John Dulaney

Friday, January 09, 2004


The information below belongs to another time, but in some cases, the past rules the future. This was received by email recently.

AN OPEN LETTER TO MARY OLINGER JULY 28TH 1993

Dear Ms. Olinger,

My name is Hartford Van Dyke. My father was the Lyle H. Van Dyke
that is cited in almost every federal brief written against so-
called "common law liens".

My father's uncle Gerald Mason Van Dyke was the man in the intel-
ligence department in the Hawaiian Islands that sent the warning
message to Washington D.C. Thursday afternoon December 4th 1941
at 2:00 pm Hawaiian time (7:00pm Washington D.C. time) warning
the U.S. government U.S. Naval intelligence of the impending
attack on Pearl Harbor Sunday Dec. 7th 1941. His message was
received in Naval Intelligence sixty-six hours before the Pearl
Harbor attack by Rear Admiral Paulis Prince Powell and relayed to
Secretary of Navy Knox and Under Secretary of the Navy James
Vincent Forrestal. Knox and Forrestal wanted to get the ships out
of Pearl Harbor and put a defense perimeter around the Hawaiian
Islands, but Secretary of War Stimpson discovered what they were
planning to do and alerted President Roosevelt of the plan,
whereupon Roosevelt had Knox, Forrestal, and Powell placed under
arrest at gun point to prevent them from warning the Hawaiian
military commanders Admiral Kimmel and General Short, who had to
receive their information through channels instead of directly
from Mason Van Dyke.

I wrote and published a paperback book on this subject entitled
The Skeleton in Uncle Sam's Closet (1973) and supplied a copy to
each and every U.S. Congressman, 535 representatives and senators
at that time. The book is out of print. In 1975 I published the
highlights of this book as a newspaper and distributed about
20,000 copies worldwide, mostly in the U.S.. I have a short form
of this newspaper available and a few copies of the 1975 color
front issue ( now a collectors item). I released the newspaper
into the public domain in 1975. Anyone having a copy of it may
reprint and sell it for a profit. The 1975 newspaper contained a
notice of the public domain release of copyright.

My father volunteered as a mortician at the Williams Mortuary in
Honolulu immediately after the Pearl Harbor attack and prepared
many of our Navy servicemen for burial. The trucks transporting
the bodies were lined up for blocks and the bodies were stacked
in the mortuary like chord wood.

The government claims that the 4000 liens that my father filed in
protest against IRS agents and Judges were mere harassment. His
lien filing fees alone were $25,000. My father did not understand
the great difference between a common law lien and a commercial
lien. Judges cannot tamper with or release a consensual commercial
lien because it is a commercial affidavit of obligation sworn to
true, correct, and complete, and truth is sovereign in commerce.

My father hated what the Roosevelt government, the IRS, the
Federal Reserve Corporation, and the Banking House of Rothchild
had done to this country and fought them until his dying day. The
IRS literally stole his $250,000 house with their unsworn non-
commercial counterfeit paperwork, Notices of Tax Liens passed off
as Tax Liens by the county recorder entering Notice of Tax Liens
on a Tax Lien Index. For example, see RCW 60.68, in the revised
code of Washington.

My father told me about the Pearl Harbor attack in 1967. It
changed the course of my life completely to total service for God
and Country, and that total service became my way of life. I set
aside all dreams of ever using my gifts and talents for personal
gain, became a lawyer (not an attorney), ended up in jail more
times than I can remember for refusing to back down when judges
used unreasonable force instead of logic against my clients to
quash due process, and finally came to realize that their was no
hope within the current judicial sphere for any justice.

The only justice resides in commercial law which is based com-
pletely upon eternal maxims and upon affidavits. There is no case
law citation in commercial proceedings. Everything is done by
affidavits sworn to true, correct and complete on the spot.
Failure to be sworn in, failure to argue or failure to rebut an
affidavit (written testimony) with a categorical point-for-
point rebutting affidavit sworn to true, correct, and complete,
are all grounds for a commercial default judgement. Because com-
merce is the ultimate legal system and its current application by
the general public would put most attorneys and every corrupt
judge out of business, judges and attorneys are extremely jealous
of it and rebellious and destructive toward it and anyone who
tries to use it. The U.S. Constitution is a commercial instru-
ment, hence it is also a target of destruction by corrupt judi-
cial officers.

After 27 years of practicing law, I can say with reasonable
certainty that the problems in the courts, county recorder's
office, and sheriff's offices, will not be remedied until the
counterfeiting of money and securities (conveyances--recording of
a Notice of Tax Lien on a Tax Lien Index), which you have de-
scribed as being done by attorneys, judges, IRS agents, county
recorders and sheriffs, is punished by the execution of a few
counterfeiters, tried and punished like horse thieves. The citi-
zens will never get these counterfeiters prosecuted by or in
today's ordinary courts of law, and so the public will have to
establish businessmen's commercial courts which operate with the
same powers as the Jewish commercial courts which are conducted
as rabbinical tribunals in American Synagogues.

All commerce is based upon maxims clearly stated as early as
Exodus of the Holy Bible. Our civilization is based upon the
Mosaic-Hebrew/Jewish Commercial Code. In America, the only real
commercial courts are conducted by and for the elite Jews and
that is done in private in the Synagogues before the Rabbis.
Jews, unlike Gentiles, do not air their dirty linen in public.

The unfortunate result is that the laws of New York and the
Uniform Commercial Code regulate the U.s. even more than the U.S.
Constitution does. The elite Jewish Commercial System operates
the Gentile court system which metes out justice based on a non-
commercial set rules of parliamentary procedure. commercial
justice, which is thew most uniform justice system of law in the
world, is reserved for the elite Jews of the world. Both the
North and the South in the Civil War were financed by the House
of Rothchild. Then the Bar association was established in 1878 to
guarantee and reserve thew commercial self-help processes, namely,
affidavits, liens, distresses, and criminal complaints for the
elite Jewish community, its governments and the IRS, and to
prevent the Gentile public and Gentile law schools from gaining a
knowledge of or using any of the self-help processes of commerce.
This knowledge has been denied to the Gentile public and to the
Gentile law schools for so long (115 years) that even the attor-
neys and judges, who are mercenaries of the Gentile legal system,
often do not understand the commercial process when they first
encounter it. They find it difficult to believe that a simpler
system underlies all of the case law garbage that they are sell-
ing to, and imposing upon their clients. Therefore, you must
understand that although you have made your point in commerce, and
although every commercially knowledgeable Jew in this country
knows your are commercially in the right, your incar-
ceration/imprisonment by stupid, ignorant, misinformed, and/or greedy
Gentiles, and, pursuant to the natural law of survival of the
fittest, non-commercial Gentiles (goyem = cattle) are regarded
as lawful prey of the commercially enlightened Jews. It is merely
a matter of survival of the fittest. Commerce will always prevail
over non-commerce. You have chosen the path of commercial
right, and therefore you will prevail. You might perhaps sit in
jail as part of the job of realizing your commercial
advantage, but if you are persistent you will bankrupt the Boulder
County Municipal Corporation and even the Government of the State
of Colorado. I was told that you are a chiropractor. I believe
that you will become a famous chiropractor, for there could be no
better adjustment of the human spine than the one you are deliv-
ering to the American Court System right now in the State of
Colorado. This spinal adjustment is worth millions to you, and
will be of great benefit to all honest Americans.

I don't know exactly how you will prevail, but I do know that
every commercial problem contains its own solution because com-
merce is a mathematically exact science, and mathematical prob-
lems always have exact solutions and exacting solutions. There
are a lot of intelligent Americans working on the problem. It is
just a matter of time now until one or more of them somewhere
stumbles onto the answer, and the personal sacrifice which you
are making may prove to be the key to that answer.

Sincerely yours, Hartford Van Dyke




Friday, December 05, 2003


YOU ARE BEING WATCHED. EVERY MOVEMENT IS BEING TAGGED.

The 'Multistate Anti-Terrorism Information Exchange' program threatens privacy

By Anita Ramasastry FindLaw Columnist Special to CNN.com Thursday, November 6, 2003 Posted: 2:20 PM EST (1920 GMT)

Story Tools

FINDLAW

FOR THE PUBLIC

Legal commentary from FindLaw's Writ LAW DICTIONARY

(FindLaw) -- On October 30, 2003, the American Civil Liberties Union (ACLU) filed simultaneous requests in Connecticut, Michigan, New York, Ohio and Pennsylvania for information about those states' participation in the "Matrix" program. (The program's formal name is the "Multistate Anti-Terrorism Information Exchange.") In addition to those five states, four others -- Alabama, Florida, Georgia, and Utah --are participating.

