Now I was in jail in a small cell with a dozen other inmates who were disgusting drunks, druggies, and the scum of the Earth

By J. McNulty

I will make my sorry tale short.

This story is being told only to warn people that it is not enough to get their money (and assets) out of their home country, they must also get themselves out fast — when they have a chance!

Decades ago, I was a retired Irishman living in San Francisco. I didn’t intend to stay there – was just visiting. While there, I had what most people would regard as a terrific piece of luck. I won the Irish Sweepstakes Lottery. How could this turn out to be the most unlucky day of my life? I got my picture in the papers when I was formally notified that I had won a tax free prize running into the millions of dollars. I could have the money sent to the USA, or go to Ireland to pick it up. As I intended to be on my way back home anyway, I made the mistake of mentioning (in an interview), I’d be going back to Dublin to pick up the prize. That was my first mistake.

I was almost immediately “detained” by Federal Marshals. I was put in chains and then found myself in the Federal Building before a Federal Judge to answer charges that my conduct (after winning the prize) constituted a “willful refusal to pay my Federal Income Tax of around 40% of the prize.” A representative of the not-so-great state of California was also there to claim another 15% of my prize for state income tax. The judge said to me: “Do you understand that this is a hearing to give you a chance to show cause why you should not be held in contempt? The I.R.S. has ordered you to turn over your winnings to the Clerk of this Court until the IRS determines how much taxes are due.”

“Sorry, I don’t understand exactly.”

“I will explain, and try to put this as simply as possible,” said the Judge.

“The USA Government has made a determination that you owe income tax on income recently earned while in the USA. You publicly said you were going to leave the country. The authorities then asked me to issue a writ prohibiting you from leaving until you have made you have paid all taxes due. To this end, the marshals have taken your passport. You have been brought before me to answer a few questions. Will you give truthful answers?”

“Sure, I always tell the truth.”

The judge then asked me if I intended to pay (what amounted to more than half) of my winnings to the income tax authorities of the USA and California. I told the judge that Irish Sweepstakes Winnings are always tax free; that I was an Irish Citizen and resident; that I had not yet collected the money, and yes, I intended to collect it in Ireland. I explained that my non-lawyer understanding of the law was that any money I made outside the USA while a tourist in the USA was tax free.

The I.R.S. said otherwise.

I didn’t have a lawyer yet, but I figured I didn’t need one. I knew my rights. Result? I made that little speech. The judge asked me “Is it then your intention to return to Ireland to collect your money and not pay any USA taxes?”

“Yes” I answered, “That is my plan.”

“If I order you to make arrangements to have your Sweepstakes winnings transferred here to the USA lending a determination on taxes due, will you do so,” asked the Judge.

Then I answered, truthfully but stupidly: “With all due respect your honor, I feel you have no jurisdiction over me and I certainly don’t expect to give you any jurisdiction over my money.”

That was my second mistake. Now I was “in contempt of court.”

The judge then said, “Then sir, I have no choice. The motion of the government to hold Mr. McNulty in contempt of this court is granted. He is ordered confined to the San Francisco County Jail until such time as he makes suitable arrangements to have his entire lottery winnings transferred to the clerk of the court.” ‘Bang’ went the gavel.

Now I was in jail in a small cell with a dozen other inmates who were disgusting drunks, druggies, and the scum of the Earth. The air was stale (no windows) and the food was beyond contempt. An overflowing toilet was in the middle of the cell. Defecation had to be performed in public. It was stopped up and it stank. My room-mates were germs.

Only two of my cellmates were human beings like me. Both were in jail for “civil contempt” as I was. One was a “tax protester” who felt that the income tax law was unconstitutional; the other was a guy delinquent on alimony payments. All three of us had in effect, life sentences without any criminal charges ever having been filed against us. We were in sort of a debtor’s prison. We were deprived of paper, pencils, our clothes, everything.

After three days I got a visit from an IRS “negotiator” who told me that I was now going to be in jail for life, with no way out until and unless I turned over my winnings. I was incurring big fines. He indicated 33% a month in penalties and interest for “tax fraud” and “willful failure to file an income tax return, report foreign income,” and on and on.

