Two national groups providing estate-planning help announced today the filing of a $500 billion class-action lawsuit against the Internal Revenue Service and approximately 50 individual IRS agents, charging them with civil rights violations against thousands of its members, most of whom are senior citizens.
The suit stems from a raid on the offices of Heritage America and the Aegis Company conducted by the IRS March 31, 2000, says the groups’ executive director, Michael Vallone. About 30 armed IRS agents reportedly entered the Palos Hills, Ill., offices of the two groups.
The IRS agent in charge, Robert Kuschel, served a search warrant for a company named “Aegis Financial Group.” The suit alleges this company has no relationship whatsoever to either Heritage America or The Aegis Company.
Vallone claims that Aegis Financial Group was a corporation of which he was a partial owner from 1996 to 1998, and that it was an Indiana licensed mortgage brokerage firm which operated exclusively in Indiana and had no business dealings whatsoever with Heritage America or the Aegis Company.
The suit alleges that upon entering the offices of the companies, the agents proceeded at gunpoint to separate the staff into separate rooms and interrogated them for as long as two hours without ever reading them their rights or informing them they were not required to provide information.
The IRS then proceeded to carry off all the companies’ records, including the paper and computer records of their members, says the suit. This material contained the names, addresses and phone numbers of all the past and present members of Heritage America and the Aegis Company. It also contained financial information and the private estate-planning information of these people, including copies of their wills, trusts and other estate-planning documents such as powers of attorney.
“Their (the IRS’) absolute rape of the privacy rights of more than 5,000 Americans … is another example of the terrorist tactics of a government agency whose abuse of power demands severe retribution,” said Vallone.
The suit also states that almost one year after the first raid, on March 29, 2001, the IRS performed a second raid in similar fashion on the offices of Homer Richardson, a representative of Heritage America and the Aegis Company. Once again, the search warrant served on Richardson stated it was to procure documents associated with “Aegis Financial Group.” Richardson states he has never had any association whatsoever with Aegis Financial Group.
Vallone charges the attack on Heritage America and the Aegis Company is part of a four-year campaign the IRS has been waging against trusts. Both Heritage America and the Aegis Company have provided their members with services to set up trusts for estate planning, business planning and tax planning. The Aegis Company has provided educational material and services for its members regarding a type of trust that IRS regulations call a “Business Trust.”
“These types of trusts are completely legitimate,” says Vallone. “They are used by many of the major mutual funds in the United States, such as Fidelity Magellan, Kemper and Nuveen. However, they can also be used by small business owners. The IRS has recognized this in their own regulations. Unfortunately, many companies have improperly promoted the use of business trusts, and so the IRS has stepped in to crack down on the abuse of these trusts.”
The class-action lawsuit contains 11 separate counts of violations of Title 42 of the United States Code for deprivation of civil rights, and an additional count under Title 18 which charges that the IRS and its agents violated federal racketeering laws.
The 56-page complaint was filed May 8 in the Southern District of Illinois.