Lynne Meredith sees her arrest as part of her mission to end the government's 'tyranny'
By Monte Morin
LOS ANGELES TIMES

Cruising the Pacific Coast Highway in a Corvette convertible, wearing high heels, metallic eye shadow and leather pants, Lynne Meredith doesn't look much like a threat to the federal tax system.

But that's how IRS officials describe her, and once she starts talking, it's easy to understand their concern.

Meredith has made millions marketing the gospel of tax avoidance, the IRS says. Her message: You don't have to pay federal income taxes, ever. She preaches not to anti-government extremists but to suburbanites struggling to balance their household budgets.

Meredith, 52, who has a perpetual tan and a lavish home in the Orange County community of Sunset Beach, lectures her followers on luxury cruises, at catered parties and in hotel conference rooms. Her best-selling book, "Vultures in Eagles' Clothing," has sold more than 100,000 copies.

For years, Meredith boasted that she had never paid income taxes and hadn't received so much as a letter or phone call from the Internal Revenue Service. That changed April 15, when federal authorities arrested her and six colleagues on charges of operating a worldwide tax scam.

Prosecutors said Meredith convinced tens of thousands of people to evade federal income taxes, mostly by selling them "pure trusts," instruments that Meredith says shield property and income from tax collectors, court judgments and former spouses.

The IRS reports a sharp rise in such tax-avoidance schemes. Last year, a record 740,000 tax filers used illegal trusts and other subterfuges to dodge income taxes, according to agency estimates.

Authorities say Meredith is particularly troublesome because she has helped move tax evasion from the fringe to the mainstream. In contrast with other tax rebels, her manner is more real estate agent than revolutionary.

She delivers her subversive message, that under the Constitution payment of income taxes is strictly voluntary, in a nonthreatening way. She is passionate and persuasive, with a flair for marketing.

"Lynne Meredith is a well-known promoter in what we see as a growing movement," said Michael Kochmanski, the Treasury Department's top agent in Los Angeles. "She's made a lot of money off what she's been preaching and selling. If you're at all gullible, you will be convinced."

Meredith, who has pleaded not guilty to the charges, says that her trusts are legal and that the government is persecuting her for exposing the basic unfairness of the tax system.

She is scheduled to stand trial in June in federal court in Los Angeles. If convicted of all counts, she could face up to 85 years in prison. In the meantime, she spends most of her time at her beachside home, surrounded by a fleet of classic cars, an extensive collection of Coca-Cola memorabilia and a parrot named Thomas Jefferson.

She wears an electronic monitor on her ankle and carries a global positioning device on the order of a federal judge, who told her as well to halt her tax seminars until after the trial.

"My arrest was just part of my mission to put an end to what I believe is a reign of IRS tyranny," said Meredith, who cannot leave Orange County without court permission. "I will use this opportunity to set judicial precedence.... I want to abolish the IRS."

A rapt audience

The scene is a conference room at a Long Beach hotel. Meredith smiles broadly and grips a miked podium. She inhales deeply as members of the audience, who have paid $50 each to attend, find their seats.

As attendees watch in rapt silence or scribble furiously on notepads, Meredith says they have been conned by the government. The mandatory federal income tax, she says, applies only to corporations and employees of the federal government. For everyone else, it's voluntary.

The seminar, videotaped in 1997, is one of hundreds she has held across the nation.

"The IRS has no authority for what they do," Meredith tells the audience. "The IRS works by intimidating you. It's your own fear that makes you comply. If we refuse to be fearful, they will have lost all power over us."

The true purpose of the income tax, Meredith says, is to fund the Federal Reserve Bank, a front for "eight primarily foreign, private bankers who intend to establish a monopolistic, global economy under their control."

Meredith sells a two-prong strategy to avoid income taxes. First, she urges people to "unvolunteer" from the tax system by renouncing their U.S. citizenship and declaring themselves citizens of their home states.

Second, she encourages them to create "sovereign pure trusts," contracts and bank accounts she says are tax-exempt.

The trusts are legal contracts that transfer ownership of assets, real estate, bank accounts and other property, to a third party. This third party can be a friend, though one of Meredith's employees often plays the role.

The taxpayer maintains control of the assets, but need not pay taxes on them, Meredith says, because they are no longer listed in his or her name. The third party doesn't control the assets and thus cannot be taxed, either, according to Meredith. The trusts are "pure" in that they reflect the uncorrupted intent of the framers of the Constitution, Meredith says.

