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Banister, PAM, & the "laugh test"!

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  • rlbaty50
    Following my name below is are exensive excerpts from the Court s opinion in the Banister case. The reference to the laugh test (were the matter not so
    Message 1 of 1 , Jan 14, 2004
      Following my name below is are exensive excerpts from the Court's
      opinion in the Banister case. The reference to the "laugh test"
      (were the matter not so serious) is made in one of the footnotes.

      You will also note in the text the reference to the religious claims
      made in connection with Banister's course of action (quite PAMite-
      like, don't you think).

      Robert Baty






      [1] This is an action brought pursuant to 31 C.F.R. Sections 10.60/2/
      and 10.91/3/ and under the authority 31 U.S.C. section 330./4/ The
      Complainant, The Director, Office of Professional Responsibility
      seeks to have Joseph R. Banister, Respondent, disbarred because, in
      the course of his representation of taxpayers "T" and "C,"/5/ he
      advised them that they were not required to file federal income tax
      returns on the grounds that the Sixteenth Amendment to the United
      States Constitution was not properly ratified and because Sections
      861 through 865 of the Internal Revenue Code defines "income" in a
      manner which excluded their earnings. Subsequently, the IRS amended
      the Complaint, adding as grounds for disbarment Banister's failure to
      file his own federal income tax returns for the years 1999 through

      [3] A fundamental purpose of conducting a hearing or a trial is to
      determine whether the allegations of fact, as set forth in a
      Complaint, occurred. But where there is no dispute as to the
      underlying facts, obviously there is no need for a court to resolve
      whether one party's version of the facts is more believable than the
      other side's version. That is what happened in this case.

      In fact, in Mr. Banister's Answer to the original Complaint he
      admitted that the facts alleged in the Complaint occurred.

      The very significant problem with Banister's advice to his clients is
      that it is absolutely wrong. Both of Banister's assertions have been
      long resolved by the Federal Courts as completely without merit.

      Banister's assertions have been addressed by so many federal courts
      that they are no longer afforded the dignity of repeating the
      explanations as to why the claims are meritless.

      (W)ith no factual dispute as to the allegations in the original
      Complaint, and having determined as a matter of law that such advice
      to clients "T" and "C" constituted misconduct and disreputable
      conduct under the regulatory sections cited in the Complaint, the
      Court directed summary judgment in favor of the IRS.

      [5] The problem for Banister was that he never offered any
      contradictory facts to rebut the official IRS records which showed
      that Banister never filed returns for the years alleged. Under such
      circumstances, that is there being no genuine factual dispute, the
      Court then determined that Banister's failure to file his federal tax
      returns for those years also constituted misconduct under the
      practice regulations. With summary judgment also fully warranted as
      to the allegations in the Amended Complaint, the Court acted

      [6] In order to determine the appropriate sanction to be applied
      here, a hearing was held to afford the IRS and Banister to present
      their respective views on that subject. A brief summary/7/ of that
      hearing on the penalty phase along with comments from the Court

      [10] By agreement between the parties, Mr. Banister elected only to
      make a statement to the Court. This statement was not made under
      oath, nor was it subject to cross-examination. Tr. 66. Banister began
      by objecting to the Court's Order regarding admissible evidence at
      the sanction phase of proceeding./11/ Banister then reviewed his
      working life, beginning with a newspaper delivery route at age
      twelve, and his acquiescence to the idea that one had to pay federal
      taxes on income, an acquiescence that continued through adulthood.
      When referring to the time he was employed by the IRS, he asserted
      that he was wrongly accused that he owed thousands of dollars in back
      taxes. The upshot of this story, was that, not only was the
      allegation incorrect, but also that he was entitled to a refund for
      the questioned taxes./12/

