Friday, June 04, 1999
Couple sentenced for tax evasion
Colerain pair joined anti-IRS society, quit filing returns in '91
BY BEN L. KAUFMAN
The Cincinnati Enquirer
Defense attorneys Thursday saved a tax-averse Colerain Township couple years in prison, but failed to win probation for them.
Daniel K. Stewart and Donna G. Stewart each must serve 18 months for tax conspiracy and evasion.
U.S. District Judge Herman J. Weber also ordered the couple to reimburse the Internal Revenue Service (IRS) $129,000 — what he calculated were unpaid taxes covered by the convictions.
Then he fined them each $41,750 and freed the couple while they appeal.
It could have been a lot worse, given the prosecution's tax-loss estimate of more than $400,000. Using that government figure, probation officers said federal sentencing guidelines recommended a prison term of 46-57 months for Mrs. Stewart and 33-41 months for her husband.
However, defense attorneys Jeffrey A. Dickstein and Lowell H. Becraft Jr. convinced Judge Weber that the government overstated the loss and related issues. That cut the sentencing range to 18-24 months.
Joe Sabino, 72, of London, Ohio, who helped with a sham trust used by the Stewarts, was put on five years' probation.
The Stewarts, in their mid-50s, said they quit paying taxes in 1991 and concealed their income and property in trusts, asset sales and other dodges because the Pilot Connection Society “duped” them into embracing its “un-taxing” plan.
They blamed their credulity and James C. Morris, a Pilot Connection true believer and salesman. He is to be sentenced on tax charges on June11.
When the Stewarts drew attention by sending anti-tax Pilot Connection form letters to the IRS, an agent warned them they faced prosecution.
The Stewarts hired a lawyer and sought to undo the damage but they said the IRS was more interested in prosecuting than settling.
Justice Department attorney Dana Boente responded that evidence from last year's trial refuted that explanation, not least because Mrs. Stewart was an “aggressive” Pilot Connection advocate, not a dupe.
If the Stewarts lose their appeal, they can return and renew their request for staggered sentences. That would allow one of them to run their firm, Danco Transmission Specialists, on which they and 25 families depend for a living.
An issue to be appealed involves their convictions for tax evasion.
Mr. Dickstein said the Stewarts followed their attorney's advice and refused to file 1991 and subsequent returns after being told they might be prosecuted.
They acted within their rights, Mr. Dickstein said, because filing would have violated the Fifth Amendment ban on self-incrimination if IRS based new charges on those returns.
Had IRS not refused immunity for those returns, the Stewarts would have filed promptly, he added.
An appellate victory on the self-incrimination argument could overturn the tax evasion convictions and the couple would be eligible for probation if their conspiracy convictions are affirmed.
Finally, Judge Weber refused to drop or suspend his $129,000 reimbursement order after Mr. Dickstein said the judge lacked authority to order taxes paid before returns are filed and taxes are assessed.
Founders of the Pilot Connection — an aggressively marketed national tax-avoidance scheme — have been convicted of tax charges in California, and the society and its successor organization have folded.
Still, hundreds of Tristate residents, who haven't been prosecuted, are trying to sort out IRS problems arising from their belief in Pilot Connection anti-tax arguments and tactics.
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