Death and Taxes

The window in Karl Granse's basement office is open and fall's first frigid breeze fills the room. A slender, energetic figure whose thick silver hair curls below the collar of his sport coat, Granse scarcely notices. He's pacing the arms-length space between two walls, one lined with hundreds of in-boxes dripping with legal documents, the other covered with bookshelves groaning under the weight of faded gray law books. His arms flail at the frosty air as he outlines government injustice, intricate taxation theories, and the raw power of the Constitution.

Over in one corner, behind the photocopier, there's a plaque congratulating withstanding the "lies" and "misinformation" a Donahue audience heaped on him and his disciple James Nichols two years ago. They were there to talk about the Oklahoma City bombing and Nichols's brother Terry, another Granse follower and one of two men awaiting trial for the conflagration.

The days and months following Oklahoma City might well have been Karl Granse's finest hour. A self-styled legal expert who'd spent years preaching anti-tax rhetoric to angry farmers, desperate working stiffs, and a variety of alienated souls in the murky patriot underground, the Lakeville man was finally perched on the fringe of a big case.

On April 21, 1995, a set of cassette tapes containing Granse's lectures on how to drop out of the "corrupt" American legal and political system had turned up under the front seat of a truck belonging to James Nichols, whom the FBI suspected of having ties to the bombing of the Alfred P. Murrah Federal Building. Suddenly, Granse was headline material by association, the anti-government mentor of one of the suspected conspirators. At the time, you couldn't turn on a TV anywhere in America without encountering features on the patriot movement. The honchos in the Michigan Militia, whose meetings McVeigh and the Nichols brothers reportedly attended, made Nightline several times.

This moment had been a long time coming. For more than a decade, Granse had been advising people who attended the anti-tax seminars he held throughout the country. He'd travel frequently to work on their trials, invoking his belief that nothing in U.S. law compels private individuals to pay income taxes. He'd also been fighting his own tax battles in Minnesota, often representing himself. But never before had the stakes been as high as with the Decker, Michigan, farmer he'd met just six months before.

Granse, who's not a lawyer, says he researched the case from his subterranean office and cranked out a writ of habeas corpus that finally freed James Nichols from a Detroit jail. (The government says Nichols's release came simply because federal officials failed to find any evidence linking him to the bomb plot.) Then he turned his attention to the other alleged bombers: Tim McVeigh, who earlier this year was convicted of driving the explosive-laden truck and sentenced to death; and James Nichols's brother Terry, who this week goes on trial on charges he conspired with McVeigh.

Granse spent a day with McVeigh's defender, who Granse says closed down his participation by declaring that Granse was asking to have the government put on trial. Indeed, Granse argues that the government itself carried out the terrorist attack, and McVeigh was nothing more than the misunderstood patriot Clinton & Co. hoped to use to malign the movement.

In June 1995, Granse finally got Terry Nichols on the phone from his jail cell for about 20 minutes. A tape recording of the conversation reveals that the self-styled legal adviser did most of the talking. Granse advised Nichols not to "stand mute before the court" because it would "only make the judge angry." He also asked Nichols to send him copies of all the charges against him along with some other court papers. Nichols, who according to his brother is very happy with his attorneys, never sent the documents.

James Nichols still calls Granse frequently in search of advice, as does Nichols's mother, Joyce Wilt. Granse also has a starring role in a low-budget video titled "Anguish in Oklahoma City" that's being distributed by associates with Web pages. But now his audience is once again mostly confined to the fluid world of anti-government tax protesters. He continues to travel and lecture others about how to stop paying income taxes and live without driver's licenses and other "illegal" constrictions imposed on people by government. A recent three-day workshop at the downtown Anchorage Holiday Inn set attendees back $150 each. The in-boxes lining his walls contain briefs he's preparing for hundreds of people--workshop attendees and other folks whose tax protests have landed them in legal trouble.

The documents usually get blown to shreds by the courts, but that only proves Granse's point. "You try to get a fair trial when you come to the federal government, or you're dealing with the IRS," he ventures. "That's like committing suicide."  

Granse swears he can trace his lineage all the way back to Francis Bacon, the British tax protester who died in 1652. His ancestors settled in Minnesota in the 1800s; he was raised in White Bear Lake by parents he will describe only as businesspeople. They struggled frequently with the IRS, he says, and it's their last audit he blames for his mother's fatal heart attack.

