place.

Capone wanted to donate! So what was his undoing?

1) He listened to his attorney;
2) He executed returns.
3) Whoops.

The following article is reprinted verbatim from the July/August, 1990 issue of "Reasonable Action", the members-only newsletter of The Save-A-Patriot Fellowship. Study it carefully.

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On August 5, 1990, an impaneled "federal jury" acquitted the notorious Chicago gangster Al Capone of all criminal income tax charges, in a restaging of his original 1931 trial. The American Bar Association conducted the mock trial using 1990 tax law standards, as part of the ABA's annual convention, held this year in Chicago.

The acquittal, on what would today be alleged violations of IR Code sections 7201 (willful failure to file) and 7203 (evasion), took the "federal prosecutors" by surprise. The convention program had scheduled a "sentencing hearing" for the next day.

The unrehearsed retrial was held on an auditorium stage, complete with U.S. District Senior Judge Prentice H. Marshall, attorneys for prosecution and defense, and a 12 member federal jury. It was viewed by an estimated audience of 700 conventioneers. Actors played the parts of Capone and actual witnesses who appeared at the trial.

In the place of evidence, selected parts of the original trial transcript were read to the jury, who were instructed to consider it as fact. Witnesses were called to testify and were cross-examined by the defense.

The trial lasted five hours, and the jury deliberated five hours in reaching its verdict. The Chicago Law Bulletin (8/16/90) reported that while "prosecutor" Linda L. Pence was "extremely disappointed over the acquittal of Capone, who is a great danger to the people of Chicago," she remarked: "Fortunately one thing remains the same. He is still dead."

According to the Chicago Law Bulletin (CLB), Miss Pence is a former U.S. attorney, currently with the Indianapolis law firm of Jenner & Block. She was assisted by another former U.S. attorney and member of that firm, Thomas R. Mukoy Jr.

The "not guilty" verdict shows that "the government was wrong 59 years ago in going after Capone. The government should not wage unfair tax prosecutions against its citizens," reported the CLB, quoting "defense attorney" Michael E. Tigar.

Tigar is a University of Texas Law School professor and chair of the ABA litigation section, according to the CLB. Assisting in the defense was Terence F. Maccarthy, executive director of the federal defender programs for the U.S. District Court for the Northern District of Illinois.

Despite the "not guilty" verdict, Capone's ABA-scheduled "sentencing" took place on the day after trial, as scheduled. He received four years and nine months, under 1990 tax law penalty and sentencing guidelines, according to MacCarthy.

Capone, who died in 1947, had originally been tried and convicted in 1931 of evading taxes and not filing returns for the years 1924 to 1929. He was sentenced to 11 years and served eight years.

Present at the staged trial was, said the CLB, "an actual observer at the original trial... [who] saw one of the jurors on a train after Capone's sentencing. 'The man said, 'We all thought he was guilty, but we didn't expect him to get that much time, 11 years.'"

This conviction was the only federal charge that Capone, called "Public Enemy No.1" by the FBI, had been successfully brought to trial on by the feds. The Internal Revenue Service, taking credit for ending Capone's criminal career, has used the conviction as a propaganda tool for over 50 years.

Many state income tax agencies have also used this illustration of "crime and punishment" to instill fear into their citizens and residents. The defense attorneys credit their win to a shift in trial strategy.

At Capone's 1931 trial, his lawyers argued that he was a professional gambler, who had big losses, and therefore didn't have any reportable income. "It was enough in the old days to show that you failed to file the forms," said Jill R. Sheilow, adding that less than "10 percent of the population had to file" then, quoted the CLB. Miss Sheilow is identified as 
a Washington, D.C. lawyer and an organizer of the event. The exemption amount in 1929 was $5,000. The 1930 census shows the U.S. population to be 122,775,046.

In the retrial, the defense successfully argued that the government had not shown that Capone actually had taxable income, and that one of the witnesses against him was psychologically tortured to cooperate with the prosecution. The 1990 jury, perhaps more enlightened about IRS abuse of citizens, decided who was the more dangerous criminal, and refused to convict Capone.

