Wesley Snipes and the 861 Tax Avoidance Argument - White Collar Crime Speaker Chuck Gallagher Comments!

Just this morning I received this comment to one of my blogs:

"Don’t quit your day job and become an attorney because it looks like you really don’t know much about law."

While I am not an attorney - never have been - the comment caused me to pause. I have been a CPA - Tax Partner in a CPA firm - and so I know a bit about tax law. However, I have focused on Wesley Snipes choices and the consequences that could have and did follow that I haven't taken time to focus on his position, his prosecution and the outcome. So in the comments that follow I'll try to break it down into manageable bits for those who want to know the thoughts behind Wesley's actions.

First, let me say - so there is no miscommunication - I am not a CPA today. I lost my license years ago for making wrong choices. In fact, I was convicted for tax fraud and spent time in federal prison. Hence, not only was I trained formally (including a Masters with emphasis in tax), but I received a Ph.D. (s0 to speak) from the school of hard knocks - learning first hand the effect of choices and the consequences that can follow. So - I speak from training and experience.

The Background: Wesley Snipes, for all I know, has been a law abiding citizen filing and paying his taxes like most normal folks for years. He has been successful and most would assume that he will continue to be - earning money from his services as an actor.

Somewhere back in the late '90's Snipes (unfortunately for him) came across two folks - Eddie Ray Kahn and Douglas Rosile - both of whom were promoters of an obscure position that a section of the tax code - Section 861 - somehow provided the ability for a US Citizen to avoid paying taxes on income earned within the US. Kahn has been described as a Veteran Tax Protester.

In August 2004 the following experts were part of a news release related to the tax protest activities of Eddie Ray Kahn and Douglas Rosile:

Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division, announced today that a federal court in Ocala, Florida has ordered four people and their businesses to stop preparing, selling, or marketing fraudulent tax schemes. The permanent injunction applies to Eddie and Kathleen (“Kookie”) Kahn of Sorrento, Florida; David Stephen Lokietz of Mt. Dora, Florida; Bryan Malatesta, a certified public accountant in Cleburne, Texas; and Eddie Kahn’s Mt. Dora, Florida businesses-American Rights Litigators (ARL), Guiding Light of God Ministries (GLGM), and Eddie Kahn and Associates.

“People who sell tax scams are cheating their customers as well as law abiding taxpayers,” said Assistant Attorney General O’Connor. “The IRS and Justice Department are working vigorously to protect the public and the U.S. Treasury from tax scams.”

The United States District Court for the Middle District of Florida entered the permanent injunction on August 12 after these defendants failed to respond to the Justice Department’s complaint. The court found that the defendants sold counterfeit checks, set up sham corporations (known as “corporations sole”) to help customers hide income and assets, and helped customers obstruct IRS investigations and collections by filing frivolous complaints against IRS employees. The order bars the defendants from selling these or any other fraudulent tax schemes and from representing customers before the IRS. The injunction also requires the defendants to send their customers a copy of the injunction and to refund to their customers all membership fees and other payments received for selling fraudulent tax schemes and services since 1996.

The court separately ordered that Eddie Kahn and Bryan Malatesta, who previously had been found in civil contempt of court for failing to obey the court’s preliminary injunction, be incarcerated until they turn over documents, including their customer list, to the Justice Department. To that end, the court directed the Clerk of the Court to issue bench warrants for the arrest and detention of Kahn and Malatesta until each complies with the previously entered injunction.

Now, let me first state - just because the government took this position does not mean that they were wrong. However, there is a clear difference between professionals (Tax Attorneys and CPA's) who understand the law, the complexities of the law and the application of the law for tax avoidance purposes and those who can't seem to find the legal boundary. The government's position is that those named above have gone too far and crossed the legal line from tax avoidance into tax fraud.

Eddie Ray Kahn reminds me of Jim Jones - except that Kahn's followers drink the "koolaid" of avoiding paying taxes or participating in the system. The "koolaid" in this case won't kill them, but the consequences can be legally and financially devastating.

The 861 Argument: Tax avoidance promoters, like Eddie Ray Kahn, promote that tsections 861 through 865 of the Code permits an individual to take the position that either the individual or the individual’s U.S. based income is not subject to federal income tax. The arguments rely on sections 861 through 865 of the Code and the regulations (in particular, Treasury Regulation § 1.861-8) to argue that taxes are only imposed on income derived from certain foreign-based activities.

