Good as Gold and sliver
On a 106-degree May afternoon in 2003, government agents raided several establishments belonging to
Kahre hadnt committed a crime. He had upset the Internal Revenue Service by paying his workers based on theface value of gold and silver coins, versus the market value in the Federal Reserve system(the value of the coinsin
Kahre didnt opt for the precious metal bullion system without first doing his homework. He consulted monetary experts, engaged in extensive research, and even met with congressmen. Kahres conclusion was simple: While the currency in the precious-metal system was greater in value than the currency in the other system, as money and a medium of exchange, the law knows no difference between the face value of both currencies.
The IRS expected Kahre to report his workers earnings based on the coins market value in the Federal Reserve system. Instead, he didnt report or pay anything at all because the face value of the coins fell below the reporting threshold. The IRS alleged that Kahre and the other defendants paid at least $114 million (based on the Federal Reserve system) to workers. The use of these coins in trade is a direct challenge to the fiat money system now in place.
Bobby Kahre is the only person in the world I know of with the courage to do that, said Joel Hansen, a
While the purpose of the case was to identify the intent of the defendants, the trial that followed tested
In 1985, Ron Paul and other congressmen challenged our countrys currency system, which was monopolized by Federal Reserve Notes (FRNs) the familiar greenbacks in American wallets. The congressmen successfully pursued the Gold Bullion Coin Act, which required the
The ultimate purpose of the act was to allow Americans to invest in gold. However, it also brought sanity back to this countrys monetary system by establishing a dual system. Instead of the Federal Reserve solely providing the money supply by endlessly printing FRNs, the
In the mid-90s, Kahre began exercising this alternate system. He compensated workers for their labor in the form of these gold and silver coins versus FRNs. The workers calculated their income and tax liability based on the face value of the coins.
One gold coin with a face value of $50 currently equals $806 in FRNs. If a worker earns a $50 gold coin each week, that person takes home an annual income of $2,600 based on the precious metal system, which is below the income-tax reporting threshold for an employee. However, the value of the coins in FRNs $41,912 is not. Thats the basic idea.
The IRS did not fancy Kahres gold-and-silver payroll system, and after seven years of operating his family businesses in this fashion, he and eight others found themselves as defendants in a
While the case was about the intent of the defendants, it raised several issues. There was the issue of whether or not Kahres workers were considered independent contractors, who are responsible for paying their own taxes, or employees, who have their taxes withheld by their employer each pay period. Then theres the issue of
No Federal Court of Appeals has ever ruled that the gold coins in question must be reported to the IRS based on FRN market value.
The defense showed that the defendants believed in good faith that a Federal Reserve Note is not the standard because Congress created the dual monetary system, Hansen said. The defendants believed that gold and silver coins are just as legitimate and legal as our other tender, the FRN.
Kahre certainly caught the attention of the IRS. In addition to operating his businesses via the gold-and-silver payroll system, according to testimony at the trial, he helped 35 other contracting companies do the same.
But even though Kahre and his colleagues followed the dual monetary system mandated by Congress, the IRS didnt care. To
Based partially on cases that pre-dated the 1985 Gold Bullion Coin Act, the judge in the case did not allow defense attorneys to argue that Kahre was justified to pay workers based on the face value of the coins. Based on case law, the court concluded that income had to be calculated based on the FRN fair market value, rather than upon the face value.
A flaw with some of those cases was that each referred to double-eagle gold coins, which Franklin D. Roosevelt outlawed in 1934. Those coins are no longer in circulation like the coins minted by the
Of course, the judges rule was binding upon the parties and was followed by the defense attorneys at the trial. Hansen, under the good faith belief defense, was able to present evidence that his specific client, Alex Loglia, who performed research work for Kahre, did not have intent to commit tax crimes. This interesting twist allowed jurors to still hear the argument that Kahre was justified to pay workers based on the face value of the coins. The U.S. Supreme Court had long before ruled, in the Cheek case, that a good defense in a tax-evasion case is a person had good faith in not following certain tax laws.
The Supreme Court said, if they dont have criminal intent, then they are not guilty of tax evasion, Hansen explained. That doesnt mean you dont have to pay the tax, but it means you didnt commit a crime and wont go to jail for a felony.
