The Evaders

How Scott and Kristin Haynes lost a tacky-figurine fortune thanks to anti-tax greed.

The sun was still tucked behind the Atlantic Ocean when the jet's tires touched tarmac. It was just before dawn on June 23, 2010, and most of the passengers on Spirit Airlines flight 826 were asleep when the cabin lights flickered on. One couple, however, had spent the night wide awake, a nagging unease keeping them from getting any shut-eye. Their short journey had begun at 2:30 a.m. in San Pedro Sula, Honduras. It ended two hours later at the Fort Lauderdale/Hollywood International Airport. Since it was the cheapest way to get from Central America to the States, the flight was packed. Crowded into cramped seats were young Honduran families with crying babies and American expats returning home, all attracted by the late-night flight's bargain rates. As the jet crawled through a pre-dawn fog up to its gate, flight attendants began whispering to each other, their eyes nervously darting around the crowded cabin. Something wasn't right. The whine of the engines stopped and a stale silence filled the plane. Dewy-eyed passengers and a befuddled crew stared at each other for what seemed like an eternity until the intercom crackled to life. "Everyone remain seated," said the voice on the speaker. "Everyone except Scott and Kristin Haynes." Heads swiveled. Whispers merged into a hissing murmur, the word "terrorists" with a question mark attached audible above the fray. But then, when a pair of laid-back- looking blond gringos stood up, alarm turned to confusion. Whatever these Hayneses had done, what they looked like most were two Teva-wearing grandparents on permanent vacation. Not the kind of people you'd expect to be handcuffed and escorted off of a plane by stone-faced federal marshals. But for Scott and Kristin, the trip was finally over. What their fellow passengers couldn't have guessed was that the kind-looking couple now perp-walking down the narrow aisle were actually fugitives in the final frame of a protracted cat-and-mouse game with the IRS. Unbeknownst to the Hayneses, the moment they'd landed on U.S. soil Uncle Sam had them in his grip. After a hearing in Fort Lauderdale's federal courthouse, they were transferred to Spokane, near Colbert, the eastern Washington town they'd lived in before escaping to Roatán, a palm-studded tropical isle off the Honduran coast, in 2004. Instead of a stateside sojourn studded with family suppers and trips to the mall, the 56-year-old husband and wife sat in separate cells for 23 hours a day in the Spokane County Jail for nearly five months. After that, they were both given federal prison terms, which they're still serving today. Their problem? Too many cherubs. Scott Haynes and Kristin Whitney met cute at the University of Utah in Salt Lake City in 1971. He was a music major and a rowdy member of Sigma Alpha Epsilon who'd grown up near San Diego playing guitar, speaking Spanish, and generally epitomizing the SoCal surfer-dude look. She was a shy Delta Gamma pledge and one of four kids in a precociously artistic Utah family. At a dance one evening, Scott's fraternity brother Wade Bledsoe brought Kristin as his date. There were no sparks between him and Kristin, says Bledsoe, but his friend Scott was smitten. "At the end of the night he came up and said, 'Hey, would you mind if I ask her out?' I said no, not at all—she won't even talk to me." Scott and Kristin were an instant pair. Around him, her shyness evaporated. Around her, he was the same hard-partying guy he'd always been, only now with a partner in crime. But while they met in college, neither stuck around long enough to get their degree. Harmony Storms, the pair's pretty, petite 34-year-old daughter who followed her parents to Roatán, says that her mom often followed her dad's lead, and that he just wasn't meant for the strictures of a university education. "My dad didn't conform all that well to their standards," she says from the wooden hilltop home with ocean views she shares with her husband and two toddlers. "They wanted to structure him in a way he didn't want. He likes to do things his way." Scott's nonconformity was also evident to his friends. Lorne Tucker, another fellow frat boy, says that like a lot of undergrads, Scott was apolitical in college—his reading list never straying far from Clancy, Crichton, and the other masters of the airport paperback. But following school, Tucker claims, his friend changed. On camping and skiing trips, the formerly disinterested rocker now had a fire in his belly. "Sometimes he would get too opinionated," says Tucker. "And sometimes it was better to bite your tongue. Scott has never been a lover of the government or the system. Especially the tax system." After marrying, Scott and Kristin stayed in Utah near her parents. Then two years later, after Harmony's birth, they relocated to Long Beach, Calif. Scott joined a touring band that mixed originals and '70s rock covers. He also started a successful recruiting agency headhunting programmers and systems analysts. But he'd soon cede the role of family breadwinner. While Kristin had never gotten her degree, she was showing uncommon artistic promise, working tirelessly to perfect paintings and sculptures, even though she