Ellicott City man is tax protesters' 'hero' Longtime foe of IRS acquitted of evasion, conspiracy charges

July 01, 1996|By Caitlin Francke | Caitlin Francke,SUN STAFF

Meet Fred Allnutt Sr. Devout Christian. Father of three. Slayer of the IRS.

The Ellicott City native has not filed a tax return in 15 years, but was recently acquitted of tax evasion and conspiracy charges. Now he's the newest poster boy for the tax-protester movement.

"Yeah, I'm a hero," says Allnutt, 54, his mouth wrinkling in a wry smile. "Of course, I knew that before the indictment."

His phone has been ringing off the hook since his March acquittal, he says. He's been on radio talk shows, cable television and this week he's heading to California to speak at the National Patriots' Rally -- a convention of self-proclaimed "constitutionalists" who decry what they see as abuses of the government.

He will share the podium with a California state senator hailed as the only elected official to repeal a tax and another man who wrote a book called "Do Unto the IRS as They Would Do Unto You."

But some of the jurors for his two-week trial on tax evasion charges in late March in U.S. District Court in Baltimore warn that Allnutt's road trip may be a misguided ego trip.

"He probably doesn't know how close he came to being convicted," says one of the jurors, who asked not to be identified. "He should get down on his knees and thank providence the jury deliberated the way it did."

Though he skirted jail time, Allnutt still owes the Internal Revenue Service about $2 million in back taxes, interest and penalties. The agency already has received about $4 million from the sale of his excavating business in bankruptcy.

In 1981, he also refused to pay state income and sales tax on the grounds that paying taxes with federal reserve notes is unconstitutional. He was convicted of tax evasion and received an 18-month suspended sentence, five years of probation and was ordered to pay a $9,500 fine.

In his recent federal trial -- and in a 1981 state trial -- Allnutt argued that he was not liable for taxes because his reading of the U.S. Constitution showed only foreign corporations with income in this country must pay income tax.

The federal jury acquitted him on the income tax evasion and tax conspiracy charges but may not have bought his entire line of argument about foreign corporations. As a second juror, Richard Smith, recalls: "I thought it was pretty bogus."

Allnutt -- who prayed in the courtroom with his attorneys -- says the tax resister movement won a notable victory anyway.

Jurors interviewed afterward say an early vote showed they were 10-2 for conviction, but in the end -- after three days of sometimes bitter deliberations -- they decided that the government did not prove Allnutt participated in a conspiracy to hide his assets.

Some jurors also felt that the IRS overstepped its bounds in its pursuit of Allnutt. Allnutt had been appealing his obligation to pay taxes for nine years, but the IRS seized Allnutt's successful JFC Excavating business before the Supreme Court ruled on his final appeal.

"He was going to the last step," juror Smith says. "Who's to say they would not have found him guilty and he wouldn't have written a check right there?"

Allnutt's acquittal also was a victory for Steve Hempfling, co-founder of the Free Enterprise Society of Clovis, Calif., sponsor of the patriot convention.

Tough opponent

The IRS -- which he labels a terrorist organization -- can be a tough opponent. "Most attorneys will tell you you can't beat the IRS," Hempfling says. "We know that's not true."

Free Enterprise has a legal defense fund for people who want to fight the IRS. Hempfling says its members -- who pay $650 to join and $300 a year in dues -- have secured 24 acquittals across the country in the past several years. Thirteen members have been convicted of tax crimes and five cases are still pending, Hempfling says.

Many in the tax resister movement claim that the income tax is a voluntary tax, that no statute in the Constitution calls for an income tax and that the 16th Amendment -- which allows the government to levy tax -- was never ratified.

Hempfling takes credit for causing the IRS to back off on prosecutions of alleged tax offenders.

Eleven years ago, the government criminally indicted 350 people nationwide on tax charges and convicted 300, according to IRS statistics. Last year, the government indicted 62 people and convicted 35. The indictments and convictions are not necessarily in the same year.

But Domenic J. LaPonzina, Maryland spokesman for the IRS, says the reduced number of criminal cases stems from a conviction rate that hovers around 95 percent. "Because of the success rate, the word was getting out" that tax-resisters would go to jail, he says.

Part of Free Enterprise's strategy -- similar to Allnutt's -- involves filing lawsuits, motions and appeals with courts asking what part of the Constitution makes them liable for income tax, among other things.

Jury sees paperwork

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