On Monday, five people who were associated with a tax fraud group known as "We the People" were sentenced to federal prison for promoting bogus tax shelters that falsely promised to limit exposure to federal income taxes.

The leader of the operation, Lynne Meredith, was sentenced to ten years in prison. A federal jury convicted Meredith last year of conspiracy, mail fraud, using a false social security number, making a false statement in a passport application and failing to file a tax return.

Meredith and her co-defendants were sentenced Monday afternoon in Los Angeles by U.S. District Judge Dean D. Pregerson. In sentencing Meredith, Judge Pregerson said her ideas on U.S. tax laws were "delusional." He further added that the defendants were motivated by greed, and that the stiff sentences in the case were warranted by the serious harm the defendants caused to their customers and to government institutions. The Judge also noted the importance of deterring other tax protest organizations that mislead taxpayers into violating tax laws.

The evidence that was presented during the 13-week trial showed that beginning in 1991 and continuing until April 2002, Meredith conducted seminars at which she sold books and bogus "pure trusts" to people with the intention of leading them to believe they could legally shield income and assets from taxation. Meredith and her co-defendants also encouraged and assisted taxpayers by forming phony "pure trusts," opening bank accounts with phony Taxpayer ID numbers, filing fraudulent income tax returns and encouraging taxpayers to stop filing income tax returns.

We the People sold the "pure trusts" for approximately $500 to $1,000 at seminars held throughout the U.S. and overseas. To entice potential "trust" purchasers at seminars, Meredith told them that each "trust" was customized for the particular customer, who would retain complete control over their businesses and assets placed into the trust without incurring any tax liability.

She also encouraged taxpayers to file frivolous tax returns, falsely report that taxpayers did not have any taxable income and fraudulently requested a refund of all income taxes paid. The defendants also encouraged taxpayers to send protest correspondence to the IRS for the sole purpose of impeding and obstructing the IRS from collecting taxes owed by them.

Meredith was the author of several books, including "How to Cook a Vulture" and "Vultures in Eagle's Clothing", in which she falsely claimed that individuals could lawfully stop paying income taxes, prevent their employers from withholding income taxes, and refuse to deliver books and records to the IRS.

The defendants falsely told their customers that paying taxes is "voluntary," and that they could file a W-4 or W-8 form with their employer claiming to be exempt from federal income tax withholdings. In fact, under federal law, anyone who earns income over $8,000 must file a tax return and pay taxes. The customers who purchased and used the "pure trusts" to hide income are now facing serious financial penalties and interest for the income taxes they failed to pay.

The jury heard evidence that Meredith and her co-conspirators earned more than $8.5 million as a result of the scheme. Meredith did not file federal income tax returns between 1991 - 2002, nor did she pay any federal income taxes. Furthermore, none of the other defendants in the case filed or paid any income taxes on income they earned from the scheme.

The prosecution of this case reflects on how the IRS is increasing its focus on the anti-tax movement. Although courts continuously reject frivolous arguments such as those presented by Meredith, the use of false, misleading and unorthodox tax advice has gained followers.

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