Kahn and others rely on this as a foundation for their positions that one does not have to pay taxes on US earned income. Likewise, there are other similar arguments that the IRS is not properly sanctioned and that there is no constitutional authority to tax citizens, etc. (the list goes on and on). Most of the folks sucked in by Kahn have elected not to pay taxes and not to file - claiming that there is not authority to compel such activity.

Snipes Actions: First, Snipes is just a well known figure who is a pawn at play here. Kahn sucked him in and in order to get Kahn (which the government did) they used the notoriety of Snipes to draw attention the the consequences than can follow choices like what Snipes made.
Snipes (now well documented) did the following:

After being indicted in 2006, actor Wesley Snipes sent a document to the Internal Revenue Service declaring he was a "nonresident alien" of the United States, refuting his Social Security number and warning that continued prosecution could lead to professional consequences for federal employees. Now honestly how dumb was that? It was clear that Snipes had, by this time, been drinking a lot of Kahn's "koolaid."

IRS Frivolous Return Program senior technical advisor Shauna Henline read excerpts of the document at his trial of the 600-page declaration signed by Snipes and sent Dec. 4, 2006, Snipes said he had "no ill intent or malice" and didn't want to evade any lawful requirement to pay taxes. But he went on to say the government had "no lawful authority to impose any kind of criminal sanctions." Snipes claimed (and that's what saved his butt) that he just wanted the IRS to prove to him that he did have to file and pay taxes. Kahn, and others, promoted that one should not file or pay until the IRS satisfied their questions. They used that as a defense. In other words, don't file or pay, rather push their issues or agenda with the IRS assuming that they would not get an answer and hence avoid the requirement to pay.

Snipes declared he had no taxable U.S. income, making the IRS Form 1040 "absolutely the wrong form for me to file." He also claimed taxes withheld were "stolen funds." Here's where the 861 argument comes into play. Their position is that income earned in the US is not taxable therefore, since his income from acting was earned in the US - he obviously didn't need to file a tax return.

Governments Position: As one can imagine, the IRS takes a different position. Treasury Regulations (some 29 pages) have been issued that define the meaning of Section 861. Click on the link if you want to mire up in the details. An excerpt defining income is shown below:

(a) Categories of Income.— Part I (section 861 and following), Subchapter N, Chapter 1 of theCode, and the regulations thereunder determine the sources of income for purposes of the incometax. These sections explicitly allocate certain important sources of income to the United States or toareas outside the United States, as the case may be; and, with respect to the remaining income(particularly that derived partly from sources within and partly from sources without the UnitedStates), authorize the Secretary or his delegate to determine the income derived from sources withinthe United States, either by rules of separate allocation or by processes or formulas of generalapportionment. The statute provides for the following three categories of income:

(1) Within the United States. The gross income from sources within the United States,consisting of the items of gross income specified in section 861(a) plus the items of gross incomeallocated or apportioned to such sources in accordance with section 863(a). See §§ 1.861-2 to1.861-7, inclusive, and § 1.863-1. The taxable income from sources within the United States, in thecase of such income, shall be determined by deducting therefrom, in accordance with sections861(b) and 863(a), the expenses, losses, and other deductions properly apportioned or allocatedthereto and a ratable part of any other expenses, losses, or deductions which cannot definitely beallocated to some item or class of gross income. See §§ 1.861-8 and 1.863-1.

Likewise, not only has the government issued Treasury Regulations but Revenue Ruling 2004-30 was issued on March 22, 2004 related to frivolous tax returns and attempting to avoid taxes under section 861. The introduction of the Ruling states:

This ruling emphasizes to taxpayers, and to promoters and return preparers who assist taxpayers with tax schemes, that there is no authority in sections 861 through 865 of the Code that permits an individual to take the position that either the individual or the individual’s U.S. based income is not subject to federal income tax. The ruling also describes many of the possible civil and criminal penalties that apply to people who make frivolous section 861 arguments to evade tax.