      [11] Banister's statement then continued with a recounting of awards
      he received while an IRS employee. Along the way he "encountered and
      accumulated information and evidence about the inception and
      administration of the federal income tax system and the practices of
      the Internal Revenue Service that deeply disturbed [him] and
      contributed to a change in [his] perspective." Tr. 73. Answering what
      he perceived to be a higher calling, he attempted to get answers to
      his doubts about the federal income tax system, but was ignored in
      this endeavor. Banister continues to have strong convictions that the
      IRS does not have the authority to collect income taxes from most
      United States citizens. He has pursued these convictions without
      success: "For reasons I do not understand, I have been unable to
      impress upon my IRS supervisors, IRS collection personnel, IRS
      appeals personnel, IRS management, the IRS Assistant Commissioner,
      the IRS Commissioner, the Treasury Inspector General's office, the
      Treasury Department, the US House of Representatives, the US Senate,
      the Supreme Court, the Clinton administration, the Bush
      administration and even an Administrative Law Judge from the
      Environmental Protection Agency that the IRS as an agency is engaged
      in serious wrongdoing." Tr. 75.

      He also ties these views to his religious beliefs: "I believe my
      perspective about the federal income tax and the IRS, as a certified
      public accountant assisting clients with IRS matters, is consistent
      with the teachings of my Christian faith and the ethics of my

      [12] Banister also asserted in his unsworn statement that he
      has "been forbidden from confronting my IRS accusers to evaluate
      what, if any, evidence they have accumulated to prove that my conduct
      was willful, knowing, conscious disregard, intentional or reckless. I
      have been forbidden from introducing my own evidence proving that my
      conduct was not in any way willfull, knowing, conscious disregard,
      intentional or reckless."/13/ This assertion is inaccurate. Banister
      was permitted to offer any evidence he could muster to rebut the
      charges set forth in the Complaint and the Amended Complaint. As this
      decision reflects, he was also given the opportunity to offer any
      factors for the Court to consider, in mitigation of the violations,
      in determining the appropriate sanction.

      Despite the opportunity to do so, Banister offered nothing that the
      Court could consider as mitigation. Instead, he continued to assert
      his ardent belief that the IRS acts fraudulently and without
      authority to impose a federal income tax: "Once I resigned from the
      Internal Revenue Service, my detailed knowledge of the IRS's
      wrongdoing increased at a seemingly exponential rate . . . I believe
      that the IRS purposely and fraudulently manipulates its individual
      master file computer system to achieve desired results against the
      unsuspecting public, because I have witnessed it."

      Banister is entitled to whatever beliefs he chooses, but the question
      here is his fitness to continue practice before the IRS. Espousing
      his long discredited views regarding the validity of the ratification
      of the Sixteenth Amendment, his equally discredited view that Section
      861 of the Internal Revenue Code accomplished a result which was
      exactly opposite to the intent to tax the income of United States
      citizens, and his personal failure to file his own income tax returns
      for several consecutive years, are all completely inconsistent with
      such fitness.

      [13] The Court does agree with one assertion made by Banister in his
      unsworn statement. In the context of referring to the reactivation of
      his CPA certificate, he stated that the preparation materials for his
      ethics examination noted that: "[e]very person is an independent
      moral agent capable of making choices and accountable for the
      consequences of those choices." Tr. 78. In this case Mr. Banister is
      being held accountable for the consequences of his choices upon his
      fitness to continue practice before the IRS.

      [16] In his closing statement, Mr. Kessler, as counsel for the
      IRS/17/, brought the proceeding back to real world of facts. noting
      that Banister['s] actions were about his "blatant disregard for the
      regulations which govern his practice before the IRS that was the
      cause of the action." The IRS noted that: "[A]s a certified public
      account who is authorized to practice before the IRS, and as a former
      IRS special agent, Respondent clearly has a more heightened awareness
      of the legal requirements related to the filing of returns and the
      payment of taxes [and that] as a practitioner before the IRS,
      Respondent has a duty to exercise due diligence and further viable
      arguments in representing clients before the IRS. Instead, the
      Respondent has shown an utter disregard for the rule of law he must
      comply with as a tax practitioner before the IRS. This utter
      disregard is evidenced by his failure to file his own income tax
      returns for a number of years and his reliance on arguments that have
      been consistently rejected by the courts to the point where sanctions
      are ordered and injunctions obtained against individuals making the
      very same claims as the Respondent." Tr. 83-84.