As a young man, Granse says he worked briefly for KSTP and for small local newspapers as a reporter, but gave up the craft when he figured out his bosses weren't interested in "the truth." In the '80s he ran a photo studio in Roseville and in 1984 made an unsuccessful bid for the Republican nomination for the House of Representatives. He lost, he says, because the "Red Tribune" painted him as an anti-Semite.

What the Star Tribune actually reported was that in 1984, a staff member at the Chicago offices of Lyndon LaRouche (himself an anti-Semite) described Granse as the "LaRouche candidate" in that year's primary. Granse responds that LaRouche organizers asked him to run on the DFL ticket, but that he had become disenchanted with LaRouche, an ultraconservative who advocated quarantining AIDS victims and who was eventually imprisoned for tax evasion.

The Strib's 1984 voters' guide contained this quote from Granse describing his positions: "I want to help Congressman Vin Weber neutralize [then-Speaker of the U.S. House] Tip O'Neill's domineering influence and join a new Republican majority in the House to replace Tip O'Neill. I would work to protect people's jobs and develop new ones, reduce the tax burden. [I am] for legislation to strengthen families, for a strong defense, and for a voluntary school-prayer amendment." He talked about running again in 1986, but his name never appeared on the ballot.

Granse's anti-tax crusade appears to have begun in 1980, when he was charged with a misdemeanor count of operating a business without a sales permit. Then in 1985, the state revoked his sales-tax permit, reportedly because Granse refused to turn over sales taxes collected from customers.

In 1987, Roseville police raided Granse's portrait studio, KG Photo, and seized his records and equipment. In court, Granse argued that while taxes should be levied on tangible items, such as pictures, his services--his real business--were exempt. The state disagreed, and the following year Granse was convicted of failing to pay some $10,000 in sales taxes. The state auctioned off the seized studio equipment to pay his tax bill, and Granse spent 90 days in jail.

It wasn't Granse's only legal entanglement. His name appears on at least a dozen files in area courthouses. From 1987 to 1993, the records show, he failed to file Minnesota income-tax returns. In 1994, the state commissioner of revenue went ahead and prepared returns for Granse. His Minnesota taxes, with interest and penalties, eventually totaled almost $79,000. He could either pay that amount, the commissioner said, or file his own returns. Rather than appeal, Granse sued the Department of Revenue alleging that he was not subject to taxation and that the taxing statutes were illegal. He eventually settled with the state attorney general's office for $12,000 worth of gold and silver coins. The rest of his Minnesota tax burden was dismissed.

The fact that his argument went nowhere in court didn't dissuade Granse from shopping it around. Soon he was hosting tax-law seminars across the country. And when his protégés ran afoul of the authorities, he was there to help. In September 1993, he acted as a spokesman for a Ramsey woman twice convicted of failing to pay taxes. Each time, she spent 90 days in jail.

His own anti-tax crusade, meanwhile, continued to founder. He was frequently in court wangling with the IRS, which eventually dunned him for failing to pay more than $166,000. In November 1994, court records show, Granse deposited more than 600 checks totaling about $155,000 into a bank in St. Louis Park. The IRS quickly froze his account, but Granse had already withdrawn the cash. So the agency seized a $150,000 house he owned in Burnsville. Granse had only recently purchased the house and did not live there. Earlier, he had filed for bankruptcy protection in Ramsey County, presumably to save the house, but his petition was dismissed when he failed to show up for court.

Enraged that the real-estate partnership that bought his seized house from the IRS tried to sell it back to him, Granse last year took the IRS to court. "The plaintiff agrees with the United States of America that funds are greatly necessary to run the government, especially when so many people depend upon the government for a handout," he wrote in the last of the voluminous pleadings stuffed into his file. "Yet it would have been better for the government to approach the plaintiff for the amount of money in his bank account of $152,000. The plaintiff with good reason from the government would have been most happy to hand the entire amount to the government.  

"Instead, the plaintiff rails against government action without authority of law, but if the government would ask for money this plaintiff would not argue, but give freely. It is not the plaintiff's desire to withhold. Yet to give freely when asked, they did not ask. They took without authority or procedure of law."

