Thinking of taking a stand against the Internal Revenue Service?
First, consider the case of James O. Molen.
Molen, 70, a Chico florist shop owner, took issue with the government’s interpretation of the tax code. For years, he resisted paying federal employment and unemployment taxes for his employees. On Thursday, he was sent to federal prison for three years, to be followed by three years of supervised release.
At the conclusion of a four-day trial in May, a jury found Molen guilty of dodging taxes, defying court orders and retaliating against federal officials. He represented himself, with prominent attorney J. Toney standing by in the event he chose to ask for help – something Molen tends not to do.
Molen and his late wife, Sandra Molen, operated Touch of Class Florist for many years. Even though they employed four additional people, following tax filings for 1999 they stopped withholding and paying federal employment and unemployment taxes, according to court documents.
They didn’t try to hide their intentions. Instead, On Aug. 3, 2000, they sent a letter to the IRS explaining that, based on their interpretation of the U.S. Tax Code, they did not consider employee compensation to be wages or gross income.
Then, in a letter dated Jan. 31, 2001, the Molens told their employees not to report income from Touch of Class. They assured the employees their wages were exempt from income taxes, as well as Social Security and Medicare taxes, because the company is a “U.S. domestic employer hiring U.S. citizens.”
The government went to Sacramento federal court in 2003 seeking an injunction to compel the Molens to pay back taxes owed and abide by the law.
“The United States has disavowed use of the ordinary IRS administrative remedies,” the civil complaint said, because trying to deal with Molen is “like Sisyphus with his boulder.” (In Greek mythology, Sisyphus was king of Ephyra. For chronic deceitfulness he was compelled to roll a boulder up a hill, only to watch it roll back down, and to repeat the fruitless effort forever.)
On Dec. 12, 2003, U.S. District Judge David F. Levi issued a preliminary injunction and, after nearly three years of litigation, he issued a permanent injunction finding that “the Molens base their refusal to meet their tax obligations on ... patently frivolous arguments.”
In November 2004, while the civil suit was percolating, James Molen filed “consensual” liens, each in the amount of $93 billion, against seven people, including six federal employees involved in the suit. Those targeted by Molen included Levi, a U.S. magistrate judge, the U.S. attorney, an IRS revenue officer, and two Department of Justice attorneys prosecuting the suit.
In March 2006, the tax division of the department filed another civil suit to remove the liens. In February 2007, U.S. District Judge Lawrence K. Karlton declared the liens “null, void and without legal effect.”
Three years later, Molen was served by the IRS with a demand for $199,659.33. Three days later, he filed liens in amounts identical to the one in the demand against the revenue officer who served the demand and the officer who had previously been assigned to the matter. Karlton voided those liens in September 2010.
Eight days after that order by Karlton, the government filed yet another suit to turn Molen’s tax liability into a court judgment, foreclose on his house and disregard a transfer of the house. In June 2007, the house had been transferred for no consideration by quit-claim deed to “Black Hole Adventures Banking Trust.” The IRS determined Black Hole was a sham and that the transfer was designed to avoid taxes.
The government finally gave up trying to get its money through administrative and civil channels and, on July 12, 2012, Molen was indicted by a federal grand jury.
Barely more than a year later, he fired his lawyer and exercised his right to self-representation. But not before U.S. District Judge Troy L. Nunley questioned him on his qualifications.
At a Sept. 19, 2013 hearing, Nunley asked Molen if he had ever studied law.
“In an informal basis, yes,” Molen replied.
The judge asked what he meant by “informal.”
“Well, I belong to a group that studies law,” Molen said.
“What group is that, sir?” Nunley inquired.
“Called Big Ears Salmon Club,” was the reply.
“And in your group Big Ears Salmon Club, what type of law do you study, sir?” the judge pressed.
“Well,” said Molen, “we’ve studied anywhere from traffic all the way up through civil and criminal law.”
“All right,” said Nunley. “And how long have you studied law with the Big Ears Salmon Club?”
“Fifteen years,” Molen responded.
The jurors weren’t convinced by his arguments. It took them less than an hour to reach a verdict of guilty on all five counts.
Call The Bee’s Denny Walsh, (916) 321-1189.