Semi OT - IRS Bites It - Got Gold & Silver?

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Thanks to particles on the millionaires board.......

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Semi OT - IRS Bites It - Got Gold & Silver?
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IRS Suffers Defeat: Kahre tax trial: LasVagas
In Memory of Aaron Russo , Oct 04, 2007 @ 04:58 GMT
IRS Suffers Defeat: Kahre tax trial: Wages Paid in Gold and Silver Coin
NEW 10/1/2007 6:49:35 AM
Most Commercial / Main Stream Media Blackout: 161 Federal Tax Charges, 0 Convictions

IRS Suffers Staggering Defeat in Kahre tax trial. Tax Questions Raised Regarding Gold and Silver Coins Used to Pay Wages
Around noon on Monday, September 17th, a Las Vegas federal jury returned its verdict refusing to convict nine defendants of any of the 161 federal tax crimes they had been charged with. The charges included income tax evasion, willful failure to file and conspiracy to evade taxes.

The four-month trial centered around the family businesses of Robert Kahre who paid numerous workers for their labor with circulating gold and silver U.S. coins, and did not report the wages. The payments took place over several years, allegedly totaling at least $114 million dollars.

On September 20, 2007, three days after the federal trial's dramatic conclusion, the Las Vegas Review Journal, reportedly under a degree of public pressure, ran its first (and last) story about the outcome of the trial. To this day, with exception of the single article by the Review Journal, no major media entity has published a news story regarding the outcome of this important federal criminal tax case.

The censorship of this important news story is, unfortunately, not unexpected given the continuing, worldwide onslaught against the U.S. "dollar" -- specifically the Federal Reserve variety, and the ever growing numbers of Federal Reserve Notes required to trade for an actual ounce of silver, gold, oil, or for that matter, anything.

In short, this failed prosecution has coalesced and exposed truths our Government desperately needs to hide from the People: the truth about our money, the truth about our (privately-owned) central bank, and the truth about the fraudulent nature of the operation and enforcement of the federal income tax system.

Click here to read the April, 2005 DOJ press release announcing the prosecution.
www.wethepeoplefoundation.org/UPDATE/misc2007/DOJ-PressRelease-KahreApril2005.htm

Click here to read the 9/20 story by the Review Journal about the trial.
www.lvrj.com/news/9893062.html

According to defense attorney Joel Hansen, who represented co-defendant Alex Loglia, the primary "willfulness" defense was that the defendants believed they had no legal obligation to withhold, pay income taxes or report anything to the government because, in part, the nominal (i.e., face value) of the gold and silver coins is so small as to fall beneath the reporting thresholds set by the Internal Revenue Code.

The Defendants also argued that regardless of the valuation of the coins for internal revenue purposes, there is no law that requires average American workers to file or pay direct, un-apportioned taxes on the fruits of their labor.

The Government argued that the payments in solid gold and silver U.S. coins must be considered at their bullion (i.e., intrinsic full-market) value when considering the worth of the wages for purposes of the internal revenue code.

Attorney Hansen cited two Supreme Court cases bolstering Defendant's monetary argument at the heart of the defendants "willfulness" defense.

The essence of the argument is that under the Constitution Congress is obligated by law to mint and circulate such coins as demand requires, and must establish the value of coins as they are used as legal tender, but the coins' market value, arising as valuable personal "property," is a distinct, separate attribute of such coins, and is of no legal consequence if the coins are used as legal tender.

In other words, if a worker is paid with such coins, his taxable "income" (if any) can only be the face value indicated upon the coin money paid -- i.e., $1.00 for a circulating silver dollar or $50 for a circulating gold U.S. coin. Not surprisingly, the IRS has never issued any public guidance regarding this significant issue.

