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California Tried to Seize Millions of This Inventor鈥檚 Fortune. He Fought Back. And Won. - YouTube
Channel: ReasonTV
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In the early 1990s, California tax authorities
traveled to Las Vegas
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in pursuit of businessman Gilbert Hyatt.
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They staked out his home, dug through his trash
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and hired a private eye to look into his past.
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They were after a piece of his fortune.
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Never make a deal with an extortionist.
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They don't view themselves as public servants,
they view themselves as bounty hunters.
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It's a story of greed, harassment, anti-semitism
and the abuse of power.
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This isn't the first time the tax agency has
strong-armed a citizen,
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but what's so unusual about Gilbert Hyatt
is that he fought back.
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I've waited 20 years for this.
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Gilbert Hyatt made his fortune as the patent
holder of the microcomputer
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a predecessor of the microprocessor.
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Hyatt was a resident of Orange County California
but in 1991 he packed up
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and relocated to Las Vegas.
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The following year he was contacted by the
California Franchise Tax Board.
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But I didn't realize that it was going to
be trouble,
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because I had moved, I had sold my house,
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I had, I was living in an apartment and then
I bought a house in Las Vegas,
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and I was very well settled.
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An agent of the Franchise Tax Board had read
an article
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about the potential billions of dollars in
royalties pouring in
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as electronics companies like Phillips and
Sony started licensing Hyatt's technology.
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He decided to investigate.
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The tax agents concluded that his move was
a sham
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and that he owed them more than 13 million
dollars in taxes, fees and interest penalties.
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They would not agree that I became a Nevada
resident until I moved into my house
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which was essentially the absurd position
that you have to buy a house and move into it
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in order to change residence.
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Which is not the law.
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Some companies have already said goodbye to
California-
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254 companies of all sizes-
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Many of them are simply moving out of California
to-
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-announced it will move it's national headquarters
and thousands of jobs to the lone star state
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California's marginal income tax rates are
the nation's highest
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which drives many wealthy residents to pack
up and leave.
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Hyatt says he moved to Las Vegas because Casino
billionaire Sheldon Adelson
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who had dreams of creating a silicon valley
in sin city lured him there.
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No matter the reason, California didn't want
to let him go.
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It's mostly the attitude of many of the bureaucrats
in the Franchise Tax Board,
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they don't view themselves as public servants
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they view themselves as bounty hunters,
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and going out and getting as much tax dollars
as possible.
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John Coupal is the head of the Howard Jarvis
Taxpayers Association in California,
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he says that California's tax agency is one
of the most aggressive in the nation.
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California is often desperate for revenue
to cover it's out of control spending.
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In 1993, when tax agents began auditing Hyatt,
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California faced a budgeting deficit of 3.8
billion dollars, the largest in the nation.
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The Franchise Tax Board itself faced huge
cuts and even possible elimination.
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There's many systemic problems with the inability
to process tax returns quickly.
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Their abusive investigatory tactics, Gill
Hyatt was an example of this.
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The agency can do whatever they want and they
have the staff and the experience to do so,
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they are judge, jury and executioner.
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Shortly after the Tax Board opened it's audit
an agent called Hyatt's lawyers
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and advised him that most people just settle,
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because wealthy or well known taxpayers
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do not want to risk having their personal
financial information made public.
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The Franchise Tax Board believed that I was
paranoid about my privacy
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because I was a very private person, I worked
very hard to keep my address private,
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because I had my research lab there.
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And therefore went out of their way to breach
my privacy in order to intimidate me.
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Hyatt declined to settle and appealed.
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The tax agency hired a private eye to interview
Hyatt's former California neighbors
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22 of whom later testified that he did indeed
move away after selling his house.
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They also sent letters to his friends, former
colleagues and even his Rabbi.
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I was shocked by those letters that they were
sending out for several reasons
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first of all, you look at it and it looks
like a criminal investigation,
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second of all it tells all of my personal
relationships,
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businesses, entities, friends, my Rabbis
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that I'm in trouble with the Franchise Tax
Board,
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and third of all it had my social security
number on it
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which is supposed to be private.
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Two agents road tripped to Las Vegas, staked
out Hyatts new house, rifled through his trash,
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and even took what a whistleblower later described
as a trophy photo of his home.
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This same whistleblower testified that her
colleague, an agent named Sheila Cox,
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vowed to "get that Jew bastard."
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I was horrified when I learned that she was
a racist who had targeted me for my religion.
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Hyatt ended up fighting a 25 year court battle
spending more than 10 million dollars.
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The state of California spent more than 25
million dollars in the fight,
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according tot he tax agency spokesman.
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It all came down to a hearing before the Board
of Equalization this August.
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Although he has a professional legal team,
Hyatt decided to speak for himself.
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I've waited 20 years for this.
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The board ruled in Hyatt's favor,
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though it did conclude that he continued to
operate portions of his business out of California
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during the disputed 6 month period.
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For this, he was ordered to pay 1.9 million
dollars
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out of the approximately 55 million the tax
agency claimed he owed
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in taxes, interest and penalties.
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And the board confirmed that he was indeed
a Nevada resident during this time.
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Hyatt also sued the Franchise Tax Board for
fraud and harassment
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and a Nevada jury awarded him a 388 million
dollar judgement
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that was ultimately reduced to 50 thousand
dollars because of a statutory cap
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on the amount state agencies can be held liable
for their conduct.
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Somebody has got to stand up against them.
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Power will corrupt and as the cliche is, the
power to tax is the power to destroy.
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