The G-Man said my misconduct was going to get me “criminally indicted.” That threat was a big laugh to me. I was already in (maybe) the worst jail cell in America. At worst, if I became a convicted criminal, I would be transferred to one of those Club Feds with tennis and golf. Much better than the county jail.

The injustice of my situation hardened my resolve. I decided I would rather die in prison and let my heirs in Ireland get the money. Not a penny would ever go to those bastards.

Grandpa writes

Fast forward: McNulty didn’t simply lie down and rot away, he got a public defender lawyer to file useless writs of habeas corpus; got sympathetic newspaper publicity in the USA and Ireland. Zero help from the Irish Consulate. Many, many years went by. The original judge died of old age.

When it looked like McNulty was about to follow that judge to the grave, a new judge summoned him to appear and said, “The purpose of a civil contempt order is to get a reluctant defendant to do what the court has ordered. We know your life has not been a bed of roses these past years. In spite of

incarceration, you have refused to comply. We are not going to give you the satisfaction of dying in our prison system. I am releasing you on compassionate grounds. Your passport is hereby returned and you are free to leave this country. You can never come back to the USA.”

Grandpa’s Notes:

And so McNulty was allowed to go back to the Emerald Island to die. We are not sure who “won.” What do you think? McNulty or the USA?

In a similar case, a Swedish boxer came to the USA to fight a championship match. When the fight was over, the I.R.S. demanded half the Swede’s share of his advance foreign TV rights sales. This money was on deposit abroad. The I.R.S. position was that any income earned by anyone physically in the USA (whether resident or not) was taxable. The Swedish boxer was then in the same position as McNulty.

Would he go to jail for contempt? The judge said, “The keys to freedom are in your hands!”

The boxer in this case avoided jail by paying the tax claimed. Had he left the country promptly, he would have been “beyond the jurisdiction” and a few millions ahead. In his case, perhaps the Swedish tax might have been even bigger. Thus this boxer stayed in the USA and used what was left of his money to buy a motel in Florida.

The moral of the story is clear. You can always report everything required of you; you can pay any and all taxes the government demands. However, don’t expect to win in court. The I.R.S. wins 98% of all cases.

Want to dispute your tax bill or criminal charges? It is not enough to get your assets out of the country. You must also get your ass out. A Judge in any country does indeed have jurisdiction over anyone physically in his court room. He can order you to bring your assets back, to convey property, to do anything! If you don’t, the judge can toss your ass in jail for the rest of your life –without any trial or any criminal charges ever being filed.

This applies in I.R.S. matters, or any civil lawsuits including divorces. Failure to pay civil court judgments, even small traffic fines can get you jailed for contempt. Lawyers and spectators can be jailed for improper decorum. Any conduct a judge decides is disrespectful can get you jailed. There is no need for any trial or jury.

The USA is not the only place where many people are now in jail for contempt. In Dubai for instance, there are hundreds of foreigners now in jail for indeterminate terms.

Why? For disputing rental contracts, drinking a glass of wine, or even kissing in public.

Grandpa feels that as insurance against arbitrary government actions, you must have a secret second passport in reserve. You must quietly depart whenever in danger of any sort of confrontation with government – whether it be for taxes or other things.

Avoid notoriety or publicity. Low profile, a packed suitcase and escape routes planned in advance are a much better defense than “asserting your rights” and demanding a “fair trial.”

What do you think?

All stories of successes or failures from our readers are welcomed. You will remain anonymous if we use your story.

Reader Comment

Ivor wrote:

I am familiar with other cases like this one. A great story with lessons for all of us. Look at the many instances of heirs and lottery winners whose life becomes miserable (whether thru their own foolishness or due to others who want a piece of their windfall).

His Biggest Mistakes? IMHO:

Did not consult a competent lawyer, accountant, or other pros BEFORE claiming his prize. DUMB.

Opened his mouth. DUMBER.

Talked to the press. DUMBEST OF ALL!

Big Brother will catch fish especially if they open their mouths.


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