Militias Arming With Instruments of Fraud (Bogus checks become Weapons of Choice in War against Government, Businesses, Individuals.)

The Washington Post/May 21, 1996
By Serge F. Kovaleski

They are con artists driven by ideological fervor, anti-government activists who support themselves and their causes by bilking the government and businesses out of millions of dollars - and their numbers are growing.

Right-wing militias and other like-minded groups are operating schemes in nearly every state, in a movement of mounting concern to law enforcement authorities. It is not just the government being targeted, as the recent case of the Freemen in Montana shows, but banks, car dealerships, clothing outlets, gun stores and unwitting individuals viewed as somehow connected to the government, according to investigators.

The method of fraud involves bogus certified checks and money orders produced so artfully that banks have accepted them. Their supposed value is derived from phony liens placed against property. The groups also write checks for twice the amount due and then demand a refund of the difference.

Once a fringe occurrence, this fraud has evolved into a pervasive problem over the past three years, paralleling the nation rise of so-called right-wing patriot groups. Prosecutors estimate that more than a half a billion dollars in fake checks and money orders may have been passed to public agencies, companies and individuals by these organizations, and millions of dollars' worth of them have been accepted - causing hardship and havoc once their fraudulent nature has become known. At the same time, these groups sometimes receive largess, mostly farm subsidies, from the very government they decry.

"This has become a phenomenon that has touched practically every state, including Alaska and Hawaii," said Robert G. Baumann, a U.S. postal inspector in Milwaukee who has testified in fraud cases involving anti-government groups. "These con artists, using outdated codes and citations and their own narrow interpretations to justify what they do, are cheating people almost every day."

A prime example is the Tigerton, Wis., Family Farm Preservation, an organization that investigators say is a 1990's incarnation of the Posse Comitatus, and armed, anti-tax group that grabbed national attention in 1993 after a shootout in North Dakota that killed two U.S. marshals. Baumann said Family Farm has passed about $63 million in ersatz checks and money orders since 1993, resulting in at least $200,000 in losses to federal and state agencies, banks and individuals who mistakenly thought the valueless paper was real.

Authorities said they believe the progenitor of these schemes was Roy Scwasinger, who founded a far right-wing group called "We the People" in Colorado in 1993 before he was convicted in Lubbock, Tex., and sentenced to nearly 16 years in prison for filing fraudulent liens.

According to authorities, those committing the fraud today are a loosely knit amalgam of tax protestors, "common law" advocates and constitutionalists that has been likened to a larger-scale version of The Order, a militant group that in the late 1980s robbed armored cars to help finance its planned war against the federal government.

As with The Order, today's defrauders have constructed a view of society and government that they believe makes them immune to laws, able to form their own governments, act as their own central banks, create their own courts - and legitimately bilk public agencies, financial enterprises and merchants. They consider judges, bankers, law enforcement officers, lawyers and many others their foes and have clogged local court systems with billions of dollars of sham liens against these people to intimidate them.

The Freemen, holed up since March 25 on a remote farm near Jordan, Mont., and surrounded by FBI agents, are another prime example. A federal indictment charges the group with cheating the government, banks and others out of $1.8 million by writing fake checks. The Freemen also were charged with stealing television equipment and threatening the life of a federal judge.

Authorities estimate the Freemen have disseminated at least $20 million worth of the phony documents. Some Freemen leaders have held seminars at the ranch for others wanting to create bogus checks and liens, and hundreds of people from around the country have attended.

In a recent report, the Anti-Defamation League of B'nai B'rith, which monitors right-wing militias, said the Freemen's schemes have spread to 17 other states, buoyed by the popularity of home computers and laser printers that can be used to produce the imitation documents.

Authorities said that groups like the Freemen also bankroll their protests by charging fees for the seminars and fake checks, targeting older and working-class people who are desperate to cut their debts and who for the most part espouse anti-government ideologies. But in most cases, prosecutors say, these followers end up in deeper trouble. A Dallas man, for instance, passed a $500,000 in bogus money orders, some of which he obtained from Family Farm Preservation, to buy seven cars, four houses and a boat. He is serving 33 months in federal prison.

Prosecutors say one of the largest scams has been run by M. Elizabeth Broderick, a Palmdale, Calif., woman who calls herself the "Lien Queen" and who attended a fraud seminar last year at the Freemen ranch in Montana. Last November, she began her own series of seminars on writing a "comptroller's warrant" against U.S. government, charging up to $200 for admission and one warrant, which looks like a cross between a Treasury check and a cashier's check. The tern "comptroller's warrant," prosecutors say, is made up.

Among those attending one of Broderick's seminars was Isobel Oxx, 65, a real estate broker in California. "Elizabeth's goal is to root out the bankers that are stripping America blind, to abolish the IRS and lawfully force Congress to return to our Constitution," she said. "This is absolutely not fraud. She is trying to kill the cancer of our economic woes."

Last month, federal agents arrested Broderick, 52, who has been indicted with four associates on charges of running a $1.5 million fraudulent check scheme. Authorities say Broderick issued 1,200 phony checks totaling $120 million that have popped up in 16 states. Losses to individuals and banks from the scam are estimated by prosecutors at several hundred thousand dollars.

If Broderick is out to "kill the cancer of our economic woes," as Oxx put it, Nancy Cole, 46, works at a Los Angeles radio station and has no connection to the government or a bank, but she lost a bundle of money anyway because of a Broderick associate. In March, 1995, Cole leased a house she owns in Canyon County, Calif., to Barry Switzer, who was arrested recently with Broderick.

Cole has not received any rent from Switzer since last July. California laws make it difficult to evict him so Switzer's family lived in the house until being evicted last week. Switzer even tried to buy the $223,000 home with a phony comptroller's warrant.

Now, Cole is out about $25,000 and fears she may lose the house to the banks because she is struggling to keep up with the payments. "I feel like I'm defending the Constitution with my pocketbook," said Cole, who until recently was a single mother of two. "This has wiped out my savings. I'm month to month now."

Reached by The Washington Post at the Canyon Country property, Switzer's wife declined to comment.

In Williamsport, Pa., Meridian Bank was the victim of another con artist, a common law advocate who considers himself above state and federal laws and used a bogus $30,000 certified money order to cover several property loans. Because the bank was in the midst of a merger and the busy Christmas season, it says the check slipped through and the mortgages were recorded as satisfied. Meridian then had to sue the customer and proceed with a foreclosure, which took two years and cost about $15,000 in legal fees.

In Oklahoma City, meanwhile, a local gun company was out $5,200 after it accepted phony checks a man presented to purchase six military-style assault rifles.

For every example of those having been bilked, there are dozens more who have had close calls. Las May in Arizona, authorities arrested a militia activist after he tried using a bogus $250,000 money order to post bond for a man charged with child molestation. Fremont Motors in Cody, Wyo., was preparing to deliver eight new diesel trucks in March when it was told by a bank that the company name on the $250,000 check did not exist.

Financial gain is not the only thing produced by the scams: The havoc and legal jams they produce is often intentional. USA First, an anti-government group in Waxahachie, Tex., not only circulated $61 million dollars in losses for those taken in by the rise, but it placed liens of up to $5 billion on lawyers, bankers and others, investigators said.

"This is vicious because your credit will be shot and you may not be able to pass a title to your house or rent an apartment," said Ton Hamilton, an assistant U.S. attorney in Dallas who prosecuted seven USA First members.

But for Gary Dean, 64, of Simi Valley, Calif., who attended two of the Freemen's seminars last year, the liens and warrants are justified. "Comptroller warrants and liens are better for traitors than what was done 200 years ago," he said. "They were stood up against a wall and shot."