was no longer being graded for her work. Living in Southern California, the family often made weekend sojourns to Mexican beaches. On the trips home, while stuck at the slow-moving border crossing, Kristin would buy figurines—chintzy plaster-of-Paris recreations of beatifically smiling cats, dogs, and birds—from roadside vendors. She soon started making her own clay animals at home. Harmony remembers sitting in the kitchen as a child while Kristin baked batches in the oven. She says her mother started improvising when her younger brother, Pat, now 24, was still a chubby toddler, and so cute that he inspired a new model: a red-cheeked cherub with wings. Thus was born the first Dreamsicle, named after one of Kristin's favorite Jimmy Buffett songs. Like the Dreamsicles themselves—fit-in-your-palm dimpled babies clutching teddy bears and angels hoisting American flags—Kristin's business started small. She operated out of a workshop on the side of the family home, paying young Harmony a tidy allowance to help her with packaging, and personally carting her creations to large gift shows throughout southern California. But by 1991, with Harmony entering high school, mother and daughter could no longer meet the demand for the chintzy cherubs. So Kristin approached Cast Art Industries, a fledgling California firm with its own manufacturing plant, to have them mass-produced. Cast Art salesman Frank Colapinto says that Dreamsicles sales didn't take off immediately. "But then they caught on. I mean, really caught on." According to Colapinto, the Dreamsicles were a huge hit, especially among moms and grandmothers in the Midwest. "When there's 10 feet of snow on the ground, they all go to the mall and shop," he says. The numbers back up Colapinto's claims. According to the government, in just one three-year span starting in 1993, Scott and Kristin earned more than $5 million in Dreamsicles money. With the figurines now a hit and enormous royalty checks padding their bank account, Harmony says her parents started re-evaluating their lives. At only 38, Scott sold his headhunting business and started talking about retirement. Then in 1992, when Harmony was 16 and her brothers still in grade school, the family moved to Sandpoint, Idaho. Harmony says her parents were sick of life in California, especially the smog, traffic, and high living expenses. She also says they'd fallen in love with Sandpoint on an earlier summer vacation. The final destination had been Calgary, but Scott and Kristin had so enjoyed Sandpoint's combination of skiing, fishing, hiking, and fresh air that the family forgot all about Canada and spent all two weeks in Idaho. For Harmony, the move was devastating. Raised in the city, she couldn't understand why her parents wanted to "trade flip-flops for Sorel boots and flannel shirts." "I hated it," she says. "I was a California girl and this was a small town. I didn't fit in." But for Scott and Kristin, Sandpoint was paradise. They bought a big, beautiful home with a barn and acres of raspberry vines. They skied often, had more time to spend at home with the kids, and made friends quickly. It didn't hurt, too, that the money kept flowing. Now all they had to do was figure out how to keep as much of it as possible. JJ MacNab can still remember her first encounter with the "tax-denier" movement. It was a cold July day in 1997 when MacNab, then an insurance analyst in San Francisco, was introduced to an elderly widower. MacNab was no ordinary pencil-pusher. In the 1980s, in an effort to find a hobby that would "spice up her professional life," she started investigating scammers who swindled AIDS patients out of their life-insurance money, a Brockovichian effort that was eventually rewarded with widespread legislation and Department of Justice prosecutions. So when the spry old man sitting in front of MacNab started talking about the gurus who had promised him a way to beat the IRS, yet could not be found now that his life savings were stuck in an offshore bank account, her ears perked up. Living in a country birthed by tax protest, MacNab wasn't surprised to find that the tax-denier movement began with a fringe militia group out of 1960s Montana. But today—after years of study and Congressional testimony, and with the upcoming release of a book about the movement—she is surprised by how far the deniers, whom she describes as a cult, have come. Of the half-million or so Americans who identify as tax deniers, MacNab says the quickest-growing demographic is black males, a curious fact reinforced by the recent, high-profile prosecution of action star Wesley Snipes. "Tax deniers are motivated by greed and paranoia," says MacNab. "In economic good times they worry about holding on to their income. In economic bad times they worry about losing their home." In 1992, Scott and Kristin were experiencing nothing but good times. And Sandpoint offered plenty of people willing to help them keep those good times going. Remote and isolated in the Idaho panhandle, Sandpoint, like a lot of small towns in the Pacific Northwest, is known for attracting its share of anti-government types. At one point home to infamous LAPD detective/O.J. witness Mark Fuhrman, white separatist Randy Weaver, and avowed racist Richard Butler, it's