The ACLU's requests seek to find out what information sources the Matrix uses, who has access to the database and how it's being used. They were made pursuant to each states' Freedom of Information Act (FOIA). In October, the ACLU had sought similar information under the federal version of FOIA and in Florida, where the program originated.

What is the Matrix, and why is the ACLU so concerned? Those are the two questions I will address in this column. I will also argue that readers should be concerned, too. The Total Information Awareness program

Last September, Congress voted to close down the Pentagon's Total Information Awareness (TIA) program. As I discussed in an earlier column, TIA would have allowed the federal government to search and combine the vast amount of data that exists in government and commercial (for profit) databases to create individual profiles of each of us.

TIA was premised on a belief that compiling as much information as possible about as many people as possible in a large-scale database would help thwart terrorist activity. The idea -- called "data mining" -- was that government officials would search the database for information, or patterns of information, that might identify terrorists.

Congress should be applauded for shutting TIA down. First, Congress banned the use of TIA against American citizens, in light of privacy concerns, as well as concerns about the potential for erroneous identifications of innocent persons as terrorists. The program was then renamed Terrorist Information Awareness. Then, Congress shut down that program as well.

Unfortunately, however, the same data mining ideas that inspired TIA have appeared again-- this time, in the guise of the Matrix. What the Matrix is, and how it works

The Matrix is run by a private corporation -- Seisint Inc. of Boca Raton, Florida, -- on behalf of a cooperative group of state governments. However, it is, at least in part, federally funded -- and may, in future, allow federal access.

The program has received $4 million from the Justice Department. It has been promised a further $8 million from the Department of Homeland Security. In addition, news reports indicate that Matrix officials have said they are considering giving access to the CIA.

What does the Matrix do? According to Congressional testimony and news reports, it appears to do just what TIA would have done, if enacted: Tie together government and commercial databases to allow federal and state law enforcement entities to conduct detailed searches on particular individuals' dossiers.

The Matrix Web site states that the data compiled will include criminal histories, driver's license data, vehicle registration records, and significant amounts of public data record entries. Company officials have refused to disclose more specific details about the nature and sources of the data. According to news reports, the data may also include credit histories, driver's license photographs, marriage and divorce records, Social Security numbers, dates of birth, and the names and addresses of family members, neighbors and business associates.

Moreover, there is no guarantee that the type of data that the Matrix compiles will not be further expanded. And information in today's commercial databases encompasses purchasing habits, magazine subscriptions, income and job histories, and much more. Soon, we may be profiled based on what we read and buy, and how we live.

In Congressional testimony, a Florida lawmaker, Paula B. Dockery, described how the Matrix works: It combines government records with information from "public search businesses" into a "data-warehouse." There, dossiers are reviewed by "specialized software" to identify "anomalies" using "mathematical analysis." If "anomalies" are spotted, they will then be scrutinized by personnel who will search for evidence of terrorism or other crimes.

As with TIA, the idea is plainly that of data mining -- the concept that searches for patterns in this data (including so-called "anomalies") that can identify individuals possibly involved in terrorist or other criminal activity. But as with TIA, this kind of "data mining" may be ineffective, and has severe downsides, including its privacy costs. Why "data mining" is dangerous

Supporters of data mining claim that it is innocuous because it is simply a faster way of gathering data that already exists. They note that police personnel, and even private detectives, can already trail suspects and search records to compile a profile of a person. Data mining, they say, is just the same process speeded-up and automatized.

In fact, however, the Matrix is so much more powerful than the work of individual detectives or law enforcement personnel, that the comparison is not useful. The Matrix allows the virtually instantaneous search of dozens of records relating to ordinary Americans. Such searches could be done routinely and on a massive scale. No complainant must walk into the police department; no client must go to a private detective.

With a keystroke, the government will be able to compile so much information about us that it could reconstruct our daily lives instantaneously. It won't need to send a detective to trail us, or put a video camera at our side, because data will be used to reconstruct our movements. Nor will it need to pick and choose suspects: Everyone will be a suspect, in effect.

Still, supporters of data mining argue, "Why would you mind this, if you don't have anything to hide? Why do you care if you're a suspect, unless you're guilty?"

But this argument is insidious, as history has proved. After all, if one has nothing to hide why would that person seek to enforce his or her privacy rights, or rights against self-incrimination, or right to an attorney? Yet, of course, it's not that simple -- and these rights are among those most valued within the Bill of Rights.

The principle of "innocent until proven guilty," too, is a fundamental part of our system. Indeed, more than this, it is a core American principle that the government will leave people alone unless it has good reason to suspect them of wrongdoing.

It is unclear when law enforcement will have access to records in the Matrix. But even more important, what triggers the creation of an individual's electronic dossier? At present, this is also an open question. The risk of painting the innocent as suspect

Even beyond the very serious privacy issues with the Matrix, there is the important risk of so-called false positives. "Data anomalies" are far from certain indicators of guilt.

The data itself may be in error. As anyone who has ever tried to correct an erroneous credit report may have found, it's not easy to stop an error once it gets into the system. Yet there has been no account of how errors in the Matrix databases can be located and corrected.

Or the data may look bad, but have an innocent explanation. Terrorists are said to be transients, moving frequently, with few fixed addresses. But students, poor people, and the homeless do the same. For that matter, so do travel writers.

The truth is that judgments about reasonable suspicion of criminal activity are fundamentally human judgments that cannot now -- and, perhaps, ever -- be made accurately by computers. A program without safeguards presents special risks

As if all this weren't bad enough -- and it is-- the Matrix lacks safeguards against these predictable problems. The Web site states that "[t]his system will ensure that state and local law enforcement officers -- the individuals most likely to come into direct contact with terrorists or other criminals -- have the best information (accurate and complete) available to them in a timely manner." Despite the promise of accuracy, it does not have an error correction system, at least not one that has been explained to the public. And it does not make clear how, if at all, it will protect privacy.

The Matrix Web site also states that "[i]nformation submitted by any state may only be disseminated in accordance with restrictions and conditions placed on it by he submitting state pursuant to the submitting state's laws and regulations." But the Web site needs to make it clear what those various state policies are, and how it believes the policies apply to The Matrix. For instance, what if data comes from several states? Will the strictest state's privacy policy apply? Or the most lax?

All of these problems with the Matrix are very serious ones. And there may be others of which we are not aware yet. Until -- and unless -- the ACLU gets full responses to its FOIA requests, we still will not know exactly what data that will be collected, how such information will be used, and who can access it.

These questions are simple. The answers may be of momentous importance. Let's hope the ACLU gets the answers it's looking for. And let's hope that the Matrix meets the same dire fate TIA did before it.


Thursday, December 04, 2003


From Paralegals

Regs, rulings and other IRS documents: what are they
worth?

RIA Practice Alert

IRS issues a wide variety of documents every week. Some
of them (such as regs and rulings) are written for
release to the public. Others (such as general counsel
memoranda) are for IRS's internal use but must be
released under the Freedom of Information Act (FOIA).
Whether written for internal or public use, IRS
administrative pronouncements vary in precedential value
and utility. This Practice Alert provides an overview of
the types of IRS documents that are available to the
public and cited in RIA publications. It explains what
they are, how they're designated in RIA publications,
their weight as authority, and their practical use to tax
professionals and taxpayers. This Practice Alert also
explains which IRS documents are "substantial authority"
for purposes of the accuracy-related penalty.

Regulations. These may be final (no prefix before the
word "Reg."), temporary (designated with the letter T in
the citation), proposed ("Prop Reg"), or proposed
reliance regs (designated as "Prop Reg ... Taxpayers may
rely").

A final reg represents IRS's authoritative explanation
and interpretation of a particular Code provision. Final
regs sometimes are not amended until many years after
enactment of tax laws (or court cases) that affect the
subject of a final reg and, until then, may be of little
use in interpreting a current Code provision.

The precedential value of a final reg depends on whether
it is a legislative or interpretative reg (but the
citations to a reg do not distinguish between the two).