The first case, Ling Su Fan v. U.S., 218 US 302 (1910) www.wethepeoplefoundation.org/UPDATE/misc2007/LinSuFan218US302-coin.pdf -- establishes the legal distinction of a coin bearing the "impress" of the sovereign:

"These limitations are due to the fact that public law gives to such coinage a value which does not attach as a mere consequence of intrinsic value. Their quality as a legal tender is an attribute of law aside from their bullion value. They bear, therefore, the impress of sovereign power which fixes value and authorizes their use in exchange."

The second case, Thompson v. Butler, 95 US 694 (1877), www.wethepeoplefoundation.org/UPDATE/misc2007/Thompson-v-Butler-coin.pdf -- establishes that the law makes no legal distinction between the values of coin and paper money used as legal tender:

"A coin dollar is worth no more for the purposes of tender in payment of an ordinary debt than a note dollar. The law has not made the note a standard of value any more than coin. It is true that in the market, as an article of merchandise, one is of greater value than the other; but as money, that is to say, as a medium of exchange, the law knows no difference between them."

Defense attorney Hansen confirmed that members of the jury were able to actually hold and inspect the gold and silver U.S. coins paid to the workers.

After almost four months of testimony and three and a half days of deliberation, the jury did not convict any of the defendants of any of the 161 crimes alleged. Although some defendants were acquitted of multiple counts, and several were acquitted completely, others may have to stand for a retrial if the Government brings charges a second time.

The Review Journal reported the jury foreman claimed DOJ prosecutors admitted they were "shocked" by the outcome.

In March 2007, the primary defendant, Bob Kahre, filed a federal civil rights lawsuit against the prosecutor and IRS agents who had conducted what he alleges to be an unlawful search and seizure raid. In 2005, the Ninth Circuit Court of Appeals refused to overturn a previous District Court ruling holding that the federal prosecutor is not entitled to absolute immunity for the unlawful raid. Read more.
www.wethepeoplefoundation.org/UPDATE/misc2007/Kahre--RICOvDOJprosecutor.pdf

Click here to execute a Google News search to attempt to locate recent news stories about the Kahre tax trial.

www.google.com/search?q=Kahre+tax+trial

The media suppression of this story is similar to the widespread mainstream media suppression of the July 11, 2007 acquittal of Louisiana attorney Tommy Cryer
www.shreveporttimes.com/apps/pbcs.dll/article?AID=2007707130321 who was also charged with multiple federal income tax crimes and relied upon numerous Supreme Court precedents and U.S. tax laws to establish his "willfulness" defense. Click here -- www.wethepeoplefoundation.org/UPDATE/Update2007-03-03.htm -- for a previous WTP update containing a link to Cryer's 100-page Motion

www.wethepeoplefoundation.org/MISC/Cryer/CRYER--MotiontoDismiss.pdf

to Dismiss which details his legal arguments.



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[hundredtoone]

October 17, 2007

The Cracks in Wall Street's Hall of Mirrors
Time for the Banks to Face the Hangman
By MIKE WHITNEY


"There is today an incredibly speculative financial sector hell bent on sustaining Credit and asset Bubbles and perfectly content to adulterate our functional system of "money" in the process. The Federal Reserve is perceived to condone the whole affair and is openly willing to employ all measures to avoid bursting Bubbles. And in a contemporary world of acutely fragile finance structures, this ensures that bust avoidance translates briskly to bubble perpetuation and speculator delight."

-- Doug Noland "Credit Bubble Bulletin"

"How can one defend a system that creates wealth by making the majority poor?"

--Henry C. K. Liu


Officials in the Treasury Dept--working with their colleagues at Citigroup, J.P. Morgan and Bank of America---have concocted a scheme to rescue the banks from their massive losses in mortgage-backed securities. The group is planning to set up a $100 billion emergency fund which will purchase non-performing assets for short term debt. In truth, the fund is a bailout which provides the financial giants with an excuse for not reporting their enormous losses from bad bets.

