By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
"I've never met anyone like him in my life," says Phil Brantley. "I would hate to be like him because he has no outside interests. He doesn't hunt. He doesn't fish. He doesn't travel. He doesn't shop. None of that stuff."
What Phipps does do with fire-in-the-belly passion is nurture grudges against an assortment of government agencies and officials. He has an almost pathological craving to bait, scorn and dare. In 1987 Phipps reported no income on his income tax returns. In 1988 he stopped filing tax returns altogether. That same year, the U.S. Postal Service shut off his mail after he was hit with an injunction from regional Postal Inspector Stephen Caver in Fort Worth demanding he cease operating what the inspector classified as an illegal pyramid scheme. Phipps signed the injunction as a condition for resuming his mail service. He quickly shifted tactics.
He began using fax machines. He urged his members to ship contributions via private shippers such as AirBorne Express, UPS and FedEx. He even produced an audiocassette to supplement his membership kit called Corruption Within the United States Post Office to expose unscrupulous conduct infecting the quasi-governmental agency he had "accidentally discovered." Phipps claims the tape juiced program revenues an extra $1 million in three months.
As government scrutiny intensified, Phipps shifted his program emphasis from positive mental attitude/self-help platitudes to history, law and taxes laced with diatribes on government corruption. The heat forced him to frequently shut down his programs and resurrect them under new names with new policies that he says were instituted to address government concerns. In 1994, the post office put him on notice that he was in breach of the 1988 injunction he signed by operating another illegal pyramid scheme under a different name. Between 1993 and 2001 Phipps was slapped with cease-and-desist letters from various state and local government agencies in California, Georgia, Oklahoma, Florida and Michigan. Phipps fought back. In a fit of temerity, he sued Michigan Assistant Attorney General Robert Ward in federal court for violating his constitutional rights by threatening to shut down his Paymaster Profit Systems program in that state. He demanded $1 million in damages. The suit was tossed.
Enter the IRS. They sent agents to Phipps' house in an attempt to audit his records. Phipps held his ground here too. "I told them to get the hell off my property," he says, fuming. "I told them that I'm a private citizen and that they didn't have any jurisdiction to audit anything."
To officially buttress his claims, Phipps penned letters to President George W. Bush, Supreme Court Justice William Rehnquist and IRS Commissioner Charles O. Rossotti in October 2001 renouncing his citizenship in "the corporate United States" and repatriating to the "Republic of the Several States." Through such letters, Phipps reasoned, he was reclaiming his original citizenship rights enumerated in the Constitution, in effect exempting him from federal and state laws and taxes. Phipps had immunized himself. The feds were powerless to act. Or so he thought.
Phipps animated his vindictive streak through his program materials, essentially tendentious derivations of the works of others. Chief among them was G. Edward Griffin's Creature From Jekyll Island, a book exploring the skullduggery surrounding the founding of the Federal Reserve System. The grist of Griffin's book is a shadowy, secret meeting in 1910 of some of world's most powerful bankers at an exclusive private hunting resort at Jekyll Island, Georgia. Here these powerbrokers sketched the basic contours of what would become the Federal Reserve Act, which passed a skeptical Congress in December 1913.
Phipps says his program members were dumbfounded to learn the Federal Reserve and its network of regional banks is not a federal agency but a private institution acting as the fiscal agent of the U.S. Treasury. Its member banks, though federally chartered, are independent, privately owned and locally controlled corporations.
Griffin characterizes the Federal Reserve System as a pernicious cartel in direct conflict with the public interest, generating currency out of nothing but debt and federal borrowing, a system that essentially renders the dollar worthless over the average American's lifetime through incremental inflation.
Phipps swallowed Griffin's teachings whole, excerpting bits and pieces of his works—along with the writings of tax protesters such as the late Howard Freeman and Lynn Meridith—in his program manuals. These ideas formed the bedrock of his own self-published books and pamphlets such James Ray Phipps' Political Science for Surviving the New Millennium and Exposing the Federal Reserve System and the International Bankers.
Phipps disdained money, his program members say, often referring to it as paper trash. "[S]ince 1913 the laws of our nation, as per the Constitution and Bill of Rights have been perverted on behalf of the central bank, which turned our nation's Constitutional Republic into a Socialist controlled so-called democracy," Phipps writes. Americans are being robbed of their property, financial resources and liberties by politicians and bureaucrats who generate great gobs of debt "in the people's name."
Phipps is equally disdainful of the income tax. He believes the 16th Amendment establishing the income tax never authorized taxes on wages but was applicable only to passive investment income. He believes Supreme Court precedents have firmly established that income tax compliance is strictly voluntary and that Americans are not required to file tax returns. He believes the tax code was devised as a tool to hook Americans on an endless cycle of borrowing to fatten bankers and empower politicians and bureaucrats.