Her business, We the People, employs six assistants who draft the trusts for $500 each. They work in a crisp, glass-partitioned office overlooking the coast highway in a low-rise professional building she calls Liberty Freedom Plaza.

At her seminars, skeptical audience members often ask if the trusts are legal. She responds that, by her interpretation at least, the Constitution exempts individuals from income taxes, even though federal laws require that they be paid.

She cites Article 1, Section 9, which outlines various limitations on the power of Congress. One provision says that "direct" taxes, such as those on personal income, must be collected in proportion to the population of each state, as determined by the census. This language formed the basis of numerous challenges to the legality of federal taxes in the 18th and 19th centuries.

The 16th Amendment, adopted in 1913, authorized Congress to tax Americans' incomes "without regard to any census or enumeration." The measure cleared the way for enactment of the federal income tax, which has withstood repeated court challenges.

Meredith, however, argues that the amendment is flawed and contains no "enabling clause" granting Congress the broad taxing authority it now exercises.

Federal officials say her argument is nonsense. An IRS fact sheet titled "False Arguments for Noncompliance With the Tax Laws" cites several tax-evasion schemes based on supposed flaws in the 16th Amendment and on trusts similar to those marketed by Meredith.

Promoters of such plans "often present their arguments in a pseudo-legal format, luring unsuspecting people into participating," the fact sheet states.

Although Meredith's presentations are tinged with talk of conspiracy, friends and foes alike say she is able to convince people who don't hate the government that they don't have to pay taxes.

Drawn by her zeal

Donna Pozdro, owner of an Orange County architectural firm, met Meredith at a party and later attended one of her seminars.

Pozdro said she has no particular animus against the government and is not one to break the law. But gradually, she said, she became convinced by Meredith's arguments.

"At first, you think she's a crackpot," said Pozdro. "Then you get interested in it because of greed. Then, when you start looking into it more, you get real sick in the stomach. It's like the carpet of innocence has been pulled out from under you."

"People are drawn to her because of the passion she feels for this," Pozdro said.

Florida trucker John Barter, 54, said he was in constant disputes with the IRS over back taxes when he attended one of Meredith's seminars. He eventually purchased one of her trusts. "She's the smartest woman I know," he said.

The IRS contends that Meredith has made at least $6 million from her anti-tax activities. Meredith declined to discuss her income but said her business was successful.

The gated garage of her home holds a fleet of vintage cars -- a Jaguar, a Porsche, a Bentley, a 1937 Gatsby roadster, a Range Rover and a 1973 Corvette Stingray with the vanity plate "TAXREBL."

"The IRS gets really upset about all my cars," she said.

From job to job

A single mother of three who divorced in the mid-1970s, Meredith spent years bouncing from job to job, working as a waitress, in a factory and selling vending machines and telephone service.

By the 1980s, she had started several businesses. One made devices that crushed recyclable cans. The company eventually went bankrupt, and Meredith was sued for fraud by people who contended that the machines were defective.

Next, Meredith started a motivational newsletter for single mothers called the Money Tree. Subscribers were paid for getting other people to take the newsletter. Meredith shut it down after attorneys general in two states accused her of running a pyramid scheme.

Meredith didn't pay taxes during much of the 1980s. Worried about going to jail, she hired an accountant to sort out her finances.

Soon she was immersing herself in the federal tax code. She likes to say that the more she learned, the angrier she got.

She opened We the People, her pure-trust business, in 1991.

"When I think of all the people who have been destroyed or committed suicide because of this tax, it makes me want to cry," she said.

Within a few years, she found the business success that had eluded her. She became a celebrity in the anti-tax movement. She put up a billboard on her new beach house telling motorists along PCH how to "save taxes."

Ignoring relatives who urged her to lower her profile or risk the wrath of the IRS, Meredith reveled in her new life. She began collecting exotic cars and traveled the world spreading her message.

To the IRS, Meredith represented a departure from past tax rebels, who often mixed tax evasion with conspiracy theories, anti-Semitic rants and militia activities.

In October 1997, the IRS began an investigation, dispatching agents to watch Meredith's home and search her trash cans. Undercover agents videotaped Meredith's seminars and attended open-house events at her offices.

In June 1998, more than 40 agents bearing guns and sledgehammers searched her offices and a second home she owned in Huntington Beach.

Employees at Liberty Freedom Plaza were handcuffed and interviewed. When Meredith refused to give agents the combination to a large safe, investigators drilled the lock and removed almost $200,000 in cash, gold and silver coins, and cashier's checks. (The money, collected as evidence, was later returned to Meredith.)