The story first appeared in Saturday's Wall Street Journal and was followed on Monday with a second headline piece:

"RESCUE READIED BY BANKS IS BET TO SPUR MARKET"

WSJ: "The high stakes plan to RESCUE BANKS FROM LOSSES on mortgage securities amounts to a big bet that a consortium of financial giants"AT THE PRODDING OF THE US GOVERNMENT"can PERSUADE INVESTORS TO POUR MORE MONEY INTO THE TROUBLED CREDIT MARKET."

That's right; the Treasury Dept is directly involved in a scam that saves the banks while trying to "persuade" investors to "pour more money" into toxic mortgage-backed sludge. Treasury Dept officials clearly have a different idea of "moral hazard" than the rest of us.

The banks are presently holding hundreds of billions of dollars in mortgage-backed securities (MBSs) that they cannot sell"because there are no buyers ---and don't want to take back on their balance sheets because they'll be forced to increase their capital reserves. So they've decided to launch a public relations campaign to promote some goofy-sounding fund, called the "Master-Liquidity Enhancement Conduit" or M-LEC, which will allow the banks to place their unwanted bonds in Limbo until some future date when the public appetite for garbage CDOs improves.

The WSJ does a good job of disguising the real motive behind the new "Super-Conduit" (aka the Bailout fund) but in the last paragraph, buried in Section C-3, they reveal the truth:

"The goal is to reassure investors and make them more willing to buy its short-term debt." So, the fund is really just a way of rearranging the marketplace until the next crop of gullible investors sprouts up and buys more mortgage-backed garbage.

Where are the regulators? The SEC and Treasury should be forcing the banks to be straightforward with the public and let them know about the hanky-panky they've been up to with their risky SIVs (structured investment vehicles) Citigroup alone has nearly $80 billion in off-balance sheets operations which are in distress. The bank accounts for "25% of the global SIV market. As of August, assets held by SIVs totaled $400 billion".

SIVs are set up as a way to make money without taking the risk onto their balance sheets. "They issue their own short-term debt, usually at relatively low rates ... then use the proceeds to buy higher yielding assets such as securities tied to mortgages." (WSJ)

Ever since Bear Stearns blew up in late July, investors have been steering clear of any securities connected to real estate, which means the SIVs are getting the Double Whammy---they can't sell their asset-backed commercial paper (because it's mortgage-backed) and they find buyers for their collateralized debt obligations. (CDOs) To a large extent, the market is still frozen despite the upbeat cheerleading on the business pages. Clearly, the worst is yet to come.

How bad is it?

An article in yesterday's Financial Times said that, "Only $9.9 billion of home equity loan securitizations have come to market since July 1---A 95% DECLINE FROM THE $200.9 BILLION IN THE FIRST HALF OF THIS YEAR AND A ROUGHLY 92% DECREASE FROM THE SAME PERIOD LAST YEAR."

The banks are in trouble. Big trouble. Main sources of revenue have dried up overnight and they're stuck with hundreds of billions of debt. That's why the papers broke the story on Saturday when there was NO chance of triggering a stock market crash.

Imagine the horror of investors around the world when they discover that the major investment banks are running these shabby "off-balance sheets" operations while concealing their real financial condition from their investors. Consider the disgust the public feels when they see Treasury officials bailing out the banks instead of ordering them to report their losses and get on with business.

Still, Wall Street nonchalantly leaps from one swindle to the next never considering the damage it's doing to the credibility of the market.

Susan Pulliam summed it up like this in the Oct 12 edition of The Wall Street Journal:

"Since the invention of the ticker tape 140 years ago, America has been able to boast of having the world's most transparent financial markets. The tape and its electronic descendants ensured that crystal-clear prices for stocks and many other securities were readily available to everyone, encouraging millions to entrust their money to the markets. These days, after a decade of frantic growth in mortgage-backed securities and other complex investments traded off exchanges, that clarity is gone. Large parts of American financial markets have become a hall of mirrors."

