By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
"I am the worst nightmare that a crooked, bully politician or public official can have," writes Phipps from prison, "because I am honest and I have a big mouth and I am not afraid of them."
It's this megaphoned fearlessness that Phipps seems incapable of curbing, even when it puts him at risk. During his weekly conference calls, some secretly recorded by the IRS, Phipps drips with contempt.
"Most people living in the individual states are under the wild assumption that they have to give up 30, 35, 40 percent of their paycheck to the federal government who has basically been lying, cheating and thieving them ever since they took out their little Social Security card at age 18," he says. "...They force people into doing things that they're not legally obligated to do...bully them to death as long as the individual is stupid enough to let them do it. And I can understand that, you know, when you got a wife and kids, you don't want to spend too much time down at the fed hotel."
Strangely, the victimized American public—the very people Phipps claims he's tasked with saving—are not spared the bite of his vindictive streak. Phipps often drives his points in language dripping with condescension. He lambastes people for their general stupidity, for their refusal to open their eyes to the corruption of the financial and political systems that are robbing them blind.
When challenged on the mechanics of his networking programs, he bristles, insisting any third-grader can grasp it. "I don't have much patience with adults [who] are dumb as a rock and refuse to open their mind," he writes from prison. "Do you think Bill Gates or any other math- or science-oriented person would have any more patience with stupidity of those who are responsible for [the] design of their products than I do?"
In 1996, Phipps met Ora Lee Calloway at a Glenn W. Turner "Dare to be Great" conference in Georgia and was immediately smitten. She had only a suitcase to her name, he says. Calloway, 61, was a poor little Alabama girl, he says, a working woman who never had a life or an opportunity to do anything or go anywhere. "She liked me at the conference, and she decided to see what Texas was about," he says. So he brought her to Colleyville. He taught her how to use a computer. He showed her how to work his mailroom. "I just done whatever it took to help James get his day's work done," she says, from her home in Alabama. "If he needed help, I was there."
It was a common law marriage, Phipps says. God puts people together. The state had nothing to do with it. In Colleyville, Phipps purchased two adjacent homes on the 600 block of Field Street: one served as the Life Without Debt Computer Center, the other is where he and Calloway lived. Because he had no use for banks, Phipps purchased the homes directly from the owner using cash or money orders to make his monthly payments.
Phipps' computer center was a clearing house for cash, and until sometime after August 2001, money orders. He refused to deal with checks and credit cards. By far Phipps' most popular offering was the $2,500 annual Life Without Debt program. New members were instructed to stuff $2,500 in cash wrapped in a completed membership form into a white, self-addressed envelope and slip it into a Priority mail or Express shipping envelope. Those joining with money orders were required to prepare 10 money orders for $240 each for disbursement to the 10 established members up line in the pyramid plus one for $100 to cover Phipps' administrative costs, all with the pay lines left blank. (International members—Phipps claims his program membership hailed from 28 countries—were instructed to pay with international travelers checks.)
At the computer center, funds were counted. The new member's sponsor ID number was entered into the computer. Reports and mailing labels were printed for that sponsor's "up line" network to redistribute the cash to the sponsor and the nine other members above each membership purchase, or $240 each. The disbursements were to the appropriate up-line members while a membership kit was assembled and shipped to the new member, who was obligated to entice at least two fresh recruits within 90 days to remain active.
Phipps moved cash to and from the computer center daily in large postal tubs. At any one time, he claims, the center could be a hub for more than $1 million in cash, waiting to be sorted, counted and doled out from the 3,400-square-foot house wired with alarm systems and security cameras. At night he secured the cash in a large gun safe.
On the morning of August 20, 2001, some 10 federal agents, armed with a warrant, raided Phipps' Colleyville computer center, seizing his computers and storage drives and more than 80 boxes of documents. During Phipps' trial, IRS special agent Dan Williams testified that Phipps was cooperative, freely consenting to show agents documents and computers, and to open his safe. "I didn't want to get shot like David Koresh, Randy Weaver's wife and son, and many more who said 'NO!,'" Phipps writes in the margins of the transcript of Williams' testimony.