On the other hand, the agency has been far less energetic when it comes to policing its own shop. Information showing abuses committed by high-ranking IRS officers has been repeatedly ignored. Those within the agency that blow the whistle on their superiors quickly find themselves demoted and penalized. It seems that some code of conduct, not unlike that found in military organizations, permeates throughout the agency. Undoubtedly the stories of corruption that do emerge are only the tip of the iceberg concerning all of the dirty dealings that happen behind closed doors. Still, judging from the size of this tip, the iceberg in question must be enormous.
Stories of corruption and wrongdoing range from the very top of the organization to the very bottom. An investigation conducted in 1990 by the Consumer and Monetary Affairs Subcommittee uncovered incidents of abuse that involved 25 senior officials and spread across ten different cities. Included in this list was the head of the Los Angeles Crime Intelligence Division (СШ), the agency responsible for examining possible infringements of tax laws. This government bureaucrat was allegedly operating a system through which fellow clients of his personal lawyer could obtain immunity from possible tax problems by anonymously clearing their debt to society by dropping their payment in a particular lockbox. At the other end of the scale, clerical staff in Florida were successfully indicted on charges of embezzling more than US $39,000 from the agency.
Bribes in any form seem to always be in fashion with those in the employ of the IRS . They range from the US $400,000 accepted by an IRS agent who, after accepting payment, was able to see the tax matters concerning one particular Californian farmer in a more favorable light to the cool million that helped another agent come to a similar conclusion for a much harassed taxpayer in Florida. However, IRS agents have gone to great lengths to insure that the nature of their corruption is far more creative and goes far beyond simply taking bribes to reduce tax assessments.
In 1992, it was uncovered that the branch chief of an IRS compliance center had filed a host of bogus tax returns using the identity of various individuals that he knew would not file. For his trouble, he received more than US $500,000 at government expense. Of course, all of this money plus penalties and interest would have eventually become the responsibility of those whose identities were stolen in this scam. Fortunately for them, the dirty dealings of this crooked bureaucrat came to light before the IRS pointed its finger at them. Other agents in both North Carolina and California allegedly took a more involved stance in the war on drugs, albeit not on the side usually favored by government officials. They have been accused of both laundering the proceeds of drug money and using their influence to help prevent a known drug dealer from being prosecuted.
Of course, above and beyond such incidents of outright corruption, the agency is also troubled by what amounts to the sheer stupidity of those in its employ. This shortcoming leads to the inevitable result of mismanagement. One favorite tactic is to arrange for the tax returns of honest taxpayers to mysteriously become “lost in the mail” in an effort to meet quotas and deadlines. Such practices are common across the US from Texas, where 27,000 tax returns were hidden by IRS employees, to California, where 39 bags of mail suffered a similar fate, to Philadelphia, where the more expedient method of simply tossing returns into the trash was used. Of course, such abuse by government employees still results in fines and interest payments for the taxpayers concerned.
As far as the agency is concerned it can do no wrong. It overlooks minor details, such as the fact that it openly admits to having lost over two million returns in 1989. It would rather not discuss the fact that in 1987 it spent a great deal of time and taxpayer money searching for a taxpayer who eventually turned up at his last known address, a federal penitentiary. Instead, the agency and the government behind it would rather get on with the business at hand, that of putting ever greater distances between you and your money.
The fact that the restrictive legislation introduced in the name of the war on drugs is here to stay underlines the basic need for reports such as this. In the modem predatory world, privacy has become a valued commodity that you can never have too much of, even if you have nothing to hide. Just as you can never be too rich or too good-looking, you can never have too much privacy.
Once upon a time, two good friends, let’s call them Henry and Howard, were relaxing in the living room, discussing architecture and the passing of the seasons. Occasionally they would glance out into the big garden to enjoy the colors of the trees in autumn. In the middle of their conversation while they were taking in the view of the falling leaves, five police cars shrieked to a halt in front of the house, all with flashing lights and sirens at full blast. Howard opened the window to see what was going on. Three cops leapt out of each patrol car. They immediately sought cover, drew their guns and started firing round after round after round towards the house.
Howard threw himself down on the floor, but Henry kept still in his chair with his legs crossed and a glass of port in one hand. He was still enjoying the view when Howard yelled, “Get down, get down NOW!”
“Why?” asked Henry, “I didn’t do anything wrong!”
This little tale is a fairy tale. Of course anyone in dear Henry’s situation would seek cover the minute bullets started flying. The irony is that while most people would be sensible if presented with such a life threatening encounter, they do not exhibit a similar instinct for self-preservation when the threat is more subtle, even though the result can often be equally disastrous. Not all use common sense or demonstrate rational thinking when the issue turns to personal and financial privacy. Most of those who will seek cover when the police start firing, do not seek cover when the tax man goes on the war path or when some other triggerhappy government bureaucrat feels like opening a case.