Notice: If there is a Treasury Regulation that defines income and a Revenue Ruling that says don't use this as a position to avoid taxes - one might assume that you would want COMPETENT tax advice - not advice from the likes of Eddie Ray Kahn and his "koolaid" crowd.
Conclusion: I have taken a keen interest in this trial, as I spent time in prison with others who were there for just the same reasons that Snipes took - taxes aren't legal, income in the US isn't subject to tax, etc. After prison, they decided that their minds were once again clear and they became law abiding citizens - avoiding the wrath of the IRS.

In Snipes case he had three things going for him: (1) he actually, to the jury, came across as a victim of Kahn's ill advice - asking for information (albeit in a bizarre way), and acting not as a conspirator but just a misguided tax payer; (2) the race card was played early so it put the "all white jury" on notice that justice should be served. Had Snipes been convicted on all charges - it would have had racial overtones hence coloring the verdict (no pun is intended); and (3) Snipes had the benefit of star power. Notice that rarely do "stars" get the same treatment that plain folks seem to experience.

What's next? The acquittal on the felony charge doesn't relieve Snipes from his responsibility to pay taxes. The Internal Revenue Service can still sue him in civil court for back taxes for the years in which he didn't file returns, from 1999 through at least 2004. The government says Snipes earned almost $38 million during that time.

Snipes is prepared to pay the taxes he owes for the years he didn't file, Bernhoft, his attorney said.

"Mr. Snipes has always been committed to doing the right thing, and after this trial is over, he'll make whatever amends are required. But this is a man of integrity."

Prison for Snipes? Some how I doubt it - although I would be that the IRS would love to see some time served for Snipes convictions - even if it's a short time like Martha Stewart. The message then would be clear.

The judge ordered a pre-sentencing investigation, which could take up to 75 days, but set no date for sentencing. He also reduced Snipes' bond from $1 million to $250,000. Pending the sentencing hearing, Kahn will remain in custody, and Rosile will remain free on bond, the judge said.

Both Kahn and Rosile were convicted of tax fraud and will, no doubt, spend many years in federal prison.

The IRS will continue to aggressively pursue tax protesters, O'Neill said. "We're going to continue to go after those people, and I think you will see more indictments of tax protesters," he said. "The IRS will go after all of those taxes."

As a professional speaker talking about business ethics and white collar crime (http://www.chuckgallagher.com/) it is clear that this case will be talked about for years to come. One thing is for sure - a clear message was sent and when the smoke clears, I would bet that Snipes once again comes to his senses and files and pays his taxes. Hopefully, he won't continue his protest - cause after this experience, he can't claim that he just didn't know.

NOW SNIPES KNOWS!

MacLafferty Convicted - Sentenced For Failure to File Tax Returns! Evidence of What's to Come for Wesley Snipes?

Robert M. MacLafferty, age 46, of Portland, Tennessee was sentenced January 29th to serve 5 months in prison, followed by 3 years of supervised release. His sentence also included the requirement to pay restitution to the IRS of $37 plus thousand.

According to the US Attorney's news release:

MacLafferty pled guilty on October 12, 2007, to five counts of income tax evasion. During his plea hearing, MacLafferty admitted that he earned income which required him to file federal income tax returns for years 1996 through 2003, however, he failed to file such a return in each of those years. MacLafferty also admitted that he had adjusted gross income totaling $227,993 from 2000 to 2003. During this period of time, MacLafferty provided false documents to his employer claiming he was not a citizen of the United States and therefore not liable to pay federal income taxes. MacLafferty also admitted that after the Internal Revenue Service filed a federal tax lien against his residence in Sumner County, he quitclaimed his interest in this property and another property to his wife.

Similarities? Let's see - Snipes claimed that he was not a citizen of the US and not liable to pay federal income taxes. Likewise, Snipes filed to file tax returns for a number of years during which he had approximately $37 million in earnings.

Possible Outcome! Snipes, due to "star power" avoids prison and makes right with the IRS and federal government. Or, Snipes gets a "hand slap" prison sentence like MacLafferty and is told to pay up for his misdeeds.

Since it will take time to see what the outcome is...want to weigh in with your thoughts.

Prison (light sentence) or freedom - which will the judge order?
Business ethics speaker, Chuck Gallagher, off for now...

