A federal appeals court in Richmond upheld yesterday the mail fraud and related convictions of three men who promoted and operated an income tax evasion scheme.

The defendants were involved with the American Liberty Information Service, which told prospective customers that a citizen's obligation to pay income taxes arose solely from voluntary participation in federal entitlement programs such as Social Security, and that an individual could become a nontaxpayer by excluding himself from all government benefits.

Between 1982 and 1984, the organization recruited about 100 subscribers who paid from $2,000 to $31,000 for membership.

After an Internal Revenue Service investigation, the defendants -- Burton D. Linne, Jack O. Slater and John C. Imlay IV -- went on trial before U.S. District Judge Albert V. Bryan Jr. in Alexandria. Their defense was that they believed their actions were lawful.

All three men were convicted of one count each of conspiracy to defraud the United States plus multiple counts of mail fraud. Linne and Slater also were convicted of willful failure to file income tax returns.

On appeal, the three contended the government violated their rights by failing to disclose an investigative report by an IRS agent who testified at their trial. The report allegedly backed the defendants' claims that they believed they were acting lawfully.

But a three-judge panel of the 4th U.S. Circuit Court of Appeals yesterday said the government had presented "overwhelming evidence . . . from which the jury could find that the defendants knew of the unlawfulness of their activities."