also the birthplace of Sarah Palin and one of the country's first prominent Tea Party groups. Harmony says it didn't take long before her father—a fan of Rush Limbaugh but not the government—found others fed up with the feds. "He was frustrated that he was making all this money and had to give the government 60 percent," she says. "It was like, the more money he made, the more he realized how expensive it was to be rich." Harmony says a family friend and financial planner started giving Scott tax advice, telling her father "When you start making some real money, come talk to me, and I'll help you find a way to best protect it." She says her dad honestly believed he was using legal loopholes to outsmart the government—a doomed argument which doesn't surprise MacNab. "They have this delusional belief that there is a vast government conspiracy covering up the secret that the average American doesn't have to pay income taxes at all," she says. "They hear what they want to hear." According to court documents, Scott and Kristin Haynes paid federal income tax until 1992. But the next year, the government says, Scott began following his friend's advice, starting to use two corporations in an attempt to hide money. The revenue from Dreamsicles was divided, the government says, with Scott only paying federal income tax on the money in one account. In 1998, Scott pleaded guilty to one count of tax evasion. At his sentencing hearing, Scott's attorney explained that his client had already repaid the government some $900,000 on a total liability of $2.1 million, and asked the judge for leniency—a plea Scott repeated in a statement to the court. "I will always regret the harm I have caused, and the bad example I set for my children," he said. "Regardless of your decision, I want you to know I will demonstrate good citizenship for the rest of my life. I will never again engage in illegal activity." But if Scott's words sounded sincere then, they would soon prove hollow. On February 7, 2000, after serving 17 months at Nellis Prison Camp outside of Las Vegas, Scott re-entered the world and quickly tracked down a man he'd come to admire while locked up: Irwin Schiff. For anyone else, nearly two years behind bars might have served as a clanging wake-up call. But the incarcerated Scott found a hero in Schiff, whom MacNab refers to as the "granddaddy" of the tax-denier movement. Originally from New Haven, Conn., Schiff rose to fame in the mid-'70s when he stopped paying taxes and appeared on talk shows to crow about it. He espoused theories that "wages" were different than "compensation," that the 16th Amendment was never ratified, and that filing a return is voluntary, not mandatory. By the end of the decade, he was in prison, a pattern that would repeat itself until the present day. Now 82, Schiff has spent much of his life tangling with the government. He's been jailed multiple times for tax evasion, with his most recent conviction coming in 2006, when he was sentenced to 151 months in prison and ordered to pay the IRS more than $4 million in back taxes. The federal government has even banned Schiff from selling books. So he now gives them away for free, a gesture that explains why some of his followers consider him a martyr. In late 2000, not long after getting out of prison, Scott invited Harmony and her husband to a seminar in Las Vegas where Schiff was speaking. "We met him, and I thought he was sort of a kooky guy," says Harmony of the jowly, clownish Schiff. She and her husband were intrigued by Schiff's theories, she says. But they weren't nearly as enthusiastic as Scott. Harmony says her father was "pumped," believing he'd found both a legitimate tax loophole and vindication for the jail time he'd served. "You won't believe the stuff I'm finding out!" she says he told her. After the seminar, Schiff, Scott, and Harmony went to dinner, where, she says, the sales pitch continued. "He was a very convincing man, very well-read like my dad," she says. "He just wanted people to be aware that there was something wrong with the tax code as it was written." Following his release and encounter with Schiff, Scott and Kristin sold their home in Sandpoint and moved just across the border to Colbert in Spokane County, far enough away where few would know of their criminal past. The change in scenery didn't, however, temper Scott's newfound belief that it was his patriotic duty to question the government's right to take his money. What's more, says Harmony, Scott's views had finally become his wife's too. "Scott can be almost like a cult leader," says family friend Rick Gilson. "And Kristin was very subservient to him." Within six months, Scott had turned from disciple to advisor. He joined a Yahoo chat group and started telling others that "there is no legitimate tax on U.S. citizens" and that "the law does not authorize the IRS to do anything but take the money you give them voluntarily." The government says Scott got so brazen, he even signed one post as "The Evader." In late 2000, the IRS sent a letter to the Haynes' home, reminding them to file a 1999 return. They stamped it "REFUSED FOR FRAUD" and sent it right back. As far as the government was concerned, it was a clear sign that the Hayneses were under Schiff's influence. According