Again, Granse lost, although he's currently appealing. "I've been in jail 43 times over this stuff. I've been wiped out financially four times," he says. "We have to be fair, but they [the government and IRS] don't have to be fair. They have huge, humungous rights. We have nothing."

In December 1994, James Nichols traveled to Appleton, Wisconsin, to hear Granse's advice for dropping out of the system. Long a stronghold for the John Birch Society, Appleton is just southeast of Tigerton, a pinprick on Wisconsin maps that in the late '70s and early '80s was a hotbed for the violently anti-tax Posse Comitatus. The lecture, plus an assortment of books and audio tapes, cost Nichols $600.

But Nichols says Granse's fee was money well spent. When he got back to his Michigan farm, he shared his newfound understanding with his brother. Terry, Nichols says, became even more entranced than he was, shuffling off to law libraries to research Granse's legal precedents.

The Nichols brothers were already deeply immersed in anti-government activity; as early as 1990, James had tried to renounce his citizenship. He gave up his driver's license and Social Security card and wrote to the clerk in Sanilac County, Michigan, explaining that he no longer considered himself a citizen. Terry Nichols did the same. (Ironically, James Nichols apparently has no qualms about taking cash from the government: Over the course of six years, Nichols accepted $89,950 in federal farm subsidies.)

Boiled down, what Granse taught Nichols was this: Man inherits certain rights from God. The purpose of the U.S. Constitution is to keep the government from interfering with those rights, a point on which government has misled the people. The government has told people, for instance, that driving is a privilege that comes with the purchase of a license. In essence, the government is selling back to people rights they already possess.

The tax arguments mustered from Granse's faded law library are far more complicated. Government attempts to tax people's labor and the product of their brains--intellectual property--he argues. But it's God, not the government, who gives humans their skills to think and work. Thus, the government has no business demanding money for something it did not create or dispense.

What's more, Granse explains, most people believe they are citizens of the United States, and that they thus must pay taxes. But in fact, people live in states and nowhere does federal law discuss an income tax on citizens of U.S. states, he says. And finally, when it came to his own state taxes, Granse argues that the government doesn't really have the power to tax anyone who's not a public employee or transactions that don't take place on government property.

In practice, Granse's courtroom wangling often seems to rest on arguing over technicalities. When the IRS notified him that it was seizing his house, for example, court records show that he demanded the process server leave his subpoena between the front and screen doors. When that happened, he filed a voluminous pleading with the federal judge overseeing his case, arguing that he hadn't been properly notified of the seizure, so the IRS couldn't sell his property.

The IRS has debunked similar arguments so many times that its Twin Cities office has issued a brochure titled "Illegal Tax Protests: Facts vs. Fiction." The flier lists a number of false but common tax-protester arguments: "Protester Claim: 'I'm a private citizen of the sovereign state of (Minnesota, North Dakota, South Dakota, etc.) and not a citizen of the United States,'" reads one example. "'Therefore I do not need to file a Form 1040 and am not subject to the United States federal income taxes.' Truth: This argument was found to be frivolous and without merit with no basis in fact or law." Courts often levy huge fines on people who continue to raise the most common anti-tax theories.  

None of this, however, diminishes Granse's stature on the underground lecture circuit. "He is a self-made law professor," James Nichols says of Granse. "He teaches people their rights. If you don't know the Bill of Rights, how do you know your rights? You can't know them unless you know the Constitution and stuff." Granse's letterhead shows him as head of Citizens for a Constitutional Republic, an umbrella group that directs 26 affiliates in 21 states with more than 3,000 members in Minnesota.

It's worth noting that while tax resistance is usually equated with violent hostility to government in all its forms, the two are not always the same. Like many tax protesters, for example, Granse argues that U.S. currency isn't really legal tender, not because it's printed by the government, but precisely because it's not: It comes from the "private" Federal Reserve Bank. (And note that the backs of those dollar bills bear the Latin words Novus Ordo Seclorum, meaning "New Order of the Centuries," or, as many translate it, "New World Order.") The only true currency, many in the patriot movement believe, is gold and silver.

In addition to settling his state income-tax case with bullion, in 1994 Granse made a donation of $11,500 worth of precious metal to federal court officials in St. Paul--out of concern, he said, over Congressional budget cuts.

