By On the occasion of our 20th anniversary
By Gustavo Arellano
By R. Scott Moxley
By Alfonso Delgado
By Courtney Hamilton
By Joel Beers
By Peter Maguire
By Charles Lam
Where redemptionists start to go off the rails is in taking this promise to not be a deadbeat, backed by the collateral of human capital, quite literally. And in their worldview, not only is every American life treated as a financial instrument, but a record of the transaction is hidden in plain sight, as well. It's called your birth certificate.
The evidence offered for this can be laughable—something about names entered in all capital letters, birth certificates printed on bond paper, someone once claiming he found his social security number on a stock-tracking site.
Elvick tabulated a very precise dollar amount for the initial birth bond offering: $630,000. Apparently, that is the amount that an average American citizen will pay in income tax over the course of his or her lifetime.
But if you're making up numbers, why stop at just more than half a million? Greg Adkins, Old Quest's Orange County manager, sent an email to several customers on July 6, 2009: "Yes, your birth cetificate [sic] is a traded stock. I found mine. My birth Cetificite [sic] is worth 24.8 Million right now."
And that is the source from which you can rightfully reclaim, from the government treasury, which really is just a private corporation, money that is really yours, if you learn the secret of how to go about doing so, which the IRS does not want you to know. And the secret often has something to do with an Original Issue Discount.
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On its face, the IRS form 1099OID is a rather ho-hum document, which specialized accountants will explain to you involves something about declaring interest income derived from certain types of zero-coupon bonds upon their maturity. But properly invoked, the 1099OID is purported to hold nearly mystical powers. The Old Quest presentation explained the Original Issue Discount as something quite extraordinary: money, created from your signature. You are the issuer of the money.
Ruiz and Mendoza claimed the OID process was the "remedy" Congress was forced to provide citizens after it confiscated all their gold. The process has been known to the elite since 1933, they told customers, but not until 1954 did the IRS implement it for the rest of us. Not that the IRS wanted us to know about that.
The manner in which Old Quest went about misusing the 1099OID, however, is actually a fairly recent innovation, first cropping up in various noteworthy tax schemes around 2005. Since then, true believers and profiteers alike have confidently stated they have finally discovered the true, proper, legal, effective method of achieving what Roger Elvick failed to.
"These kinds of scams have the pattern of growing very large, very fast," Todd says.
It's hard to say exactly why the 1099OID form was deemed the proper vehicle to access secret accounts. If there is a logical train of thought, it is one predicated on conspiracy upon conspiracy. Sensible and knowledgeable tax professionals would have to presuppose too many absurd facts to make sense of it.
But the way the process actually works isn't too complicated at all—you just enter some numbers in the wrong boxes on a tax form, make up others, add them up to a huge refund, and then have your client sign on the line at the bottom.
Old Quest's founders hardly invented this scheme or the sinister, quasi-historical narrative that provides its intellectual underpinnings. But Ruiz and Mendoza proved extremely savvy businessmen, implementing their operation in an extraordinarily efficient, organized and entrepreneurial manner. With aplomb, they built a thriving business that employed a considerable staff of presenters, sales associates, tax preparers, regional managers and recruiters. They also introduced customers to a number of faux tax professionals—all claiming to be tax attorneys, former IRS staffers and CPAs—which spoke to the program's validity.
Once Old Quest signed up a new client from a seminar, staffers would follow a detailed process sheet that outlined each step in shepherding the account from return to refund. The taxpayer's documents would proceed through multiple departments handling stages of the sophisticated process designed to bypass IRS safeguards.
At trial, Assistant U.S. Attorney Joshua Robbins described the Old Quest operation as "like a factory, an assembly line of false statements that defendants put in place."
The first stage involved creating a file for the new client containing past mortgage statements, tax returns, financials and deed of trust. The processor would then walk the file to Old Quest's OID Department, where a so-called "OID Technician" would begin preparing 1099A and 1099OID forms by inputting financial information in accord with the company's inverted guidelines.
The preparer would list the client as the lender on all the loans, and the financial institutions that issued mortgages as the borrowers. Old Quest customers, many of whom earned just above minimum wage, were represented as having loaned hundreds of millions of dollars to major banks and subprime lenders.
The process sheet instructed the tax preparer to enter the original amount of all the client's loans into the Original Issue Discount box—the amount of interest income supposedly earned on an investment bond—and then to subtract $100 from that amount and enter the slightly reduced value as federal income tax withheld by the payer of the bond.