According to attorney MacCarthy, interviewed by phone in Chicago by this reporter, Capone may not have been guilty of "willfulness" at all. Capone had been in prison on a minor charge in 1930, when he heard of several of his gangster buddies getting indicted for income tax violations. He had never heard of this crime and told his accountant to find out how much he owed the government and to pay it. A series of letters was exchanged between the accountant and the IRS, which proved damaging when used at the original trial.

The retrial defense presented Capone's tax attorney, Lawrence Mattingly, as a witness, said the CLB, and the defense argued that Capone was ignorant of his responsibility to file. Mattingly, played by Washington lawyer Cono R. Namorato, "said he did not advise Capone to file taxes after having 'serious questions as to whether illegal profits had to be disclosed," reported the CLB. Mattingly/Namorato cited the 1928 U.S. Supreme Court case of US. V. Sullivan, as the legal basis for his advice.

Another interesting aspect was that Capone was selectively prosecuted, on the orders of then-President Herbert Hoover. It seems that Capone had a large house in Florida, where he threw large and loud parties. A neighbor, annoyed by this, complained directly to his friend, Hoover, who reportedly told the FBI to "get Capone" any way possible. The IRS had been investigating him for years, without success.

The 1990 defense, said MacCarthy, required a new defense theory to show:

1. The government could not prove he received over $5,000 annually for the years charged; and

2. The government could not prove he knew he had a duty to file income tax returns.

The strategy also included an attack on the prosecution, to show the government's motive, method and means. The motive, that Hoover's friend was annoyed by rowdy parties, was apparently a more compelling reason to prosecute Capone than his Chicago-based illegal gambling, bootlegging, protection racket and alleged involvement in numerous murders. The means used included the coercion, by psychological torture, of Capone's bookkeeper, Fred Ries.

Federal agent Louis H. Wilson locked Ries, who had a hysterical fear of insects, in a jail cell crawling with cockroaches. At the mock trial the cross-examination of Ries was more pointed, giving the following exchanges: "You could get out, Wilson told you, if you just tell the jailer you're willing to 'play ball'? asked MacCarthy. "It was torture, wasn't it?" "I don't like bugs," Ries responded. "It was not an enjoyable experience." MacCarthy countered, "But then you said, 'I'll tell them whatever they want to know.'"

At the restaging, Ries's credibility as a witness was discounted by the testimony of a boyhood associate, Father Anthony Smith. He testified that "they wouldn't trust Fred Ries no matter what it was he said." Smith was played by Jenner & Block partner Robert L. Byman, dressed in a priest's robe and carrying his own Bible to the witness stand, stated the CLB. In the defense's closing argument to the 1990 jury, attorney Tigar asked the jury not to let the federal government use "torture" as a weapon to build a case. "No one, including the president of the United States, is above the law," he argued. (Quotes from the CLB 8/6/90 article.)

HOW YOU CAN USE THIS INFORMATION

For years, the IRS has used their reputation as "the agency that got Al 'Scarface' Capone, to imply that even hard-boiled gangsters knuckle under to the tax man. The additional, subtle implication is that anyone accused of, or convicted of a "tax crime" is a contemptible criminal, and just like Capone, a "public enemy."

The evidence now shows that the government

(1) had to resort to coercion of a witness,
(2) misled the jury about Capone's alleged willfulness, and;
(3) selectively prosecuted him for "tax crimes" because he threw rowdy parties.

The government failed to prove its case. It failed to show that Capone had income above the "exemption amount." Instead it brought in witnesses to describe his allegedly extravagant lifestyle. They also failed to show that Capone even knew he had a legal obligation to file a return, especially if Capone relied on legal advice from his lawyer, considering his alleged illegal" gambling earnings.

This theory of defense is a plausible explanation, which shows "reasonable doubt" concerning Capone's "intent" and "motive." The Save-A-Patriot Fellowship has constantly emphasized the importance of documenting your "intent" in any necessary correspondence with the IRS.

If you believe the law does not apply to you, say that this is your belief. If the IRS contends the law does apply to you, demand it show its jurisdiction, with law citations, and documentation. If the IRS can't produce such, ask why not. A lot of times.

SAPF's Affidavit of Revocation and Rescission, properly submitted to the secretary of the treasury, is a strong presumptive defense on your side. In a short time, SAPF predicts that disgruntled citizens and jurors will begin to uphold the hated "income tax laws" with the same frequency that caused the liquor "Prohibition" to fail: NOT AT ALL!!!

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