The investigation crept along for several years before she and her employees were arrested April 15 and charged with conspiracy, mail fraud, failure to file income tax returns and other offenses. (Federal officials say the timing was a coincidence. They say they planned to make the arrests a few days earlier but held off after Meredith's mother died.) [highlighting mine]

Federal prosecutors have not filed charges against any buyers of Meredith's "pure trusts." Some are scheduled to testify for the prosecution.

Calling her an "economic threat" to the government, prosecutors persuaded U.S. Magistrate Patrick Walsh last spring to issue an order requiring Meredith to shut her Web site and stop selling books on the tax code. In addition, the judge barred her from associating with We the People employees and ordered that her movements be tracked by satellite.

"The worst thing is I can't go to the beach. They told me saltwater is bad for it," Meredith said of the ankle bracelet. "I used to go to the beach all the time."

To outsiders, it might seem as if Meredith has met her match. But die-hard followers like Barter, the Florida trucker, advise against counting her out.

"Let me tell you, the government's going to be sorry they messed with her," he said.

RESPONSE OF LYNNE MEREDITH TO THIS ARTICLE

Subject: Response to Times Article!

Good Morning Monte -

I hope your weekend was wonderful. I have gotten a lot of positive feedback on your article. The consensus has been "You go girl!" A published author called saying that he wants to write a book about our story.

You asked for my input on your article so here it is.

I don't think that you will be getting any angry calls from the U.S. attorney. Although you did present a good view of my position, you also covered the government's side of the story quite well.

Paragraph 7 of your article states 'Last year a record 740,000 tax filers used illegal trusts...to dodge income taxes ' Even though the sentence ends with, 'according to agency estimates', it appears to be your words because there are no quotations marks around the sentence. One of the things I did learn in my college journalism courses is that the words "alleged" illegal trust would have been fairer. As we will prove at an evidentiary hearing - the trusts are legal.

I am going to give you the benefit of the doubt and conclude that your editors cut out some relevant parts of your story.

I had really hoped that you would have mentioned our Civil Action. Five women, including a teenager and a great grandmother, taking on the IRS, pro per, is newsworthy and is certainly relevant to the story. The fact that the Judge ruled that the agent in charge of the 1998 raid was denied immunity from suit and had to stand trial for Constitutional rights violations substantiates that our case has merit. It is also more than a coincidence that we were arrested the day before Erath's Appeal Brief was to be filed and Erath is the agent that obtained the indictment and searched my house while I was incarcerated.

Your story seemed to perpetuate the governments' false picture of me as someone who is in this for the money and focused more on my purported lavish lifestyle than the real issues such as, "Where's the law" that gives the government ownership in over one third of every American's labor? Where's the statute or case law that provides evidence that the trusts are illegal or bogus. I gave you statutes and case law to prove the legality of the entities. The government provided nothing to dispute the law.

The 16th Amendment is not one of my arguments. My primary issue is the constitutional definition of the word 'income' as defined by the Supreme Court and the constitutional jurisdictional limitations of the IRS. We have received letters from the IRS stating, "We agree that you are not legally required to file a [1040] tax return."

The reason that the mainstream has listened to me is NOT because they are GULLIBLE but because my books are supported by case law, supreme court decisions, statutes and regulations. It is because I am telling the TRUTH and it is verifiable. I believe that, for over 80 years, the IRS has relied upon the gullibility of the American people who do not ask for proof of the existence of an actual statute that creates a liability for the tax.

There are CERTAINLY a lot easier ways to make a living than taking on the most powerful agency in America. It was hardly the exotic lifestyle that your article and the IRS and your article painted. Every day we were exposed to the horrors of the IRS, cleaning out someone's bank account, seizing someone's wages so they couldn't pay their rent, taking away someone's car so they couldn't go to work, etc. etc.

Once our Receptionist received a call from a horrified woman saying, "I need to talk to Lynne Meredith, the IRS is surrounding our home with drawn guns and battering rams!" The Receptionist, not knowing what else to say, responded with, "Honey, you don't need Lynne Meredith, you need Jesus!"

We gave the people hope and we gave them remedy in the law. We also heard stories of suicides where the remedy came too late. (Thank you for putting that in your story). My point is, that I was hardly 'reveling in my new life!'

Your sentence, "Within a few years she had found the success that eluded her" is misleading. Success had NOT eluded me. While, like most entreprenuers, I have had my share of down cycles, I had successful businesses before I wrote the book. Some of the cars, held in trust, that your article mentions, I have had for 15-20 years. I did not go 'from job to job'. The jobs as a waitress and factory worker (which lasted for three weeks was while in college thirty years ago).

