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Justice News

Department of Justice
U.S. Attorney’s Office
District of Alaska

Thursday, October 2, 2014

North Slope Worker Convicted of Tax Crimes

Anchorage, Alaska – U.S. Attorney Karen L. Loeffler announced today that James R. Back, 60, of Soldotna, Alaska, was convicted of seven federal tax crimes in U.S. District Court in Anchorage.  After three days of trial and one hour of deliberations, the jury of eight women and four men convicted Back on all charges.  Back, who is employed by the Alyeska Pipeline Service Company as a pipeline technician at Pump Station One in Prudhoe Bay, was found guilty of filing false 2006, 2007, and 2008 individual income tax returns, and of failure to file his 2009, 2010, 2011, and 2012 returns.  Evidence presented at trial showed that Back earned over $125,000 in wages during each of the prosecution years, yet falsely claimed on the 2006, 2007, and 2008 returns that his wages were zero.  For the years 2009-2012, Back simply failed to file.

Other evidence at trial established that Back contributed over $140,000 to a retirement plan during the prosecution years, had investment accounts worth hundreds of thousands of dollars, owned real estate in the Kenai Peninsula Borough, and purchased over $400,000 in gold and silver bullion during the prosecution years.  Back represented himself at the trial, and argued to the jury that taxation was immoral and unfair, and that he simply refused to submit to it anymore.  He argued that the Alaska Permanent Fund Dividend was not taxable, even though he applied for and received it each year.  He also argued that there was no evidence that state or federal laws applied to him.  Back ignored prior warnings from his employer, his supervisor, the IRS, and a United States Tax Court judge that his arguments were frivolous.

According to witness testimony, Back used a scheme similar to one promoted by Peter Hendrickson of Michigan.  Hendrickson operates a website known as “Lost Horizons” and wrote a book called “Cracking the Code” which promotes the “zero wages” tax evasion scheme.  According to federal court records, in 1992 Hendrickson was convicted of failure to file tax returns and firebombing a Michigan post office on April 16, 1990, and served 21 months in prison.  In 2010, he was sentenced to another 33 months in federal prison for tax crimes, including filing false returns and failure to file.

The defendant was remanded to the custody of the U.S. Marshal pending sentencing. Chief United States District Judge Ralph R. Beistline described Back’s crimes as “flagrant” and said he was “unrepentant.”  The judge set sentencing for December 16.  Back faces up to three years in prison on each of the three false return counts, and up to a year in prison on each of the four failure to file counts, in addition to significant criminal fines, restitution, and costs of prosecution.

“Using schemes and tactics intended to willfully conceal income from the IRS isn't tax planning; it’s criminal activity,” said Special Agent in Charge Teri Alexander, IRS Criminal Investigation. “There is no secret formula that can eliminate a person’s tax obligations. This verdict reinforces our commitment to every American taxpayer that we will identify and prosecute those who use abusive scams designed to evade the payment of taxes.”

Ms. Loeffler commends the Internal Revenue Service, Criminal Investigation, for the investigation and prosecution of this case.
Updated February 3, 2015