A legislative reg is one mandated by the Code. For
example, Code Sec. 197, dealing with amortizable
intangibles, directs IRS to issue regs "as may be
appropriate to prevent avoidance of the purposes of this
section through related persons or otherwise...." A
legislative reg carries nearly the same weight as the
Code itself. The Supreme Court held in Chevron U.S.A.
Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,
843-44 (1984) that "legislative regulations are given
controlling weight unless they are arbitrary, capricious,
or manifestly contrary to the statute." This is commonly
referred to by the courts as "Chevron deference."

An interpretative reg is one issued under the Treasury
Secretary's general authority to issue rules and regs
dealing with the Code. Although not binding on the
courts, interpretative regulations are given deference as
long as they don't misapply or misconstrue a statutory
rule. Interpretative regs can be, and on occasion have
been, invalidated by the courts if they find that IRS did
not correctly interpret the Code.

A temporary reg provides taxpayers with guidance they can
follow pending issuance of final regs, and has the same
precedential value as a final reg. (Temporary regs issued
after Nov. 10, '88 expire three years after their
issuance date , which is why and also must be issued as
proposed regs.)

A proposed reg is issued to give taxpayers and
practitioners notice of how IRS interprets a provision,
and the opportunity to comment on and critique that
interpretation. It has little precedential value. Courts
have said proposed regs "carry no more weight than a
position advanced on brief" and are "suggestions made for
comment; they modify nothing."

Nevertheless, proposed regs are useful for tax planning.
In many cases (although there have been notable
exceptions, e.g., in the passive activity loss area),
final regs follow the broad outline presented in proposed
regs. One court has ruled that where a taxpayer relies on
proposed regs, differing final regs cannot be imposed to
his detriment. This was so even though the proposed regs
were not ones IRS said the taxpayer could rely on.
(Elkins, Paul, (1983) 81 TC 669) However, other courts
have leaned the other way. For example, the Court of
Appeals for the Federal Circuit held that where existing
final regs provided an unfavorable result to a taxpayer
while proposed amendments to those regs indicated a
position more favorable to him, the taxpayer's reliance
on the proposed regs wasn't justified. (Garvey Inc v.
U.S., (1983, Cl Ct) 51 AFTR 2d 83-721, 1 Ct Cl 108, affd
(1984, CA Fed Cir) 53 AFTR 2d 84-776, 726 F2d 1569).

A proposed reliance reg is one which states that
taxpayers may rely on it, with any more stringent
provisions in a later final reg to be effective only
prospectively. These regs can be relied on as if they are
final regs. In an infrequently used variation, IRS states
that it will not challenge tax return positions that are
consistent with a proposed reg.

Revenue ruling ("Rev Rul"). This is an official IRS
interpretation of tax laws, Code provisions and regs, and
usually addresses a specific issue or question (e.g.,
what is a "temporary" work location for purposes of the
business transportation deduction rules). It may arise
from various sources, e.g., private letter rulings to
taxpayers, technical advice to district offices, court
decisions. A Rev Rul's conclusions are limited to the
pivotal facts stated in it. Revenue rulings don't have
the force and effect of regs but may be cited and relied
on. The courts have held that they are merely a statement
of the IRS's litigating and administrative position.

Assuming that the facts and circumstances at issue are
substantially the same as those in a Rev Rul,
practitioners and their clients generally may rely on it
and don't have to ask for a private ruling addressed to
their particular cases. Rev Ruls, like regs, can become
outdated (e.g., by the passage of subsequent legislation,
other rulings or court cases) and may be modified or
distinguished by subsequent rulings.

Revenue Procedure ("Rev Proc"). This is a statement of
practice and procedure. It addresses a broad subject such
as accounting method changes, how to compute depreciation
allowances, or how to obtain innocent-spouse equitable
relief. The precedential value of a Rev Proc is the same
as that of a Rev Rul.

Announcement ("Ann") or Notice ("Not"). These address a
timely topic of wide interest (e.g., extension of the
period in which a Roth IRA can be recharacterized) and
can be relied on and cited as precedent by taxpayers. IRS
is bound to what it says in an announcement or notice to
the same extent it would be with a Rev Rul or Rev Proc.

News release or information release ("IR"). This document
is issued to the press to bring public attention to
general-interest items, rather than items of a technical
nature. IRS's statement of policy in an IR has been held
to bind it in its dealings with taxpayers.

General Counsel Memorandum ("GCM"). This is a legal memo
prepared by the IRS's Chief Counsel's Office in response
to a formal request from within IRS ranks for legal
advice. It can't be used or cited as precedent. Some
courts have held that a GCM can be relied on for
interpretive guidance, but IRS has resisted this
conclusion. IRS stopped issuing GCMs after '95.

Action on Decision ("AOD"). This is a legal memo prepared
by IRS Chief Counsel when IRS loses a court case. It sets
forth the issue, a brief discussion of the facts, and the
reasoning behind the recommendation to acquiesce ("acq")
or nonacquiesce ("nonacq") in (follow or not follow) a
decision, or to acquiesce in result only. IRS says that
an AOD isn't an affirmative statement of its position,
isn't intended to serve as public guidance and can't be
cited as precedent. As a practical matter, acqs or
nonacqs can be relied on (e.g., if the taxpayer's
situation is the same as the one decided in a court case
to which IRS has acquiesced, the taxpayer may assume his
position won't be challenged by IRS).

Private Letter Ruling ("PLR"). In a PLR, IRS's National
Office responds to a taxpayer's request for IRS to state
its opinion on the tax consequences of a particular
transaction. IRS will not issue private rulings in some
areas. Generally, a PLR is binding on a district office
in its determination of the requesting taxpayer's
liability. Because a PLR represents IRS's conclusions as
to the particular transaction described in the ruling
request, one taxpayer can't rely on a PLR issued to
another taxpayer. A PLR may be modified or revoked
retroactively by IRS, unless it is part of a closing
agreement.Although PLRs can't be relied on as precedent,
they have acquired some status in the courts as guides to
how IRS interprets a particular provision.

A request for a private ruling can be withdrawn before
the ruling is finalized (e.g., if it becomes apparent
that IRS will rule adversely). PLRs are an important
research resource for practitioners,because they often
reveal "cutting edge" planning techniques used by other
practitioners and indicate how IRS views them.

Technical Advice Memorandum ("TAM"). In a TAM, IRS's
National Office responds to a request for advice on a
technical or procedural question. Although the District
Director or Chief, Appeals Office determines whether to
request technical advice, a taxpayer may ask that the
examining or appeals officer get technical advice on an
issue. TAMs are cited the same way as private letter
rulings (i.e., with a PLR number), and are similar to
them in their effect, reliability, and use by
practitioners.

Internal Revenue Manual ("IRM"). The IRM contains the
policies, procedures, instructions, and guidelines
governing IRS's organization and operations and covers in
detailed fashion the daily functions of IRS personnel. It
is updated by Manual Supplements. The IRM isn't legally
binding because its provisions are directory and not
mandatory. It is nonetheless an important research
resource topractitioners, e.g., it shows what IRS may be
looking for during an audit.

Guides for auditors. IRS sometimes issues "Market Segment
Specialization" (MSSP) Guides for its field agents and
auditors. Some of them are audit guides covering a
specific industry (e.g., the MSSP Audit Guide for
Independent Used Car Dealers), and others are Reference
Guides (e.g., the MSSP Reference Guide on Passive
Activity Losses). These Guides can't be cited as
authority and can't be relied on by taxpayers.
Nonetheless, they are valuable to practitioners for
planning purposes because they represent IRS's "playbook"
on a particular industry or topic.

Other IRS internal documents. None of the following
documents may be cited or used as precedent, but all of
them are valuable to practitioners in tax planning and
tax controversies because they provide insight into IRS's
current thinking on a particular topic.

... Field Service Advice ("FSA") memoranda are prepared
by IRS's National Office of the Office of Chief Counsel
in response to requests from IRS field personnel for
legal guidance, usually with respect to issues relating
to a particular taxpayer. FSAs usually contain a
statement of issues, facts, legal analysis and
conclusions. The primary purpose of FSAs is to ensure
that IRS field personnel apply the law correctly and
uniformly.

