More Scams

by | Jun 12, 2001 | Archives

There is a special trickery in some scams and here is one we can see clearly.

Here is an excerpt from my book, “65th Octave” “Con men rely on the public's acceptance of authority figures. A fraud always relies on one of four fatal attractions, fear, greed, anger or lust.” The note I received from the reader below shows how this works.

		"Dear Gary,

I appreciate your earnestness in protecting people from scams. However regarding
the subject of "Pure Trusts" there is considerable amounts of misinformation
both pro and con. I am enclosing some court case excerpts to you to illustrate
that pure trusts do exist and are valid. There have been numerous instances
where so called pure trusts have been set up and sold that have been abusive
stuctures and have basically operated as alter egos. These stuctures have been
rightly condemned by the courts. This does not mean nor should we draw the
conclusion that all pure trusts are illegal or abusive; as perhaps the IRS and
others would like us to believe.

Pure trust organizations have a very effective and useful place in estate
planning and other considerations of protecting one's property, if they are
constucted properly. They do not depend on statuatory law and thus have been
overlooked by lawyers who have been schooled in statuatory law only. Pure trusts
are entities of federal law and more specifically the Constitution, whereas most
business and other trust organizations are creatures of state law.

It is not necessary to go overseas to establish an effective trust program. If
you would like more information on this subject you may contact me."

The reader then included this:


Weeks vs. Sibley, D.C. 269 F 135, " A Pure Trust is not illegal if formed for
the express purpose of avoiding taxation."

Phillips vs. Blatchford, 127 Mass 510, " A Pure Trust is not illegal if formed
for the express purpose of avoiding taxation."

Edwards vs. Commissioner, 415 F 2d 578,582, 10th Cir.(1969), "Dignity of
contract cannot be set aside because a tax benefit results either by design or

Phillips vs. Blatchford, 137 Mass 510 (1884), as stated by Mr. Justice Holmes
"An association does not become illegal simply because another very like it is


Baker vs.. Stern, ALR 462 , the Court said "It is established by legal
precedence that Pure Trusts are lawful, valid business organizations."

Burnett vs. Smith, SW 1007 (1922), the Court ruled " Trust or trust estate is a
legal entity for almost all purposes as are Common Law Trusts."

Smith vs. Morse, 2 CA 524 , A Pure Trust is established by contract, and any law
or procedure in its operation, denying or obstructing contract rights impairs
contractual obligation and is, therefore violative of the United States

Crocker vs. MacCloy, 649 US SUP 39 at 270 , A Pure Trust organization, consists
of a US constitutional right to contract which cannot be abridged. The agreement
when executed becomes a federal organization and not under laws passed by any of
the several legislatures.

Elliot vs. Freeman, 220 US 178 , A Pure Trust is not subject to legislative
control. The United states Supreme Court holds that the Trust relationship comes
under the realm of equity, based upon the common law, and is not subject to
legislative restrictions as are corporations and other organizations created by
legislative authority.

Schumann-Heink vs. Folsum, 159 NE 250 , The basis for "Common Law Trust" in this
connection, is not that such organizations are creatures of common law, as
distinguished from equity, but that they are created under the common law of
contracts and do not depend on any statute.

Schumann-Heink vs. Folsum, 159 NE 250, If it is free from control by Certificate
holders, then it is a Pure Trust.

Berry vs. McCourt, 204 NE 2d 235 (1965), A Pure Trust is a contractual
relationship in Trust form."

Plus there was more and looking at all this started me wondering….

The authority figure in this instance are these excerpts. This authority is enhanced by discrediting lawyers and suggesting that some lawyers are schooled in some other type of law. I asked eClub legal advisors attorney, Joe Cox and Leslie Share advisors their thoughts on this note.

Joe Cox replied first.

		"Gary, The Pure Trust is a scam. There are NO tax savings. That is how it is 
sold. A complete and careful reading of the cases will show that these are NOT
tax cases and contail NO tax saving tricks. The trust is a contract a contract
can be a trust and so on. But, income is income and is taxed in the trust or out
of the trust. You can find exerpts of cases that when taken alone can say
anything. This guy could not stand the heat if he had to debate the issue. Show
me the income and estate tax saving with this trust. It is not there."

Tax attorney and legal advisor Leslie Share at Packman Neuwahl & Rosenberg was even more descriptive.

		"Pure garbage. A pure trust has as much viability as claiming the world is flat 
or the moon is made of green cheese.

So how can you know who to believe? Be sure that the person who is advising you can also defend you in court. Check their credentials in defending their clients. This will be the most important time you will need them if your structure is challenged.

By the way, I know that both Leslie and Joe have had great success in defending their clients. Until next message, good investing!