FOR IMMEDIATE RELEASE TAX THURSDAY, JUNE 27, 1996 (202) 514-2008 TDD (202) 514-1888 LEADERS OF 'PATRIOT' TAX PROTEST SCHEME HIT WITH HEAVY SENTENCES WASHINGTON, D.C. -- Severe penalties have been imposed on the organizers of a so-called "patriot" tax protest scheme that is estimated to have cost the Treasury as much as $50 million and defrauded participants of $10 million in fees. On Wednesday, Federal Judge Vaughan R. Walker in San Francisco sentenced Phillip Marsh, age 72, also known as Milton Pilot, Jr., founder and leader of the Pilot Connection Society, to 17 years in prison and his wife, Marlene, age 60, co-founder and marketing director of the organization, to 14 years in prison. Bail for both Marshes was revoked and they were taken into custody. Selling an "Untax Package," which the Marshes guaranteed would permanently and legally remove the purchaser from the obligation to pay federal or state income taxes, the Society enrolled over 12,000 members, disseminating its anti-tax, anti- government message in a series of seminars and on national television. The "Package" included detailed instructions on how to commit tax evasion under the guise of being a "First Amendment" organization. The defendants all stated they were part of the Patriot movement. "This successful prosecution of one of the nation's largest illegal tax protestor organizations sends a clear message to those who would cheat or counsel others to cheat the government that they will be held fully accountable for their crimes," Attorney General Janet Reno stated. At a ceremony at the Justice Department today, the Attorney General will bestow the Department's John Marshall Award for Litigation to the trial team that tenaciously pursued the Pilot Connection Society case: Sandra Teters and Thomas Carlucci, Assistant U.S. Attorneys in the Northern District of California, and Steven P. Ward, Senior Trial Attorney in the Justice Department's Tax Division in Washington. Altogether, six defendants were convicted on 72 counts of tax evasion, mail fraud, conspiracy to defraud the United States, and related charges after a six-week trial that ended in December 1995. Other than Phillip and Marlene Marsh, those convicted were: Darrell Spencer, age 28, of Sunnyvale, California, the General Manager of The Pilot Connection Society and the Marshs' son-in-law. Spencer was sentenced to 7 years. Jill Spencer, age 29, wife of Darrell Spencer, also of Sunnyvale, the Office Manager, received a sentence of 7 years. John Campion, age 62, of Las Vegas, Nevada, the National Coordinator of sales training. Campion received a sentence of 5 years. Douglas Carpa, age 50, of Tempe, Arizona, a self-styled trust promoter who provided sham trusts to The Pilot Connection Society members to be used to conceal assets from the IRS. Carpa was sentenced to 4 « years. Assistant Attorney General Loretta C. Argrett, in charge of the Tax Division, said, "These individuals perpetrated a fraud on the American taxpayers, and this successful prosecution demonstrates the government's commitment to ensuring the integrity of our tax system." The Pilot Connection Society, which touted itself as the largest "patriot" organization in the nation, was headquartered at various times in San Jose and Stockton, California and Parker, Colorado. It operated from April 1990 through December 1993, selling its "Untax Package" through a multi-level marketing system that utilized sales personnel and franchise operators in several parts of the nation. Approximately 4,000 individuals purchased the "Untax Package," which sold for as much as $2100. This case was investigated by personnel of the San Francisco and San Jose Districts of the Internal Revenue Service and the United States Attorney's office in San Francisco, as well as by the Tax Division of the Department of Justice. Michael J. Yamaguchi, United States Attorney for the Northern District of California, said: "We have taken a big step toward ensuring the integrity of our tax system and rooting out those who abuse and manipulate the legal process." Yamaguchi noted that the Marshes and Jill Spencer were also convicted of filing "commercial liens" against the judges and Internal Revenue Service employees during the course of the investigation. "Commercial liens, which are bogus documents filed in county recorders' offices to attempt to cloud title to property, have become a popular harassment device employed by tax protestors in recent years," said Yamaguchi. This sentencing closely follows the sentencing in Dallas in May of eight Pilot Connection Society Associate Members, franchisees who held the "rights" to market the "Untax Package," Package," who were convicted on a similar charge of conspiracy to defraud the United States. U.S. District Court Judge Barefoot Sanders sentenced five of the eight defendants to eight-years incarceration; one defendant to nine years and the eighth defendant received three years. This brings to 34 the total number of The Pilot Connection Society members who have been charged with criminal tax offenses or other criminal offenses. Thirty were convicted on federal criminal tax offenses; two others were convicted on state charges in Colorado and Nevada, and two were acquitted. Assistant Attorney General Argrett noted that The Pilot Connection Society had aggressively spread its anti-tax message on such television programs as "20/20" and "The Jerry Springer Show," as well as through local media. Ted Brown, Assistant Commissioner, Criminal Investigations, Internal Revenue Service, stated that "When individuals attempt to interfere with good government, it is important that we send a loud message that it will not be tolerated." ##### 96-311