White Collar Crime - Week In Review From South Carolina to California to Florida - Comments by Ethics Speaker Chuck Gallagher

After reviewing the verdict in the Wesley Snipes case - both guilty and innocent - it makes sense to consider what else is taking place on the white collar crime front.

South Carolina: Christina J. Williams, age 32, of Conway, South Carolina, was sentenced in federal court for aggravated identity theft and credit card fraud.

Williams worked as the office manager in a doctor’s office in Surfside Beach, South Carolina. From August 2003 to July 2004, Williams made unauthorized charges using the doctor’s personal and business credit cards, and used his personal information to secure a card for herself. Williams also embezzled money from the doctor’s office and had her name added to his cellular phone account. Investigators determined that Williams stole more than$104,000.00 during the course of the scheme.

Rhode Island: Cory Johnson, the former president of Mixitforme, a company that sold electronic devices over the Internet and by telephone, pleaded guilty today to fraud and money laundering. Johnson admitted that he defrauded a credit card processing firm out of about $2.2 million worth of customer orders that Mixitforme failed to fulfill.

Between November 2005 and March 2006, NOVA processed millions of dollars worth of credit card transactions on behalf of Mixitforme for orders the company received over the Internet and by telephone. In March 2006, Mixitforme ceased operations, and hundreds of customers subsequently complained to NOVA that their credit card accounts had been charged for orders to Mixitforme but the merchandise had not been delivered.

NOVA refunded customers a total of $3,178,347 in charges for unfulfilled orders. NOVA was able to recoup $954,460 from a bank, but was left with a net loss of $2,223,887.

Johnson, 29, of Morrisville, Pennsylvania, pleaded guilty to one count of conspiracy to commit wire fraud and one count of money laundering. He is free on bond pending sentencing, which Judge Smith scheduled for June 20. The maximum prison sentences are: conspiracy -- five years, and money laundering -- ten years. Each offense also carries a maximum fine of $250,000.

Pennsylvania: William D. Edgar, a resident of Verona, Pennsylvania, has been sentenced in federal court in Pittsburgh, Pennsylvania to 37 months of incarceration and five years supervised release on his conviction of Conspiracy, Bank Fraud, and Wire Fraud.

Edgar, who was a mortgage broker licensed by the Pennsylvania Department of Banking, operated a mortgage brokerage business known as America's Mortgage Outlet in Monroeville, Pennsylvania. Between May 2001, and October 2003, Edgar participated with loan officers at America's Mortgage Outlet in a scheme to defraud banks and private lenders by making false representations in more than seventy mortgage loan applications submitted on behalf of his customers.

Two types of fraudulent schemes were used. One form was to falsely represent to the lenders that mortgage loan applications presented to the lenders were for refinance loans, when in actuality the applications were for purchase loans. The refinance scheme deceived the lenders into approving and funding loans on terms and conditions they would not have otherwise approved or funded.

Another form of the scheme was to accurately represent loans as purchase loans, but to falsely inflate the sale prices and values of real properties being purchased in order to cause the lenders to approve larger loans than they would have otherwise approved. This scheme deceived lenders into financing down payments and other cash disbursements from mortgage loan proceeds. In total, more than $3,000,000 worth of loans were issued in connection with this scheme.

California: BARRY HOLLAND, age 60, of Carmichael, entered a guilty plea to accepting unlawful bribes while serving as Superintendent for the City of Sacramento’s Water Distribution Branch. HOLLAND pled guilty to a one count information charging him with bribery in connection with a municipality that receives federal funds.

From at least 1999 through 2005, one Sheldon M. had an oral agreement with the Water Distribution Branch under which he would retrieve used meters from the Water Distribution Branch, transport the same to a recycler, and sell the same for profit. Sheldon M. would then keep a portion of the meter sale proceeds for himself as a fee and would maintain a separate portion of the meter sale proceeds in a “slush fund” which he later would disburse to certain employees of the Water Distribution Branch, including HOLLAND, or utilize to make purchases for the benefit of the Water Distribution Branch. Between October, 1999 and November, 2005, defendant HOLLAND accepted approximately 16 checks and cash totaling approximately $10,371 as rewards from Sheldon M. for allowing Sheldon M. to sell the water meters. HOLLAND also accepted various machinery (then retained by the Water Distribution Branch), including two air motors with a combined value of approximately $7,200, and a tapping machine with an approximate value of $8,000 to $9,000 from Sheldon M., also as rewards from Sheldon M. for allowing Sheldon M. to sell the water meters.