      [17] Mr. Kessler noted, as has this Court, that "a number of courts
      have clearly rejected the positions taken by Respondent" and
      that "not a single court has ruled in Respondent's favor on these
      issues." Tr. 84. He correctly observed that it is "hard to believe
      that despite his stated extensive research into the subject of
      federal taxation, the Respondent, a certified public accountant, who
      also received extensive training to become a special agent for the
      IRS's criminal investigative division, and then served in that
      capacity honorably for five years, approximately, failed to be aware
      of or discover the numerous cases that have refuted the frivolous
      positions he has taken." Tr. 85. In fact, the Court finds that it is
      not believable at all and that, if accepted that Banister did not
      know of all the cases rejecting his views, such unawareness would
      itself "clearly evidence incompetence on the Respondent's part." Id.

      [18] The Court notes that, contrary to the assertions of Banister and
      his Counsel, this case is not about restricting Mr. Banister's
      beliefs. As expressed by the IRS, "Respondent can have the belief he
      wants to have. He can advocate that the Internal Revenue Code be
      changed. He can advocate that there be a flat tax in this country, to
      make it simple. But if he wants to practice before the IRS, he must
      comply with the regulations which govern such practice based on the
      laws as they are today, whether he personally disagrees with those
      laws or not." Tr. 86. The Court agrees with the IRS that Mr.
      Banister's actions are "about a tax practitioner who demands that the
      government follow his interpretation of the law when so many courts
      have already taken the time to consider these arguments and shown him
      and others the error of their ways."/18/ Tr. 87.

      [19] Having considered the arguments, statement, and testimony
      presented at the hearing for the sanctions phase of this proceeding,
      the Court concludes that nothing less than disbarment is appropriate
      for Mr. Banister. As reflected in the Orders previously issued, this
      Court has found that the Respondent committed a number of violations
      of 31 CFR Part 10, and that these violations demonstrate incompetent
      and/or disreputable conduct. These violations amply warrant Mr.
      Banister's disbarment. In the Court's view, either the violations
      found to have been committed in the original Complaint or the
      additional violations, which were also found to have occurred,
      independently warrant nothing short of disbarment./19/ It should be
      obvious that the combination of both of these grounds for disbarment
      only serve to make matters worse.

      [20] The Court also finds that Mr. Banister's actions were
      detrimental to the effectiveness of the Internal Revenue system. No
      mitigating factors were presented at the hearing. Indeed, Banister
      was anything but contrite or remorseful for his actions, and thus the
      Court agrees with the IRS that there is "no reason to believe that he
      would engage in any different conduct in his future dealings with
      clients and with the IRS." Tr. 89.


      [21] For the reasons set forth in this decision, the Respondent,
      JOSEPH R. BANISTER, is hereby ORDERED DISBARRED from practice before
      the Internal Revenue Service.

      William B. Moran
      United States Administrative Law Judge


      /5/Because Banister insisted, albeit at the last moment, through his
      counsel, that the hearing in this proceeding be held in public,
      pursuant to 31 C.F.R. section 10.71, this decision should also be
      made available to the public. To protect the identity of the
      taxpayers Banister advised, as set forth in the Complaint, they are
      identified only as "T" and "C."

      /6/Where the effect of this advice, misleading taxpayers about their
      federal tax obligations, not so serious, Banister's worn out theories
      would be in the laughable category. As noted by the Tax Court: "Some
      people believe with great fervor preposterous things that just happen
      to coincide with their self-interest. "Tax protesters" have convinced
      themselves that wages are not income, that only gold is money, that
      the Sixteenth Amendment is unconstitutional, and so on. These beliefs
      all lead -- so tax protesters think -- to the elimination of their
      obligation to pay taxes. United States v. Bell, 238 F.Supp.2d 696,
      700 (M.D. Pa. 2003), quoting Christopher v. C.I.R., 2002 WL 71029 *3
      (U.S. Tax Ct. 2002), which in turn quoted from Coleman v.
      Commissioner, 791 F.2d 68, 69 (7th Cir. 1986).

      /7/ The Court read and considered the entire transcript. To the
      extent that some aspects of that hearing transcript are not
      discussed, such absence reflects the Court's view that it was
      unnecessary to note them in this decision. The Court has determined
      that much of the cross-examination of Mr. Finz does not warrant
      discussion in this decision.