to a report from U.S. Attorney James A. McDevitt, the government wrote that it "appears that some of the tactics the defendants used to thwart the IRS came right out of the Schiff tax protestor playbook." One of Schiff's other tactics was to advise his followers to write zeros on all the lines of their 1040 forms where they were supposed to list their wages. According to court papers, on April 16, 2001, Scott filed such a "zero return." A week later, he amended a zero tax return for 1997 and requested a quarter-million-dollar refund. Then Scott and Kristin switched from being merely reactionary to antagonistic. In a series of audacious letters to government officials, the duo insisted they weren't actually U.S. citizens. In February 2001, Kristin mailed a letter to "George W. Bush, President of the [corporate] United States" formally proclaiming her expat status. She asserted that "through fraud and a conspiracy against my rights, a U.S. corporate subsidiary known as Colbert, WA is attempting to take my private property in the form of property taxes unless I pay tribute to their de facto government." She then sent a "declaration of expatriation/repatriation" to "Chief Justice Rehnquist, Supreme Tribunal/court," renouncing her U.S. citizenship. The following month, she delivered another letter, this one addressed to the IRS. "PLEASE BE ADVISED," it began. "I am no longer a 14th Amendment citizen of the corporate United States . . . I was led to believe I owed federal taxes . . . please send all monies I have sent to the Federal Reserve (federal taxation) . . . to me." She concluded her missive by warning "if you have not responded in writing by midnight, 20 days from the date of this document with lawful evidence to the contrary, then this document is in full force and effect without objection. GOVERN YOURSELF ACCORDINGLY." Although she's not quite the believer that her parents are, Harmony takes pains to point out that her mom and dad signed most of their letters Without Prejudice, suggesting that by doing so, "they thought they went about it in a legal and respectful way." Throughout their one-sided battle with the feds, the Hayneses continued to get rich from Dreamsicles. According to the IRS, they amassed nearly $3 million after Scott got out of jail, yet did not file any tax returns. But as with many small businesses, Dreamsicles sales fell sharply after 9/11. At the end of the year, Scott and Kristin brought in barely half a million dollars, and the drop-off steadily continued. By 2006, according to IRS records, the Dreamsicles dream was over: Scott's total income was estimated at $214; Kristin's barely topped $25,000. In total, the Hayneses sent more than 450 pages of letters and declarations to the IRS between November 2000 and March 2004. The U.S. labeled them all "frivolous tax defier arguments." In March 2004, the agency decided to audit the Hayneses—most likely because the couple hadn't filed a return in five years. Citing "harassing correspondence from the IRS who must KNOW there are NO RECORDS that exist that show [we have] a tax liability and NO RECORDS showing [we] are requiring to file a form with the IRS," Scott and Kristin quickly counter-defended. Despite their bravado, sometime during the couple's locked-horns battle with the government they decided it would be better to turn tail and run rather than continue to fight. So near the end of 2004, Scott and Kristin moved to Roatán, a primitive, reef-ringed jewel off the Honduran coast which locals only half-jokingly refer to as "a sunny place for shady people." In the Caribbean, Kristin and Scott enjoyed a laid-back life in the ramshackle hamlet of West End, where cruise-ship tourists and American expats spend lazy days diving, drinking, buying real estate, or some combination thereof. Her parents loved island life, says Harmony. Kristin was turning into a tan, lithe yoga enthusiast. And Scott, with his tattered T-shirts and sun-splashed face, looked the part of the SoCal kid he'd always been. Kristin sold artwork online and in the island's few galleries. And in the evenings, Scott could usually be found at Rick's American Café, a popular expat hangout, banging out flawless Who covers with a few pals. Sometimes Harmony would even join her dad onstage to sing. She says one of their favorite tunes was Warren Zevon's "Lawyers, Guns and Money": "I'm hiding in Honduras/I'm a desperate man/Send lawyers, guns, and money/The shit has hit the fan." On Roatán, the couple toned down the dissent. They lived in a modest wooden home perched on stilts atop a hill overlooking the Caribbean.They bought property in what was still a booming real-estate market, and gave freely to local charities. Friends on the island say they didn't see a lot of flash; the Hayneses lived frugally. "They quit going to Tong's [their favorite Thai restaurant] because they said it was too expensive," says bar owner and friend Gilson. "They were always barefoot. They rode their scooters everywhere." Kate Stott, a Canadian real-estate agent who owned property adjacent to the couple, says that any money they had was in local real estate. But by 2008, with the global economy tanking, the value of that real estate had seriously slipped. "If they had money, they didn't have very