Florida: It was announced that owners of nine separate Miami-based health care corporations have been sentenced to prison terms within the past two weeks. Collectively, the nine defendants filed fraudulent claims with Medicare for $56,599,832 worth of unnecessary durable medical equipment (DME) and infusion therapy.

The nine defendants sentenced in Miami are: (1) Luis Soto, 41, sentenced to 87 months in prison; (2) Noel Rodriguez, 50, sentenced to 51 months in prison; (3) Rosabel Gonzalez, 32, sentenced to 30 months in prison; (4) Christian Vasquez, 22, sentenced to 41 months in prison; (5) Maria De La Serna, 55, sentenced to 19 months in prison; (6) Ariel Betancourt, 35, sentenced to 24 months in prison; (7) Jose Prieto, 58, sentenced to 41 months in prison; (8) Armando Jorge Herrera, 27, sentenced to 36 months in prison; and (9) Reinaldo Lopez, 40, sentenced to 46 months in prison.

Comments: First, as a business ethics speaker (http://www.chuckgallagher.com/) I often speak to groups about the Truth About Consequences. My workshops on white collar crime and fraud are well attended as it appears that anyone can get caught up in criminal activity - and I speak from experience - the consequences can be devastating.

The Florida issue clearly is one of pure greed and seemingly opportunity. Time after time people (especially in dealing with the government) think that the customer - US Government - is too big and would never catch their "slick" illegal scheme. And, more times than not - they do and the consequences are less than pleasant. Prison terms no matter their length are unpleasant.
In California we see an example of someone being found guilty for participating in a scheme. I would be that this person would have felt that it must be O.K., someone else is making the choice - he was just a recipient. Wrong! Illegal is illegal.

Pennsylvania, Rhode Island and South Carolina - well that was just fraud pure and simple. Most of the time when a fraud is committed there are three components: (1) Need; (2) Opportunity and (3) Rationalization. While I don't know how the three came together in there cases...you can bet they did.

But, this week has past - Snipes has been found innocent and guilty - and we face another week. Perhaps, it would help if people understood two simple facts:
Every choice has a consequence! and You reap what you sow!

Your thoughts and comments are welcome!

Wesley Snipes - Patriot or Plain Idiot?

How many times did I hear in federal prison, people convicted of tax fraud claiming that they were just patriots imprisoned by a government gone amok. Fact was - they were in prison for their misguided belief. Considering that today the closing arguments were being made in the Wesley Snipes tax fraud case, we will likely see either a conviction (my prediction) or the miracle of the century - Snipes acquittal.

Federal prosecutor M. Scotland Morris portrays Wesley Snipes as a common criminal with worked with idiots like Eddie Ray Kahn to defraud the government of their duties as a citizen to file and pay their taxes. While Robert Barnes, Snipes attorney, portrays Snipes as a patriotic American who was legitimately seeking information about his tax liability. (If the jury buys that one - well, there's some outstanding property in the Everglades for sale.)

According to Rick Cundiff with the Star-Banner:

Prosecutor Morris went first, telling jurors Snipes conspired with Kahn and Rosile to file a fraudulent refund claim for $7.3 million in taxes on his 1997 return, and sought to illegally deny his ongoing tax liability for 1999 through 2004.

"Nobody likes paying taxes. Nobody," Morris said. "But paying taxes is the privilege we pay to live in a civilized society ... That's what this case is about - three men who believe they are above the law. They're not above the law. Tell them that."

Barnes invoked the Founding Fathers and said the Internal Revenue Service deprived Snipes of his civil rights by not responding to his letters seeking information.

"It may have been protest," he said of filings by Snipes and by Kahn on Snipes' behalf. "Protest is not criminal. It may have been disagreement. Disagreement is not criminal. It may have been frivolous. Frivolous is not fraud."

Barnes urged jurors to acquit Snipes in the name of American freedoms.

