http://www.nytimes.com/2004/02/07/business/07tax.html
February 7, 2004
Tax Protester Tells Federal Court That He Is Delusional
By DAVID CAY JOHNSTON
LOS ANGELES, Feb. 6 - Irwin Schiff, the nation's best-known promoter of claims that no law requires the payment of income taxes, suffers from delusions including a fantasy that he alone can properly interpret the tax laws, according to papers that he had his lawyers file in Federal District Court in Las Vegas.
The filing, made on Jan. 23, is highly unusual, especially in a civil lawsuit. The document asks a judge to deny a summary judgment in favor of the Justice Department that Mr. Schiff owes $2.5 million in income taxes, fraud penalties and interest.
The mental health claim is also a ruse, according to an e-mail message sent on Tuesday to Mr. Schiff's thousands of supporters by his girlfriend, Cindy Nuen.
"We are sick about having to use this defense," Ms. Nuen wrote in her e-mail message. "It is ridiculous."
She wrote that this defense is the only way for Mr. Schiff to escape fraud penalties because, she wrote, his lawyers are "scared" to tell judges that "the income tax law is meritless and frivolous."
Mr. Schiff's personal psychiatrist, Dr. Luis Carlos Ortega of Las Vegas, wrote last year, in notes placed in the court file, that Mr. Schiff has suffered from paranoid delusions about the tax system for decades.
Dr. Ortega attributes the mental illness, after a normal upbringing, to Mr. Schiff's loss of his own money and that of clients of his Connecticut insurance brokerage firm in an oil industry tax shelter decades ago. That shelter turned out to be a Ponzi scheme.
"Mr. Schiff's distorted beliefs" that the tax system is a hoax "appear to have grown out of his business failures," Dr. Ortega wrote.
Mr. Schiff's assertion that he is delusional comes as the United States Court of Appeals for the Ninth Circuit in San Francisco is scheduled to hear oral arguments on Tuesday on whether Mr. Schiff can be barred from selling his book "The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes."
His appeal has drawn support from the Nevada chapter of the American Civil Liberties Union, the American Booksellers Association, the American Publishers Association, the American Library Association and the writers' group PEN.
Mr. Schiff contends that Judge Lloyd D. George of Federal District Court in Las Vegas banned his book, although the order allows anyone to sell the book except Mr. Schiff, Ms. Nuen and an associate.
The order also requires Mr. Schiff to turn over the names of all those who bought the book from him so the Internal Revenue Service can audit them. The I.R.S. says in recent years it has identified more than 5,000 returns reporting zero income, the technique taught in the book, forcing it to spend taxpayer money pursuing these individuals.
Last week a promoter of a competing theory that Americans are tricked into taxes, Thurston P. Bell of Hanover, Pa., complied with a court order to give the I.R.S. a list of his clients, striking a serious blow at the so-called tax honesty movement.
Mr. Schiff, a convicted tax evader, has a large core of dedicated followers, especially in Las Vegas, where he has lived since his second release from prison a decade ago. He has prospered in recent years from sales of his books and lecture fees, but he has also engaged in increasingly rancorous disputes with proponents of competing theories, like the one Mr. Bell marketed, that Americans are tricked into paying income taxes. None of these theories have had any success in court.
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