They began their meetings with a prayer and the Pledge of Allegiance. Then they passed out copies of the Constitution and studied the wording of obscure Supreme Court decisions. Their message was beguilingly simple: The government has no right to your wages. The country's tax system is a fraud.
"We believe the income tax is doing nothing but destroying the country," explained Charles Shugarman, the soft-spoken ex-president of a tax protest group called the Virginia Patriots. "One of our goals is to abolish the Internal Revenue Service."
Last week, Shugarman and two other Patriot leaders, James R. Dubose Sr., 56, of Newport News, and his son, James R. Dubose Jr., 32, an Army platoon sergeant at Fort Lee, were on trial in federal court here charged with running a series of illegal "tax fraud mills." In exchange for $200 membership fees, Shugarman and his colleagues allegedly instructed hundreds of residents in the Richmond and Tidewater areas -- many of them, like Shugarman, employes of Newport News Shipbuilding and Drydock Co. -- on how to dupe the IRS and file false income tax returns claiming big refunds from the government.
In total, Virginia Patriot members filed returns claiming $430,000 in refunds during 1983 and 1984. The IRS paid out about $250,000 before it cracked the scheme. After a week-long trial, embellished by testimony from undercover IRS agents who "infiltrated" the group, the Patriot trio was convicted on virtually all counts, handing the government its latest victory in a 10-year-old war against organized tax protesters.
For IRS officials, the conviction provided new hope that they are finally close to dousing a rebellion that only a few years ago was threatening to get out of control. In the mid 1970s, the IRS first set up a special Illegal Tax Protester Program to crack down on a rash of protest groups that, inspired by offbeat constitutional and legal theories, were preaching open defiance of the tax laws.
Despite the government's best efforts, though, such groups only seemed to multiply. In 1980, the IRS identified 17,222 tax protesters -- persons who either refused to file tax returns on political grounds or filed false returns that identified them as members of a tax protest group. By 1982, the figure had nearly tripled to 49,213, and it jumped again to 57,754 in 1983.
But last year, the number of tax protesters declined for the first time to 52,242 -- a direct result, IRS officials say, of court rulings that repudiated the protesters' constitutional claims and a wave of criminal prosecutions by the Justice Department.
"The fact is, the illegal tax protesters have lost their credibility," said Larry Batdorf, an IRS spokesman. "They've been beaten down, not once, but repeatedly, by the courts."
The most notorious of the tax protester groups was the Posse Comitatus, a violent hate organization that grabbed national headlines two years ago when one of its members died in a fiery Arkansas shootout that killed two U.S. marshals. But others adopted far more subtle and ingenious forms of protest.
In one case, Thomas K. Williams, a Richmond, Va.-based former pastor in the Worldwide Church of God, set up something called Liberty Ministries, a mail-order ministry that, for $3,000 a piece, would send customers a minister's certificate. Along with it would come instructions on how to donate all your income to your ministry and then claim it as a tax-deductible religious contribution.
Yet another group, called the Committee for Constitutional Taxation, urged its followers to refuse to file tax returns by citing the Fifth Amendment protection against self-incrimination. Others urged their members to refuse to file on the grounds that, because the government had abandoned the gold standard, their dollar incomes were worthless anyway.
"These folks like to make nuisances of themselves," said John McDougal, a lawyer in the IRS's Richmond office who helped prosecute the Patriots. "Many of them believe we should go back to the system we had 200 years ago. . . . But the fact is, any one of them can cause a lot of work for the agency."
In fact, IRS officials say more than 200 auditors and agents work exclusively on protest cases, including 16 workers in each of the agency's 10 service centers to screen protester returns and a "protest coordinator" in the district offices in each state to head up investigations.
It took more than two years of work by the protest team in the IRS' Richmond office to bust the Patriots. An offshoot of a loosely organized nationwide Patriots Network that was founded by a now-debarred South Carolina lawyer named Robert Carlson, the Virginia group first became active in the Tidewater area about three years ago.
Its leader, Shugarman, 39, was an unlikely rebel -- a mild-mannered former music student who once was a drummer in the band for television evangelist Pat Robertson's 700 Club show. He later landed a job as a radiological control technician working on nuclear submarines at the Newport News shipyard.
Along the way, he converted to Carlson's tax protest philosophy -- a conversion inspired in part by his discovery that one of the planks of the Communist Manifesto called for a progressive income tax.
"I was startled" by the similarities between Karl Marx's manifesto and the 16th Amendment to the Constitution, Shugarman said.
A staple of the Patriots philosophy was the belief that the payment of wages was really barter, an equal exchange between employers and a worker. Therefore, they reasoned, a workers' wage is not "income" that the government can tax legally. Spreading this message to his colleagues at the Newport News shipyard, Shugarman recruited hundreds to attend seminars where he and other Patriot leaders offered advice and played videotapes on how to file false exemption forms to prevent taxes from being taken out of workers' weekly paychecks.
"Most of us have been brought up to believe there are two things in the world you have to do: to pay taxes and die," Shugarman testified on the stand last week. "But when I read more, I learned that the intent of the 16th Amendment was not to tax wage earners. It was supposed to be tax on corporate privilege and wealth . . . a tax to soak the rich. That's how it was sold to people."
During the opening days of testimony, IRS undercover agents testified they had attended the group's meetings and witnessed Shugarman and others coaching members on filing the false forms. But Shugarman said the group's leaders always suspected that the agents where there and never bothered to kick them out.
"We weren't trying to hide anything," Shugarman said. "We were trying to return the country to constitutional government."