... Chief Counsel Advice memoranda consist of written
advice issued from any national office component of the
IRS Office of Chief Counsel to IRS field personnel. Chief
Counsel Advice encompasses advice or instructions that
convey legal interpretations or positions of the IRS or
the IRS Office of Chief Counsel concerning revenue
provisions or laws relating to the assessment and
collection of any liability under a revenue provision.
RIA publications have described these memoranda in
various ways, depending on how they are described in the
IRS document, itself. Examples: IRS Legal Memorandum
("ILM"), Service Center Advice ("SCA"), or Chief Counsel
Advice, or IRS Technical Assistance ("ITA").

IRS Publications ("IRS Pubs"). Although IRS Pubs are
issued to help taxpayers comply with the tax laws, they
are not precedent. Courts have held that IRS isn't bound
by the literal language of these publications, that they
neither have the force of law nor create any rights, and
that they aren't an authoritative source of income tax
law. Despite these limitations, IRS Pubs are an important
resource because they often explain provisions in greater
detail than other forms of guidance. Sometimes, they
represent the only IRS guidance on a subject until more
formal guidance (e.g., a reg or ruling) is issued on it.

RIA observation: As a practical matter, even though a
position taken by IRS in a Pub may not be cited as
precedent, it is rare that IRS will contest a position
taken by a taxpayer that is identical to that taken by
IRS in the document, at least where the facts are
substantially identical.

Authority of IRS documents for accuracy-related penalty.
Under Code Sec. 6662 , a 20% accuracy-related penalty
applies to substantial understatements of income tax and
underpayments attributable to negligence or disregard of
rules or regulations. Except in the case of tax shelters,
the penalty tax for substantial understatements is
avoided to the extent the understatement is due to the
treatment of an item that is based on substantial
authority, or that was adequately disclosed on the
return. The regs say the "substantial authority standard
is an objective one involving an analysis of the law and
application of the law to relevant facts." Only the
following IRS documents are authority for purposes of
determining whether there is substantial authority for
the tax treatment of an item (some non-IRS documents also
are substantial authority, but are not listed below):

Final and temporary regs, and proposed regs not yet
superseded; Rev. Ruls. and Rev. Procs.; PLRs, TAMs,
AODs, and GCMS after they are released to the public, if
they are dated after Dec. 31, '84. Notice 90-20, 1990-1
CB 328 ) The regs provide that PLRs and TAMs are
authority if issued after Oct. 31, '76, and AODs and GCMs
are authority if issued after Mar. 12, '81 or (for GCMs)
if published in pre-'55 Cumulative Bulletins; and IRS
information or press releases, Notices, Announcements and
other administrative pronouncements published in the IRB.
(Reg. 1.6662-4(d)(3)(iii))

The 20% penalty for negligence or disregard of rules and
regs doesn't apply for a return position that has a
reasonable basis. If a return position is reasonably
based on one of the IRS authorities listed above, the
return position generally will satisfy the reasonable
basis standard even though it may not satisfy the
substantial authority standard. (Reg. 1.6662-3(b)(3))



Tuesday, December 02, 2003


This is long - but worth the read

THE CREDIT RIVER CASE...


STATE OF MINNESOTA
COUNTY OF SCOTT
IN JUSTICE COURT
TOWNSHIP OF CREDIT RIVER
MARTIN V. MAHONEY, JUSTICE

First National Bank of Montgomery,
Plaintiff,
vs. JUDGE & DECREE
Jerome Daly, Defendant.


The above entitled action came on before the Court and a Jury of 12 on
December 7, 1968 at 10:00 A.M. Plaintiff appeared by its President
Lawrence V. Morgan and was represented by its Counsel Theodore R.
Mellby. Defendant appeared on his own behalf.

A Jury of Talesmen were called, empanelled and sworn to try the issues
in this Case. Lawrence V. Morgan was the only witness called for
Plaintiff and Defendant testified as the only witness in his own behalf.

Plaintiff brought this as a Common Law action for the recovery of the
possession of Lot 19, Fairview Beach, Scott County, Minn. Plaintiff
claimed titled to the Real Property in question by foreclosure of a
Note and Mortgage Deed dated May 8, 1964 which Plaintiff claimed was in
default at the time foreclosure proceedings were started.

Defendant appeared and answered that the Plaintiff created the money
and credit upon its own books by bookkeeping entry as the consideration
for the Note and Mortgage of May 8, 1964 and alleged failure of
consideration for the Mortgage Deed and alleged that the Sheriff's sale
passed no title to Plaintiff.

The issues tried to the Jury were whether there was a lawful
consideration and whether Defendant had waived his rights to complain
about the consideration having paid on the Note for almost 3 years.

Mr. Morgan admitted that all of the money or credit which was used as a
consideration was created upon their books, that this was standard
banking practice exercised by their bank in combination with the
Federal Reserve Bank of Minneapolis, another private Bank, further that
he knew of no United States Statute or Law that gave the Plaintiff the
authority to do this. Plaintiff further claimed that Defendant by
using the ledger book created credit and by paying on the Note and
Mortgage waived any right to complain about the Consideration and that
Defendant was estopped from doing so.

At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for
the Defendant.

Now therefore, by virtue of the authority vested in me pursuant to the
Declaration of Independence, the Northwest Ordinance of 1978, the
Constitution of the United States and the Constitution and laws of the
State of Minnesota not inconsistent therewith:

IT IS HEREBY ORDERED, ADJUDGED & DECREED:

1. That Plaintiff is not entitled to recover the possession of Lot
19, Fairview Beach, Scott County, Minnesota according to the Plat
thereof on file in the Register of Deeds office.

2. That because of failure of a lawful consideration the Note and
Mortgage dated May 8, 1964 are null and void.

3. That the Sheriff's sale of the above described premises held on
June 26, 1967 is null and void, of no effect.

4. That Plaintiff has no right, title or interest in said premises or
lien thereon, as is above described.

5. That any provision in the Minnesota Constitution and any Minnesota
Statute limiting the Jurisdiction of this Court is repugnant to
the Constitution of the United States and to the Bill of Rights of
the Minnesota Constitution and is null and void and that this
Court has Jurisdiction to render complete Justice in this Cause.

6. That Defendant is awarded costs in the sum of $75.00 and execution
is hereby issued therefore.

7. A 10 day stay is granted.

8. The following memorandum and any supplemental memorandum made and
filed by this Court in support of this Judgment is hereby made a
part hereof by reference.

BY THE COURT
Dated December 9, 1968
MARTIN V. MAHONEY
JUSTICE OF THE PEACE
CREDIT RIVER TOWNSHIP
SCOTT COUNTY, MINNESOTA
----------------------------------------------------------


MEMORANDUM

The issues in this case were simple. There was no material dispute on
the facts for the Jury to resolve.

Plaintiff admitted that it, in combination with the Federal Reserve
Bank of Minneapolis, which are for all practical purposes, because of
their interlocking activity and practices, and both being Banking
Institutions Incorporated under the Laws of the United States, are in
the Law to be treated as one and the same Bank, did create the entire
$14,000.00 in money or credit upon its own books by bookkeeping entry.
That this was the Consideration used to support the Note dated May 8,
1964 and the Mortgage of the same date. The money and credit first
came into existence when they created it. Mr. Morgan admitted that no
United States Law or Statute existed which gave him the right to do
this. A lawful consideration must exist and be tendered to support the
Note. See Anheuser-Busch Brewing Co. v. Emma Mason, 44 Minn. 318, 46
N.W. 558. The Jury found there was no lawful consideration and I
agree. Only God can create something of value out of nothing.

Even if Defendant could be charged with waiver or estoppel as a matter
of Law this is no defense to the Plaintiff. The Law leaves wrongdoers
where it finds them. See sections 50, 51 and 52 of Am. Jur 2d.
"Actions" on page 584 -- "no action will lie to recover on a claim
based upon, or in any manner depending upon, a fraudulent, illegal, or
immoral transaction or contract to which Plaintiff was a party."

Plaintiff's act of creating credit is not authorized by the
Constitution and Laws of the United States, is unconstitutional and
void, and is not a lawful consideration in the eyes of the Law to
support any thing or upon which any lawful rights can be built.

