Jury gets income tax case involving value of gold, silver coins

Section:

By Joan Whitely
Las Vegas (Nevada) Review-Journal
Thursday, August 13, 2009

http://www.lvrj.com/news/53117037.html

Jurors start deliberating today whether business owner Robert Kahre and several others willfully broke federal law by taking their pay in gold and silver coins, but reporting only the coins' modest face value on their income tax returns.

Jurors must examine two diametrically opposed portraits of Kahre that were painted during the trial, which has lasted almost three months.

The 48-year-old Rancho High graduate, who has six construction businesses, is a man with a "portfolio of excuses" who was "on a mission of deception" to disguise his tax evasion, according to federal prosecutor J. Gregory Damm.

Or, according to his attorney, William Cohan, Kahre is a brave sentinel who tried to fend off federal tax tyranny by exercising what he believed to be his right to go by the dollar value stamped on the post-1985 $50 gold and $1 silver coins he used for payroll.

Kahre faces more than 50 counts on allegations that he evaded taxes, failed to turn over withholding taxes of workers, and hid assets through real estate transactions.

Judge David Ezra has instructed the jury that the law requires a taxpayer to go by the fair-market value of such coins for tax purposes, not the much lower face value. But jurors must decide if Kahre and two others charged in the payroll conspiracy knew about that requirement and still chose to disobey it, which would form a criminal intent.

The other two are Kahre's sister, Lori Kahre, who works for him, and Alex Loglia, a former business assistant.

Jurors also must decide whether Robert Kahre and a fourth defendant, Danille Cline, who stays at home to care for their four children, hid taxable assets when they bought homes in her name using his income. The family lives in southern Utah but has been renting a condo here during the trial, which began in mid-May.

The prosecution and defense agree that Kahre did extensive research to shore up his tax beliefs. From financial analysts and lawyers around the country, he collected written opinions to support his views.

But the two sides differ on why he did the research.

"Selective research negates good faith," Damm said Tuesday in his closing argument.

To demonstrate deceit, federal prosecutors cited one of the opinions. Floyd Wright, California author of a tax-related book, wrote to Kahre in 2000 that if he built a portfolio of such opinions, it would demonstrate good faith in his belief system, causing the Internal Revenue Service to find easier targets to prosecute.

Cohan argued Tuesday that, although Kahre's mistaken belief doesn't exempt him from paying taxes, it prevents him from having criminal intent.

To show Kahre's good faith, Cohan emphasized that defense witness Wayne Paul, a certified public accountant with 40 years' experience, took no money from Kahre but shares his unorthodox ideas. Paul is the brother of Ron Paul, the Texas congressman who helped design a 1985 federal law allowing the U.S. Mint to again issue circulating gold and silver coins.

Wayne Paul and Kahre have exchanged materials on tax and government theory for several years. They believe circulating gold and silver coins are legal tender for use at face value, testimony shows.

The two also think the U.S. treasury secretary, who oversees the IRS, is beholden to foreign powers because he plays a leadership role in international economic development organizations that receive some U.S. funding. That is another reason Kahre cites for not cooperating with the IRS.

At the height of Kahre's payroll service, he had more than 30 other local companies also enrolled as customers. One owner of an outside business has been tried for related tax crimes. Several government witnesses testified in exchange for reduction or elimination of criminal charges for participating in either Kahre's payroll system or his real estate deals.

Kahre's tax saga began in the early 1990s, when he went through bankruptcy after several partners in a now-defunct Las Vegas construction business took assets and left town, leaving Kahre with an unpaid IRS bill that led to seizure of his business equipment.

Starting over as a sole proprietor, Kahre embarked on tax research and began filing numerous lawsuits to dispute his tax liability, against parties including the U.S. secretary of the treasury and the IRS.

All the lawsuits were dismissed as frivolous, which the government cited to argue Kahre had plenty of notice that his ideas were wrong. The defense cited it to show his devotion to his beliefs.

By 2002 Kahre's net worth was more than $6 million, according to a financial statement cited by prosecutors. Kahre has not filed an income tax return since the mid-1990s.

In a 2003 raid of several Kahre business locations, authorities seized evidence for a tax investigation. In 2007 Kahre and eight others went to trial before Judge Robert Jones, with no convictions. Most of those defendants were acquitted or left out of the latest reformulated indictment.

But the 2007 jury was unable to reach a verdict regarding the Kahre siblings and Loglia, which allowed authorities to prosecute them again. Cline is a new defendant.

Alex Loglia has been victimized by IRS hypocrisy and error, his attorney, Joel Hansen, argued Wednesday. For the years in question, Loglia mishandled his taxes based on his sincere beliefs. In 2004 Loglia started realizing his actions ran counter to law, so he amended his returns and attempted to pay penalties and back taxes to the IRS. But the agency has repeatedly failed to credit him, Hansen says.

The government contends Loglia not only conspired by taking coins for pay but also helped Kahre recruit new business to the payroll service. An IRS agent testifying for the government said Loglia owes $17,000 in taxes.

Lori Kahre faces conspiracy charges because she took pay in coins and also did payroll work for her brother. She saw numerous workers take pay the same way at more than 30 participating companies, and that reinforced her mistaken belief, according to Michael Kennedy, the federal public defender representing her.

Prosecutors can't prove criminal intent if Lori Kahre only "likely, probably, maybe" should have known her tax theory was wrong, according to Kennedy. She owes about $37,000 in back taxes, the same IRS witness testified.

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