Tuesday, Aug. 10, 2004 | 11:12 a.m.
A federal appeals court Monday upheld a ban on the sale of a book by a Las Vegas businessman that suggests that the income tax is voluntary and does not have to be paid in many cases.
The ruling by the 9th U.S. Circuit Court of Appeals apparently stunned author Irwin Schiff, 76, whose first comments to the news of the ruling were "You're kidding," and "Unbelievable."
He argued his book "The Federal Mafia" was protected by the constituional guarantee of free speech. He said he has sold 90,000 copies of the book.
Schiff is under indictment by the federal government on charges of filing false income tax returns.
The three-judge panel of the appeals court held that the book was commercial speech. Commercial speech traditionally has been granted less free speech protection than political and expressive speech.
The decision, written by Judge Procter Hug Jr., upheld U.S. District Judge Lloyd George's preliminary injunction prohibiting sales of the book and directing that the order of the injunction by the District Court be placed on the Web sites of the business that sells Freedom Books.
Hug wrote, "Given Schiff's extensive history of tax avoidance and the fact that the defendants operate a bookstore devoted to introducing others to his tax avoidance schemes, there is a strong likelihood that the defendants would violate the law in the future. Therefore, the District Court did not abuse its discretion when it granted the preliminary injunction."
The appeals court had put George's preliminary injunction on hold until it could rule on the matter.
In its ruling the court said the key issue is whether this book is commercial speech. If it is, the court said, the government may regulate or ban it entirely if it is misleading or related to unlawful activity.
Schiff maintained commercial speech is limited to advertising only and there are only a few inserts in the books that would qualify. The court said Schiff "cannot use the protected portions of 'The Federal Mafia' to piggy-back his fraudulent commercial speech into full First Amendment Protection."
When contacted about the court's decision, Schiff said his book would not be banned if he advocated and told how to make "moonshine." He said those who made it would be arrested. But he does not know anybody who has bought his book who has been arrested on tax charges.
The court said, "The Federal Mafia" is acting as an advertisement for Schiff's full range of tax-avoidance products and services. It added, "An advertisement is fraudulent when it misleads customers about the benefit of the offered product."
For instance, the court said, Schiff informs his readers there is no law requiring them to file income tax returns or pay this tax. And there are no laws giving federal courts authorization to prosecute anyone for income tax crimes.
"Although these claims are far-fetched, they could mislead a customer into believing that he or she could use Schiff's products to legally stop paying income taxes," Hug wrote.
The court declined to consider George's order that Schiff turn over the list of those who purchased the book. It said that issue is pending in the federal district court.
The American Civil Liberties Union of Nevada was joined by publishing groups and the American Library Association in appealing the injunction based on concerns that the banning of Schiff's book could have a chilling effect on free speech.
Gary Peck, executive director of the ACLU of Nevada, said: "The court said Irwin is free to expound on his theories regarding income taxes and the IRS but prohibited him from connecting that to efforts to sell commercial goods and services."
Schiff and his associates, Cynthia Neun and Lawrence N. Cohen, are facing criminal charges set forth in a 33-count indictment alleging that they conspired to file and to cause others to file fraudulent tax returns, including more than 4,950 tax returns reporting no income.
That criminal trial has been set for Feb. 28.
The government alleges that Schiff, who sells anti-tax books and materials at his East Sahara Avenue bookstore, Freedom Books, has been running a tax scam that has cost the government an estimated $56 million.
The Justice Department alleges that Schiff, Neun and Cohen, through consulting, seminars, books, audiotapes and Web sites, help people file "zero-income" tax returns, even though these people have taxable income. The government alleges that Schiff has been selling his materials online and at his store, providing step-by-step instructions for filling out income-tax returns falsely listing no income and no tax due.
archive
