NINTH CIRCUIT AFFIRMS ORDER ENJOINING IRWIN SCHIFF
AND TWO ASSOCIATES

WASHINGTON D.C. - The United States Court of Appeals for the Ninth Circuit today affirmed a federal district court preliminary injunction barring Irwin Schiff and two associates, Cynthia Neun and Lawrence N. Cohen, from selling their tax scheme, which according to the court’s holding fraudulently claims that paying federal income tax is voluntary. The preliminary injunction bars Schiff and his associates from: 1) advertising or selling Schiff’s “zero-income tax return” plan; 2) preparing tax returns for others; and 3) assisting others to violate the tax law, including by “selling services, books or other materials that provide direction about how to fill out fraudulent or false tax forms.” The preliminary injunction also requires Schiff, Neun, and Cohen to provide a copy of it to each of their customers, to post it on their websites, and to provide the government with a list of their customers.

The Ninth Circuit rejected Schiff’s contention, also asserted by the American Civil Liberties Union in a “friend of the court” brief, that the injunction violated the First Amendment because it prohibited the sale of Schiff’s book, The Federal Mafia. The court held that the portions of the book that the government sought to enjoin were “fraudulent commercial speech” and as such were not protected by the First Amendment. The appeals court also held that it was not a violation of the First Amendment for the lower court to require Schiff to post the injunction on his website.

“Today’s decision affirms the government’s ability to take action against tax scams,” said Eileen J. O'Connor, Assistant Attorney General for the Justice Department’s Tax Division. “As the Supreme Court recently held in a unanimous decision, ‘the First Amendment does not shield fraud.’”

In issuing the preliminary injunction, the United States District Court for the District of Nevada had found that the promotion of Schiff’s scheme “has involved over 3,000 individuals and an estimated $56 million in attempted tax evasion,” further noting that “a number of individuals have been convicted of tax crimes after following Schiff’s theories.”

For more information on this case and for information on other tax-scam enforcement actions, go online to <http://www.usdoj.gov/tax/03_tax_167.htm>

###

04-551