The fact of the matter is that you may not have anything to hide, but you would be unwise not to seek some measure of privacy. With a bloated government virtually bankrupt and out for blood-money, even the most honest taxpayer can find himself in the line of fire. Not seeking some form of cover is dangerous to your financial health. If you manage to annoy the bureaurats enough you could find yourself at the receiving end of a phoney criminal case. This has happened to thousands of US tax payers who could not prove their innocence when they were charged with scheming to defraud the IRS. All received jail sentences of at least one year. They didn’t commit a crime, but they had to do the time. All had their property attached even before the case got to court. Eventually their assets were confiscated and later sold at auction to fill the tax man’s coffers.
Do not think this won’t ever happen to you. As I will explain in greater detail in the following chapter, in criminal tax cases, unlike other criminal cases, the defendant is assumed guilty unless he can prove otherwise. This flagrant piece of human rights abuse is accepted not just in the US, but in most European countries. An OECD special session, as reported in the Wall Street Journal, even drew up a model treaty on ways the government can take your property away from you without prior trial. The way the treaty was implemented in at least one country, means that failure to file just one of some forty-five different forms automatically puts your entire worldwide assets at risk.
Do not think that privacy is only for those who have something to hide. Do not claim that low profile is for those whose dealings cannot bear scrutiny in the light of day. It may have been like that in Utopia many years ago. Today the world is simply not so. Privacy and low profile have become urgent necessities for all of us. A criminal investigation can hit any of us from out of the blue. You do not need to be a criminal. Today, it is the criminals who go free. The easiest victims to nail are hard-working citizens who prefer to be low profile in their daily dealings and don’t like to share their salary with a government or a political system with which they cannot sympathize. An unfounded out-of-the-blue criminal case can be opened on even the best of us. Usually the reasons are flimsy. Take steps today to lower your profile. Don’t put it off. No one likes to be under surveillance and no one likes to live with the fear that one day a vicious law, that never should have been there in the first place can wreck his life.
Although the US has introduced the most severe drug-trafficking and money laundering laws in the world, drug consumption continues to soar and major crime is still on the rise. What should this tell lawmakers? More importantly, what does this tell any intelligent individual? One thing is certain, these new laws and regulations do nothing to deter professional, ruthless criminals. Instead they nail the wrong victims, little people who do nothing wrong and who are certainly not crooks. This unknown side of the coin reveals that those caught in the net of reporting requirements, computer database surveillance and other spin-offs of the money laundering war are common folk. Continually, small independent businesses are victimized while criminals go free.
Those with reason to fear these new laws are small-time tax evaders and others who simply fail to notice that the world as they know it has suddenly changed. Belgian dentists who went to Luxembourg and hid a little gold left over from their fillings became victims of the new laws. So did Italian workers in Switzerland and Spanish moonlighters on Gibraltar. In short, the bureaucratic nets have time and time again captured the little guy who likes to hide a bit of his dough from the all knowing taxman. Many of those who have fallen into the new bureaucratic traps own a small import-export business or are self employed in some other way. Under the phony cry of the war on drugs, neighborhood firms, mom-and-pop stores, cottage industries and private professionals are routinely the ones who suffer. Many have already learned their lesson the hard way. The rest will soon, unless by reading reports such as this they learn to change their tactics.
By 1991, five years after the passage of money laundering legislation in the United States, the government had charged over 290 accountants, 151 CPAs and 225 attorneys. According to a recently released IRS survey conducted on the subject, most of these indictments eventually became successful convictions. Add to this list the more than 5000 tax-paying Americans who were audited and later sent to jail by the Internal Revenue Service (IRS) and you begin to get a true idea of what the war on drugs is really about. For every bona fide drug trafficker actually prosecuted, this bogus war has also nailed between 100 and 150 others, the actual number depending on the country surveyed. Again, these convictions are all brought about solely as the result of new laws supposedly introduced to stop drug barons.
The world today has more than two hundred countries. Half of these are either banking or tax havens. Of the rest, a number can be counted as financial centers. All countries have banks and banking regulations that differ. With more than two hundred places to choose from, smart criminals will always manage too get around the system in spite of any and all possible regulations or restrictions. Like rainwater, their money will always find a way to disappear. Once you understand this basic principle, you will also understand the real reason for this explosion in recent legislation. Governments around the world continue to pass these silly laws because victims are nailed every day. Only unlike the politicians lead us to believe, it is Joe Taxpayer, Johnny Lunchbucket, Jane Homemaker and all their well-meaning pals who get caught in the system.
The real injustice behind the legislation that has come about as a result of the war on drugs is that it hardly ever succeeds in doing that which the politicians tell us it is meant to do. It doesn’t catch criminals. Of course, that such laws were ever brought about in the first place underlines the fact that, even by their own admission, governments are basically inept. What exactly was Big Brother saying when he told us that he must transform a number of related financial transactions into illegal behavior? He was admitting his own inability to catch criminals in the act. As Big Brother was not clever enough to actually catch people in the process of selling drugs or committing fraud or plotting terrorist activity, he had to resort to trying to stop them after the fact when they tried to wash clean the profits from such activity.