      /9/Banister was an IRS Special Agent with the criminal investigation
      division. Banister touted this background in promoting his IRS
      practice. There was certainly ample evidence of this from Banister
      himself. For example the website "Joseph Barnister.com" refers to his
      experience as an IRS special agent with the criminal investigation
      division. IRS exhibit 2. Tr. 56, So too, Banister's book,
      Investigating the Federal Income Tax, also refers to his former IRS
      employment. IRS exhibit 8, Tr. 57. These were not the only exhibits
      where Banister used his background with the IRS in promoting himself.
      Tr. 59 - 61. Finz believed this promotion of his background operated
      to give weight to his views before clients. Tr. 28. Finz also
      expressed that, even if the touting of his work experience with IRS
      had not occurred, IRS would still be seeking disbarment for the
      transgressions identified in the Complaint. Tr. 62.

      /12/Every sentence from Banister's statement must be considered in
      the context it was given. Hence, it must be remembered his story was
      not under oath, nor was it subject to cross- examination. And these
      observations do not take into account that his stories, such as the
      asserted wrongful claim of back taxes, are not relevant at all to the
      violations which have been found or to the appropriate sanction to be
      applied for those violations.

      /13/ Banister also claimed to have "been forbidden from presenting
      evidence of the number of time [he has] petitioned government
      officials in good faith for a redress of grievances in connection
      with the income tax and IRS injustices that [he has] encountered." It
      must be noted that this claim is not relevant to the charges in the
      Complaint, charges which, as described above, were either admitted by
      Banister regarding the original complaint or effectively admitted
      with regard to the amended complaint, by virtue of Banister's failure
      to come forward with any evidence to rebut the prima facie showing
      that he failed to file his federal income tax returns for the tax
      years 1999 through 2002.

      /14/ The Court notes that Mr. Bernhoft does not exactly come to this
      proceeding as purely a detached advocate for the Respondent. In
      United States v. Robert R. Raymond and Robert G. Bernhoft, the United
      States Court of Appeals for the Seventh Circuit upheld the federal
      district court's granting of a permanent injunction "preventing
      [Raymond and Bernhoft] from engaging in . . . activities related to
      the sale of . . . materials known as the 'De-Taxing America
      Program' . . . and the incitement to violate federal tax laws." 228
      F.3d.804, 806, 816. (7th Cir. 2000). (emphasis added). Like Banister,
      the Court of Appeals noted that Bernhoft "expressed no remorse
      concerning [his] participation in the unlawfull activities at issue
      here." Further, like Banister, Bernhoft "refused to acknowledge that
      [his] conduct in [the] matter was anything other than perfectly
      lawful." Id. at 814. Not unlike Banister, in the Respondents'
      advertising for their "De-Taxing" Program, they represented
      that "payment of income tax is a voluntary activity and that
      individuals cannot be legally compelled to file tax returns or submit
      to tax investigations or penalties." Id. at 812. As this Court also
      has observed, the Seventh Circuit has quoted with approval that "the
      argument that an individual is a sovereign citizen of a state who is
      not subject to the jurisdiction of the United States and not subject
      to federal taxing authority is 'shop worn' and frivolous." Id at 812
      (emphasis added).

      /18/Appropriately, the IRS notes this case is also "about a tax
      practitioner who quickly alleges that this action is being taken in
      retaliation for his having been a former IRS criminal special agent
      when he uses that very fact in his advertisements and in his letters
      to the IRS on behalf of his clients [and that Banister traded upon]
      his former position well when it suit[ed] him, [by] attempt[ing] to
      rely on his former position to bolster his credibility with gullible
      members of the public and in his communication with IRS employees.
      Tr. 87-88. Although the established violations in the Complaint by
      themselves amply warrant disbarment, the Court notes that this is
      certainly an aggravating factor.

      /19/While this Court entertains no doubt that its findings of the
      violations in the Complaint and the Amended Complaint will be upheld,
      it wants to make it expressly clear that, either of the demonstrated
      violations in the Complaint warrant disbarment.

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