Nothing in the Constitution of the United States limits the
Jurisdiction of this Court, which is one of original Jurisdiction with
right of trial by Jury guaranteed. This is a Common Law Action.
Minnesota cannot limit or impair the power of this Court to render
Complete Justice between the parties. Any provisions in the
Constitution and laws of Minnesota which attempt to do so are repugnant
to the Constitution of the United States and are void. No question as
to the Jurisdiction of this Court was raised by either party at the
trial. Both parties were given complete liberty to submit any and all
facts and law to the Jury, at least in so far as they saw fit.

No complaint was made by Plaintiff that plaintiff did not receive a
fair trial. From the admissions made by Mr. Morgan the path of duty
was made direct and clear for the Jury. Their Verdict could not
reasonably have been otherwise. Justice was rendered completely and
without denial, promptly and without delay, freely and without
purchase, comfortable to the laws in this Court on December 7, 1968.

BY THE COURT
December 9, 1968
/s/ MARTIN V. MAHONEY
JUSTICE OF THE PEACE
CREDIT RIVER TOWNSHIP
SCOTT COUNTY, MINNESOTA


TESTIMONY OF:

RONALD GRAHAM, Vice President and General Counsel of the Federal
Reserve Bank of Minneapolis taken Wednesday February 11, 1970 in the
disbarment proceedings brought by the Minnesota State Board of Law
Examiners against Jerome Daly to have Mr. Daly disbarred from the
practice of law. This Testimony was taken under oath:

Wednesday, February 11, 1970
Approximately 2:30 p.m.

(Whereupon, the following proceedings were duly had:)

MR. DAVIS: Mr. Graham.
ROLAND D. GRAHAM
------ -- ------

being first duly sworn, testified
as follows on behalf of the Petitioner on:

BY MR. DAVIS:

Q. Will you state your full name please.

A. I am Roland D. Graham, G-r-a-h-a-m.

Q. Your address, Mr. Graham?

A. My address is 73 South Fifth Street, Minneapolis: Federal
Reserve Bank of Minneapolis.

Q. What is your profession?

A. I am an attorney.

Q. By whom are you employed?

A. I am Vice-President and General Counsel of the Federal Reserve
Bank of Minneapolis.

Q. Are you licensed to practice law in the state of Minnesota?

A. Yes sir.

Q. For how long a time have you been counsel for the Federal Reserve
Bank of Minneapolis?

A. I have been general counsel for the Federal Reserve Bank of
Minneapolis since 1966; however, I was on the staff of the legal
department of the bank since 1959.

Q. In the course of your duties with the Federal Reserve Bank of
Minneapolis, have you had occasion to be involved in litigation
with one Jerome Daly?

A. Yes.

Q. Have you received any inquiries from other agencies of government
or other persons within the banking group concerning these actions
commenced by Mr. Daly?

A. Well, we received several inquiries with respect to the actions
commenced against our bank and especially by other Federal Reserve
Banks and the Board of Governors; we kept them constantly informed
of the progress in these cases as it occurred. And there was an
occasional inquiry made with reference to theses cases from our
office, yes.

Q. Do you have any compilation or list of inquiries that were made
either to you or to the board, the Federal Reserve Board?

A. I have a compilation of inquiries that were made and letters sent
out by the Board of Governors and the Treasury Department with
reference to a case arising in Credit River, Minnesota, involving
the constitutionality of the Federal Reserve System.

Q. Do you have that letter with you?

(WHEREUPON, Petitioner's Exhibits 66 and 67 were duly marked for
purposes of identification.)

Q. I show you Petitioners Exhibit Number 66, will you identify that
for the Court?

A. This is a letter dated September 2, 1969, addressed to me from
Mr. Robert Sanders, Assistant General Counsel of the Board of
Governors of the Federal Reserve System. And Mr. Sanders sent me
this list at my request, in which it contains a list of a number
of responses made by the Board of Governors and the Treasury
Department, in connection with inquiries received by them, certain
congressional offices, relating to a case arising out of Credit
River, Minnesota, and arising as a result of a publication,
primarily of a publication distributed, reporting that case,
entitled Myers' Finance Review.

Q. And I show you Petitioner's Exhibit 67 and ask you to identify
that.

A. This is a subsequent Xerox copy of some articles that were
referred to in that letter, which also were the basis of inquiries
that we received.


CROSS-EXAMINATION

Mr. Jerome Daly's cross-examination consisted of two arguments. The
first part of his argument was to elicit confirmation from Mr. Ronald
D. Graham, a qualified spokesman for the Federal Reserve banks, that
the Federal Reserve banks and the commercial banks do create Deposit
(checkbook) Money on their books as their lending and investing money
media.

The second part of Mr. Daly's argument was the convertibility of the
pocket paper currency into gold and/or silver is a separate argument,
and irrelevant to the mechanics of Deposit (checkbook) Money creation.

Therefore, to make it easier for the reader to understand the mechanics
of where and how bank Deposit (checkbook) Money (generally referred to
as "credit" is created -- all questions and answers referring to
currency convertibility were edited (left) out.


BY MR. DALY:
-----------

Q. You say you have been with the Federal Reserve Bank for how long?

A. For ten years, approximately ten years.

Q. And you are a Vice President of the bank?

A. Yes sir.

Q. And you say that you have been in the practice of law in the state
of Minnesota?

A. Yes sir.

Q. And also in the United States District Court?

A. Yes sir, for the state of Minnesota.

(WHEREUPON, Respondent's Exhibit J was duly marked for purposes of
identification.)

Q. Showing you Respondent's Exhibit J, I will ask you if you can
identify that.

A. Respondent's Exhibit J is a publication put out by the Board of
Governors of the Federal Reserve System explaining its purposes and
functions.

Q. And what issue is that?

A. According to this, this is an issue that was published in 1963.

Q. Are you familiar with that, Respondent's Exhibit J?

A. I am familiar with its publication; I could not cite it, all the
language; but I am familiar with its publication.

Q. Have you looked it over?

A. Yes.

Q. Generally, do you agree that the statements in there are true?

A. As to the functions and so forth, yes, sir.

Q. That is the official publication of the Board of Governors, is it
not true?

A. Yes.

MR. DALY: I offer in evidence Exhibit J.
MR. DAVIS: No objection.
THE COURT: It will be received.

Q. Now, your Federal Reserve Banks, there are twelve of them in the
United States, aren't there?

A. That is correct.

Q. And more or less the head bank is in New York, is it not?

A. There is a Federal Reserve Bank of New York, that represents a
second Federal Reserve District; it is a separate incorporated
bank, separate from the other eleven banks, yes.

Q. Now, by the way, these Federal Reserve Banks have employees, do
they not?

A. Yes, they do.

Q. And there are none of these employees on Civil Service?

A. No, sir.

Q. That is a true statement, is it not?

A. Yes, sir.

Q. You are not on Civil Service, yourself?

A. No, sir.

Q. And the Federal Reserve banks pay taxes to the state for the real
estate they are situated upon?

A. Yes, sir.

Q. And the Federal Reserve banks are owned by the member banks, are
they not?

A. I don't know what you mean by owned, Mr. Daly.

Q. I withdraw the question. The Federal Reserve corporation is a
corporation organized and existing by virtue of the laws of the
United States, is that correct?

A. That is correct.

Q. And the member banks are required to subscribe to so much stock?

A. That is correct.

Q. But this is non-voting stock, isn't that correct?

A. They have a right to elect six of the directors of the Federal
Reserve bank.

Q. I didn't mean that; it is a stock that doesn't actually carry any
rise to ownership with it, isn't that correct?

A. The Federal Reserve stock, owned by member banks of the Federal
Reserve System, represent the capitalization they put into the
system required by law and it gives them certain limited rights as
to the election of directors on the Board of the reserve banks.
However, in the event of dissolution of any Federal Reserve bank,
they are only entitled to their reserves, the amount of capital-
ization they have put into the reserve bank. And after the
reserve banks have paid all of the liabilities and expenses, all
the residuals go into the United States Government.

Q. And the member banks, like the First National here in Minneapolis;
Northwestern National; they have a right to use the services of the
Federal Reserve bank?

A. Yes, we do provide services for them, yes.

Q. And the First National Bank of Montgomery is one of your member
banks?

A. Yes, sir.

Q. Now, calling your attention to page seventy-five in that book, will
you read the last two paragraphs out loud.

A. The last two paragraphs?

Q. I think that is what I want.

A. The commercial banks as a whole can create money only if additional
reserves are made available tot hem. The Federal Reserve System
is the only instrumentality endowed by law with discretionary power
to create (or extinguish) the money that serves as bank reserves or
as public's pocket cash. Thus, the ultimate capability of expend-
ing or reducing the economy's supply of money rests with the
Federal Reserve.

