Pursuing A Church Tax Scam

Posted: December 28, 1986

Mine eyes have seen the horrors of the present

income tax.

With it freedom has eroded so I've given tax the ax.

I would like to help all people so they, too, won't

break their backs.

Let justice be restored. Glory, Glory, Hallelujah!. . .

- Song from Liberty Ministries publications

As an Eagles defensive end, Lem Burnham was plowing down bodies on the football field in late 1979 when he took a vow of poverty and became the chief minister in a church named the Life Enrichment Institute of America.

No services were ever held at the church, Burnham's home on Almonessen Road in Deptford. But by turning his home into a church and by donating his Eagles salary to its work, Burnham thought he would be able to avoid paying taxes to the federal government.

Burnham and 300 South Jersey residents who, like him, became ministers in the church, now face hefty tax bills and are attempting to settle with the IRS, which wants its share from the collection plate. These ministers are considered by the federal government to be victims of an illegal tax scheme and are not charged with any wrongdoing.

But the "elders" and "missionaries" of the Virginia-based mother church organization, Liberty Ministries International, found themselves on the wrong end of a handful of federal indictments and have been convicted in courts in Virginia and New Jersey for conspiracy to defraud the United States government by evading Internal Revenue Service laws.

On Tuesday, the elder who headed the New Jersey branch of Liberty Ministries was sentenced to serve six months of a year-long prison term by U.S. District Judge Dickenson R. Debevoise in Newark.

The elder, Theodore Jerome, 38, of Philadelphia, was found guilty of conspiracy to defraud the government on Nov. 10. He was acquitted of one charge of assisting one of his clients in filing a false tax return.

The indictment filed against Jerome, formerly of Berlin in Camden County, called him the top sales distributor in South Jersey of a $3,000 package of information that gave taxpayers the documentation they would need to declare themselves ministers of their at-home churches.

The so-called ministers learned how to sign vows of poverty, turning over all their assets, including their weekly salaries, to their own personal churches. And because they were the sole directors of the church, they had authorization to spend the church's money as they saw fit, Assistant U.S. Attorney Howard Wiener said.

Under IRS laws, churches, as nonprofit organizations, are exempt from paying taxes, providing that they serve a spiritual purpose and providing that their leaders do not personally benefit from church funds.

In court, Wiener avoided any First Amendment debate about whether his efforts to prosecute Liberty Ministries leaders interfered with their constitutional right to practice their own religious beliefs. Instead, he based his case entirely on whether the at-home churches fit the IRS definitions.

Burnham, like others, volunteered to testify against Jerome. Pennsauken auto mechanic David E. Dunay, who named his church "Dave's Center," testified that he was told that donating all his money to his own church would not make him poor: "They told me it's just like putting your wallet

from one pocket to another."

The owner of a Cherry Hill employment agency, Deborah Lattrell, testified that Jerome and Thomas K. Williams, the founder of Liberty Ministries, told her some "earth-shattering" information that the government was ''misappropriating the taxes paid by the taxpayers." They told her, she said, that taking a vow of poverty would help prevent people from "losing total control as taxpayers."

Jerome argued that he had been hoodwinked by Williams. Williams was convicted in 1984 of tax evasion, fraud, filing false returns and advising others to file false tax returns.

"Ted Jerome was a victim. They were after him because he was a good salesman," Lawrence Lustberg, Jerome's attorney, argued to the jury.

"People invest in real estate . . . to reduce their taxes. So I didn't feel anything wrong with trying to do it. I thought it was your right to reduce your taxes as much as possible," Jerome testified.

"If I had known all of the things then that I have learned since being here, I would not have gotten involved with it, probably," he said. "But at that time, with all the attorneys and the CPAs and all the literature that we had . . . I just felt I was on fire. I mean, I just thought - I told my wife it was about the best thing that happened to me in my life."

Documents and church manuals provided as evidence and testimony from Burnham and others, including some church insiders, gave the jury in the three-week trial an inside look into the operation of an illegal tax scam cloaked in ministers' robes.

Liberty Ministries founder Williams improved on an earlier West Coast-based tax-church scheme, beefing up the religious language in Liberty materials. He hired a certified public accountant and persuaded a lawyer to attend meetings to give the church scheme the air of legitimacy.

The materials included instructions on how to keep account books for the at-home churches. Checks drawn on church accounts should be written with a special light-blue magic marker. Although the printing would be legible enough to allow the check to be cashed, it would not show up on photocopies, making any kind of audit more difficult.

Williams sat at the top of a sales pyramid. At the bottom were missionaries - the rank-and-file salesmen. They would get a percentage of the $3,000 fees. Above them were the missionary leaders and, finally, on top, the elders, such as Williams and Jerome, who received a cut for every church kit sold.

Shortly after Burnham signed up with Liberty Ministries, Williams tried to persuade the Eagles player to be a missionary.

"The missionary program had to do with going out and recruiting people and receiving the commission, or a portion of the fee for joining the organization," Burnham testified at the trial in October. He said he had been offered between 10 percent and 15 percent of the $3,000 for each recruit. Burnham told the court that he turned Williams down.

Wiener said that the federal government decided not to prosecute so-called ministers for tax evasion because it preferred to concentrate its resources on convicting the leaders of the scam. Besides, he said, considering that many of the so-called ministers later faced hefty tax bills, they could well be considered victims of the Liberty leaders.

Late in 1979, when Burnham attended a Liberty Ministries International meeting at the Rickshaw Inn in Cherry Hill, the Eagles player was one season away from retiring his helmet and shoulder pads.

"The reason I went to the meeting is that I was looking for some way to organize and implement a nonprofit organization to do something to help people in trouble, like young people," testified Burnham, who now has his doctorate and works as the psychologist director of drug and alcohol rehabilitation at West Jersey Hospital.

"I understood the vow of poverty to be a document that would make the church that I was organizing, or make me, tax-exempt through the church," Burnham said in his testimony. "In other words, every asset that I had, income, personal property, otherwise, would be turned over and become the property of the church once I executed the vow of poverty."

"How was that supposed to help you avoid taxes?" Wiener asked.

"Well, if I had no income, I paid no taxes. That's the way it was explained," Burnham replied.

Burnham, like the others, paid $3,000 to the Liberty Ministries and received, in return, a three-ring brown plastic binder with a picture of the Liberty Bell on the cover.

Inside, the book offers all sorts of advice and copies of documents. The documents include a sample church charter with language pulled almost directly

from the portion of the IRS tax code governing tax-exempt religious organizations.

To illustrate the method, the book includes documents for a sample church: Grapes of Wrath Church and Order.

There are sample minutes to be used at the annual meeting of the Grapes of Wrath's three-member governing board of trustees - a board that consists of the minister, spouse and a trusted friend.

A certificate of ordination - "Be It Known By This Official Document That . . . has been specially chosen and called to be a Minister in the Work of Our Supreme Being" - comes on parchment-like paper, suitable for framing.

In addition to the documents, the notebook includes page after page of church philosophy:

* "Yesterday is a cancelled check, tomorrow is a promissory note, but today is cash-in-hand for 24 hours of unlimited achievement."

* "Analyze what you really believe in life. If you don't think you believe in anything, you'll need to dig deeper into your mind than you have ever dug before. You may have succeeded in burying your beliefs under a heap of surface tension, but your beliefs are down there somewhere."

* "The obvious lesson is: If you are a loser, don't try to be a leader right away."

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