Paul Andrew, Mitchell, B.A., M.S. Counselor at Law and federal witness c/o 2509 N. Campbell, #1776 Tucson, Arizona state, USA zip code exempt (formerly DMM 122.32) Under Protest and by Special Visitation with explicit reservation of all rights UNITED STATES DISTRICT COURT JUDICIAL DISTRICT OF ARIZONA IN RE GRAND JURY SUBPOENA ) Case No. GJ-95-1-6 (JMR) SERVED ON ) NEW LIFE HEALTH CENTER COMPANY ) JOINT AFFIDAVIT OF ) DR. AND MRS. EUGENE BURNS AND _______________________________) DR. AND MRS. SHELDON DEAL In re: the income tax matters of Dr. Eugene A. and Mrs. Linda H. Burns, Dr. Sheldon C. and Mrs. Cindy M. Deal, all Citizens of Arizona state, and the New Life Health Center Company (currently an Unincorporated Business Trust company comprised of four health food retail outlets). Subject of this Affidavit The abusive and illegal tactics of certain agents of the "Internal Revenue Service" and the United States Department of Justice employed against the People and the Trust listed above. Years in Question Beginning January 1, 1978 and through and including December 31, 1995. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 1 of 17 Purpose of this Affidavit This will be an effort to explain, in the broadest terms, the events of abuse which have continued for over 15 years to the aforementioned persons. Opening Statement Deal and Burns are licensed Chiropractic Doctors and business people who have never been convicted of a serious crime and who have attempted to conduct their personal business lives according to the laws passed by Congress and enforced by law enforcement agencies. They are conservative Republicans who are active in their community and care about the future of our Country. Contrary to the position of the IRS, Burns and Deal are NOT illegal tax protesters as otherwise asserted by certain agents of the IRS. Burns and Deal have always preserved their First Amendment Rights, as guaranteed by the Constitution for the United States of America, to voice their opposition to the wrongful acts of our government when, in their opinion, wrongful acts have been committed. In the first place, to "protest" is a fundamental Right and, since that it is true, then the term "illegal" must modify the tax in order for this term to be constitutional. There is no question that they entered into certain private programs, subject to the review by competent Counsel, with the objective being to preserve assets, to limit tax liability, and to conduct estate planning. They have always felt that this was the pathway to accumulating wealth. Little did they know that the "programs" they joined would become the target of the federal government, and thereby plunge them into a whirlpool of litigation costing hundreds of thousands of dollars and years of constant harassment by way of a blizzard of audits and court appearances extending from 1981 to the present. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 2 of 17 Counsel Employed Cecil Hartman Joe Izen Bill Cohan G. Singh Khalsa John Standifer Art Tranakos Ralph Seifelt Howard Feldman Jim Schook, CPA Jim Everett (present) Government Agents Involved with this Case Justice Department: Steven Furth* Bernie Knight* Don Overall* "*" means Washington, D.C. Robert Johnson (Phoenix) Rachel Zepeda (Phoenix) Internal Revenue Service: Melvin Martineau (auditor) Tucson Sharon Bennett (auditor) Tucson (since left the Service) John Magee (auditor) Tucson (retired) Jeri L. Cantrell (Collection) Tucson Courts in which Burns & Deal Have Sought Remedies Tax Court (twice), Federal District Court, Ninth Circuit Court of Appeals, Supreme Court and finally Bankruptcy Court (twice). Remedies Sought and Received To somehow shift the burden to the government so that it is they who must prove the amount of taxable liability due, rather than Burns and Deal attempting to prove otherwise. So far it has not been possible. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 3 of 17 Goal of this Report To somehow put the pressure on the Department of Justice to settle this case. To come to a legitimate tax due which all parties can live with and afford. The Justice Department refuses to settle this case under any circumstances. At present, there are liens and levies placed upon Burns/Deal and NLHC in excess of $4,000,000! Hardly affordable. Overview In late of 1977, Burns and Deal, accompanied by competent Counsel (Howard Feldman, tax attorney, and Jim Schook, CPA) attended a week-long seminar conducted by Karl Dahlstrom of the American Law Association. At the end of this seminar, it was determined by their Counsel that this would be a "legal means" by which Persons could preserve their assets, limit their tax liabilities, and plan their estates. Burns and Deal filed a final tax return for New Life Health Center ("NLHC") (at that time an Arizona Corporation) on December 1977. The assets of the Corporation were transferred into the Triple Trust Program (a foreign trust organization). Other trusts were set up at that time. Discovering that the foreign trust arrangement, although adjudicated "legal" by the Ninth Circuit Court of Appeals, was not "acceptable" to the IRS, the assets of the foreign trust were transferred (December 31, 1980) to an unincorporated business trust company named New Life Health Center Company ("NLHC"). The unincorporated business trust is a legal contract under the Common Law of Arizona state (a Republic, by Law). Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 4 of 17 Little did they know that, during the subsequent Grand Jury investigation of Karl Dahlstrom et al., there would be an "ex parte" meeting with the office of the United States Attorney for the Western District of Washington, and the Office of the Tax Division of the U.S. Department of Justice. A "Disclosure Order" was issued by District Judge Barbara Rothstein purporting to find a "particularized need" for breach of Grand Jury secrecy on the part of the IRS. The Grand Jury materials (especially the membership list of the ALA) was provided directly to the IRS for use in civil audit investigations of most, if not all, of the members of the Association. It was so stated in a document obtained through the Freedom of Information Act that, armed with the membership list, "the IRS could proceed with maximum impact." As a result of this egregious violation of the Fourth Amendment, a suit was filed in Federal District Court (a Bivens type Action) and summarily defeated at this level. The Judge ruled that the government has "sovereign immunity." In short, they can do any damn thing they want to do, and the Court will uphold their illegal activities. As early as 1981, Burns and Deal were subjected to intense audits for the years 1978, 1979, and 1980. Subsequent to these audits, all legitimate deductions such as wages and utilities were disallowed from the returns filed by Burns, Deal and NLHC. A plethora of 90-day letters was issued on Burns, Deal and NLHC (some intentionally sent to wrong addresses) the alleged deficiencies of which totaled, for all parties, $3,819,479.42! The total adjusted gross income for Burns, Deal and NLHC for the same period of time was $596,225. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 5 of 17 Prior to the issuance of the Notices of Deficiency, Burns was personally confronted by "agents" of the IRS who attempted to intimidate him with stories of a criminal prosecution which "they" had brought against some of the ALA members. The "agents" attempted to indicate to Burns that they "had the goods" on all members of the ALA and that, unless he (Burns) "cooperated" by agreeing to accept their proposed deficiency, Burns would be subjected to criminal prosecution and civil seizure, not to mention future harassment. Burns is now convinced that this conduct on the part of these "agents" of the IRS was extortion. Burns informed the "agents" that the atmosphere of coercion which they exuded required him to stand on his Fifth Amendment Immunity against self-incrimination. Apparently angered by this response, and desiring to punish Burns, the "agents" proceeded to issue Notices of Deficiencies in amounts which had no reasonable basis in either law or fact and were at best arbitrary, capri- cious, and unreasonable. The facts which they presented to Burns about his personal and financial affairs could have come only from the records illegally gleaned from the aforementioned Grand Jury records. Looking back, it is obvious that the government agents were committing acts of extortion and conspiracy to violate the fundamental rights of Burns, Deal and NLHC. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 6 of 17 At this time Burns and Deal were advised as to their extremely limited choices: either (1) pay the deficiencies and sue in Federal District Court, or (2) apply to the United States Tax Court. In both cases, they recognized that the legal system had gone full circle and that they were GUILTY and must carry the burden of proving their innocence. Certainly, this is a defect in the legal justice system that must be remedied in the future. It was during the 1981 audit period that Burns and Deal recognized what was happening and attempted to settle the only real issue of the triple trust arrangement, and that was the so-called "contingent liability." Burns attempted to settle with the U.S. Attorney, Robert A. Johnson ... reverse the distribution and compute the tax, penalties, and interest, and "we'll pay it." Johnson, however, refused to settle the issue and, in fact, stated that "This is not an issue of money (Dr. Burns), this is a power issue. We intent on putting you and your Company out of business to make you an example." Neil T. Nordbrock was there to witness this statement by Robert A. Johnson. It seemed that the entire motive was to crush the membership of the ALA, as well as Burns and Deal, no matter what it took or what it cost, which, for the most part, they have accomplished. Many times both Burns and Deal, and their attorneys, have attempted to settle the case. In fact, Jim Everett has settled many cases (such as ours) with Bernie Knight (U.S. Attorney in Washington, D.C.). In an attempt to settle, Everett was told in no uncertain terms that "the government has no intention to settle with those tax protestors," or words to that effect. They have been met with the same negative attitude even after 15 years of litigation. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 7 of 17 The only choice was to petition Tax Court. The date set was for November 2, 1987. Prior to this date, the IRS conducted audits for the calendar years of 1980, through and including 1986. Burns and Deal were subjected to weeks of intensive interrogation (inquisition?) with respect to the legitimacy of deductions. No matter what justification was argued, the end result was that most deductions were summarily denied, thereby creating as large a tax deficiency as possible. As the tax court date approached, it was determined that Burns and Deal would not get relief in that forum. In fact, the burden was too great to overcome, especially in light of the fact that they were being "tried" by a "Special" Judge (Payjak) who was there solely for their case. At that time, the choice was made to file a personal Chapter 11 and thereby stay the Tax Court proceedings. Little did they know that their attorney, John Standifer, had notified Robert A. Johnson (the U.S. Attorney) of their intentions (thereby violating the Attorney/Client privilege). The Bankruptcy attorney, Ralph Seifelt, was confronted by several U.S. Attorneys when he went to file the petition. They attempted physically to prevent Seifelt from filing the petitions. The date for the filing was on or about October 28, 1987. Seifelt successfully filed the petitions; however, the government rousted the bankruptcy judge away from a weekend vacation and demanded that the judge "lift the stay," which he did. In Tax Court, Standifer stipulated to the Court that Burns owed approximately $293,000, an amount of which Burns had no knowledge whatsoever. In fact, Burns did not discover that Standifer had done so until about a year later, when he was going through some old files given to him by Standifer. When asked why he entered the stipulated figure, Standifer replied that he felt that this was his way of "remaining in good faith with the government." Standifer also went on to say that "$293,000 was better than millions of dollars." It turned out that Standifer was our worst nightmare. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 8 of 17 Burns and Deal then proceeded to litigate in Bankruptcy Chapter 11. The government moved for more audits, which they were granted, and Seifelt moved for discovery on their part. The court granted the motion; the government refused to comply with discovery; and the court never enforced it. Therefore, there was no way of determining the true tax liability. So much for justice. Burns and Deal were forced out of Chapter 11 protection on or about February 10, 1992, due to a pending conversion. Through the use of Freedom of Information Act requests, Burns and Deal obtained certain information substantiating the fraud that had been perpetrated upon them. A suit was prepared by our attorney, Jim Everett, and filed against the IRS on February 11, 1993, alleging, among other violations, fraud, embezzlement and numerous Constitutional violations. See case #CIV 93-0301 PHX (PGR). After spending in excess of $20,000 to prepare the case, the Judge granted summary judgment for the Defendants without so much as oral arguments or, for that matter, any discovery. In short, the Judge did not want to be bothered. So much for equity in the courts. The only choice at this point was to re-file into Bankruptcy Court. Deal filed Chapter 11 (and remains there) and Burns filed Chapter 7. Burns liquidated over a half a million dollars of debt, most of which he never owed. NLHC was forced into a Chapter 11 (June 13, 1993) when it was learned that the Collections Branch was now treating NLHC as a "hidden" asset of Burns. Rather than let collections ruin the business and give Burns and Deal a chance to argue the issue of ownership, the trust had no choice but to file for protection. After approximately 13 months of time, the government still had not entered a proof of claim. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 9 of 17 After the Judge granted NLHC a bar date, the government moved for a 90-day extension, during which time they could "conduct their investigation," despite the fact that they had plenty of time to do so. The extension was granted. It was at that hearing that the Judge ordered the United States (Rachel Zepeda) to file a Proof of Claim ON OR BEFORE May 23, 1994 at 5:00 pm the terms of which appears in the transcript. The Judge was emphatic about his order and even went so far as to tell Mr. Everett to proceed with a Motion to Dismiss if the United States did not provide a timely proof of claim. The U.S. Attorney ordered all books and records pertaining to NLHC for the years of 1989 and through and including 1993. Burns