In the name of American freedoms? What American freedom is it that allows us to avoid filing tax returns? What American freedom is it that allows us to avoid paying income taxes on the money we earn? What is Barnes talking about?

"The liberty to ask questions ... the liberty to challenge your government. The liberty to engage your government. These liberties are American liberties," Barnes said. "The Liberty Bell may be cracked in Philadelphia, but it can still be heard in Ocala."

The last time I checked, challenging your government was perfectly legal as long as it was done through the legal legislative or judicial process. Here Snipes is taking the judicial road to challenge something he will lose and ultimately end up paying the price with his freedom. Sorry, but that to me is the mark of a plain idiot.

Every choice has a consequence. Snipes (unless I'm dramatically wrong) will pay the price of his choices with his freedom and while he spends time in federal prison, perhaps will come the knowing that he was duped by the likes of Kahn. But, maybe not, maybe they'll share a cell together so they can experience the joy of knowing they took a stand for the civil liberties of us all.

For now, I'm going to do my tax return.

Mortgage Fraud - Chuck Gallagher Ethics Speaker Discusses FBI Report

In an effort to deter mortgage fraud the FBI has listed (from their investigations) typical fraud schemes. Some are listed below:

Backward Applications: After identifying a property to purchase, a borrower customizes his/her income to meet the loan criteria.

In effect the borrowers determine from the lender what the criteria should be to qualify for the mortgage loan. Then income is "customized" or fabricated to meet the criteria. This sort of fraud is usually a single loan fraud. The fraud can involve others - as mortgage professionals may coach the borrower thus participating in the fraud.

In many cases, as I've addressed mortgage industry professionals, we find that such frauds involve the mortgage broker knowing that they are paid based on production and production can't take place without sufficient income.

Air Loans: These are non-existent property loans where there is usually no collateral. An example would be where a broker invents borrowers and properties, establishes accounts for payments and maintains custodial accounts for escrows. They may set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency, etc. for verification purposes.

These loans represent a clear intent to commit fraud. Many convictions this past year have involved the complete creation of fabricated documentation. Other than "money for nothing" these frauds when caught will result in prison time.

While presentations to industry professionals focus on various types of frauds and the consequences that follow...rarely have I seen this other than from experienced criminals.

The last fraud scheme identified by the FBI that will be reviewed in this blog is:

Silent Seconds: The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender.

This fraud is common especially with first time home buyers, low income buyers or those who are new at investing in real estate for profit. In some cases, borrowers don't see the fraud involved in this scheme. Based on experience there are two types of people involved: (1) folks who, as first time buyers, borrow the money from relatives and knowingly don't disclose to the lender (otherwise they wouldn't qualify) or (2) folks who clearly don't have the fund to purchase the real estate and use funds (401(k) loans, personal loans from relatives or friends. or personal loans from undisclosed lenders.

For information about presentations related to ethics choices and mortgage fraud contact Chuck Gallagher at http://www.chuckgallagher.com

Mortgage Fraud - Prison and 1.2 Million in Restitution - Ethics Speaker Chuck Gallagher Comments

Manager of Nations Title Agency of Florida, Robert W. Hulbert, Jr., age 46, was sentenced to three years in prison, 4 years supervised release upon release from prison, restitution of $1.2 million and forfeiture of more than $4 million of assets.

Not only was Hulbert manager of Nations Title where several mortgage frauds were obtained, but he was personally involved in obtaining fraudulent loans on two properties he acquired in his name.

According to the Mortgage Fraud Blog (an excellent source for up to date material on mortgage frauds):

According to court documents, the scheme operated this way: Conspirators negotiated to buy residential real estate at a given price. A conspirator who was a licensed real estate appraiser then fraudulently appraised the property for a substantially higher amount than the actual negotiated price. Documents reflecting the inflated appraisal price were submitted to a lender, along with other fraudulent documents, to obtain first and second mortgage loans on the property. The total amount of the loans was at or near the inflated price.

At the closing on the property, the difference between the actual sales price and the inflated appraisal price—the proceeds of the fraud—was disbursed to one or more of the conspirators as an “assignment fee” or “payoff of third mortgage” that did not exist. During the course of the scheme, the conspirators obtained a total of about $17.7 million in mortgage loans, which would not have been approved but for the fraudulent documents. The conspirators received approximately $4.024 million in proceeds from the fraudulent transactions.

As a business ethics speaker, I am finding that mortgage fraud (of one sort or another) is capturing the attention of law enforcement as the housing market declines. More and more institutions are finding it necessary to reinforce their ethical rules as it relates to this kind of business.

Every choice has a consequence. Having spent time in federal prison for unethical conduct, I understand how easy it is to become embroiled in unethical activity. Today I speak to groups about the Truth About Consequences.

As a result of unethical behavior Hulbert will find his life will dramatically change. He will get up early - go to work (in prison) - be back at 3:30 and be standing for one of the six or so times a day he will be counted. He will walk into prison a nobody and will be treated as such till he leaves. Once out, he will be branded a "convicted felon" and find it hard to regain a normal life. There will be times (many times in fact) while in prison he will wonder if the temporary enjoyment he received from his ill gotten gains was worth it. And, he will emerge a changed man.

Feel free to comment.

If you've been the victim of a mortgage fraud - fell free to share your experience.

If you've perpetrated a mortgage fraud, feel free to share your experience on the price you've had to pay.

Business Ethics Speaker - Chuck Gallagher signing off.

Not Now Senator Grassley...Not Now! Hinn Delays Response. Business Ethics Speaker Gallagher Reviews

Several months ago Senator Charles Grassley, R Iowa, ranking member of the Senate Finance Committee, sent questionnaires to six ministries asking numerous financial questions - probing whether the pastors and their ministries were complying with IRS rules related to their tax exempt work.

The deadline was today and it appears that Binny Hinn Ministries of Grapevine (Grapevine, TX) and Benny Hinn World Healing Center Church, Inc. have stated that they will not respond to Grassley's inquiry until next year (2008).

According to the Associated Press:

"A lawyer for preacher Creflo Dollar of World Changers Church International in suburban Atlanta had said Wednesday that the investigation should be referred to the IRS or the Senate panel should get a subpoena for the documents."

"Only Joyce Meyer Ministries of Fenton, Mo., has provided the detailed financial and board oversight information sought by Grassley."

Several questions have been raised by both sides. Many of the ministries through their spokes persons have taken the position that they comply with the law and the IRS is the watchdog. Hence, they feel that Grassley has overstepped his bounds by making such a broad request.

Again, according to the Associated Press in a report in the Dallas Morning News:

"Grassley, an Iowa Republican, said in a Wednesday conference call with reporters that he "can't be impressed" by the argument from some of the preachers that the IRS already monitors them, because his past inquiries have unearthed information that the IRS never knew.

Grassley has insisted his investigation "has nothing to do with church doctrine" and is strictly concerned with making sure nonprofit groups are following the law."

Some of the ministries have suggested that Grassley get a subpoena if he plans on capturing the information he's requested. Should the ministries refuse to turn over the information, a very interesting court fight could ensue.

"Hopefully these organizations will work with us," said Grassley, who has been investigating nonprofit compliance with IRS rules for years. "I don't think I've had to issue a single subpoena in the five years that I've been trying to get cooperation from organizations."

So here are the questions and your comments are welcome:

What does not complying to Grassley's request mean to the ministries?

If one believed that they were fully compliant, would it be best to turn over the records or stand on principle (perhaps the belief that Grassley over reached)?

Since the IRS rules provide that a tax-exempt organization cannot be a conduit for excessive personal gain, is it possible to define that in a highly successful ministry?

For the record, the ministries targeted by Grassley's requests were, in addition to Hinn: Bishop Eddie Long of New Birth Missionary Baptist Church and Bishop Eddie Long Ministries of Lithonia, GA; Randy and Paula White of Without Walls International Church and Paula White Ministries of Tampa, FL; Joyce Meyer Ministries of Fenton, MO; Creflo Dollar of World Changers Church International in Atlanta, GA; and Kenneth and Gloria Copeland of Kenneth Copeland Ministries of Newark, TX.

Every choice has a consequence. In fact, in Galatians it states, "Do not be deceived, God is not mocked: for whatever a man sows, this he will also reap." As this unfolds the truth will be revealed...whatever that truth may be.

Comments?