much," says Stott. "I mean, we went out to dinner all the time, but Kristin and Scott would order a meal and they'd split theirs, and we'd all split a bottle of wine. There was never any throwing money around." Harmony says her parents thoroughly enjoyed their idyllic life on the Caribbean island. They could sleep well with the comfort that Honduras had no extradition treaty with the U.S. There was only one way they could get caught: if they decided to come back. By last June, Harmony says her parents were itching to return to the States. Elderly parents needed care, grandchildren expected hugs, and the couple wanted to visit old friends they hadn't seen in forever. So they started planning a trip. First they would fly to Fort Lauderdale, then on to Las Vegas, where they would rent a car and spend the summer trekking across the West. Unknown to the Hayneses, however, on March 24, 2010—a mere three months before they boarded the flight that would end their freedom—a federal grand jury in the Eastern District of Washington issued an indictment charging the duo with five misdemeanor counts each for failing to file tax returns. Because all names of passengers on international flights are routed through an Immigrations and Customs Enforcement database, the Hayneses were easy targets by the time Spirit 826 touched down in Fort Lauderdale. Family and friends gathered in Las Vegas were surprised when the couple failed to show. "We had a huge get-together planned," says Bledsoe. "We got a call from Scott's brother saying they weren't coming. I thought they were fooling with me." But whereas their American friends were surprised, the Hayneses' friends in Roatán were stunned. Despite plenty of heated beer- and rum-fueled arguments at the bar with his opinionated pal, Gilson had no idea Scott had spent time in jail until he read about it in a Spokane newspaper. "I question his intelligence," says Gilson. "I used to tell him, 'The same system that allowed you to make all this money is the same system you're so angry at!' The political thing was nothing more than a mask for greed." At first Scott and Kristin entered not-guilty pleas. But they were soon crushed beneath an overwhelming mass of legal precedent. In August, Kristin's lawyer worked out a release deal. If she surrendered her passport, stayed with friends in Spokane, and could be monitored via GPS satellite, she was free to leave. But the government insisted a hefty fee of $450,000 was needed to prove she wasn't a flight risk. So she stayed locked up. Also that month, the IRS sent a pair of agents to investigate the Hayneses' life in Roatán. They estimated that in West End alone the pair owned several properties worth $800,000. Some of the people the agents interviewed "specifically requested that their names not be used for fear of retaliation" by the Hayneses, according to their report. The agents also reported that Scott and Kristin had purchased four beach condos and one mountain property in Panama and a dive business in Nassau, Bahamas. After their arrest, Kristin insisted to the government that she was only earning about $3,600 a year on Roatán. But with mounting evidence of the couple's well-stocked real-estate portfolio, the government wasn't buying the argument. Upon seeing this onslaught of bad news, Scott's lawyer urged him to reverse his not-guilty plea. "Stop fighting," Harmony says he told him. "Cooperate as much as possible." In September, the two took that advice and changed their pleas. Before their sentencing last November 16, U.S. federal defender Kailey Moran asked Judge Justin L. Quackenbush for leniency. "Ms. Haynes is a generous person and gifted artist," said Moran. "She has no prior criminal history and is a 56-year-old grandmother. To the extent that she has lived in the Caribbean care-free, that is clearly over." Moran asked the judge to sentence Kristin to time served followed by supervised release, arguing that if she was free to earn income or sell property, she could pay off the back taxes. But Quackenbush was unmoved. He sentenced Kristin to 24 months at SeaTac Federal Detention Center and Scott to 40 months in a low-security California prison. In letters sent to her from prison, Harmony reports that her mom says she's trying to find "a new, radiant peace" through yoga, and finding a way to "step outside her situation and observe, not participate." She's also ordered art supplies so she can start drawing and painting again. Meanwhile, Scott is reportedly passing the time by giving guitar lessons to some of his fellow inmates. Harmony says she's sad that her parents won't see their grandkids for a long time. But she still has faith that they're behind bars for the wrong reason. "I believed in my heart—and I still do—that their intentions were not to be greedy or to hide money," she says. "They felt like they were justified in asking questions." Still, Harmony says that despite the strength of his convictions, and the convictions he passed on to the rest of his family, her father is finally starting to question the direction of the past two decades. "He's not saying 'What was I thinking?'," she says. "He's saying 'Why did I think we could take on the government like that?' "

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