IRS Sends ‘Sovereign’ Inmate $327,456, But Not For Long

Everyone has heard of jailhouse lawyers. How about a jailhouse accountant – an antigovernment “sovereign citizen” doing time in New York – who got a $327,456 tax return from the IRS?

Ronald Williams not only filed 12 fraudulent tax returns for himself while behind bars, he also reportedly helped at least 10 other New York state prison inmates with their tax returns, testimony revealed at his just-concluded trial.

In a supposedly cashless prison environment, Williams was paid in canned food and stamps for his accounting expertise, investigators learned.

But his bogus scheme – apparently based on the false notion that prison bonds underwrite an inmate’s incarceration and can somehow lead to their freedom – came to an abrupt end when the staff at the Camp Gabriels Correctional Facillity in northern New York opened Williams’ mail and spotted the $327,456 refund check. That led to a federal investigation and indictment.

Williams was convicted last week in U.S. District Court in Syracuse, N.Y., of 11 counts of filing false tax returns and one count of helping another prisoner do the same. The conviction could keep Williams in prison for as much as five more years.

While IRS refund checks can be spotted in routine screening of inmates’ mail, those inmate returns sent to their family members or post office boxes are beyond the reach of authorities, and can be quickly cashed.

It’s just the latest case showing how the sovereign citizen movement – considered by the FBI to be the most dangerous domestic terrorism threat and composed of people who don’t believe most federal criminal and tax laws don’t apply to them – is even extending its tentacles to the nation’s prison systems.

No one seems to know exactly how much such fraudulent filings, including those from prisoners, are costing. In the latest public discussion of the topic, the Internal Revenue Service said that a computer program glitch intended to catch fraudulent filings wasn’t working in 2006 and only some 34% of the fraudulent claims filed the previous year were caught. That loss to the government was estimated at $200 million to $300 million.

Meanwhile, the growing legions of sovereign citizens and their anti-IRS allies in other antigovernment extremist groups continues to challenge the system.

A sovereign citizen web site, “American’s Bulletin,” has sold a $22 booklet specifically targeting inmates. The publication encourages prisoners to file liens and complaints – not only clogging the court and legal system, but also instructing them how to walk away with cash while in prison.

The fraudulent underlying premise is that – somehow – the government holds accounts on each prisoner’s behalf. The story line suggests that by filing for large income tax returns, these accounts would be closed and the prisoner magically released from prison.

Williams’ attorney, assistant federal defender James Greenwald, told a jury that his client wasn’t trying to get a refund from the IRS, but simply believed in the scheme promoted by “American’s Bulletin,” The Post-Standard of Syracuse, N.Y., reported. The America’s Bulleting article was co-authored by “Obi-Wan Kenobi,” a reference to the character from “Star Wars” series that also brought us Darth Vadar, light sabres, Jedi, death stars and The Force.

“I’m not here to tell you it’s true,” Williams’ defense attorney told the jury, “but Ronald Williams believed it to be true,” the Syracuse newspaper reported.