IN THE UNITED STATES DISTRICT COURT u.
VOR THE NORTHERN DISTRICT OF ILLINOIS Si
EASTERN DIVISION

UNITED STATES OF AMERICA, : Bus

Plaintiff,

Case No. 02 C 1559
{IONORABLE CHARLES R. NORGLE

Vv.

MICHAEL D. RICHMOND AND REX E.
BLACK, d/b/a THE LIBERTY
NETWORK, LIBERTY ESTATE
PLANNING, THE LIBERTY INSTITUTE,
FIDUCIARY MANAGEMENT GROUP,
NATIONAL COUNCIL OF CERTIFIED
ESTATE PLANNERS, ASSOCIATION
FOR CERTIFIED ESTATE PLANNING
ATTORNEYS, and EAGLE
PUBLICATION TRUST,

Defendants.

Vee eee ee Se eee

OPINION

CHARLES R. NORGLE, District Judge:

Before the Court is the Government’s motion to hold Defendant Rex E. Black in contempt
of court. For the following reasons, the Court grants the Government’s motion.

I. BACKGROUND!

This case involves the promotion of abusive tax schemes and false statements about the tax
laws. The Government filed a civil action on March 4, 2002, to enjoin Rex Black (“Black”) and
Michael Richmond (“Richmond”) from promoting abusive tax schemes. Specifically, Black and

Richmond advised customers to claim unallowable federal tax benefits. Black and Richmond further

' The court takes the facts from the court file as well as the brief submitted by the
Government. Defendant's only response to the Government’s motion for contempt was the
statements he made at the hearing on September 6, 2002. (See Transcript of Contempt Hearing,
September 6, 2002, Ex. A).

SO



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(Proceedings heard in open court:)

THE CLERK: 02 C 1559, United States versus Michael

Richmond. Motion for contempt.

MS. LARSON; Good morning, your Honor, Kari Larson

for the United States.

THE COURT: Good morning.

MR. RICHMOND: Mr. Clerk, are you calling for the

creditor or the debtor in this issue?

THE COURT: What is your name, please?

MR. RICHMOND: Are you calling for the creditor or

the debtor in this issue?
THE COURT: What is your name?
MR. RICHMOND: I’m the secured party for
THE COURT: What is your name?
MR. RICHMOND: My Christian name, living
mean -- being. It‘s Rex Eugene Semi-Colon Black.
THE COURT: Do you have any other names?
MR. RICHMOND: Pardon?
THE COURT: Do you have any other names?
MR. RICHMOND: I’m the secured party for
of this issue.
THE COURT: What is your name?

MR. RICHMOND: And I request the release

THE COURT: What is your name?

this debtor.

sentient

the debtor

of the order



IL. DISCUSSION

Civil contempt proceedings arise under 18 U.S.C. § 401(3). “A court’s civil contempt power
rests in its inherent limited authority to enforce compliance with court orders and ensure judicial
proceedings are conducted in an orderly manner.” United States v. Dowell, 257 F.3d 694, 699 (7th
Cir. 2001) (quoting Jones v. Lincoln Elec. Co., 188 F.3d 709, 737 (7th Cir. 1999)), To hold a party
or witness in civil contempt, the court must be able to point to an order which specifically sets forth
an unequivocal command that the party in contempt violated. See Jones, 188 F.3d at 738. Sanctions
for civil contempt are designed either to compel the contemnor into compliance with an existing
court order or to compensate the complaintant for losses sustained as a result of the contumacy.

Dowell, 257 F.3d at 699 (citing Jones, 188 F.3d at 738). The proof for civil contempt must be clear

and convincing. Dowel], 257 F.3d at 699 (citing Stotler & Co. v. Able, 870 F.2d 1158, 1163 (7th

Cir. 1989)). The court does not have to find that the violation was willful, and may find a party in
civil contempt if that party has not been reasonably diligent and energetic in attempting to
accomplish what was ordered. Goluba v. School Dist. of Ripon, 45 F.3d 1035, 1037 (7thCir. 1995)
A district court has broad discretion to fashion sanctions in a contempt proceeding. See South

Suburban Housing Center v. Berry, 186 F.3d 851, 854 (7thCir. 1999), Appropriate sanctions may

include a coercive daily fine, a compensatory fine, attorneys’ fees and costs, and coercive

incarceration. See In the Matter of Grand Jury Proceedings, 280 F.3d 1103, 1109-1110 (7th Cir.

2002).
It is clear that Black has not complied with any aspect of the Court’s Order of June 14, 2002.

The Court need not look any further than the “Conditional Acceptance” that Black filed with the



prepared tax returns for their customers claiming unallowable deductions resulting in substantial
understatements. On June 14, 2002 this Court found Black and Richmond in violation of 26 U.S.C.
§ 7402, 26 U.S.C. § 7407, and 26 U.S.C. § 7408 of the Internal Revenue Code. The Court

permanently enjoined Black from:

- Organizing or sclling his abusive tax shelters, or instructing others
to sell his abusive tax shelters through Liberty Institute course;

- Making false statements about the tax benefits of his tax shelters;
- Instructing or advising taxpayers to understate their federal tax
liabilities, and

- Engaging in similar conduct that substantially interferes with the
proper administration and enforcement of the internal revenue laws.

