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The redemption movement is a debt repudiation and tax evasion movement active primarily in the United States and Canada. The movement relies 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, Treasury Direct Accounts and secured party creditor kits.
The redemption movement's legal 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 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 sentenced him 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). 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 and an appeals court upheld the dismissal.
Purported redemption methods
While the specific details of redemption theory can vary, recurring elements include (1) a distinction between a living individual and a corresponding legal person or "straw man" (2) valuable property possessed by the legal person, but rightfully belonging to the individual (3) a supposed procedure by which the individual can claim the property to pay debts. According to the most common explanation, 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
- 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 schemes also fail to discharge debts. In a 2007 foreclosure case, the debtor claimed to have paid her home mortgage with a redemption "bill of exchange" at the suggestion of promoter Barton Buhtz. The US District Court found 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 institutions have issued warnings against them.
- The Federal Bureau of Investigation (FBI) states that kits for gaining access to obscure government accounts are fraudulent.
- 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. It 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 TreasuryDirect web site warns that redemption schemes which involve "sight drafts," "bills of exchange" or using a birth certificate as a commercial instrument are fraudulent and subject to prosecution.
- The Federal Trade Commission (FTC) has stated that attempting to draw funds from a Federal Reserve Bank with a Social Security number is a scam and the drafts are refused. The Federal Reserve Banks have issued similar statements.
- The Inspector General of the Treasury has warned that the Treasury does not honor invoices marked with "Accept for Value" or similar language and does not maintain individual checking accounts.
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 ficitious 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. The US government indicted him on 19 charges of passing fictitious instruments and failure to pay tax, and he was convicted on all charges in April 2017.
- Tax protester (United States)
- "Capital letters" argument
- Paper terrorism
- Freemen on the land
- Guardians of the Free Republics
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- See generally 26 U.S.C. § 6702.
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