The anti-tax ideas people pay handsomely to hear Granse explain are hardly new. Most have long been popular with underground groups, particularly in the Midwest. In the late '70s and early '80s, similar notions were circulated by the Posse Comitatus, culminating in the 1983 shootouts that killed North Dakota Posse member Gordon Kahl and two federal agents (see James Ridgeway's portrait of the Posse in this issue). From there, the philosophy spread through the rest of the patriot movement. It's been preached by the Freemen in Montana and the secessionists who make up the Republic of Texas. Adherents often refer to themselves as "sovereigns," that is, people not subject to what they consider a fraudulent government's authority. (Although Granse espouses many of the sovereign ideas preached by the Posse, he says it and groups like it are "dangerous." He says he tells clients to rely "only on what's in the law books.")

One of the most popular twists on sovereignty theory in recent years has been the certified-check scam. Montana's Freemen, for example, placed millions of dollars' worth of frivolous liens--legal papers that lay claim to someone else's property--on then-U.S. Treasury Secretary Lloyd Bentsen and other public officials. They then printed certified checks, some from real banks and some from made-up institutions, supposedly backed by those liens. Thousands of people bought the fake checks and tried to use them to pay bills, most often tax bills. Some enterprising adherents wrote checks to the IRS for far more than their taxes and demanded refunds for the overpayments, typically tens of thousands of dollars.

In addition to being fraudulent, such schemes are often designed to intimidate the low-level government employees who work in courthouses and county recorder's offices. Often, sovereigns also place bogus liens on county clerks, promising to remove them once the tax liens on the filer's property are lifted. One clerk in California was beaten nearly to death in 1994 by someone who placed a lien on her. Jack Mason, supervisor for internal security at the IRS office in Minneapolis, says that until recently, agency employees frequently found bogus liens on their homes. But now, he adds, most county clerks recognize fraudulent liens and refuse to file them.

The liens are an extension of an extremist theory that goes even further than Granse appears to. It holds that the only legitimate court in the land is a county-level grand jury made up of God-fearing citizen volunteers who read and interpret the law themselves. Such "constitutional courts" frequently "indict" or even "convict" the unwitting public servants who then find liens on their property.

In the Twin Cities, the most prominent recent case involving such a scheme was that of a Fridley man and an Inver Grove Heights couple, who earlier this year were convicted of using counterfeit checks signed by Freemen leader Leroy Schweitzer. When the IRS searched the home of Marilyn and Ronald Kerkvliet, the "clerk" and "notary" of the "Fillmore County Common Law Court," it found thousands of silver coins and stacks of anti-tax movement literature. Two weeks ago, the Kerkvliets were again indicted, this time along with three other people, on charges that they illegally hid assets in offshore trusts. Of the Kerkvliets, Granse will say only that their actions were "wrong," and that he "told them it wouldn't work."

The Nichols brothers, too, put sovereignty theories to use in solving money troubles. In March 1992, faced with a credit-card debt of $32,000, Terry Nichols invoked Posse Comitatus lingo to "revoke" his signature, and on being hauled into court argued with the judge about his authority. By April he announced he was "no longer a citizen of the corrupt political corporate state" of Michigan and the U.S. When the judge ordered him to repay his debts, Nichols wrote something called a "certified fractional reserve check" for $17,861.68.  

This phony check was similar to others issued by a group called the Family Farm Preservation, a Posse-related group in Wisconsin that once featured Terry Nichols as a speaker. Last April, its 65-year-old leader, Thomas F. Stockheimer, was sentenced to 15 years in prison after being convicted with three others of passing as much as $80 million in bogus money orders during the early 1990s. He was already serving a 16-year sentence for assaulting two cops.

According to testimony at the trial, Family Farm Preservation advertised its money-order scheme through patriot meetings. The blank money orders were sold in designations of from $100 to $500 and supposedly could be redeemed through the group. One man testified he bought $100 worth of the money orders and used one of them to pay off a $1.4 million mortgage that was about to be foreclosed. Another phony money order was used to purchase army assault rifles.

In Stockheimer's defense, his attorney, E.J. Hunt, said his client never defrauded anyone and that the packets of money orders were meant to educate the public about the true nature of the American monetary system. At his sentencing, Stockheimer muttered he was being "kidnapped."