New Federal Reserve money, when it is not wanted by the public for
hand-to-hand circulation, becomes the reserves of member banks.
After it leaves the hands of the first bank acquiring it, as
explained above, the new reserve money continues to expand into
deposit money as it passes from bank to bank until deposits stand
in some established multiple of the additional reserve funds that
Federal Reserve action has supplied.

Q. Now, the mechanics, can you explain the mechanics by which the
Federal Reserve bank runs its open market committee.

A. Runs its open market committee?

Q. Yes.

A. The open market committee is not a committee of the Federal Reserve
Banks, Mr. Daly. It consists of seven members of the Board of
Governors of the Federal Reserve System and five of the seven --
five of the twelve presidents of the Federal Reserve banks.

Q. And the seven members of the Board of Governors?

A. Yes, sir.

Q. Will you explain to the Court what their function is?

A. The function of the Federal Open Market Committee is to meet and
make policy with reference to the purchase or sale of government
securities by Federal Reserve Banks.

Q. Now, can you elaborate on that.

A. The purchase and sale of government securities by Federal Reserve
Banks, under the direction of the Open Market Committee, is a
device, one of the monetary tools used by the Federal Reserve
System to expand on one of the Federal Reserve --

Q. Expand or reduce the reserves?

A. Yes.

Q. Now does the Federal Reserve Bank expand its reserves?

A. The reserves of the commercial banks?

Q. Or its own reserves?

A. The action taken with reference to the Open Market Committee and
expansion of the commercial bank reserves that are required to be
held in the Federal Reserve banks in their own vault, by expanding
reserves of the commercial banks. This then takes out of circula-
tion or the ability of commercial banks to expand loans or invest-
ments.

Q. So that seven members of the Board of Governors and the twelve
presidents of the Federal Reserve banks have the control over the
volume of credit that is made available to the public?

A. The Open Market Committee, which consists of five of the twelve
presidents of the Federal Reserve banks and the seven members of
the Board of Governors, directs policy with reference to the sales
or purchase of the government securities on the open market, which
expands or contracts the ability of commercial banks to make loans
and investments.

Q. And this has a direct bearing upon the amount of money that is
available to the public?

A. It would have a direct bearing on the amount of money and supply of
credit available.

Q. Now, the Federal Reserve Bank actually creates credit on its books,
does it not?

A. The only way in which it creates credit is by its discount policy,
in which it may credit, by making a temporary loan and credit the
reserve account of that individual bank.

Q. It can credit the account of the individual bank by making a loan
to the bank?

A. Yes, sir, this is a loan that is repaid.

Q. And when the Federal Reserve bank makes the loan or that credit
first comes into existence, is when they manufacture it on the
books?

A. It is a credit to their reserve?

Q. And it first comes into existence at that time?

A. These are temporary loans.

Q. And it doesn't make any difference if it is temporary or long term,
the first time it comes into existence is when it is credited on
the books of the bank?

A. Yes, sir.

Q. And as a practical matter, this credit never leaves the books of
some bank; it is transferred by check entry from one bank to
another?

A. The effect of that particular transaction may or may not be
transmitted through the banking system, I don't know.

Q. What percentage of the volume of business was done by check in this
country?

A. I don't know the figure, Mr. Daly, I don't know the breakdown upon
demand deposits and currency at the present time.

Q. Now, when a member bank makes a loan, what is the percentage of so-
called reserves that they are supposed to have on hand?

A. That is determined by the Board of Governors of the Federal Reserve
System and it varies at what the Board decides.

Q. What is it at present?

A. It is kind of a multiple breakdown at present; my recollection is
reserves are seventeen per cent reserve requirement; a sixteen
per cent for the country banks, which are required to have a lower
reserve.

Q. In other words, when say like the First National Bank of
Montgomery wants to make a loan of one hundred dollars; if it has
a reserve of seventeen dollars on deposit with our bank, it can
make a loan of a hundred dollars?

A. If the reserve bank decides to lend it, yes, this is discretionary.

Q. If the First National Bank decides to lend it?

A. Now, now, an application for a loan or discount from the Federal
Reserve Bank may be made; in discretion with the Federal Reserve
Bank, if it feels it is an appropriate borrowing.

Q. Does the First National Bank of Montgomery, do they have to get
the permission of the Federal Reserve Bank of Minneapolis before
they can make a loan?

A. They make application for a loan and they can be turned down if the
Federal Reserve Bank in Minneapolis did not deem it a good loan.

Q. To an individual?

A. They only make loans and discounts to banks.

Q. I am talking about the individual citizen that walks into a bank
and wants to borrow ten thousand dollars from the bank out in the
country.

A. All right.

Q. Does that bank out in the country also create money on its books?

A. That bank may make a loan to that individual if it has the funds
available to make that loan.

Q. Does that bank, the commercial banks can also create credit on
their books?

A. To the extent that the reserve or equity at the position permits
them to make a loan in accordance with their policy. They can do
this by issuing a cashier's check, which is a liability in the
bank or do so by crediting the deposit account of that individual.

Q. To what extent can they do that?

A. I guess I don't follow your question.

Q. Is there a limit upon them? Is there a limit to the extent that
they can do that?

A. The ultimate limit to which they would be restricted would be
determined by the amount of reserves they are required to hold
back, dependent upon what the reserve requirements, as established
by the Board of Governors of the Federal Reserve System, are.

Q. So, there is a percentage of limit?

A. Yes.

Q. They also create credit on their books?

A. To the extent they can make loans or investments.

Q. And this credit first comes into being when they create it?

A. When the credit is made tot he account of the customers, they have
thus created a loan to the customer in the form of a deposit
balance. Now, this may be drawn upon to pay off perhaps creditors
of the individual, that is making the loan.

Q. But in any event, this is the first time that this credit comes
into existence, they create it on their books?

A. Yes.

Q. So, in effect, the books of the member banks amount to a bill of
credit, do they not?

A. What is your definition of a bill of credit, Mr. Daly?

Q. There has been some argument about that, isn't that right?

A. Yes.

Q. But at any rate, the credit is manufactured on the books though?

A. There is a credit on the account of the customers, either that he
is given in disbursed funds by means of a cashier's check or some
other.

Q. Now, have you had a chance to read over my publication, the Daly
Eagle?

A. I don't remember if I have read it through or not, Mr. Daly.

Q. Have you attempted to read it?

A. I believe I did read it at one time; but I don't recall all the
language in it.

Q. There is a picture of a note in here, on page twelve, a one dollar
Federal Reserve note?

A. Yes, sir.

Q. Is this a sample of what is in circulation?

A. As currency.

Q. Yes.

A. It appears as though it is a Federal Reserve note, yes, sir.

Q. Well, that is a reasonably accurate portrayal, is that right?

A. Yes.

Q. Your bank acquires United States obligations by creating credit on
its books, do they not?

A. I guess you might say by creating credit as permitted under the
policy of the Federal Reserve, yes.

Q. But the physical notes themselves, they are made up by the Bureau
of Printing and Engraving?

A. That is correct.

Q. And that is under the control of what, the Treasury Department?

A. I believe it is the Treasury Department.

Q. The notes themselves, you get these notes in denominations from one
dollar up to ten thousand dollars, is that right?

A. I don't believe there is a ten thousand dollar bill in circulation;
but we get them in the various denominations now permitted by law.

Q. And your bank gets them for the cost of printing?

A. We get them, yes; these are the actual physical notes, yes, for the
cost of printing; but they are issued as a liability to the Federal
Reserve Bank of Minneapolis or whatever Federal Reserve Bank is
involved.

Q. Well, now, I believe you indicated that you had some correspondence
from the head office of the Board of Governors of the Federal
Reserve System?

A. Yes, sir.

Q. With your self, for purposes of following it to the Bar
Association, is that right?

A. This arose, because I had heard that there was some testimony being
given before the Ethics Committee with reference to the Credit
River proceeding. I talked to Mr. Orren with the Ethics Committee
and indicated I had a number of telephone calls with respect to the
Credit River proceeding and I acknowledged they had received a
number of inquiries down at the Board, at the Treasury Department,
arising out of the Myers' Finance Publication.