In 2005, Loglia penned a paper that earned him an A from his law school professor Jay Bybee (who just happens to also be a 9th Circuit judge) on the gold-coin issue and the separation of powers. His paper took the position that, under Article 1, Section 8, Clause 5 of the Constitution, Congress alone had the power to coin money and set its value.
Loglias position was that the judicial branch does not have this power.
The judge applied those old court cases, but we were still able to make the argument that Alex was not criminally liable because he believed in good faith in the use of the face value of the gold and silver coins for tax purposes, Hansen said. Loglias 100-page legal paper was great evidence for the jury of his good faith belief.
Beyond the courtroom, there is another significant issue with the Kahre case it gives attention to the ever-decreasing value of the Federal Reserve Note.
One Euro is now worth $1.45 in FRNs. A Chinese Yuan buys the same as $1.34 in FRNs. Even the Canadian dollar is now more valuable than our paper currency. Compared to the American buck, itll buy seven cents more in goods and services.
Because of how much stronger the Euro is compared to an American FRN, the Federal Reserve just pumped up to $50 billion of FRNs into Federal Reserve banks to prop up the banks, Hansen said. But when they do that, every dollar that you have in your pocket is now worth less.
However,
Take socialist Karl Marxs theory, for example. He believed the most effective way to obliterate the middle class involved a system of progressive taxation coupled with inflation. In the Federal Reserves case, if the bank continues to inflate the currency so that everybody moves into higher and higher tax brackets, eventually everybody will pay 30 to 40 percent of their income to taxes in Federal Reserve Notes, all while the FRN decreases in value due to inflation.
By using the gold coins, Kahre was beating Karl Marx, the socialists and the liberals who want people to pay more and more so they can have bigger and bigger government, Hansen said. Kahre challenged the whole system and thats why the IRS came down so hard on him and his associates.
The IRS doesnt want this going on; they want you to use their fiat money and be forced into higher tax brackets through progressive taxation coupled with inflation. That way theres no limit on the money they can issue and inflate.
On Sept. 17, after four months of trial and days of deliberation, the
Hansen was uncertain of what to expect. He just hoped that the jurors listened closely to the evidence presented.
I could tell in the closing arguments, as I was watching the jury, that they were sympathetic to what I was saying. But what they were going to do, I did not know, he recalled. I think the government, because it had packed the courtroom, was confident they were going to get numerous guilty verdicts.
Rather, jurors delivered zero guilty verdicts. Three defendants, all workers, were acquitted as well as Kahres mother, who worked as a runner for her sons businesses. Two other defendants were partly acquitted the jury hung on one count each. The jury also hung on all counts faced by Kahre, Loglia and Kahres sister, resulting in mistrials.
Im telling you that I have never seen such a dejected group of people leave a courtroom in my life, Hansen said of DOJ and IRS officials. They were shocked. Of course, we were pleased.
The thing is, they had 161 counts and they did not get a guilty verdict on a single one. They got a big goose egg. We didnt get not-guilty verdicts for everyone, but the government didnt get anything.
The IRS was supposed to notify the judge in late October if the agency intended to retry the five defendants on the charges that resulted in a hung jury. The government waffled, indicating they would pursue another grand jury and issue superceding indictments. More information will be known by mid-November.
Looking back, Hansen recalls what may have been a key turning point in the trial. The government called three accountants to testify. The defense asked each one, What is the proper way to calculate income for purposes of the Internal Revenue Code if you are paid in a gold coin that has a $50 face value on it? All three of them responded, I do not know; Ill have to research that.
One of them had a masters degree in taxation! Hansen observed, saying their answers made it difficult to prove the defendants willfully committed tax crimes. If accountants and masters of taxation dont know the answer to this question, how in the world can they expect anything different from an ordinary person who is confronted with a dual monetary system created by Congress?
Hansen believes it was uncalled for to prosecute Kahre and the other eight defendants criminally. The case revolved around a complicating and confusing legal issue. It should have been handled civilly, Hansen said, but the IRS wanted to make an example of these defendants because the federal government simply doesnt want anyone paying a lower tax than what the feds determine should be paid.
If a coin says it is a $50 gold piece, and it says In God We Trust, and the law says that it is legal tender, and it is in circulation, isnt it reasonable for people to think that they can calculate their tax liability based on that? Hansen asks. If a tax accountant cant answer that question, how can a common worker be guilty of a crime? The outcome of this case is a magnificent victory for those of us who believe that the
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