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IRS Aims to Make Rebel Pay

A suburban iconoclast helped move tax evasion to the mainstream. She sees her arrest as part of her mission to end the government's 'tyranny.'

January 04, 2003|Monte Morin | Times Staff Writer

Cruising 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 last 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 S. 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 orders of a federal judge, who also told her 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.

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