Opinion ID: 3066115
Heading Depth: 3
Heading Rank: 3

Heading: Trial Testimony and Verdicts

Text: George Rodriguez (Rodriguez), who pled guilty to tax evasion, served as a foreman and superintendent for Kahre’s business, Wright Painting and Drywall. According to Rodriguez, all employees were required to sign an independent contract agreement in order to receive their pay. The agreement was designed to shield Kahre and his employees from tax obligations by establishing a system of wage payments in gold and silver. Although Kahre told Rodriguez that he was an independent contractor, Rodriguez described himself as an employee of Robert Kahre’s business. Kahre had the authority to direct Rodriguez in the performance of 12 UNITED STATES V. KAHRE Rodriguez’s duties, including what work to perform and when the work was to be performed. Kahre also instructed Rodriguez regarding the timing of hiring additional workers, and regarding where to purchase supplies and tools. Kahre also had the right to terminate Rodriguez’s employment. According to Rodriguez, he and the other employees were paid in gold and silver on a weekly basis based on a system developed by Kahre and administered by Lori. Each week, Rodriguez received a single gold coin which he immediately exchanged for an envelope containing his $500 weekly salary in cash. All employees were required to accept payment in gold or silver coins, which coins were later exchanged for cash. Rodriguez never received W-2 forms reflecting his wages, and no deductions were made from his wages for income tax purposes. Rodriguez obtained tubes of gold and silver which he exchanged for envelopes of cash to distribute to the other employees. Rodriguez confirmed payroll payments after consulting payroll sheets generated by Lori. Payrolls were met with cash payments, and Rodriguez did not recall any employee who actually retained the gold or silver coins as wage payments. Heidi Molesworth (Molesworth), who also pled guilty to tax evasion, was employed in Kahre’s payroll office for five years. Kahre informed Molesworth that she was an independent contractor and she signed an independent contractor agreement. Nevertheless, Kahre paid Molesworth’s wages in gold and silver coins that she immediately exchanged for envelopes of cash. Molesworth UNITED STATES V. KAHRE 13 did not receive W-2 or 1099 forms,3 and never filed a tax return. Molesworth paid Kahre’s employees in gold and silver coins. If an employee retained the gold or silver coins, the coins’ fair market value was deducted from the cash wages due. Molesworth testified that she and Lori used false names on the payroll sheets to avoid having to pay taxes, and that it was standard procedure to use false names on employment verification forms. Although most other employees were paid using the gold and silver exchange, Molesworth and the Kahres did not use that system for payment of their own wages. Instead, envelopes of cash were prepared for payment of their wages. In addition, Robert Kahre received fees for administering the payrolls of other companies, for which he used the same coin/cash payment system he utilized for his employees. IRS Special Agent Ryan Rickey testified that, between 1999 and 2003, Kahre’s companies paid $22,382,760.42 in wages. Between 1998 and 2003, the companies using Kahre to administer their payrolls paid a total of $95,042,952.14 in wages and Kahre received $14,100,087.10 in fees. Agent Rickey also testified that return filing histories reflected that 3 A W-2 form is “[t]he form that an employer must send to an employee and the IRS at the end of the year. The W-2 form reports an employee’s annual wages and the amount of taxes withheld from his or her paycheck.” http://www.investopedia.com/terms/w/w2form.asp (last visited May 29, 2013). A 1099 form is “[t]he IRS form for reporting payments to independent contractors or interest earned on investments or bank accounts . . .” http://financial-dictionary.thefreedictionary.com/Form+ 1099 (last visited May 29, 2013). 14 UNITED STATES V. KAHRE Kahre did not file any tax returns between 1991 and 2006; Lori filed false returns from 1996 to 1999, and did not file any returns between 2000 and 2006; and Loglia did not file returns from 1998 to 2006. IRS Revenue Agent Sue Cutler estimated that, between 1999 and 2002, Kahre’s companies paid Kahre a total salary of $1,956,738, and Kahre earned $14,100,087.10 in fees from other companies using his payroll services. Agent Cutler surmised that Kahre owed $2,049,172.97 in income taxes. Because Kahre did not file any employment taxes for his businesses from 1999 to 2003, Agent Cutler calculated an additional tax liability of $7,082,138.54. In his testimony, Robert Kahre explained that he developed his payroll system after the IRS seized his property and equipment from a failed business. Kahre met John Nelson (Nelson), who authored books and taught classes about the IRS and the monetary system, and Nelson’s ideas influenced Kahre to develop the payment system at issue. According to Kahre, he developed his gold payroll system because the United States government had debauched the national currency and utilized inflation to confiscate the wealth of U.S. citizens. Kahre relied on court cases and the Gold Bullion Coin Act of 1985 that approved gold coins as legal tender. Kahre devised the independent contractor agreements to reflect that the IRS was a foreign agent for the World Bank and the International Monetary Fund (IMF). In Kahre’s view, by collecting taxes for the IRS, employers illegally served as foreign agents for the World Bank and IMF. Kahre relied on several federal statutes, regulations, and “Presidential Documents” in the process of developing UNITED STATES V. KAHRE 15 his payroll system to avoid the collection of taxes on behalf of foreign agents. Loglia testified that, like Kahre, he was influenced by Nelson’s ideas about monetary history and monetary policy. Loglia believed that Congress approved the use of gold coins as an alternative to paper currency. Because of his interest in gold payments, Loglia agreed to work for Kahre, and stopped filing tax returns in 1993, since his income, calculated in accordance with the face value of the gold and silver coins, was below the filing threshold. Loglia believed that there was legal precedent supporting the gold payment system, and he calculated his income based on the coins’ face value on the ground that coins can be legally used to pay debt. Loglia was of the view that federal statutes and the Gold Bullion Coin Act of 1985 supported the gold payment system, considering that coins were approved legal tender, and that gold clause contracts were legally authorized. Lori Kahre testified that she started to work for her brother, Robert, in 1988. In 1993, Kahre commenced paying Lori her wages in silver dollars, and Lori thought the coins were legal tender based on Congressional acts. Lori was persuaded that the coins were legal tender because a coin shop did not collect taxes when exchanging cash for the coins, and the companies utilizing Kahre’s payroll system never challenged the transactions. Initially, Lori filed tax returns based on the face value of the silver coins. In 2000, Lori determined that she received between $63 and $125 wages per week, based on the face value of the coins. Because her wages calculated on the face value of the coins were below the threshold for filing taxes, Lori did not file any tax returns between 2001 and 2006. 16 UNITED STATES V. KAHRE The jury found Kahre guilty on all counts. Loglia was acquitted of conspiracy, but convicted on the remaining counts. The jury found Lori guilty on all counts with the exception of one count of willfully attempting to evade or defeat tax.