"Hall of mirrors" is an understatement. The system is thoroughly opaque and crooked as a ram's horn. The market's new architecture, "structured finance", is a dismal rip-off from start to finish. Consider the mentality of the hucksters who dreamed up "securitizing" subprime mortgages and selling them off as precious jewels in the secondary market. This was a blatant con-job. How can the liabilities of "borrowers with bad credit" be traded to foreign investors and pension funds like they were valuable assets? And where were the regulators while this scam was going on?

Isn't this sufficient evidence that the system is totally out of whack?

Wall Street avoids transparency like the plague. That is to be expected. But what about the government? It's the government's job to protect the investor and maintain the integrity of the system. Is that what Treasury Dept is doing or are they "LURING investors to buy debt issued by the rescue fund as part of the plan"? (quote from the Wall Street Journal)

"Luring"? Is that how Paulson sees it; like luring turkeys to the chopping block with a trail of bread crumbs?

The idea of protecting the little guy has never occurred to anyone in the Bush administration. Their job is to shift wealth from one class to the other via equity bubbles and government bailouts--anything that advances the corporate agenda.

Presently, the banks are sitting on $200 billion in non-performing mortgage-backed securities (MBSs) and collateralized debt obligations. (CDOs) They are also hold another $300 billion in collateralized loan obligations (CLOs) from mergers and acquisitions which stalled after the Bear Stearns meltdown. If the present bailout doesn't materialize, we're likely to see bank closures and a plummeting stock market.

Shouldn't the regulators have considered the probability of a crash before they allowed trillions of dollars of radioactive-bonds to flood the market when no one had any idea of their real value? Wouldn't that have been the prudent thing to do?

Now we know what they are worth. They're worth nothing. That's why the banks are running scared and refusing to put them up for auction. They'd rather sleaze them into a lofty-sounding superfund that masks their true value.

In the last 2 weeks the stock market soared on the news that the banks were reporting billions of dollars in losses. Investors were hoodwinked into believing the banks were being honest and had "come clean" about their financial condition. What a joke. In reality, the banks only reported roughly 5% of their potential losses; the rest were hidden in their off balance sheets operations.

Equities skyrocketed to new heights. Wall Street was euphoric.

Now we know the truth. It was all baloney.

The Wall Street Journal: "The new fund is designed to stave off what Citigroup and others see as a threat to the financial markets world-wide: the danger that dozens of huge bank-affiliated funds will be forced to unload billions of dollars in mortgage-backed securities and other assets, driving down their prices in a fire sale ... .The ultimate fear: If banks need to write down more assets or are forced to take assets onto their books, that could set off a broader credit crunch and hurt the economy. It could make it tough for homeowners and businesses to get loans."

It could "hurt the economy" and "make it tough for homeowners and businesses to get loans?"

Ahhh, yes. It's all clear now. The banks only cooked up this colossal bailout to make things better for us common people. How is it that we didn't notice that before? Our problem is that we don't see the magnanimity and altruism which drives the corporate agenda.

From the New York Times:

"The conduit (The bailout fund) is expected to start operating in 90 days and will stay in place for a few years until it has disposed of the assets it buys, according to people familiar with the negotiations.

To maintain its credibility with investors from whom it would raising money, the conduit will not buy any bonds that are tied to mortgages made to people with spotty, or subprime, credit histories. Rather, it will buy debt with the highest ratings " AAA and AA " and debt that is backed by other mortgages, credit card receipts and other assets."

We already know about the problems with the ratings agencies and how they are in bed with the investment banks. We also know that the whole purpose of the new fund is to off-load mortgage-backed tripe which is no longer sellable on the market. What we didn't know is that the New York Times eagerly provides the peppy public relations narrative to assist big business in dumping its failing assets.

NY Times: "The conduit will pay market prices for the securities it buys. But it remains unclear how officials will determine the price of some bonds that have not been actively traded since August, because the difference between what buyers are willing to pay and what sellers want has widened significantly."

Of course, they'll pay full price because they want to be "made whole" again. The truth is, however, that these derivatives will probably only fetch pennies on the dollar unless they get another Wall Street PR face-lift.