On March 16, 1994, Terry Nichols--by then living in Marion, Kansas--filed an affidavit with the state treasurer's office in which he declared himself to be a "natural-born free adult citizen" and said studies had convinced him that he was not subject to the "internal" government organizations of the United States. And he argued that "under the color of law," he was the victim of a "constructive fraud" by a certain "Criminal Element" that he hoped would be brought to book by a constitutional court.

In challenging this "octopus," he declared himself free of its laws, singling out for special attention IRS agents who he insisted "have no written, lawful 'delegation of authority' knowledge... Their so-called Form 1040 appears to be a bootleg document, lacking both a required [Office of Management and Budget] number and an expiration date."

Like the Nichols brothers, many of the most faithful adherents of anti-tax theories live in economically depressed communities such as Midwestern burgs hit hard by the farm crisis, or Rust Belt towns that have hemorrhaged industrial jobs. They connect with theorists like Granse through the underground lecture circuit and, more recently, the Internet, trading court tactics and information on government outrage. Some discuss active violence; others are more interested in getting government, credit-card companies, and banks off their backs. The IRS's Mason says the schemes continue to gain popularity. "They're just so attractive," he notes. "It doesn't make any difference that it's not viable if someone can avoid giving money to the federal, state, or local governments. I just see people's willingness to believe."

Not everyone preaching the anti-tax gospel is necessarily a true believer, Mason adds. Privacy laws mean that new converts will never know whether the lecturer they're listening to has escaped the long arm of the law through a compelling legal argument, quick wits, or because he secretly pays his taxes. Granse certainly has no track record of the latter, but Mason's point is well-taken; it's possible to make good money selling snake oil you wouldn't consume yourself.

The IRS and its lackeys can scoff at Granse's theories all they want. But in the mind of supporters, ideas like his are so dangerous to the federal government that the nation's leaders will stop at nothing to keep people from hearing them. Back at Granse's house, he and James Nichols--on the speakerphone from his Michigan farm--try to explain.

"What was going on [at the time of the Oklahoma City bombing]?" asks Granse. "Well, we had launched a new Congress, and the patriot movement had really come alive. And patriots were taking a stand, they weren't backing down. There was a movement in like 26 states to defederalize. That means throw the feds out, or make them prove they actually have jurisdiction to do what they're doing in the first place by the Constitution.

"Well, they couldn't do it. And this scared the living daylights out of the federal government. Not only that, you had the purported militias--which are nothing more than lawful groups, as every state can have a militia--that were saying that we'll back you up... Of course the White House was in shambles, and Clinton's approval rating was about 22 percent then, on April 18." Nichols murmurs his agreement.  

"So all of this stuff is going on, pro the people, anti-government," Granse continues. "And they had to put a stop to it and the only way they could do it was to blame this very sect, the conservative sect, be it Rush Limbaugh, be it the militia, be it the homespun guy who waves the flag, they had to be stopped. And the only way to stop them was to do the bombing."

What blew up the Murrah building, Granse maintains, was not ammonium-nitrate fertilizer, as prosecutors charge, but a small nuclear missile launched by the government itself. "The kind used to destroy runways," he explains, like in Tom Clancy's Clear and Present Danger. The action served as a tidy method for simultaneously diverting attention from the Clintons' growing Whitewater troubles and discrediting the increasingly magnetic patriot movement. It's a refined version of a theory members of the movement have been spinning via the Internet, low-budget video tapes, public-access cable shows, and shortwave radio in the two and a half years since McVeigh and Terry Nichols were arrested; the nuclear missile is Granse's own contribution.

But while Granse has pleaded with McVeigh's lawyer to make this case, the story of the upcoming trial will probably be quite different. Nichols's defense is likely to portray him as an unwitting tool of McVeigh, while prosecutors will lay out a skein of evidence showing how Nichols purchased the bomb ingredients. During the McVeigh trial, witness Michael Fortier described conversations in which Tim McVeigh told how he and Nichols planned the bombing of the building in Oklahoma City. Prosecutors will also probably cite physical evidence to link Nichols to storage lockers used to hold the bomb components.

