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Friday, January 25, 2002
By CATHERINE WILSON, Associated Press
MIAMI A man who organized a national sales force offering purportedly tax-free trusts received a 10 1/2-year federal prison sentence Thursday for tax conspiracy and obstruction of justice.
Federal prosecutors estimate the Internal Revenue Service lost at least $5 million to the trusts created by John Ellis. Three co-defendants received sentences of 15 months to five years, and one received probation.
“He totally objects to the government in any form,” prosecutor Kerry Baron said. “Mr. Ellis is unrepentant. Mr. Ellis is dangerous. He seeks to not just live by his interpretation of the revenue laws but to market it.”
Ellis, who operated from offices in Palm Beach County, immersed himself in tax-protest literature and the federal tax code and claimed his trusts were legally justified. He said he was convinced he was right but now realizes he was wrong.
Physicians and others with income to shelter were attracted to 360 trusts created under Ellis’ plan, which promoted “sovereign trusts” beyond the reach of the IRS and U.S. tax law.
Some trust packages cost $20,000, and sales by Ellis’ American Asset Protection, International Asset Protection and Capital Strategies totaled $750,000.
At various stages of his case, Ellis had three attorneys and got rid of them. He insisted on representing himself at trial but wanted to delay his sentencing so he could “get some advice and guidance” from an attorney.
U.S. District Judge Paul Huck said he had given Ellis time to prepare “and then some” and rolled through a series of Ellis’ objections, overrulling him each time.
Baron asked for the maximum of more than 12 years for “offering himself up as a stonewall to the United States.”
Ellis blamed prescription antidepressants in part for his handling of the case until two months ago when he stopped taking them. He conceded he became arrogant, “very prideful and very stupid.”
But he repeated his defense that he often asked the Internal Revenue Service to say whether his trust business was legal, never hid anything and expected to be sued by the agency in civil court as the worst-case scenario.
“It seems like there’s a whole lot of people out there that accept my viewpoint,” he said, citing his extensive tax law research, including an anti-tax book titled “Vultures in Eagle’s Clothing.” “All I needed was for someone to tell me, ‘You’re wrong.'”
Ellis’ sister Joan spoke through tears for her brother until he stood up and said, “That’s enough, please, please.” His mother, wife and children also were present.
The judge rejected criticism of the prosecution as an attack on “some strongly held beliefs.” He recalled a trial witness who was “a very broken man as a result of what happened in this case.”
The obstruction conviction involved Ellis giving documents to his grand jurors to misdirect them and suggesting documents be hidden from them, Baron said.
Ellis also called police to say two clients were kidnapped by gunmen when they were arrested by federal marshals for skipping grand jury appearances.