and Deal were then put through another series of interrogations and depositions costing a great deal of time and money, not to mention additional mental anguish and frustration. The U.S. Attorney failed to meet the bar date and exceeded that court-ordered date by ten (10) days. Jim Everett proceeded forward with his Motion, per the Judge's ruling. At the hearing, the Judge asked Ms. Zepeda why she was late in filing the proof of claim. Her answer was, "We do this all the time your Honor, and we are very busy" (or words to that effect). The judge, however, was not concerned about the government's not meeting the time for filing, and granted the extension based on "excusable neglect." Everett then filed a Motion for Reconsideration, which was granted. At this time, Everett introduced a plethora of law on point. The government's response was not only weak, it was also a sorry piece of legal work. It is no wonder that these people go to work for the government; they could not make it on the outside. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 10 of 17 Several weeks later, the Judge ruled for the second time against Burns/Deal and NLHC with a remark, "No one has been injured." One would wonder what it takes for a judge to be at all concerned that someone has "been injured." We then filed an appeal which was assigned to Judge Jim McNamee. On July 14th, without a great deal of surprise, he sustained the bankruptcy's judge's ruling. An appeal to the Ninth Circuit was filed, and it is still pending. Should we fail all of the above, we have two choices: (1) file an adversary proceeding which, in effect, is another law suit against the IRS, with the purpose of forcing the IRS to prove ownership of the Company. This would (of course) cost a great deal of legal fees and time. Or (2) we can hire independent business appraisers to evaluate the value of the business on a shut-down basis. The latter option we have done. We hired two independent appraisers (the cost of which was approximately $7,000) to evaluate the business as of June 13, 1993. The value at that time, according to these appraisers, was approximately $111,000. We then can choose to stipulate as to ownership, introducing the value of the business as a settlement figure, and offer to pay this amount as a settlement. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 11 of 17 The only thing the government can move to do is to object. The Judge should either sustain the objection, or overrule it, and accept the settlement figure. The problem is this: can this amount be paid? And, if the government forces the Company into auction, this could result in a loss of the assets of a business Burns has guided for more than 25 years. Following the "investigation" which occurred during the 90- day extension, Martineau of the IRS issued a 30-day letter dated June 8, 1995, disallowing certain (legitimate) business deductions for the taxable years of 1992 and 1993 (NLHC returns), resulting in additional taxes of over $60,000!!! This latest move leads one to believe that there is nothing stopping the IRS from further disallowing business deductions for the years 1994, 1995, and so on, ad nauseam. These actions will eventually collapse the New Life Health Center and, therefore, a long- standing business which has been a benefit to the community, with an excellent reputation. But what do they care? Update On March 5, 1996, a Grand Jury subpoena was served on New Life Health Center to deliver all books and records for calendar years 1990 thru 1995 to the Grand Jury on March 27, 1996, 9:00 a.m. This subpoena was served upon Richard Rineer, Manager of one of New Life's retail stores located at 4841 E. Speedway in Tucson, Arizona state. The subpoena was defective in many ways. Counsel for the company (Paul Andrew, Mitchell, B.A., M.S.) generated a Privileged Communication which was submitted to the Grand Jury Foreperson by way of registered U.S. Mail, restricted delivery and return receipt both requested. This method of mailing is the most restrictive, and only the Grand Jury Foreperson could have signed for it. As it turned out, by way of a U.S. Postal investigation, the Assistant U.S. Attorney, Robert L. Miskell, appears to have intercepted the mail, and the Grand Jury never received Counsel's Privileged Communication. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 12 of 17 Of course, Mr. Miskell has alleged that he had never received the Privileged Communication until April 18, 1996. Coincidentally, that was the date that the Postal investigation was completed, and also the date that Miskell would have become aware that the Postal investigation was underway. Therefore, a charge of perjury was filed by Counsel. Further, it appears that Mr. Miskell is also guilty of mail fraud, jury tampering, contempt of court, and obstruction of justice. All of these charges have been briefed and submitted to a list of participants, including District Judge John M. Roll. Subsequent to a hearing on an Order to Show Cause why New Life Health Center and/or its General Manager should not be held in contempt of court, Judge John M. Roll served upon Dr. Burns an order to appear in front of the Grand Jury on May 22, 1996, at 9:10 a.m., "with copies of the requested document" [sic]. Burns did appear on that date and attempted to deliver to the Grand Jury copies of the Company's Notice of Offer Withdrawal, Petition for Clarification, for Reconsideration, for Writ of Mandamus, and for Orders to Show Cause, with Exhibits, all of which was also mailed to the Grand Jury but never reached them. Now Mr. Miskell has put in front of Judge Roll an "order to strike" certain crucial pleadings, based on the absence of licensed counsel. Reply briefs are being prepared. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 13 of 17 It is obvious to us that, since the civil side of the IRS pursuit is stymied by the bankruptcy, they have decided to generate a criminal case. This action further supports the original statement promulgated by Robert A. Johnson, wherein he stated that it was the goal of the "Service" to put Burns, Deal and New Life out of business and thereby make an example of them. Conclusions It has been our experience that the attitude of the IRS and DOJ is that whatever People earn really belongs to them. They will tell you how much you can retain. These agencies do not adhere to any of the laws enacted by Congress. They can violate any law or Constitutional provision and be supported by the Courts, Barbara Rothstein notwithstanding, her eminence who "prosecuted" the Karl Dahlstrom case in Washington state. History is replete with the abuses which have befallen hundreds of thousands of decent, hard-working, God-fearing people, attempting to play by the rules on a non-level playing field, with the United States charging downhill. If Burns and Deal had ever realized what would happen to them by entering into any program for building an estate that is NOT approved by the federal government, they certainly would not have done so. Since the original audit, they have been billed approxi- mately $500,000 in legal fees to defend themselves against these unreasonable people. It is incomprehensible how much money the government has spent on this case. It is easily in excess of whatever they could possibly realize in any kind of settlement. Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 14 of 17 Had this argument been between two private parties, it would have been settled in a heartbeat. However, it seems that, when the government targets someone, it will go to any lengths, including the commission of serious felonies like mail fraud, perjury, obstruction of justice, and jury tampering, despite the obvious costs and serious damages to the Citizens. There is no question that both Burns and Deal desperately want to settle this case and get on with their lives. We hereby reserve all our Rights without prejudice. We witness each other, and further Affiants sayeth naught. Executed on June 7, 1996 /s/ Eugene A. Burns /s/ Linda H. Burns Dr. Eugene A. Burns Mrs. Linda H. Burns Citizen of Arizona state Citizen of Arizona state /s/ Sheldon C. Deal /s/ Cindy M. Deal Dr. Sheldon C. Deal Mrs. Cindy M. Deal Citizen of Arizona state Citizen of Arizona state Exhibits available upon request. All Rights Reserved Without Prejudice Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 15 of 17 PROOF OF SERVICE I, Linda H. Burns, hereby certify, under penalty of perjury, under the laws of the United States of America, without the "United States", that I am at least 18 years of age and a Citizen of one of the United States of America, that I am not currently a Party to this action, and that I personally served the following document: JOINT AFFIDAVIT OF DR. AND MRS. EUGENE BURNS AND DR. AND MRS. SHELDON DEAL by placing said document with exhibits in first class U.S. Mail, with postage prepaid and properly addressed to the following individuals: ROBERT L. MISKELL John M. Roll Acapulco Building, Suite 8310 U.S. District Court 110 South Church Avenue 55 E. Broadway Tucson, Arizona Tucson, Arizona JANET NAPOLITANO Clerk Acapulco Building, Suite 8310 U.S. District Court 110 South Church Avenue 55 E. Broadway Tucson, Arizona Tucson, Arizona Grand Jury Foreperson Postmaster In re: New Life Health Center Co. U.S. Post Office 55 E. Broadway Downtown Station Tucson, Arizona Tucson, Arizona Judge Alex Kozinski Evangelina Cardenas Ninth Circuit Court of Appeals "Internal Revenue Service" 125 S. Grand Avenue, Suite 200 300 West Congress Pasadena, California Tucson, Arizona Attorney General Solicitor General Department of Justice Department of Justice 10th and Constitution, N.W. ! 10th and Constitution, N.W. ! Washington, D.C. Washington, D.C. Dated: June 7, 1996 /s/ Linda Burns ________________________________________ Linda H. Burns, Citizen of Arizona state All Rights Reserved without Prejudice Joint Affidavit of Dr./Mrs. Burns, Dr./Mrs. Deal: Page 17 of 17 # # #
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In Re Grand Jury Subpoena