Scheme to avoid paying taxes ends in disbarment

A southern California attorney whose online anti-tax programs drew the attention of federal officials and resulted in a permanent injunction has been disbarred. EDUARDO MARMOLEJO RIVERA [#52737], 63, of Torrance lost his license Aug. 17, 2006, after a federal court concluded that he violated tax laws by advising his customers not to file federal income tax returns and not to pay federal taxes.

Since 1991, Rivera has operated an anti-government Web site that focuses on abusive judges, government propaganda and religion, and offers an internet law school affiliate program and links to the Sovereignty Education and Defense Ministry, a group that appears to emphasize religious freedom and the separation of powers.

Rivera found himself in trouble for selling tax schemes that purported to exempt his customers from federal taxes.

He sold opinion letters — for anywhere from $100 to $2,000 — designed “for use in avoiding criminal charges, for submission to the IRS and for persuading bankers to resist IRS collection efforts,” according to the bar court. He advised his customers to rely on the letters as part of a demand that their employer stop withholding taxes.

For $100, a buyer could purchase one letter, delivered electronically, and for $150, a single letter sent by mail. For $500, a buyer received four letters, including research and a motion to dismiss a federal indictment, and for $1,000, he received four letters, research, a dismissal motion and documents “to establish business and personal non-liability.”

For $2,000, customers received a “COMPLETE PACKAGE of opinion letters, agent letters, lien, levy, lawsuit and employer kit.”

In 2003, the federal government sued Rivera civilly for preparing and selling abusive tax schemes. It won a permanent injunction against his activities after the court found he was impeding the IRS’ collection efforts.

The six customers involved in the government case owed more than $9.5 million in tax, interest and penalties. The court concluded that Rivera made numerous false and misleading statements about internal revenue laws, including:

• only federal employees are subject to federal income taxes;
• private sector employers are not required to withhold federal taxes from their employees;
• filing federal tax returns is voluntary;
• people cannot be convicted of tax crimes because federal district courts do not have judicial power over residents of the 50 states;
• the IRS does not have the authority to collect taxes; and
• violation of tax laws is not a crime.

Rivera also advertised that for $3,500 a year, he would represent clients before the IRS. He sent the IRS letters on behalf of several clients that claimed they were entitled to a refund and challenged IRS attempts to collect taxes. In the letters, Rivera said there is no public law that imposes income tax or any other tax measured by income, wages or earnings.

The federal court found little doubt that Rivera’s opinion letters “are without merit and have been universally rejected by the courts. [His] statements are knowingly false and fraudulent and they ‘strike at the very heart of the internal revenue laws.’”

Bar court Judge Richard A. Platel found that Rivera interfered with the enforcement of Internal Revenue laws, advised violating the law and made misrepresentations, committing acts of moral turpitude. He intentionally and knowingly dispensed erroneous legal advice, Platel said, that could subject his customers to civil and/or criminal liability. The court also found that he violated his fiduciary obligation to disclose that his beliefs were contrary to law.

Rivera’s actions involved moral turpitude, Platel found, and he violated the Rules of Professional Conduct by advising people to violate the law.

During Rivera’s trial before the bar court, he said he still sells his material to customers who can do with it what they wish, although he claimed the letters do not appear on his letterhead.

In recommending his disbarment, Platel said Rivera’s “insistence in misinterpreting the Constitution, important laws and significant court opinions in such a way as to fit his needs and those of his customers/clients will clearly negatively impact not only his future customers/clients, but law, the courts and the legal profession.”

Rivera also was disciplined twice in 1994.