Opinion: Chilliwack proponent of 'natural person' theory convicted of counselling fraud
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By David Baines, Vancouver Sun? January 19, 2012
Chilliwack's Russell Porisky has been convicted of counselling people to evade taxes through his school, Paradigm Education Group.
B.C. Supreme Court judge Elliott Myers also convicted Porisky and his common-law wife of failing to report a total of $1,127,185 of income derived from the school during the five-year period ending December 2008, thereby evading $225,222 in income tax.
The judge further convicted Porisky of failing to remit $66,133 in goods and services taxes that he should have collected on the sale of Paradigm courses and materials.
The trial was held in November and December. The Crown was represented by Bruce Harper, while Porisky and Gould represented themselves.
Judge Myers handed down his 36-page decision on Wednesday morning. For the Minister of National Revenue, it represents a major victory.
For years, Porisky has been promoting his "natural person" theory, which holds that a per-son can arrange his or her business affairs to receive income as a "natural person" rather than as a taxpayer, thereby avoiding income taxes.
The only problem is, the courts have consistently rejected this argument. More than a dozen people, including some of Porisky's former students, have been convicted of tax evasion, and some have been sentenced to jail terms.
By getting Porisky convicted of counselling people to evade tax through the natural person theory, the federal government has effectively cut off the head of the snake.
In his decision, Judge Myers noted that Porisky worked in the construction industry, then in the early 1990s began to study the taxation system.
By 2001, he had dedicated him-self to studying and propagating his theories. He founded the Paradigm Education Group to "create a structure that everyone could work together in to save the country from a foreign parasite" - the international bankers who were supposedly responsible for the income tax system.
To promote his natural per-son theory, he wrote books and created instructional DVDs, and Paradigm sold them through its website, www.naturalperson. com.
He also conducted seminars, for which he charged a fee, and he qualified "educators" to teach Paradigm materials and assist people who wanted to set them-selves up as natural persons.
Gould, who has lived with Porisky since 1998, assisted in administrative matters and attended his seminars. Money generated by Paradigm was deposited into four bank accounts, two of which were in their joint names.
Paradigm proved to be a very popular and lucrative business. A Canada Revenue Agency investigator testified that a total of $1,843,298 was deposited into Porisky's and Gould's bank accounts during the relevant period. After deducting expenses, he estimated net business income to be $1,127,185, which he allocated evenly between the two accused.
While the profitability of the venture was clear, its underlying logic was not:
"Mr. Porisky's theory not only does not bear any legal logic but it also fails to accord with common sense. It is a failed attempt at word magic and has no validity," Judge Myers wrote in his decision.
He said the "absurdity" of Porisky's distinction between a natural person and a non-natural person was illustrated during the trial when he was asked whether he wanted to give any evidence.
"If I make the decision and I go in that box, which person, in the eyes of the law, am I?" he asked the judge.
"Am I Russell Anthony Porisky in my inherent personality as a natural person, or am I a sovereign-granted personality?"
"You're Mr. Porisky," the judge replied.
"That's fairly misleading because that's not clear enough for me," Porisky responded.
At that point, the judge tried to reduce the question to its simplest form:
"Let's assume you get into the stand and the Crown asks you, 'What did you have for break-fast today?' Would it make a difference as to what capacity you were in?"
"For me, it would, your honour, yes."
The judge also noted that, when Porisky was asked to confirm the identity of a Paradigm educator in the public gallery, he said it depended in what capacity the Crown was asking about.
The judge found that Porisky was well aware of previous court decisions rejecting the natural person theory, and was therefore "wilfully blind" in utilizing and promoting his views to others.
"It is clear to me that Mr. Porisky intended that Paradigm students follow his teachings by arranging their affairs as natural persons and avoid paying income tax."
The judge noted that Paradigm's books and DVDs contained a disclaimer that the information in them "should in no way be construed as either legal or financial advice," and that readers should consult a competent expert to determine its veracity before utilizing it.
But he said these caveats were "lost in a sea of material that [Paradigm] presented with 100-per-cent certainty," and it was clear he was "encouraging the fraud of income tax avoidance."
Judge Myers will consider an appropriate sentence at a later date. Based on his income tax evasion conviction alone, it is highly likely that Porisky, at least, will be handed a jail sentence. The counselling conviction can only lengthen that term.
dbaines@vancouversun.com
Blog: vancouversun.com/baines
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