As Christopher Maietta, the Justice Department prosecutor in the current trial of Las Vegas businessman Robert Kahre, was making his opening statement, the following sentence appeared on a screen inside the courtroom: “This is a case about money, greed and fraud.”
The case is certainly about money, because it involves Kahre’s use of gold coins and silver coins issued by the U.S. government to pay his workers.
The case is likely about greed as well, given that most people in life, including no doubt attorney Maietta himself, prefer more money to less.
Regarding Maietta’s claim that the case is about fraud, the facts would indicate that the perpetrator of the fraud isn’t Kahre but rather the U.S. government itself.
Under the law, fraud involves the intentional misrepresentation of a material fact, with the intention that it be relied upon, to the detriment of the victim.
Based strictly on newspaper accounts of the case, it seems that the important facts in the case are undisputed. The U.S. government issues gold and silver coins in various denominations and publicly represents that they are legal tender at face value. Kahre enters into agreements with his workers to pay them with the coins at face value. The face value of the coins significantly reduces the taxable income of the workers, placing them beneath the minimum income threshold for filing income-tax returns.
The IRS gets upset. It says that Kahre’s workers should have reported the fair market value of the coins as their income rather than the face value of the coins. If the fair market value had been reported, they would have had to file income tax returns and pay taxes on the income.
Yet, it would seem that at no time did Kahre misrepresent any material fact, either to his workers or to the IRS. In fact, it would seem that he has been up front and truthful the entire time with what he has been doing. While the IRS is obviously upset with what he did, it is difficult to determine how the facts sustain a finding of fraud.
But can the same be said of the government? I don’t think so. It seems to me that the facts indisputably establish that U.S. officials have defrauded Kahre and every other American. Here’s why:
The government has affirmatively represented to the American people that the gold coins and silver coins it has issued can be used as legal tender at their face value. Moreover, the government leads people into believing the truthfulness of that representation through actual conduct.
Let’s assume that a person owes the IRS the sum of $1,000 in taxes. He decides (stupidly) to pay the taxes in gold coins and silver coins having a face value of $1,000 but a fair market value of $10,000 in Federal Reserve Notes.
In other words, the taxpayer could go out and sell the coins for $10,000, use $1,000 to pay his taxes, and pocket the other $9,000. Instead of doing that, he simply sends the coins to the IRS.
Would the IRS refund to the taxpayer the difference between the fair market value of the coins and the face value of the coins? Of course not. The IRS would say, “This guy is incredibly stupid to use these gold and silver coins to pay his taxes, and we don’t have to refund anything because these coins are legal tender under the law.”
How can we be confident that U.S. officials would not issue a refund and instead simply accept the coins at face value (as Kahre’s workers did)? Several years ago, Kahre filed a civil lawsuit in federal court against U.S. officials. He used gold or silver coins to pay the filing fee, at their face value, notwithstanding the fact that the market value of the coins was much higher. Did the court personnel refund the difference between the fair market value of the coins and the face value? No! They kept the coins and issued no refund, obviously figuring that the coins were legal tender at face value (as Kahre’s workers did).
Thus, the government not only represents that its coins are legal tender at face value, its very own conduct lulls people into believing the truthfulness of that representation and relying on it.
Why don’t the Feds simply amend the tax code to provide that U.S. gold and silver coins cannot be used as legal tender for payroll purposes? Because that would shed light on what the Federal Reserve has done to debase its paper money over the past several decades, enabling them to effectively defraud Americans of a sizable portion of their incomes without raising taxes. It’s much more important to U.S. officials to maintain the charade of gold and silver coins as legal tender and then prosecute Americans who innocently trust that their government’s representations are true.