New York Times
June 17, 2003

Judge Tells Tax Adviser to Stop Selling Book

By DAVID CAY JOHNSTON

A federal judge ordered a Las Vegas tax adviser yesterday to stop selling a book that contends income taxes are voluntary and that people can lawfully escape them by filing tax returns listing no income. A civil liberties group said it thought the ruling improperly censors the book.

Judge Lloyd D. George of Federal District Court in Las Vegas ruled that the $38 book was central to a tax-evasion scheme sold by Irwin Schiff, who has twice been convicted of tax crimes. The Justice Department sought the injunction on behalf of the Internal Revenue Service, which has had to deal with at least 5,000 zero-income tax returns filed by Mr. Schiff's clients.

Judge George barred Mr. Schiff and two associates from giving tax advice, preparing tax returns and selling Mr. Schiff's book, "The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes."

Mr. Schiff and his associates, the judge wrote, knew that they "are offering fraudulent tax advice" and that the book is false commercial speech which "is not protected by the First Amendment."

"The First Amendment does not shield criminal conduct in tax schemes," the judge wrote in his 35-page opinion.

He ruled that the record in the two criminal tax prosecutions of Mr. Schiff, which resulted in prison sentences, established that he knew that his tax advice was inaccurate.

The judge said that Mr. Schiff, his girlfriend, Cindy Neun, and Lawrence N. Cohen, an employee of Mr. Schiff's Freedom Books, told clients that by filing returns with zero income they could escape both taxes and prosecution when they knew that was not true.

"That Schiff has no misunderstanding of the falsity of the claim that income tax is voluntary," the judge wrote, "is further evidenced by his many losses in civil tax cases."

In addition to the many Schiff clients who have lost civil cases after following his tax advice, a California chiropractor was sent to prison in 1999 for filing returns that listed no income. Mr. Schiff, in interviews earlier this year and last year, said he was not responsible for the conviction of the chiropractor, James V. Dentice, because Dr. Dentice did not follow his advice precisely.

Allen Lichtenstein, general counsel of the American Civil Liberties Union in Nevada, said he looked forward to arguing the case before the Ninth Circuit Court of Appeals. Mr. Schiff said he had done nothing wrong and would appeal.

"We argued that the book is not commercial speech, cannot be banned as false commercial speech and does not meet any other criteria for censorship," Mr. Lichtenstein said.

The A.C.L.U., the American Booksellers Association, American Publishers Association, American Library Association and PEN, the writers' group, filed a friend of the court brief opposing any restriction on sales of the book as prior restraint in violation of the First Amendment guarantees of free speech. They took no position on the validity of Mr. Schiff's tax advice.

At the court hearing, Mr. Schiff fired his lawyer after she said that she could not argue his tax claims because they lacked merit.

In another case yesterday, the Justice Department filed papers in federal court in Georgia seeking to block Morris James Sr. from promoting a scheme involving a nonexistent slavery reparations tax refund. At least 6,300 people have filed returns seeking the bogus tax break after paying Mr. James and his company, National Resource Information Center, the Justice Department said.