Seven Arrested in Tax Shelter Scheme

Seven Californians, including the author of books on tax avoidance, were arrested Monday on various federal charges related to the alleged promotion of bogus tax shelters, the Internal Revenue Service said Monday.

Lynne Meredith of Sunset Beach, author of two books that purport to teach individuals how to legally stop paying income taxes, and six other individuals who worked as trust salespeople in Meredith’s various enterprises, were indicted on a total of 35 federal charges.

The charges included conspiracy to defraud the IRS and fraudulently using Social Security numbers and passports.

Meredith and other officials of her companies, We the People and Sovereignty Pure Trusts, could not be reached for comment Monday.

The indictment alleges that Meredith earned more than $6.2 million over a five-year period by holding seminars, selling books and creating trusts aimed at helping taxpayers illegally hide income from tax authorities.

The government also alleges that Meredith didn’t file tax returns or pay tax on her own income from 1994 through 1999.

Tax protest groups, such as We the People, take disconnected pieces of court cases and federal laws to assert one of several arguments--that the U.S. tax system is voluntary; that income derived from legal work is not taxable; or that the law authorizing federal income taxes was never properly ratified and consequently the entire U.S. tax system is invalid.

None of these arguments have ever been successful in court, said tax attorney Elliot H. Kajan, partner with Kajan, Mather & Barish in Beverly Hills, but taxpayers sometimes buy into the argument.

Also arrested Monday were Gayle Bybee of Sunset Beach, Gregory Paul Karl of Solana Beach, Teresa Manharth Giordano and Willie Watts of Murrieta, Betty Erickson of Windsor, and Nora Moore of Huntington Beach.

Those arrested were charged with varying counts of conspiracy, mail fraud and failing to file tax returns.

Depending on the number of charges, some of the individuals could face up to 20 years in prison if convicted, according to the indictments.

Kajan said the indictments were aimed at sending a message as this year’s tax filing season comes to a close.

“They serve as a lesson and deterrent to people who might be considering getting into these things,” he said.

“The IRS is coming out now in an effort to advise the public that no matter what they thought they could get away with in the past, they are not going to be able to get away with it in the present and the future,” Kajan said. “It will be a busy time for lawyers and accountants.”

The IRS has taken several recent steps against tax cheating, which is believed to cost the federal government $70 billion in lost revenue a year.

Last week, the government filed civil suits against tax promoters in San Diego, Boston and Cincinnati for allegedly selling bogus trusts to hundreds of taxpayers.

The IRS also secured deals with credit card companies to get access to the credit transactions of customers who use offshore banks--havens for tax scofflaws.