Redemption movement

The redemption movement is an offshoot of Posse Comitatus, an American right-wing populist organization established in 1969 by leaders of the white-supremacist Christian Identity sect. The Posse denounced income tax, debt-based currency and debt collection as tools of Jewish control over the country.[4] It found an audience among farmers hit by an agricultural recession during the 1970s and 1980s. One such supporter was Roger Elvick, a former North Dakota farmer who had lost his farm in a business deal.[5][6] He became the national spokesman for Committee of States, a Posse successor organization that engaged in open rebellion against tax authorities.[7] Elvick sold a book, The Redemption Package, that encouraged people to claim large refunds and information rewards from the Internal Revenue Service (IRS) and then pay their debts with "sight drafts" (worthless checks) issued by his own company, Common Title Bond & Trust. Elvick was convicted and imprisoned for his activities, as were several of his accomplices.[8][9][10][11]

Debt cancellation schemes and prosecutions similar to Elvick's continued through the 1990s, including Family Farm Preservation[12] and the Montana Freemen.[13] Elvick resumed his activities after his release in 1997, giving seminars around the country, and the use of redemption schemes surged.[14] The state of Ohio charged him with corrupt business activity in 2005 and he was sentenced to four years in prison.[15]

By the late 1990s, the belief in a secret bank account had become a fixture of redemption schemes. The origin of this idea is not clear, but elements of it appeared in Lodi v. Lodi (1981, Shasta County, California). In that case, plaintiff Oreste Lodi sued "Oreste Lodi, Beneficiary," produced a birth certificate as evidence that the defendant controlled his estate, and served his complaint upon the IRS. The Shasta County Superior Court dismissed plaintiff Lodi's case for failure to state a claim. An appeals court upheld the dismissal, agreeing that "Plaintiff's birth certificate did not create a charitable trust" and that the case was a "slam-dunk frivolous complaint."[16]

The details of redemption schemes vary, but they typically rest on the same assumptions: (1) a distinction between a living individual and a corresponding legal person or "straw man," (2) valuable property associated with the legal person, but rightfully belonging to the individual, and (3) a supposed procedure by which the individual can claim the property to pay debts. Promoters justify these assumptions with elaborate historical tales. The most common explanation claims that the United States went bankrupt when it abandoned the gold standard in 1933 and started using its citizens as collateral so that it could borrow money.[1]

Supposed procedures for using the nonexistent "straw man" funds include:

• Filing a UCC-1 financing statement or UCC-3 amended statement against the straw man[17]
• Passing a birth certificate or other official document as if it were a bond[18]
• Submitting documents to the Secretary of the Treasury[17]
• Asserting copyright on a name[19]
• Paying bills with self-printed or promoter-printed checks known as bills of exchange[1] or sight drafts[20][17]
• Charging bills to a "Treasury Direct Account" identified by a Social Security number[21]
• Returning bills, collection letters and court notices with "accepted for value" and other language stamped or written across them[17][19]
• Reporting the funds as tax withheld via Form 1099-OID to offset tax liability[22]
• Corresponding with red ink[19]

When participants find themselves worse off after following the procedures, they are often told that they have followed them incorrectly.[23]

The United States government has successfully prosecuted and convicted a number of redemption scheme participants. The convictions include forgery, providing false information, passing fictitious financial instruments, defrauding the United States, counterfeiting, impeding administration, filing false tax returns, money laundering and wire fraud.[9][10][11][20][24][25][26]

Aside from the risk of criminal charges, redemption processes also fail to discharge debts. In a frequently-cited 2007 foreclosure case, a debtor attempted to pay her home mortgage with a redemption "bill of exchange" at the suggestion of promoter Barton Buhtz. A United States District Court concluded that "the legal authorities Plaintiff cites and the facts she alleges suggest that she did not tender payment, but rather a worthless piece of paper. Other courts addressing claims nearly identical to Plaintiff's have found likewise."[27]

To caution people away from redemption schemes, several U.S. agencies have issued warnings against them. Both the Federal Bureau of Investigation (FBI)[23] and the TreasuryDirect web site[21] have posted statements that redemption schemes are fraudulent. The Inspector General of the Treasury,[28] the Federal Trade Commission,[29] and various Federal Reserve Banks[30] have warned that the Treasury and the Federal Reserve Banks do not maintain draft accounts for individuals and will not honor any individual drafts. The IRS has announced that attributing tax liability to a "straw man" is a frivolous position[31] that can result in a $5,000 administrative penalty,[32] and it included the Form 1099-OID variation of the redemption scheme in its "Dirty Dozen" list of prominent tax scams every year from 2009 to 2019.[33][34] The Comptroller of the Currency has noted that, in addition to being fraudulent and ineffective, redemption schemes can be used for identity theft.[35] Outside the US, the Reserve Bank of New Zealand responded to a 2017 information request by stating that birth certificates are not investment securities and that redemption processes are scams.[36]

• Cheque fraud
• Tax protester (United States)
• "Capital letters" argument
• Paper terrorism
• Freemen on the land
• Swissindo

• FBI page on the Sovereign Citizen movement