Use of corporate 'soles' draws attention
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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Racist, anti-government groups in Washington register as nonprofit religious
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