Truth about payroll scam puts tax protester, partners in prison

When his lawyer called Robert Kahre a hero, the odor of something organic and overripe wafted into U.S. District Court.

When psychiatrist Karen Cruey diagnosed Kahre as delusional, she was onto something. When last week consummately compassionate U.S. District Judge David Ezra described Kahre's elaborate tax-evasion scheme "too clever by half," it was a sign the plain truth had finally sprouted from the pile of horse manure Kahre generated under the guise of something nobler.

At the end of Kahre's pathetic jousting with the tax man, after years of scheming while dreaming of the ultimate con, he was convicted on 57 felony counts, sentenced to 15 years in federal prison, and took some of his family down with him. While I'm certain some of those who get their information from the fuzzy end of the radio dial will cling to the thought Kahre was a patriot, tax protester, and constitutional scholar, the facts make it painfully clear he was a con man whose payroll scam not only laundered $120 million around the tax code, but also generated a substantial score for himself along the way.

Kahre's debts came due following a trial that, despite the best efforts of Texas accountant Wayne Paul, cut through the funky fog to reveal what IRS Criminal Investigation Special Agents Jared Halper and Ryan Rickey called "a typical, under-the-table cash payroll" scheme. Judge Ezra said it was the most transparent tax scam he had ever witnessed.

Like most tax scammers, Kahre tried to exploit the IRS provision that enables filers to make sincere mistakes without triggering a criminal penalty. In other words, if you do some research and sincerely believe you've followed the rules, your error isn't a crime but can result in an administrative or civil penalty.

Kahre used the face value of gold and silver coins for tax dodge purposes, then peeled off cash to thousands of construction workers without deducting the proper Social Security and other payroll taxes. Bags of money were regularly sent by armored truck to Kahre's warehouse, where he played paymaster for dozens of construction outfits. His company essentially stuffed cash into envelopes and kept a whopping 15 to 20 percent off the top.

That's one pricey patriot.

It wasn't a tax protest. It was a racket.

The millions Kahre made paid for a luxurious Las Vegas home and a compound in Oregon with several houses, all purchased for cash under different names to obscure the source of the money.

For years Kahre worked angles to avoid paying taxes. He filed documents, got regularly rejected, and eventually resorted to harassing federal judges and IRS agents. He also picked up his share of followers.

When he crafted the gold and silver coin scam, he enlisted willing business partners. Perhaps some dreamed he would come up with the ultimate tax loophole, but plain greed motivated others.

In the end, thousands of construction workers' Social Security taxes weren't paid. They will pay the price for the Kahre scam.

Kahre's sister, Lori Kahre, was sentenced to six years. His co-defendant, promising law student Alex Loglia, was sentenced to 26 months. Kahre's wife, Danille Kahre, received five years probation. If not for Judge Ezra's compassionate hand, it might have been harsher.

If you want to change tax law, have at it. If you want support to lower the tax burden, count me in.

But if you still entertain the daffy notion you can avoid paying taxes by reinterpreting the Constitution, boycotting the Federal Reserve, beard-stroking about the face value of gold and silver coins, and calling the secretary of the Treasury a "foreign agent," there may be a prison cell waiting for you.

Make that a padded cell.

John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/smith.