Use of corporate 'soles' draws attention
Spokane.net, Dec. 26, 1999
http://www.spokane.net/news-story-body.asp?Date=122699&ID=s724761&cat= Racist, anti-government groups in Washington register as nonprofit religious groups, gain federal benefits

John Craig - Staff writer

An obscure Washington law is allowing dozens of individuals in anti-government movements to declare themselves "corporation soles" -- religious nonprofit corporations with benefits both real and imagined.

The secretary of state's office hands out certificates for these one-person religious corporations to anyone who can jot a set of bylaws on a napkin. Little information is required of applicants, and the corporations they form are virtually unregulated.

The Northwest Coalition for Human Dignity began investigating corporation soles last summer when it learned several white supremacists and anti-government militants had them.

"At first, we thought it was something they had made up, like their common-law courts, but when we checked into it, it turned out it was a real state entity," said Jonn Lunsford, research director for the Seattle-based coalition.

Lunsford said the coalition is still studying the proliferation of corporation soles, but is concerned they may be used to avoid taxes, child support or other obligations.

Indeed, a Web site devoted to constitutionalist tax-avoidance schemes says "no one can levy, lien or seize assets titled to a corporation sole."

If not impossible, it can be difficult to collect debts from people who place their assets in a corporation sole. They can claim they are no more responsible for their corporations' debts than Lee Iacocca was for Chrysler's, and vice versa.

Creditors would have to prove in court that a corporation sole is merely the alter ego of its director in order to collect a personal debt.

Under the law last revisited in 1915, corporation soles were intended for traditional churches such as the Roman Catholic Church. Unlike most Protestant churches or other nonprofit organizations, Catholic churches are governed by a bishop instead of a board of deacons, elders or directors. A corporation sole recognizes the right of a bishop or other "overseer" to control the assets and activities of a church.

But sketchy state records show relatively few of the approximately 700 corporation soles now registered in Washington belong to the Roman Catholic Church or other traditional churches.

Despite huge holes in the secretary of state's database, Lunsford was able to spot about 50 corporation soles associated with white supremacists, militiamen, constitutionalists or people who deny the Holocaust. He discovered some supporters of the Christian Identity, anti-government group Posse Comitatus had set up "soles" as early as 1979.

A few of the people identified by the Coalition for Human Dignity are:

•Harrie A. Schmidt Jr., state chairman of the Populist Party, which is run nationally by Ku Klux Klan leader Kim Badynski.

•Glen Stoll, a Populist Party member who also is involved in the Embassy of Heaven, an anti-government religious organization based in Sublimity, Ore. Stoll was the leader of the Liaison Group, which called for militia members across the Northwest to assist Whatcom County constitutionalist Donald Ellwanger in a 1995 standoff with the IRS.

•Doyal Gudgel, also active in the Liaison Group, but best known for organizing events in Seattle for David Irving, a British man who denies the Holocaust happened.

The state database lists no addresses for most corporation soles, not even a city or zip code. Agents or leaders also are mostly unlisted.

Because state law has so few requirements for corporation soles, Kettle Falls-area resident Linda J. Erickson was able to take over more than $20,000 worth of real estate she persuaded acquaintance Gregg Holmes to put into a corporation sole called the Sonlight Pathway Society.

After Holmes committed suicide last year, Erickson took over the property on the strength of having been listed as secretary when Sonlight Pathway was founded in December 1992. The secretary of state's office accepted Erickson's claim to have "canonically taken possession" of the society as "the only surviving incorporating officer."

Spokane attorney John Zeimantz, who represents Holmes' estate, is fighting to recover the property for Holmes' two young sons. Zeimantz said he will try to pierce the "corporate veil" if other legal strategies aren't successful. First, though, he will attempt to prove that Erickson isn't the corporation's legitimate overseer.

Secretary of State Ralph Munro said he also may review the situation.

"If there is any kind of fraud, we'll be the first to try to do something about it," Munro said.

One of Erickson's anti-government associates, Posse Comitatus supporter James E. Shaver Sr., found another use for corporation soles. He said in a 1992 court document that his status as "archtrustee" of the Santiago Seafarers Society entitled him to perform a disputed marriage ceremony for Erickson.

Shaver rattled some Stevens County residents in December 1994 when he publicly offered to drive the IRS out of the county with a "posse." He also unnerved an assistant attorney general a few months later when he accompanied Erickson to an administrative hearing and claimed to be a "private civil rights investigator."

Records show Shaver has at least four corporation soles, and his address is associated with five.

The Coalition for Human Dignity's Lunsford said he suspected at first that corporation soles, like unauthorized "common-law courts," would be used to place bogus-but-troublesome liens on the property of public servants.

Now, though, he believes right-wing political and religious philosophies may have more to do with the new popularity of corporation soles. Advocates apparently believe the religious corporations give them license to ignore man's laws and follow what they perceive to be God's laws, Lunsford said.

"Taxpayers should be concerned if people aren't paying their fair share or if assets are being hidden and child-support payments aren't being made," Lunsford said. "We all pay for that."

Although effective at shielding assets from creditors, corporation soles apparently have little value as tax shelters.

Federal law allows any organization that considers itself a church to quit paying income taxes, regardless of whether it is a nonprofit corporation. The only catch is that the IRS had better agree the church is legitimate if there is an audit.

State taxes are controlled by the Washington Department of Revenue, which takes a skeptical look at each nonprofit organization's request for a tax exemption. An examination of tax exemptions in northeastern Washington showed almost all of them belong to mainstream charities and churches.

Erickson's, Holmes' and Shaver's corporations aren't on the tax-exemption list.

In general, it is up to the courts and agencies other than the secretary of state's office to make sure corporations don't abuse their privileges.

"We're a filing agency," Munro said. "We're not an agency that judges corporations at all."

Still, Munro and the director of his corporations division, Mike Ricchio, said the corporation sole law may need review.

"I think it would be appropriate for the Legislature to review that statute," Ricchio said. "Given the difference between that statute and other (corporation) statutes, I would say it is ripe for review." :===End Quote===

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