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Businessman who paid in gold and silver coin found guilty of tax fraud

Section: Daily Dispatches

By Joan Whitely
Las Vegas (Nevada) Review-Journal
Saturday, August 15, 2009

A federal jury Friday found Las Vegas businessman Robert Kahre guilty of all 57 felony counts of evading taxes, failing to withhold taxes from workers' wages, and engaging in fraud during real estate transactions.

Three other defendants were found guilty of most but not all of their related charges.

Kahre had claimed he tried to legally avoid taxes by creating a cash payroll system that disbursed gold and silver coins, on the theory that recipients could go by the coins' face value for tax purposes.

Though the trial lasted almost three months, the jury took only a day and a half to deliberate.

As lengthy sheets of guilty verdicts were read, Kahre's longtime girlfriend Danille Cline sobbed, putting her head against him.

Three jurors were observed crying too. Some spectators, sitting on the defense side of the full courtroom, also were in tears.

After the verdicts were accepted, federal prosecutor J. Gregory Damm asked Judge David Ezra to order the two male defendants, Kahre and Alex Loglia, into immediate custody.

As Damm spoke, two law enforcement officers took positions in front of the spectator section, near the gate that separates the public from the rest of the courtroom.

But Ezra permitted all four defendants to remain free until their Nov. 17 sentencings.

The judge spoke to the 48-year-old businessman before denying the government's request to detain the two.

Ezra asked Kahre for his word that he would not flee the community, nor commit violence nor encourage a "fringe element" to commit violence.

Kahre nodded his head yes, that he would abide by the conditions.

"Your honor," Kahre said when he stood to answer, "This last 17 years of my life has been to get my issues" aired about taxation and the importance of a gold standard to back U.S. currency.

"My life is basically over," Kahre said,, indicating that before sentencing he wants to "spend time with family and tie up some loose ends."

He faces up to 296 years in prison and fines of up to $14 million, according to the U.S. attorney's office.

Kahre and co-defendant Danille Cline have four children, with the youngest born during Kahre's 2007 trial on similar charges. That trial, with nine defendants, ended with no convictions.

This time Kahre was convicted in the payroll conspiracy, along with his sister, Lori Kahre, who works for him.

But defendant Alex Loglia, who used to work for Kahre, was acquitted of his conspiracy charge.

Lori Kahre was acquitted of one count but she and Loglia were found guilty of multiple other counts of tax evasion.

Cline was acquitted of two counts of wire fraud in connection with two home purchases, but she was convicted of another count involving a third real-estate transaction.

Jurors accepted the prosecution theory that the couple bought themselves a series of homes in Cline's name and on the strength of her credit -- even though she had not worked outside the home in almost two decades -- in order to hide Kahre's income.

The two held a commitment ceremony but do not have a marriage license, although they did not make those choices for any tax benefit, Kahre's defense attorneys have said.

U.S. Attorney Gregory Brower said late Friday afternoon that he views the four acquittals as a sign that the jury carefully scrutinized each count.

"It certainly was not a rubber stamp of the government's case," Brower said. "I can't say enough about the extraordinary efforts of the investigators, the prosecutors, and the jury."

In order to convict, jury members had to decide that the defendants knowingly broke federal tax laws, with a criminal intent rather than out of good-faith ignorance.

Jurors rejected a recurring defense theme that the defendants sincerely believed Congress gave them the permission to go by the dollar amounts stamped into the coins by the U.S. Mint.

Certified public account Wayne Paul, brother of Texas congressman Ron Paul, testified that Congress created a dual monetary system when it authorized the gold and silver coins that currently circulate. That means, according to the accountant, that people can switch between coin and paper money, always going by the printed value.

Prosecutors at the Kahre trial showed that defendants selectively assigned a value of their coin income -- switching between face value and market value -- depending on whether they were trying to lower their tax liability or qualify for a home or car loan.

Jurors heard how the payroll system operated. When workers at Kahre's six businesses and more than 30 companies that were payroll clients went to pick up their pay, each received a tube containing coins.

Most immediately converted their coins to paper cash, in an amount equivalent to the coins' fair-market value.

Kahre did not withhold taxes, because he classified all the workers as independent contractors, who are responsible for doing their own taxes.

According to prosecutors, during the span of the payroll conspiracy, Kahre paid at least $25 million in untaxed wages to his workers and about $95 million to people who worked for client companies.

Kahre, or the defendants who worked for him, occasionally kept some pay in coin form. But prosecutors argued that the process of converting coin to paper money was a sham transaction, with no economic value, and was designed only to disguise tax evasion. As proof, prosecutors cited business records suggesting Kahre kept only $40,000 in coins in his business safe in one three-month period, during which he covered a payroll of about $8 million.

When William Cohan, Kahre's attorney, argued for his client's release until sentencing, Cohan disclosed that he and Lisa Rasmussen, Kahre's other attorney, are not being paid for their representation. Cohan also said Kahre is virtually bankrupt.

Federal and local law enforcement raided several Kahre business locations in 2003 to seize evidence in the tax investigation that culminated in Friday's verdicts. Since then those businesses have gone downhill, losing customers and workers.

Kahre wouldn't comment after the adjournment. He and Cline huddled with weeping relatives outside the courtroom. Then the two went to an office inside the courthouse to make arrangements for their pre-sentencing release.

Defense attorneys said they intend to appeal the verdicts.

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