Christian Stracke, market analyst from the research firm CreditSights, said the effort appears to be "an attempt to soothe tense investors in the debt market, rather than to provide substantive relief to the worst-hit mortgage securities".

Stracke added, "For me, this is more of a P.R. blitz."

Bingo.

The announcement of the forthcoming Master-Liquidity Enhancement Conduit or M-LEC further underlines the gravity of the problems facing the banking system. The fund creates a "buyer of last resort" so that these dubious assets won't be sold on the market at fire-sale prices.

Citigroup appears to be the greatest beneficiary of the current plan. They have a number of Enron-type SIVs which could be at risk.

Again, the problems that are surfacing in the banking sector today are the direct result of Greenspan's loose monetary policies coupled with the dismantling of the regulatory regime that was created following the 1929 stock market crash. We are now back to Square 1. All of the various scams and swindles which permeated that hyper-inflated market are now back in full-force foreshadowing a steep decline in investor confidence, increased market manipulation, and an unavoidable economic calamity.

"Structured finance" has transformed US markets into a carnival sideshow. Productivity and real growth have been replaced with never-ending credit expansion and speculative abuses. Reckless monetary policies and the behemoth current account deficit have destabilized the global economy a set the stage for a fiscal Armageddon.

The subprime mortgage crisis and subsequent shrinking of asset-backed commercial paper (ABCP) has thrown a wrench in the funding of daily corporate operations. These are the harbingers of an impending recession. As mortgages continue to default at a record pace; the aftershocks will continue to rumble through the credit markets where subprime loans have been "securitized" into bonds and leveraged at maximum levels. It's just one domino knocking down the next.

The financial system is at greater risk now than any time in the last 80 years. Regrettably, the only remedies coming from the Fed are more currency-destroying rate cuts or hundreds of billions of dollars in repos to remove mortgage-backed bonds from the banks' balance sheets. Neither of these solutions addresses the critical issues; they do not stabilize the market, reinvigorate lending, or restore investor confidence. They are merely band aids on a sucking chest-wound. They won't stop the bleeding.

The Fed's monetary policies promote financial speculation which inevitably leads to equity bubbles. Under Greenspan's stewardship, the country has lurched from the 1990's bond bubble, to the dot.com bubble, to the subprime meltdown, to the liquidity crisis, to the credit crunch---all engineered at the Federal Reserve with ancillary assistance from the charlatans in the banking industry.

An article in China Worker, "Credit Crunch threatens Global Downturn" summarizes our present predicament it like this:

"Financial globalization has rebounded on the system. Capitalist leaders boasted that the near total integration of financial markets across the globe would provide lenders and borrowers everywhere with instant access to a completely liquid money market. New types of financial securities and sophisticated derivatives would spread the risk of borrowing so widely that it would eliminate risk entirely. While economies were growing and bubbles inflating, it appeared that---through derivatives trading--- losses would be widely diffused among speculators, reducing risk to very low levels. Not even the most astute financial analysts could predict what would happen in the event of recession. The unanswerable question was: Who would ultimately bear the risks arising from widespread defaults or bankruptcies? The veteran investor, Warren Buffet, warned that derivatives would prove to be 'weapons of mass destruction'.

The fantasy of financial alchemy transforming high risk gambling into low risk money-making has now been shattered."

The author is right. "Structured finance" is a fraud. Risk has not been eliminated. In fact, it has exploded and become a system-wide problem. The dead wood is everywhere.

The banks are being crushed by a debt-load they generated through "securitization". They need to accept responsibility for their poor judgment (or greed?) and report their losses. The Super-Conduit is just a dodge to put off the unavoidable day of reckoning.The whole wretched plan should be scrapped. No amount of financial chicanery will eradicate billions of dollars in bad bets. It's time for the banks to face the hangman.

Mike Whitney lives in Washington state. He can be reached at: [e-mail]

counterpunch.com/whitney10172007.html

... Flying Moose (cmkxunofficial)