Q. This is Myers' Finance Review?

A. Yes.

Q. From Calgary, Alberta, Canada?

A. Yes, sir.

Q. Did you ever see his review before this?

A. Before today? I had seen copies of a publication, I believe, that
was dated May 27, 1969.

Q. May 27, 1969?

A. Yes, sir.

Q. And this is the first publication in which he published it, is
that right?

A. Published what, I am sorry.

Q. This story with reference to the Credit River verdict?

A. I don't know, Mr. Daly, I just saw the May 27th issue.

(WHEREUPON, Respondent's Exhibit K was marked for purposes of
identification.)

Q. Do you recognize that as a copy that you saw?

A. Yes, sir.

Q. And how soon after May 27th of 1969 did you see that?

A. The only one I recollect was a publication that came out, I
believe, in June. I don't subscribe to the publication.

Q. Well, it is fair to say that you gentlemen that are counsel for
the Federal Reserve banks and the general counsel for the Board
of Governors, you are keeping very close tab on this dispute?

A. Well, as a matter of information, yes, yes.

Q. And you have since 1963?

A. I have transmitted all the information down to the Board of
Governors, with reference to the suits, yes.

Q. And by the way, the Board of Governors of the Federal Reserve
System are independent of the control by Congress, are they not?

A. No sir, that is not true.

Q. Well, can you elaborate on why it is not true?

A. The Federal Reserve System was established by Congress under the
Federal Reserve Act, by legislation enacted by Congress.

Q. But at the present time, Congress exercises no control over them?

A. Are you talking about control over the decisions, policy decisions
made by the Federal Reserve?

Q. Right.

A. There is specific law I am aware of that any Congressman can
effectuate a policy decision upon the Federal Reserve.

Q. That is what I am driving at.

A. Yes.

Q. And the Board of Governors of the Federal Reserve System controls
volume of credit that is put into circulation?

A. The policy decisions of the Board of Governors, Mr. Daly, influence
the supply of money and credit in the country, yes; I think that is
a fair statement.

Q. And that, under the present laws, is independent of any act of
Congress?

A. The policy decisions, I am aware of, are not subject to any
Congressional mandate, that is correct.

Q. And the determination of the interest rate is not subject to any
Congressional mandate?

A. No sir, I think the determination of the interest rate is a result
of the marketplace, are you talking about?

Q. Actions of the Open Market Committee?

A. Actions of the Open Market Committee could have an influence on the
level of interest rates.

Q. Isn't that set by basically, it is set or controlled, that is the
prime rate is set and controlled by the Board of Governors?

A. The prime rate, no.

Q. Pardon me?

A. No.

Q. What do they do with reference to the interest rate?

A. The only interest rate, I think you are referring to, is a discount
rate, established by the Federal Reserve banks. The discount rate
is established initially by the Board of Directors of Federal
Reserve banks, subject to review and determination by the Board of
Governors. The discount rate is the rate charged against member
banks of the Federal Reserve System, who make loans or discounts at
Federal Reserve banks.

Q. Isn't it pure and simple, the rate of interest that the Federal
Reserve bank charges the member banks for the credit that they
create on their books?

A. Would you repeat that one?

Q. To use simple language: Isn't the rate of interest that the
Federal Reserve bank charges the member banks for credit they
create on their books?

A. This is for loans or advances given to member banks, yes.

Q. And these loans and advancements are created on the books of the
Federal Reserve bank?

A. The making of a loan or discount is effected of a credit to the
reserve account of a member bank.

Q. When they create the credit on their books, it comes into
existence?

A. Yes.

Q. This discount rate is set by the Board of Governors of the Federal
Reserve System?

A. The discount rate is initially set by the Boards of Directors of
reserve banks, independently; they are subject to review and
determination of the Board of Governors in the Federal Reserve
System.

Q. So if all of the member banks get together and agree to set the
discount rate, that is the federal reserve banks get together and
set the discount rate, the Board of Governors doesn't have anything
to say about it?

A. They have to approve a discount rate.

Q. And the people in charge of the Federal Reserve banks are not, none
of them are government employees as such?

A. Of the Federal Reserve banks?

Q. Right.

A. None of them are under Civil Service, no.

Q. And none of them are government employees as such then?

A. No, sir, they are not under Civil Service.

MR. DALY: I think that is all the questions I have.

THE END OF MR. JEROME DALY'S CROSS-EXAMINATION.
--------------------------------------------------------------


The Federal Reserve Bank of Boston in a 1977 publication titled: "The
Federal Reserve, Putting It Simply", writes:

"The most important thing to understand about money is that money is
artificial -- that is to say, that money is entirely a man-made
creation. It isn't an element of nature (such as gold or silver). It
is simply a creation of civilized man: it always has been and it
always will be."

It is also important to understand that all *artificial* money, better
known as "Bank Credit", is created by the commercial banks, first in
the form of *checking account* "deposit credits" -- either as bank
expenditures, bank loans, or bank investment monies -- and most Bank
Credit money remains and circulates in that *deposit credits* form by
means of checks -- until some is (temporarily) converted into physical
cash currency notes.

The Treasury's Engraving and Printing Bureau tailor-prints the Federal
Reserve notes cash currency for the 12 Federal Reserve banks at the
cost of printing, about 2 cents per note. The Federal Reserve banks
then distribute the cash currency amongst the commercial banks by
charging it to their (Fed provided) reserve accounts.

The banks then distribute the cash currency amongst the general
commerce and public, by exchanging their obtained cash currency for the
public's checking or savings account *deposit credits*. In other
words, the general public gets its cash currency from banks, or from
someone who got it from some bank by having it charged, either to his
checking or savings account.

---------------------------------------


PRESIDENT OF THE BANK OF ENGLAND...

Quoting Sir Josiah Stamp at the time he was president of the Bank of
England and president of the English Railway System. His directorates
filled several pages of WHO'S WHO. In the late 1920s, in an informal
talk to about 150 history, economics and social science professors, at
the University of Texas Josiah Stamp explained the following:

"Banking was conceived in iniquity and born in sin... The bankers own
the world. Take it away from them, but leave them the power to create
money and control credit, with a flick of the pen they will create
enough money to buy it back again... Take this power away from bankers
and all great fortunes like mine (he was the second richest man in
Great Britain) will disappear, and they ought to disappear, for this
world would then be a happier and better world to live in. My sons
should not object. They are well educated, and should be willing to
take their places in the business world and forge their own fortunes...
But, if you want to continue to be slaves of bankers and pay the cost
of your own enslavement, then let the bankers continue to create money
and control credit... However, as long as governments will legalize
such things, a man is foolish not to be a banker."

From: LEGALIZED CRIME OF BANKING
By: S. W. Adams, Money Analyst


From: Althompson

I find it interesting that when I start investigating some solutions
that might have some merit and possibly effective, Becraft seems to
show up out of no where.

The problem you're having is that the Codes are not law, nor are
they statutes.

Here is how it works and how I understand it.
Go to http://www.thomas.loc.gov/home/lawsmade.bysec/publication.html

The first sentence says:" One of the important steps in the enactment of a valid law is the requirement that it shall be made
known to the people who are to be bound by it." We want to know what the valid law is before we go forward in any court
action. It just makes common sense.

When Congress passes a bill or resolution, it has to pass in both
the House and the Senate, and then is either signed by the President,
or may be passed by an override to a veto of the President.

When these laws are passed, the first publication of these are called
"slip laws" and is published in an "unbound pamphlet." It will have
a public or private number.

These "slip laws" are competent evidence of the law.
Competent evidence: "That which is the very nature of the thing to be proven requires, as, the production of a writing where its contents are the subject of inquiry." Black's 4th pg. 355

These slip laws are then published in the United States Statutes at Large which become "legal evidence of the laws contained in them will be accepted as proof of those laws in any court in the United
States.

Legal Evidence: "A broad general term meaning all admissible evidence, including both oral and documentary, but with a further implication that it must be of such a character as tends reasonably and substantially to prove the point, not to raise a mere suspicion or conjecture." Black's 4th.

Here's the interesting part. The Code is "prima facie" evidence of the law.
Prima Facie: "Evidence good and sufficient on its face; such evidence as, in the judgment of the law, is sufficient to establish a given fact, or the group or chain of facts constituting the party's claim or defense, and which if not rebutted or contradicted, will remain sufficient."

