December 28, 1999

Use of corporate 'soles' draws attention

SPOKANE (AP) -- Some people in anti-government movements have been using a little-known state law to declare themselves "corporation soles," religious corporations that are exempt from many regulations.

The secretary of state's office hands out certificates for these one-person religious corporations with little review.

Little information is required of applicants, and the corporations they form are virtually unregulated, according to the Northwest Coalition for Human Dignity.

"At first, we thought it was something they had made up, like their common-law courts, but when we checked into it, it turned out it was a real state entity," said John Lunsford, research director for the Seattle-based coalition.

The coalition is concerned the law may be used to avoid taxes, child support or other obligations.

It can be difficult to collect debts from people who place their assets in a corporation sole. They can claim they are no more responsible for their corporations' debts than Lee Iacocca was for Chrysler's.

Creditors would have to prove in court that a corporation sole is merely the alter ego of its director in order to collect a personal debt.

Under a law last revisited in 1915, corporation soles were intended for traditional churches such as the Roman Catholic Church. Unlike most Protestant churches or other nonprofit organizations, Catholic churches are governed by the bishop of a diocese instead of a board of deacons, elders or directors.

A corporation sole recognizes the right of a bishop or other "overseer" to control the assets and activities of a church.

State records show few of the approximately 700 corporation soles now registered in Washington belong to the Roman Catholic Church or other traditional churches.

Despite big gaps in the secretary of state's database, Lunsford was able to spot about 50 corporation soles associated with white supremacists, militiamen, constitutionalists or people who deny the Holocaust.

A few of the people identified by the Coalition for Human Dignity are:

--Harrie A. Schmidt Jr., state chairman of the Populist Party, which is run nationally by Ku Klux Klan leader Kim Badynski.

--Glen Stoll, a Populist Party member who also is involved in the Embassy of Heaven, an anti-government religious organization based in Sublimity, Ore. Stoll was the leader of the Liaison Group, which called for militia members across the Northwest to assist Whatcom County constitutionalist Donald Ellwanger in a standoff with the IRS.

--Doyal Gudgel, also active in the Liaison Group, but best known for organizing events in Seattle for David Irving, a British man who denies the Holocaust happened.

The state database lists no addresses for most corporation soles, not even a city or zip code. Agents or leaders also are mostly unlisted.

Kettle Falls-area resident Linda J. Erickson was able to take over more than $20,000 worth of real estate she persuaded acquaintance Gregg Holmes to put into a corporation sole called the Sonlight Pathway Society.

After Holmes died last year, Erickson took over the property on the strength of having been listed as secretary when Sonlight Pathway was founded in December 1992.

Spokane attorney John Zeimantz, who represents Holmes' estate, is fighting to recover the property for Holmes' two young sons.

Secretary of State Ralph Munro said he also may review the situation.

"If there is any kind of fraud, we'll be the first to try to do something about it," Munro said.

One of Erickson's anti-government associates, Posse Comitatus supporter James E. Shaver Sr., found another use for corporation soles. He said in a 1992 court document that his status as "archtrustee" of the Santiago Seafarers Society entitled him to perform a disputed marriage ceremony for Erickson.

Shaver rattled some Stevens County residents in 1994 when he publicly offered to drive the IRS out of the county with a "posse."

Records show Shaver has at least four corporation soles, and his address is associated with five.

Advocates apparently believe the religious corporations give them license to ignore man's laws and follow what they perceive to be God's laws, Lunsford said.

"Taxpayers should be concerned if people aren't paying their fair share or if assets are being hidden and child-support payments aren't being made," Lunsford said. "We all pay for that."

Although effective at shielding assets from creditors, corporation soles apparently have little value as tax shelters. An examination of tax exemptions in northeastern Washington showed almost all of them belong to mainstream charities and churches.

Erickson's, Holmes' and Shaver's corporations aren't on the tax-exemption list.