The Court’s order also required Black, by June 24, 2002, to:

- Provide the United States with a complete list of clients (including
names, addresses, phone numbers, and social security numbers or
employer identification numbers) who have purchased Contract
Business Trusts or Family Estate Trusts, or who have obtained any
services from Fiduciary Management Group, including but not
limited to tax return preparation and trustee services:

- Maintain the websites, www.mcep.com, www. libertyinsitute.com.

www.nationalCEP.com, and display prominently on the first page of
those websites a copy of this Court’s Order of Injunction; and

- Mail a copy of the Complaint and Injunction Order to all trust
customers, tax return preparation customers, and all course attendees
at any Liberty Institute course from 1995 to the present.

On September 6, 2002 the Government presented this motion for contempt of court against Black.
Black appeared at the hearing for presentment of the motion, but he offered no response to the
motion nor did he ask for time to respond. Rather, Black continually deterred stating his name to
the Court and challenged the Court’s right to know his name. (See Transcript of Contempt Hearing,

September 6, 2002, Ex. A); see also John Coe v, County of Cook, 162 F.3d 491, 498 (7th Cir. 1998)

(Parties to federal litigation must litigate under their real names).



1 FOR THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
2 EASTERN DIVISION

3 | UNITED STATES OF AMERICA,

4 Plaintiff, ) 02 ¢ 1559
)
5 vs. ) Chicago, Illinois
) September 6, 2002
6 |MICHAEL D. RICHMOND, et al., ) 9:30 a.m.
)
7 Defendants. )
8 TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE CHARLES RONALD NORGLE, SR.
9

10 | APPEARANCES:

11 |For the Plaintiff: UNITED STATES
DEPARTMENT OF JUSTICE
12 Post Office Box 7238
Ben Franklin Station
13 Washington, DC 20044
BY: MS. KARI M. LARSON
14 (202) 514-6540
15 | Defendant, Pro Se: MR. REX EUGENE SEMI-COLON BLACK
16 |Court Reporter: MS. MAELLEN E. PITTMAN, RDR, FCRR
219 South Dearborn Street
17 Room 2342
Chicago, Illinois 60604
18 (312) 435-5576
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a5



‘Mimste Oraor Harm (08°97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Charles R. Norgle, Sr. Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 02 C 1559 DATE 9/10/2002
CASE United States of America vs. Richmond and Black
TITLE

[In the following box (a) indicate the party filing the motion. ¢.g.. plaintiff, defendant. 3rd party plaintifY, and (h) state briefly the nature
of the motion being presented. ]

MOTION:

DOCKET ENTRY:

a) gO Filed motion of [ use listing in “Motion” box above.)

(2) a Brief in support of motion due ____-

@) o Answer brief to motion due___- Reply lo answer brief due__

(4) oO Ruling/Hearing onset for at

(3) oO Status hearing[held/continued to] [set for/re-set for]on  ____setfor__att

(6) 0 Pretrial conference(held/continued to] [set for/re-set for]on ___set for___ at
(7) o ‘Trial[set for/re-set for] on at

(8) oO [Bench/Jury trial] [Eearing] held/continued to at

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) O Local Rule 41.1 OPRCP41(ax(1) OO FRCP41(a)(2).

(10) WE [Otherdocket entry] Before the Court is the Government’s motion to hold Defendant Rex. E. Black
in contempt of court. The Court grants the Government’s motion. See attached Opinion and Order.

dl) [For further detail see order attached to the original minute order.

No notices required, advised in open court Document

Numiber

50

No notices required
umber of natizes

Notices mailed by judge's staff. “SEP 1 3 2002

Notified counsel by telephone.

dae dncketed

X | Docketing to mail notices
Mail AQ 450 form, AAMAS pe

ocketing deputy initiate

Copy to judge/magistrate judge.

courtroom
deputy’s:
initials

Date/time received in
central Clerk's Office

mailing deputy initints



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THE COURT: A

11 right. The matter is under

advisement. I will issue an order shortly.

MS. LARSON:

(Proceedings concli

I hereby cert.

correct transeript of p

Thank you, your Honor.
uded.)
CERTIFICATE
ify that the foregoing is a true and

roceedings in the above-entitled case.

F100

Maellen E. Pittman
Official Court Reporter

Date



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MR. RICHMOND: --~ to me.

THE COURT: What is your name?

MR, RICHMOND: What is your name?

THE COURT: Please be seated. We will call the case
later.

MS. LARSON: Okay.

MR. RICHMOND: I would like --

THE COURT: Be seated. Be seated.

(The Court attends to other matters on its call,
afterwhich the following further proceedings were heard in
open court:)

THE CLERK: 02 C 1559, United States versus Michael
Richmond. Motion for contempt of Rex E. Black,

THE COURT: Who represents the plaintiff?

MS. LARSON: Kari Larson for the United States.

