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The redemption movement is a debt resistance movement and fraud scheme active primarily in the United States and Canada. Participants in the movement rely on the belief that a secret fund is created for everyone at birth, and that a procedure exists to "redeem" or reclaim this fund to pay bills. Common redemption schemes include acceptance for value (A4V), Treasury Direct Accounts (TDA) and secured party creditor kits.
Although the movement has maintained a small following since the 1990s, its theories are false and meritless. Those who participate in redemption schemes, and especially those who promote them to other people, can face criminal charges and imprisonment. Several government institutions have issued stern warnings about the fraudulent character of redemption schemes.
The ideas of the redemption movement should not be confused with the actual legal right of redemption, under which a debtor may buy back property that has been levied or foreclosed, either by paying the balance of the debt or by matching the price at which the property sells.
The redemption movement is an offshoot of Posse Comitatus, an American right-wing populist organization established in 1969 by leaders of the white-supremacist Christian Identity sect. The Posse denounced income tax, debt-based currency and debt collection as tools of Jewish control over the country. It found an audience among farmers hit by an agricultural recession during the 1970s and 1980s. One such supporter was Roger Elvick, a former North Dakota farmer who had lost his farm in a business deal. He became the national spokesman for Committee of States, a Posse organization that engaged in open rebellion against tax authorities. Elvick sold a book, The Redemption Package, that encouraged people to claim large refunds and information rewards from the Internal Revenue Service (IRS) and then pay their debts with "sight drafts" (worthless checks) issued by his own company, Common Title Bond & Trust. Elvick was convicted and imprisoned for his activities, as were several of his accomplices.
Debt cancellation schemes and prosecutions similar to Elvick's continued through the 1990s, including Family Farm Preservation and the Montana Freemen. Elvick resumed his activities after his release in 1997, giving seminars around the country, and the use of redemption schemes surged. The state of Ohio charged him with corrupt business activity in 2005 and he was sentenced to four years in prison.
By the late 1990s, the belief in a secret bank account had become a fixture of redemption schemes. The origin of this idea is not clear, but elements of it appeared in Lodi v. Lodi (1981, Shasta County, California). In that case, plaintiff Oreste Lodi sued "Oreste Lodi, Beneficiary," produced a birth certificate as evidence that the defendant controlled his estate, and served his complaint upon the IRS. The Shasta County Superior Court dismissed plaintiff Lodi's case for failure to state a claim. An appeals court upheld the dismissal, agreeing that "Plaintiff's birth certificate did not create a charitable trust" and that the case was a "slam-dunk frivolous complaint."
Purported redemption methods
The details of redemption schemes vary, but they typically rest on the same assumptions: (1) a distinction between a living individual and a corresponding legal person or "straw man," (2) valuable property associated with the legal person, but rightfully belonging to the individual, and (3) a supposed procedure by which the individual can claim the property to pay debts. Promoters justify these assumptions with elaborate historical tales. The most common explanation claims that the United States went bankrupt when it abandoned the gold standard in 1933 and started using its citizens as collateral so that it could borrow money.
Supposed procedures for using the nonexistent "straw man" funds include:
- Filing a UCC-1 financing statement or UCC-3 amended statement against the straw man
- Passing a birth certificate or other official document as if it were a bond
- Submitting documents to the Secretary of the Treasury
- Asserting copyright on a name
- Paying bills with self-printed or promoter-printed checks known as bills of exchange or sight drafts
- Charging bills to a "Treasury Direct Account" identified by a Social Security number
- Returning bills, collection letters and court notices with "accepted for value" and other language stamped or written across them
- Reporting the funds as tax withheld via Form 1099-OID to offset tax liability
- Corresponding with red ink
When participants find themselves worse off after following the procedures, they are often told that they have followed them incorrectly.
Several people who have participated in redemption schemes have been convicted. The convictions include forgery, providing false information, passing fictitious financial instruments, defrauding the United States, counterfeiting, impeding administration, filing false tax returns, money laundering and wire fraud. William Oscar Harris, who executed a redemption scheme as a purported citizen of the "Al-Moroccan Empire," is held in a highly restricted Communication Management Unit at the United States Penitentiary, Terre Haute, under a contempt of court order for continuing to send redemption instruments and other false paperwork from prison.
Aside from the risk of criminal charges, redemption processes also fail to discharge debts. In a frequently-cited 2007 foreclosure case, a debtor attempted to pay her home mortgage with a redemption "bill of exchange" at the suggestion of promoter Barton Buhtz. A United States District Court concluded that "the legal authorities Plaintiff cites and the facts she alleges suggest that she did not tender payment, but rather a worthless piece of paper. Other courts addressing claims nearly identical to Plaintiff's have found likewise."
To caution people away from redemption schemes, several U.S. agencies have issued warnings against them. Both the Federal Bureau of Investigation (FBI) and the TreasuryDirect web site have posted statements that redemption schemes are fraudulent. The Inspector General of the Treasury, the Federal Trade Commission, and various Federal Reserve Banks have warned that the Treasury and the Federal Reserve Banks do not maintain draft accounts for individuals and will not honor any individual drafts. The IRS has announced that attributing tax liability to a "straw man" is a frivolous position that can result in a $5,000 administrative penalty, and has included the Form 1099-OID variation of the redemption scheme in its "Dirty Dozen" list of prominent tax scams every year since 2009. The Comptroller of the Currency has noted that, in addition to being fraudulent and ineffective, redemption schemes can be used for identity theft. Outside the US, the Reserve Bank of New Zealand responded to a 2017 information request by stating that birth certificates are not investment securities and that redemption processes are scams.
In June 1991, Roger Elvick was found guilty by a federal jury in Hawaii of conspiracy to impede justice in connection with federal tax filings under 18 U.S.C. § 371 He was fined $100,000, and was sentenced to five years in federal prison and three years of supervised release. He served his time and was released from the federal prison system on December 8, 1997. While incarcerated he was further convicted in another conspiracy. Upon release from prison he restarted the scheme in Ohio, where he was convicted in April 2005 of forgery, extortion and corrupt business activity.
During the early 2000s redemption promoter Barton Buhtz distributed phony bills of exchange to clients to use for debt payments. In October 2007 he was convicted on multiple counts of conspiring, aiding, and personally passing fictitious financial instruments, and sentenced to three years in prison. He was released in November 2012.
Sam Kennedy (Glenn Unger)
According to The Christian Science Monitor, a key figure is Sam Kennedy (whose real name is Glenn Richard Unger), host of the "Take No Prisoners" program on Republic Broadcasting Network in Round Rock, Texas. In a mass e-mail early in 2010, Unger vowed to use his show to present a "final remedy to the enslavement at the hands of corporations posing as legitimate government." He pointed to a plan to "end economic warfare and political terror by March 31, 2010." In two months, he said, "we can and WILL, BE FREE with your assistance." In 2013, Unger was tried in the United States District Court for the Northern District of New York, in Albany, New York, on one count of attempting to interfere with the administration of the U.S. internal revenue laws, four counts of filing false claims for over $36 million in tax refunds, one count of tax evasion, and one count of uttering a fictitious obligation. Unger was convicted of multiple counts of tax fraud, and on April 22, 2014, he was sentenced to 97 months in prison for those convictions.
Winston Shrout, a former construction worker, started practicing redemption schemes in 2000. By 2004, he was marketing the schemes under the name "Solutions in Commerce." Shrout built a following on social media to become a leading redemption promoter, holding seminars in the United Kingdom, Australia and New Zealand. During the same period he also attempted to pass billion and trillion-dollar "bills of exchange" on the IRS and various financial companies. He was indicted on 19 charges of passing fictitious instruments and failure to file federal income tax returns, and he was convicted on all charges in April 2017. He was sentenced to ten years in prison. Shrout failed to surrender to authorities at the Federal Bureau of Prisons to begin serving his prison sentence. On March 5, 2019, a warrant was issued for his arrest, and Shrout is a fugitive.
- Cheque fraud
- Tax protester (United States)
- "Capital letters" argument
- Paper terrorism
- Freemen on the land
- Guardians of the Free Republics
- Meads v. Meads, 2012 ABQB 571, ¶ 529 et seq..
- 26 U.S.C. § 6337 (Redemption of property)
- Real Estate Principles. Rockwell Publishing Company. 2006. p. 276.
- Balleck, Barry (2014). Allegiance to Liberty: The Changing Face of Patriots, Militias, and Political Violence in America. Praeger. ISBN 978-1-4408-3095-2. Retrieved 17 February 2016.
- Bye v. Elvick, 336 N.W.2d 106 (N.D. 1983).
- Bye v. Mack, 519 N.W.2d 302 (N.D. 1994).
- Duda, Gary E. (July 7, 1987). "Officials Warn: Beware of Farm Loan Scam". Durant (OK) Daily Democrat. p. 3. Retrieved 2011-03-12.
- US v. Lorenzo, 995 F.2d 1448 (9th Cir. 1993).
- US v. Wiley, 979 F.2d 365 (5th. Cir 1992).
- US v. Rosnow, 995 F.2d 1448 (9th Cir. 1995).
- US v. Dykstra, 991 F.2d 450 (8th Cir. 1994).
- "Nine militia members indicted in checks scam". The Journal Times. May 18, 1996. Retrieved 2018-09-09.
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- Staff (Winter 2002). "New Multi-Million Dollar Scam Takes off in Antigovernment Circles". Intelligence Report. Southern Poverty Law Center. Retrieved 2018-09-08.
- Staff (Summer 2005). "His 'Straw Man' Free, a Scammer Finds the Rest of Him Isn't". Intelligence Report. Southern Poverty Law Center. Retrieved 2018-09-08.
- Lodi v. Lodi, 173 Cal.App. 3rd 628.
- "Rev. Rul. 2004-31: Frivolous tax returns; meritless 'removal arguments.'" (PDF). Internal Revenue Bulletin. 2004 (12): 617. March 22, 2004. Retrieved 2018-09-08.
- TreasuryDirect - Birth Certificate Bonds
- Martin, Gus (2016). Understanding Homeland Security.
- US v. Anderson, 353 F.3d 490 (6th Cir. 2003).
- "Frauds, Phonies, & Scams". TreasuryDirect. Retrieved 2018-09-03.
- Treasury Inspector General for Tax Administration (June 20, 2017). Actions Can Be Taken to Increase Detection of Frivolous Redemption Claims (PDF) (Report). Reference Number: 2017-40-040. Retrieved 2018-09-08.
- "Common Fraud Schemes". fbi.gov. Federal Bureau of Investigation. Retrieved 2010-09-22.
- US v. Hildebrandt, 961 F.2d 116 (8th Cir. 1992).
- US v. Salman, 531 F.3d 1007 (9th Cir. 2008).
- Dorman, Travis (July 21, 2018). "Well-known 'sovereign citizen' sentenced in federal bank fraud case in Knoxville". Knoxville News-Sentinel. Retrieved 2018-09-03.
- Johnson, Carrie; Williams, Margot (March 3, 2011). "'Guantanamo North': Inside Secretive U.S. Prisons". All Things Considered. National Public Radio. Retrieved 2011-03-04.
- US v. Harris, 582 F.3d 512 (3d Cir. 2009).
- Bryant v. Washington Mutual Bank, 524 F. Supp. 2d 753 (W.D. Va. 2007).
- Office of Inspector General (April 13, 2018). "Fraud Alerts". Retrieved 2018-09-08.
- Tressler, Colleen (August 17, 2017). "No secret bank accounts to pay your bills". Consumer Information. Federal Trade Commission. Retrieved 2018-09-08.
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- "Rev. Rul. 2005-21: Frivolous tax returns; use of 'straw man' to avoid tax" (PDF). Internal Revenue Bulletin. 2005 (14): 822. April 4, 2005. Retrieved 2018-09-08.
- See generally 26 U.S.C. § 6702 (Frivolous tax submissions).
- "Beware of IRS 2009 'Dirty Dozen' Tax Scams". IRS.gov. April 13, 2009. IR-2009-41. Retrieved 2018-09-08.
- "IRS concludes "Dirty Dozen" list of tax scams for 2019". IRS.gov. March 20, 2019. IR-2019-49. Retrieved 2019-06-22.
- "Fraudulent Debt Elimination Schemes". Office of the Comptroller of the Currency. September 5, 2007. Alert 2007-55. Retrieved 2018-10-04.
- Barclay, Angus (24 May 2017). "Birth Certificate Investment" (PDF) (Letter). Letter to unidentified correspondent. Reserve Bank of New Zealand. Retrieved 2018-09-26.
- US v. Elvick, No. 1:90-CR-01570-ACK (D. Haw. 1991): Docket entry 39, June 27, 1991
- US v. Elvick: Docket entries 47-48, Sept. 30, 1991
- "Roger N. Elvick #05618-059". Inmate Locator. Bureau of Prisons. Retrieved 2018-09-08.
- "The Sovereigns: Leaders of the Movement". Intelligence Report. Southern Poverty Law Center. Fall 2010. Retrieved 2018-09-08.
- Press Release, "Sunland, California Man Sentenced in Southern Oregon in Counterfeit Treasuries Case," Feb. 12, 2008, United States Attorney's Office, District of Oregon, at  Archived 2010-08-30 at the Wayback Machine.
- "Barton Albert Buhtz #44316-112". Inmate Locator. Bureau of Prisons. Retrieved 2018-09-08.
- Jonsson, Patrik (April 2, 2013). "Guardians of the free Republics: Could threats spark violence?". The Christian Science Monitor. Retrieved 2018-09-08.
- Dupis, Roger (January 20, 2013). "Who is Glenn Richard Unger". Daily Courier-Observer. Retrieved 2018-09-08.
- US v. Unger, No. 1:12-CR-00579-TJM (N.D.N.Y. 2014): Indictment
- Gavin, Robert (April 22, 2014). "Prison for anti-tax activist who was once a child star". The Times Union. Retrieved 2018-09-08.
- "Winston Shrout: The rise and fall of a sovereign citizen guru". Anti-Defamation League San Diego. March 22, 2016. Retrieved 2018-09-08.
- Bernstein, Maxine (April 21, 2017). "Man who failed to pay taxes for 20 years found guilty on 19 federal charges". The Oregonian. Retrieved 2018-09-08.
- Bernstein, Maxine (October 22, 2018). "Prominent tax dodger Winston Shrout sent to prison for 10 years". OregonLive.com. Retrieved 23 October 2018.
- United States v. Winston Shrout, case no. 15-cr-00438-JO, U.S. District Court for the District of Oregon (Portland Div.).
- Maxine Bernstein, "Prominent tax dodger now dodging prison sentence, prosecutor says," March 20, 2019, The Oregonian, at .