Any money that was made after paying all of our business expenses was spent in trying to keep the business open after the 1998 IRS raid. All of the precious metals taken by the IRS from my safe, (which was my retirement savings) have been converted into checks and were deposited into our business accounts and has all been spent on expenses.

Also, I did not shut down MoneyTree "after the U.S. Attorney accused me of operating 'pyramid scheme'". That company sold a $10 newsletter, that taught self-improvement and motivation and raised huge amounts of money for homeless rescue missions. I started that company because I wanted to help homeless mothers get a boost so that they could eventually take care of themselves and their children. I loved that business more than any other I have ever been involved with.

The U.S. attorney in Michigan did send me a letter saying that I MAY be violating pyramid laws because it was a referral program. I looked up the purported 'pyramid' laws he was referring to. The law stated that you could not distribute commissions, unrelated to the sale of a product. Since all commissions came from product sales, I phoned the U.S. attorney to ask him what part of that law he thought I was violating. He finally agreed that I was not violating the law but said that he didn't like my newsletter. When I asked him what part of the newsletter he didn't like, he admitted that he had not read it. We finally agreed that I had not broken the law. I told him that if he continued harassing me I would file an interference of trade suit and I did not hear from him or any other U.S. attorney again. The business ultimately ran its course and ended on its own because I was putting more time into researching and writing the Vultures book than I was promoting and watering the 'MoneyTree'.

My aluminum Recycling business marketed vending machines that accepted aluminum cans and automatically paid out cash. It was successful until the 'State of California' passed new regulations, authored by our only competitor, Envipco from New Jersey. The new laws mandated that, in order to sell aluminum, the Recycling machines must be Certified by the State of California and that, in order to be certified, the machines had to accept glass and plastic. Our machines could only recycle aluminum. Of course, Envipco's machines were 'certifiable' but ours were not. We did not have the funding or the time to redesign all of our machines. That caused the business to collapse overnight. I paid off as many debts as I could and started over again. I am not aware of any lawsuits filed regarding any defects in the machines which I did not manufacture but only marketed.

I and my friends did get a good laugh out of your description of me in my red Corvette with the TAX REBEL plates, wearing high heals and leather pants (although I do want to be taken seriously as a legal researcher and author).

Following are the Positive Aspects of the Article

"My arrest was just part of my mission to put an end to what I believe is a reign of IRS tyranny," said Meredith... "I will use this opportunity to set judicial precedence.... I want to abolish the IRS."

"When I think of all the people who have been destroyed or committed suicide because of this tax, it makes me want to cry," she said.

. Lynne Meredith doesn't look much like a threat to the federal tax system.

. She preaches not to anti-government extremists but to suburbanites struggling to balance their household budgets.

. Her best-selling book, "Vultures in Eagles' Clothing," has sold more than 100,000 copies.

. She delivers her subversive message -- that under the Constitution payment of income taxes is strictly voluntary -- in a non-threatening way. She is passionate and persuasive.

. Meredith, who has pleaded not guilty to the charges, says that her trusts are legal and that the government is persecuting her for exposing the basic unfairness of the tax system.

. "The IRS has no authority for what they do," Meredith tells the audience. "The IRS works by intimidating you. It's your own fear that makes you comply. If we refuse to be fearful, they will have lost all power over us."

. The true purpose of the income tax, Meredith says, is to fund the Federal Reserve Bank -- a front for "eight primarily foreign, private bankers who intend to establish a monopolistic, global economy under their control."

. The trusts are legal contracts that transfer ownership of assets -- real estate, bank accounts and other property.

. The trusts are "pure" in that they reflect the uncorrupted intent of the framers of the Constitution, Meredith says.

. She cites Article 1, Section 9, which outlines various limitations on the power of Congress. One provision says that "direct" taxes, such as those on personal income, must be collected in proportion to the population of each state, as determined by the census.

. Meredith, argues that the amendment is flawed and contains no "enabling clause" granting Congress the broad taxing authority it now exercises.

. To the IRS, Meredith represented a departure from past tax rebels, .

. Federal prosecutors have not filed charges against any buyers of Meredith's "pure trusts."

To outsiders, it might seem as if Meredith has met her match. But die-hard followers like Barter, the Florida trucker, advise against counting her out. "Let me tell you, the government's going to be sorry they messed with her," he said.

Love and Liberty - Lynne