Clearly, there's a longstanding connection between both Nichols and McVeigh. After protesting outside the Branch Davidian compound in Waco, Texas in April 1993, McVeigh drove straight to the farm, according to James Nichols, to vent his anger over what he had seen. Later, McVeigh got a driver's license bearing Nichols's Michigan address. Also, upon his April 19, 1995, arrest in Perry, Oklahoma, McVeigh listed James Nichols as his next of kin.

Whether Granse himself will figure in the arguments isn't clear. The feds do know from phone records that two days before the Oklahoma City bombing, James Nichols called Granse and they talked for 45 minutes. When the FBI asked Granse about it two months later, Granse said Nichols was asking unrelated questions on behalf of a friend in Decker.

There is no evidence that Granse knew either McVeigh or Terry Nichols at the time, though both almost certainly knew of him. Just before James Nichols left Decker for Granse's 1994 seminar in Appleton, he'd played host to both men. The three reportedly conducted survival exercises and set off small bombs in the woods behind the farm. After Nichols got back--all fired up and with a new worldview, he says--the three traveled together to at least two meetings of the highly visible Michigan Militia. It's believed that at one of the confabs members of the paramilitary organization allegedly discussed an attack on an Army Reserve base in northern Michigan.

None of this, Granse and Nichols tell me, in any way contradicts their theory that the feds themselves planned and carried out the Oklahoma City bombing. Rather, they say, it shows why Terry Nichols and Tim McVeigh are perfect patsies. Federal agents have acknowledged taking McVeigh's picture in Waco, they note, and probably trailed him after the conflagration to Nichols's farm. Both McVeigh and Terry Nichols were well-known on the gun-show circuit, which most everyone in the patriot movement believes is lousy with federal agents. The two could have been targeted during the five weeks they spent together doing the shows before the bombing.

"I'll guarantee you that the government and the [Bureau of Alcohol, Tobacco and Firearms] were watching my brother Terry at the gun shows," says Nichols, "and they knew exactly what he was doing--selling ammonium nitrate. He was selling it to make money, of course. He was an entrepreneur. He bought it in 50-pound bags, and he would take it home and repackage it into smaller containers. Little honey bottles to be specific, I believe. One-, two-, three-, and five-pound containers." And, Nichols emphasizes, though Terry was selling the explosive at gun shows, he never represented it as anything other than fertilizer. "He took the actual fertilizer bag and put it on a copy machine and shrunk the label down to fit each container and taped it on there. He said he was grossing $20,000 a ton selling it like that. From $250 to $20,000--is there room for a little profit there?"  

When arguments begin in Terry's trial later this month, James Nichols adds, all of this will come out. It won't be a dog-and-pony show like McVeigh's proceeding, "it'll be a real trial." And just in case, Nichols has co-authored a self-published book about the bombing that's due back from the printers about the time this article goes to press.

But back to the nuclear missile. Granse's flipping through pictures of the eviscerated Murrah Building, pointing to damage he says could never have been wrought by the fertilizer cocktail, which he calls an "anvil bomb." He hauls out federal statutes requiring that ammonium nitrate and blasting caps be separated by a 15-inch concrete wall--proof, he claims, that the homemade explosive could never have ripped through the rebar-reinforced pillars that kept the Murrah Building erect.

Color snapshots litter the floor of the makeshift office, spilling off a stack of magazines put out by the John Birch Society. If the extent of the devastation doesn't provide proof positive that Granse and Nichols are right, there are always the Internet and shortwave intelligence reports. One of the bombing investigators who probed the building, Granse has learned, was killed by a cancer that came on practically faster than you could diagnose it. Plus, Nichols chimes in, all of the search-and-rescue dogs are dead. Granse's nodding. "Radiation poisoning," he hisses.

Then he turns back toward his computer. Though it'll soon be in the headlines again, right now the bombing is old news. Granse has just two hours before his flight to finish the legal brief he's taking to Kansas City, where he expects to testify about why his client doesn't have to pay the IRS. Last week it was Idaho. Lately he's been thinking, he muses, about winding down. "It takes so much strength, so much courage, it takes so much out of me to do what I do," he says. "It's insidious." CP

Village Voice Washington correspondent James Ridgeway and City Pages interns Erin Cummings, James MacTavish, and Scott Carlson contributed to this article.

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