The fact that the public allowed such legislation to go through unhindered rather than tell Big Brother to go back and do his job properly tells us much about the persuasive rhetoric of politicians. It also points yet again to the real reasons behind the war on drugs. It is only by examining the actual effects of all of this newly introduced legislation that we come to understand who the real victims are. What do all of these new laws do? Who are they meant to stop? Who needs to be afraid of them? To discover the real answers all you need do is cut away Big Brother’s snake-oil rhetoric and look closely at what effects these laws have produced on day to day life in all developed countries. To discover the real answers look at who suffers. Look at whose money is being taken away and at who is forced to turn up in tax court.
Do you see any drug barons there? Of course not. Money launderers only need fear these new laws if they don’t know how to hide. Which is exactly why these laws never affect drug lords or big time swindlers. These shady underworld characters know how to hide and how to use fall guys, middle men and ghosts. They know how to keep such a low profile that no one knows their true identity or where they live. The fact of the matter is that all of this new legislation fails miserably in its attempt to stop drug traffickers, corrupt kingpens, gangland bosses or top white collar criminals. Professional crooks are far too clever to get caught in such bureaucratic traps.
Do you think Pablo Escobar wet his pants when Germany enacted reporting requirements a few years ago? Do you think that drug barons were sent home quivering in their boots when Luxembourg asked banks to start reporting “suspicious” transactions? And who do you think got hurt when France decided that from now on cash deposits would be subjected to extra scrutiny? No matter how hard bungling governments try to stop crime they will never succeed with paper.
Big Brother understands these very simple concepts. He only made a show of actually trying to rid the country of drugs so that his little ruse would not be found out. Quietly, he introduced law after law that would, supposedly, rid the country of its drug problem, but that only succeeded in robbing you of yet more precious freedom. In other words, the plan worked brilliantly. If the government had actually cared about the prevalence of drugs in our society, it would have set out to create better opportunities for people so that they would not.
longer feel the need to escape into drug addiction. Although perhaps right from the start, your government understood that even this approach would have met with little success.
Drug use cannot be wiped out. Like prostitution, it has been around from the beginning and will be around long after we are all dead. Some people use drugs to seek a brief refuge from a reality that is, rightly or wrongly, perceived by them as cruel and unbearable. Others use drugs to seek relief from boredom. The fact is that there will always be some people who will take drugs of their own free will, serious and proven side effects notwithstanding. These people will in turn create a market for drugs and thus ensure their presence in our society. The obvious question, that no one dares ask, is that if drugs are always going to be here, then why not eliminate all drug related crime with one almost deceptively simple maneuver? Why not legalize drugs?
Freethinkers such as Milton Freedom have been arguing that drugs should be legalized for a long time now. Their arguments invariably make a lot more sense than those put forward by government in its war on drugs. Most people do not know that narcotic drugs only came to be outlawed at the start of this century. Sigmund Freud habitually used cocaine. Still, as far as his contemporaries were concerned, this was his own personal business, not something that society ought to interfere with through laws or regulations. Before 1913, drug use was considered a vice. Today, it is a crime only because certain politicians found that stirring up anti-drug hysteria was good for a few votes. What have their actions accomplished? Since drugs have been made illegal, their use has only increased many times over.
The use of legal drugs must also be taken into consideration. Very powerful lobbying groups ensure that killers such as tobacco and alcohol stay legal and freely available. Nicotine is responsible for more deaths than all illegal drugs combined, yet few talk about banning cigarettes. Alcohol has also destroyed far more lives than can possibly be imagined, yet history shows quite clearly that prohibition failed before and would only fail again. Similarly, even those sheltered behind the highest White House hedge realize that the war on drugs of today is a miserable failure. The cost is enormous: violence between drug traffickers, increased crime by addicts, overflowing jails, needless deaths. Not to mention the fact that this war on drugs has also produced the constant erosion of everyone’s civil rights, an invasion claimed to be necessary by those fighting and losing battle after battle.
In 1989,1 wrote in the first edition of PT that when a solution fails time after time, the only intelligent alternative is to try something else. As every other effort has failed, legalizing drugs is an issue that at least ought to be studied. Champions of legalization argue that if it is done properly governments could take the world’s largest untaxed industry out of the hands of criminals and start to exercise workable controls. In addition, through taxes on the newly legalized drugs, Big Brother could reap tremendous rewards. Indeed, it is surprising that this alternative has not at least been mumbled by the odd politician here and there. Even the likes of Bill “at least I didn’t inhale” Clinton avoids this entire issue like the plague. Some of his subordinates, however, have displayed at least a little more intelligence.
Of the pack originally appointed by Bill Clinton, Jocylen Elders is probably the one who makes the most sense when she opens her mouth. She was the first black to serve as the problems. Jocylen Elders was eventually relieved from her office in an attempt by Clinton to save his fumbling career. Her crime? She had suggested that teenagers might actually be interested in the topic of masturbation. She has since returned to teaching in her home state of Arkansas. We can only hope that at least a few of the bumbling bureaucrats in Washington actually heard a thing or two that she said during her brief stay in their midst.