Tax evader sees his equipment sold off

November 21, 1993|By James M. Coram | James M. Coram,Staff Writer

Convicted tax evader Fred Waters Allnutt stood outside the Ellicott City building that bears his name, watching in silence Thursday as his lifelong dream took a nightmarish turn.

Eight rows of construction equipment that his JFC Excavating company owned until it was seized by the Internal Revenue Service on Oct. 2, 1992, for nonpayment of taxes was sold at auction Thursday for $4.8 million.

The sale ends this chapter of his 12-year battle with the IRS over the legality of its taxing power.

If any in the crowd of more than 150 people noticed Mr. Allnutt, they did not show it.

"Usually, when you work on an auction sale [of heavy construction equipment], the ones you really like are those where the owners are ready to retire and they sell off and go to Florida," said Chuck Lewis, district manager for Miller and Miller, the Texas-based company conducting the auction.

That was not the case Thursday.

Mr. Allnutt was one of the county's leading excavators until federal agents seized his property in 1992, saying he owed $6 million in back taxes, including fines and penalties for failure to pay federal income taxes from 1981 through 1986.

After the seizure, Mr. Allnutt -- who was convicted in 1983 of failure to file a valid 1981 state tax return on an income estimated to be $400,000 and for failure to pay his 1981 retail sales taxes -- filed for bankruptcy.

The court-appointed trustee was going to liquidate the company until Mr. Lewis, a 1975 graduate of Howard High School, helped put together a deal to save the company.

The arrangement called for Ellicott City entrepreneur Nicholas B. Mangione and Miller and Miller to buy JFC Excavating from the trustee for $7.3 million. Mr. Mangione would keep the equipment he needed to run the company, and Miller and Miller would sell the rest.

Mr. Lewis said he started thinking about such a possibility after reading newspaper articles that said JFC Excavating likely would be liquidated.

"I went to high school with a lot of JFC employees -- loyal employees who stayed with the company in dire straits" after the IRS seizure, he said. "When you see that kind of dedication, you want to do whatever you can no matter how small to help keep them together. The bottom line is that a lot of jobs have been saved and a lot of people are going to have a happy Christmas."

Mr. Lewis said the auction was one of the best sales he has ever been involved with. Mr. Allnutt "bought no mistakes and maintained his equipment impeccably," he said. Mr. Mangione's son, John, who is president of the reorganized company, said the significance of the auction for him is that the company can return to normal soon.

"It's been very confusing for customers -- dealing with the trustee, dealing with a new company," he said "They have been very cooperative, very cordial through the ordeal."

Mr. Mangione credits Mr. Allnutt, who was retained as manager of the reorganized company, with maintaining customer loyalty. "He has a special rapport with them," he said. "They have been very tolerant."

Mr. Allnutt -- who said at the time of his 1983 trial said payment of taxes with Federal Reserve notes was unconstitutional -- maintains he is right and the government is wrong.

"This is not a horrible day for me; it is a horrible day for America," he said after the auction. "If they can levy, seize and sell my property with no authority, they can levy, seize and sell anyone's. My property was not sold today; it was fenced by a bunch of thieves" in the federal government.

"I never waged a battle with them. I studied the law, drew conclusions and wrote letters to which I never received answers. I got persecuted and received injustice in the courtroom. My issues are correct.

"Ask 99 percent of the people -- lawyers -- how the government can levy and seize property if the Constitution is still in effect, and they say the don't know or the Constitution doesn't apply. The government is circumventing the Constitution or [has] done away with it, and people just don't know it."

Mr. Allnutt is particularly agitated that the government sent a team of armed federal agents to seize his property early in the morning rather than "a feeble sheriff's deputy" in the middle of the day.

"What impression were they trying to create?" he asked. "That we would have killed him? Are we anything other than honest businessmen? Are we anything other than upright citizens? The crime that we've been charged with is not that we did something -- we are not rapists or murderers -- but that we didn't do something. We did not file a piece of paper."

NOTICE

Because of a problem with the press, some Howard County readers received only part of this story in Friday's paper. The Sun regrets the error and any inconvenience or confusion it may have created.

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