Here we can see that if we are in any action in a court, prima facie evidence can be challenged and the underlying statutes
must be produced. How many people in the tax movement have done this? Many people simply rely on Codes which may
or may not be sufficient or best evidence of the law. Why take that chance? Show me the law, doesn't mean show me the Code.

The Code "is prepared by the Law Revision Counsel of the House of Representatives.." See what appears to be happening?
We have been taught to rely on Codes which are "revised" by people other than the Represenatives in the House or the Senate.

The Code is simply and index of the law. One cannot violate an index, they would have to be guilty of violating a law.
Notice in the Schiff and Simkanin cases, there are no sworn competent witnesses in their cases. Just accusations from
attorneys who have no first had knowledge.

Therefore, if the internal revenue laws were repealed in 1939, by what authority did the 1954 Code appear? Are these
Codes based upon repealed statutes? It certainly looks like it. If the government refuses to show us the law that makes
us liable, it would follow that there probably isn't one. Arguing codes without the underlying statute is an exercise in
futility. It would make sense to challenge the codes and make the government produce the statutes.

So the statutes you refer to in 68A are certainly questionable. Did Congress pass the Code first and make them statutes?
I don't think so, since that act would completely reverse the normal process. Is 68A based upon repealed statutes? Congress
could have simply amended these statutes, but they chose to repeal them. The revisions come from codifiers, and not
Congress. The Code, once again, is an index of the laws, but not necessarily a true representation of the law. Laws
are amended, codes are revised. There is a big difference between the two.

So when any of us make an argument using the Code, we really don't have the full picture without the law. I've seen you
quote Codes as if they were the law. They are not, and perhaps that's why the government calls the argument
meritless or frivolous. They must know the Code isn't law in the first place. I don't know, it's just a thought.

But the main thing we should remember, that we need valid law and the best evidence for any controversy that
may come up regarding internal revenue laws. Let's not make incomplete arguments based upon prima facie evidence,
without knowing what the law really says.

Show me the law!


Everyone needs to read Stanton v. Baltic Mining, the U. S. Supreme Court opinion where the U. S. Supreme Court (the only guys in America who have the full power and authority to interpret the law and apply it and make their opinion stick) says that the 16th Amendment did NOT give Congress any new taxing power that they did not already have. And the original constitution explicitly borbids a tax on all money received by any American for any purpose; that's called a "capitation tax", and power was NOT granted to Congress to lay and collect such a tax.

Stanton v. Baltic Mining states very clearly what the correct reading of the 16th Amendment is. It means that any money received by any American for any purpose, MUST HAVE COME FROM AN ACTIVITY OR EVENT REQUIRING FEDERAL PERMISSION, before Congress has the power to lay and collect a tax upon the activity. That's what the "indirect" in indirect tax means: the tax is on the activity or the event, NOT on the money itself that came from it; the money is used only to CALCULATE how much tax is paid for having engaged in the taxable "activity".

Any work performed that required any form of Federal permission, permit, or application approval makes it a "taxable activity" and a sovereign citizen must pay the federal tax on incomes based on any income realized from that activity. Federal government employment is a taxable activity because it requires Federal permission to do it (the hiring process). Alcohol, tobacco, firearms, gambling, pharmaceuticals... they all require federal licensing to engage in lawfully. And a foreigner-- citizen of another country-- who is here working under a green card is here with FEDERAL PERMISSION (the green card) and they owe the tax on any money they earn while they are here. And a sovereign citizen who goes to work for a company over in London, or Paris, is doing so with the Federal permission of an exit visa-- because their employment over there is protected by the full weight and force of the American military to protect them under TREATY. All of those incomes are within the power of Congress to indirectly tax.

From: Marsha Breazeale


WASHINGTON, Dec. 1 (UPI) -- Every time my wife urges me to look into getting
OnStar, the digital,
computerized communications device installed in many newer-model General
Motors vehicles, I have resisted.

Yes, I know; I've heard the tear-jerk ads on the radio with the plaintive
voices of supposedly real wives,
mothers, and metro-sexual-sounding men fearing for their lives because
they've locked themselves out of
their cars and have called OnStar so someone can get them out of the jam
into which they've put themselves.
Still, I've not been convinced the loss of privacy is worth the remote
possibility that I would find myself in a life-threatening situation from
which the only possible salvation would be my ability to reach out and touch
an OnStar employee.

Now, even my wife agrees that OnStar -- or similar tracking devices
installed in non-GM vehicles -- would be a really bad idea. What changed her
mind? In addition to the irrefutable eloquence of my arguments, it was a
recent story, tucked away in an Internet news service, describing a recent
federal court decision that confirms what my own conspiratorial-oriented
mind always suspected was true. The FBI and other police agencies have been
using these factory-installed tracking systems as a way to eavesdrop on
passengers in vehicles, without the folks in the car even knowing the
government was listening to their conversations! Unbelievable, you scoff?
Nope, it's as real as the genetically engineered smells automobile
manufacturers are now putting into their cars.

Even though the federal court decision -- rendered by the Ninth Circuit
Court of Appeals, which covers several western states, including
California -- concluded that the FBI could no longer surreptitiously listen
in via computerized communications systems like OnStar, it did so only for a
tangential reason and therefore left the door wide open for continued
invasions of privacy.

This tends to get a bit technical, but let me see if I can describe it
accurately in a way that makes sense to us non-techno-geeks.

The manner in which the FBI has been worming its way into individual
vehicles equipped with one of these "emergency" communications systems
requires them to temporarily disable the particular system in the "target
vehicle." The targeted vehicle therefore cannot send an outgoing "emergency"
signal while the eavesdroppers are "dropping in."

Let's assume John or Jane Doe is proudly tooling around New York City in
their late-model Cadillac equipped with OnStar. Unbeknownst to them, an FBI
snoop believes they are discussing matters of gravest national security
interest during their jaunt. The agent has therefore directed the Bureau's
computer to reverse-engineer OnStar so it becomes a listening device instead
of a transmitting device.

Unfortunately, if during the time the FBI is thus listening in, John or Jane
suffers a real emergency, their expensive computer communications device
cannot send out a distress signal.

This scenario is what the federal court seized on as the basis for slapping
the FBI's hand. The customer has paid for an emergency communications
device, and because the FBI snooping renders it potentially incapable of
providing that service, the FBI has improperly disrupted a service the
customer has paid for. This it cannot do, sayeth the Court.

Of course, what the Court should have focused on is the gross and
unconstitutional invasion of privacy represented by this new manner of
electronic snooping. Instead the Court essentially told the government, go
back to the engineering room, and if you can come up with a way to use
OnStar to listen in to what's going on inside private vehicles without
hampering the other, legitimate functions of the system, then boys, go right
ahead with our blessing.

The implications of this opinion are not exactly reassuring.

What's even more frightening, however, is that this latest peek into the sub
rosa world of high-tech government snooping is just the tip of the
proverbial iceberg. For the past 10 years, the government has used a
little-known provision of the federal law, known as the Communications
Assistance to Law Enforcement Act, to browbeat the telecommunications
industry into spending billions of dollars to make its technology
eavesdrop-friendly, requiring technology advances to include built-in ways
for the government to use that technology to listen in to whoever is using
it.

The government's efforts to thus enhance its ability to listen in to our
conversations have moved into high gear in the aftermath of 9/11.

Cell phones already will be required to have tracking devices installed
therein, for the convenience of government employees who wish to track us
and listen in on our cell phone conversations. Now we find out that
automobile emergency communications systems can serve as one-way, secret
phone lines directly to the FBI. We've all heard the stories that our home
phones and computers serve the same purpose. As more information emerges
such as the one concerning the OnStar court decision, it's getting harder
and harder to dismiss these stories as "black helicopter" fantasies.

-- Bob Barr is a former member of the United States Congress and a former
U.S. Attorney in the state of Georgia.

-- United Press International's "Outside View" commentaries are written by
outside contributors who specialize in a variety of important issues.

--
--------------------------------------------------------------
Listen to Bob Barr's Laws of the Universe, Sunday evenings at 6:00 p.m.
E.S.T on Radio America (www.radioamerica.org)
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Saturday, November 22, 2003

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