THE COURT: And what is your name?

MR. RICHMOND: The question that was on the table is
are you calling for the creditor or the debtor in this issue.
If not, I am the secured party to this matter.

Here are the original papers that were sent, and they
are accepted and returned to the parties from which they came
from. And I ask that the order of Court be released unto me.

THE COURT: Is there anything further you wish to
say?

MR. RICHMOND: No, sir.



Court on June 26, 2002. (See R. 40.) Black's “Conditional Acceptance” is a blatant refusal to
acknowledge the validity of the injunction issued by the Court. (See id.) As further evidence of a
refusal to acknowledge the validity of the injunction, Black has failed to take any of the steps the
Court instructed. Black has failed to provide a client list to the Government, failed to post a copy
of the Court’s Order of June 14, 2002 on any of his websites, and failed to provide any of his clients
or course attendees with copies of the Courts Order of June 14, 2002 or the Government’s
Complaint. (Sge Shoemaker Decl., 2; Cantrell Decl. {13 and 5.) Based on Black’s stated as well
as demonstrated refusal to acknowledge or comply with the Court’s order, the Court finds Black in
contempt of the Court’s Order of June 14, 2002.
IL. CONCLUSION

For the foregoing reasons, the Government’s motion for contempt of court is granted.
IT IS SO ORDERED

ENTER:

Larter! poryle-

{
CHARLES RONALD NORGLE, sui

United States District Court

DATED: f 7 O-D2r-



Should Black fail to pay all fines associated with this Order, or should he fail to fully comply
with the June 14, 2002 Injunction Order, the Government is directed to file a motion, supporting

affidavit, and proposed arrest order with the Court.

IT 18 SO ORDERED

ENTER:

Lacla Aey”

CIIARLES RONALD norte, E, Judge

United States District Court

DATED:

70 -O


a. Provide the United States with a complete list of clients (including
names, addresses, phone numbers, and social security numbers or
employer identification numbers) who have purchased Contract
Business Trusts ot Family Estate Trusts, or who have obtained any
services from Fiduciary Management Group, including but not
limited to tax return preparation and trustee services;

b. Maintain the websites, www.mncep.com, www. libertyinsitute.com
www.nationalCEP.com, and display prominently on the first page of
those websties a copy of this Court’s order of injunction; and

c¢. Mail a copy of the Complaint and Injunction Order to all trust
customers, tax return preparation customers, and al! course attendees
at any Liberty Institute course from 1995 to the present.

Black has failed to comply with any of these provisions.
FINE

Beginning within 21 days from the date this Contempt Order is issued, until Black fully
complies with the June 14, 2002 Injunction Order, and until he fully pays all fines imposed pursuant
to this Contempt Order, a $2,000 daily fine will be imposed against Black, payable to the Clerk of
the Court, Michael Dobbins.

CONDITION TO PURGE THE CONTEMPT

In addition to payment of all fines imposed pursuant to this Order, the following condition

must be satisfied to purge the contempt:

1. Provide the United States with a complete list of clients (including
names, addresses, phone numbers, and social security numbers or
employer identification numbers) who have purchased Contract
Business Trusts or Family Estate Trusts, or who have obtained any
services from Fiduciary Management Group, including but not
limited to tax return preparation and trustee services;

2. Maintain the websites, www.mcep.com, www.libertvinsitute.com.

www.nationalCEP.com, and display prominently on the first page of
those websties a copy of this Court’s order of injunction; and

3. Mail a copy of the Complaint and Injunction Order to all trust
customers, tax return preparation customers, and all course attendees
at any Liberty Institute course from 1995 to the present.



*

IN TIJE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
FASTERN DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

Case No. 02 C 1559
HONORABLE CHARLES R. NORGE 2

Vv.

)
)
)
)
)
)
MICHAEL D. RICHMOND AND REX E. )
BLACK, d/b/a THE LIBERTY )
NETWORK, LIBERTY ESTATE )
PLANNING, THE LIBERTY INSTITUTE, )
FIDUCIARY MANAGEMENT GROUP, )
NATIONAL COUNCIL OF CERTIFIED — )
ESTATE PLANNERS, ASSOCIATION —)
FOR CERTIFIED ESTATE PLANNING _ )
ATTORNEYS, and EAGLE )
PUBLICATION TRUST, )
Defendants. )

ORDER
CHARLES R. NORGLE, District Judge:
Before the Court is the Government’s motion to hold Defendant Rex E. Black in contempt
of court. The Court grants the Government's motion and issues the following order.
FACTUAL FINDINGS
By an order dated June 14, 2002, the Court permanently enjoined Black from the following:
a, Organizing or sclling his abusive tax shelters, or instruction others
to sell his abusive tax shelters through Liberty Institute courses;
b. Making false statements about the tax benefits of his tax shelters;
c. Instructing or advising taxpayers to understate their federal tax
liabilities, and;
d. Engaging in similar conduct that substantially interferes with the

proper administration and enforcement of the internal revenue laws.

The order required Black, by June 24, 2002 to: