Lynne Meredith has it—and loves to flaunt it. Her apartment in Sunset Beach, Calif., commands a to-die-for view of the Pacific. Downstairs in the garage, the 53-year-old grandmother, who earned a fortune dispensing financial advice, keeps two Porsches and a '56 Bentley, not to mention a '72 Corvette convertible that bears the license plate TAX REBL.
Now the federal government would very much like to see that vanity tag changed to CONVCTD FELN. In one of the most aggressive prosecutions mounted in recent years, the Internal Revenue Service has charged that Meredith not only failed to pay income taxes herself but—through various fraudulent schemes—she encouraged others to stiff Uncle Sam as well. At issue are a series of books Meredith wrote and lucrative seminars she ran from 1991 to 2002, in which she claimed to have proof that federal income tax was voluntary. She also showed audiences a way she said would shelter their assets from the IRS. With her trial scheduled for June, Meredith continues to insist she is the victim of a witch hunt. "I did not conspire to defraud the government," she says. "I believe the IRS is conspiring to defraud the people." IRS spokesman Gary Tang scoffs at that, saying, "This is a great case for those who pay their fair share of taxes."
As Meredith tells it, her views were shaped by her own experience. In the '70s and '80s she was a single mother living in Southern California who had a tough time making ends meet. (Married once, she has three children—Kari Dolan, 29, a teacher; Erik Knear, 27, a musician; and Jeni Meredith-Drissel, 23—by three different men.) "At the end of the year there wasn't enough money to pay taxes," she says. "I thought it was really an unfair system." So she started doing research. "I wanted to know the truth," she says. "I have a genius IQ," she claims, "and a hunger for knowledge."
Meredith drew conclusions about the tax system based on an unusual reading of the Constitution. In essence, she maintains that the 16th Amendment, ratified in 1913—which begins, "Congress shall have power to lay and collect taxes on incomes..."—has nothing to do with direct taxation of private earnings. She insists that the amendment was meant to apply to local, state and federal government workers. The trouble is that every mainstream tax expert disputes her claim. "She is a modern snake-oil saleswoman," says Gordon L. Klein, an authority on tax issues at UCLA's Anderson School of Management. "I group her with psychics and the Easter Bunny."
Nonetheless, Meredith was able to build up an impressive financial empire. In 1991 she started her company, We the People, and began traveling the country sharing her insights—for a price. She charged $50 a head for seminars and wrote and self-published three books, including Vultures in Eagles' Clothing, which she claims sold 100,000 copies at a cover price of $39.95. Her company also sold something called a "pure trust organization," which supposedly shielded income and property from tax collection, at $500 apiece. The IRS has called the trusts a tax dodge, and estimates that between 1994 and 2000 Meredith raked in $6 million from her ventures. When asked whether she failed to pay taxes on that or any other income, as the IRS contends, Meredith turns coy, saying, "I have paid all the taxes that I'm legally required to file."
In July 1998 the IRS moved to investigate Meredith. She claims in a lawsuit that federal agents kicked in the front door of her home and brandished guns at her, a charge the agency denies. In any event, she kept on operating We the People until last year, when she and six associates were arrested—on April 15, of course.
Now out on $500,000 bond and required to wear an ankle monitor, Meredith spends much of her time in her apartment, which is decorated in red, white and blue and filled with quaint items of Americana such as a Wurlitzer jukebox. "She hasn't done anything wrong," says daughter Jeni. Although she is facing a possible 85 years in prison if convicted on all charges, Meredith continues to believe that she can play a key role in a complete overhaul of the tax laws. "I want them to have a tax system that's fair, just and constitutional, one that people will want to pay," she says. "I'd sell everything I have to stand in line to pay that tax."
Bill Hewitt
Lyndon Stambler in Sunset Beach
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