Editor’s Note: I was forever changed after reading the depositions of five Brazilian girls who told the Brazilian Federal Police they were lured off their reservations into prostitution for North Americans fishing clients, including a group of Jesters. Though there is resolution in this Jester tax case, I will continue reporting on the human trafficking and child sex tourism cases moving through American and Brazilian courthouses.
On February 15, 2008, I launched the first ever investigation into the Shriners’ secret sub-group, the Royal Order of Jesters by publishing “Jesters Exposed.” It alluded to rumors of prostitution but actually focused on how the Jesters appealed property tax decisions by the Marion County assessor to tax their ”nonprofit” headquarters 100%. Nineteen days later, I published "Jesters" To Testify about Illegal Drugs, Child Prostitution?” then twelve days after that, I published “Judge Resigns, Police Captain to Plead Guilty as FBI Investigates Royal Order of Jesters for Prostitution.” Since these three stories broke within 33 days of each other four years ago, I have exposed, detailed and documented the greatest nonprofit fraud of our time; human trafficking and prostitution at tax payer expense.
This seemingly boring property tax story began when attorney Ron Pruitt filed nonprofit incorporation documents with Texas’ Secretary of State on 7/11/2003. These documents were then filed with the IRS, where the Director of Exempt Organization Rulings and Agreements decided the Royal Order of Jesters deserved 501(c)(3) status as a charity and, on July 24, 2004, approved their application that classified their new headquarters as a “museum.” The Jesters then filed as a foreign corporation business entity with the Secretary of State of Indiana to qualify their new Indianapolis headquarters for property tax exemption. Additionally, the Jesters were afforded other nonprofit benefits including reduced postal rates, possible exemption from state income, sales, and employment taxes, tax-deductible contributions and exemption from Federal income tax. According to About.com, “Tax-exempt means that a nonprofit (1) does not pay taxes to the federal government and (2) that its donors can take a tax deduction for their donations to the organization.”
Marion County inspectors found the property did not meet the standards for tax exemption and denied the Jesters’ applications for 2008 and 2010. The appeal process proceeded from October 23, 2009 to October 11, 2011, when an attorney for the Jesters and their executive director appeared before the three-member Indiana Board of Tax Review and failed to prove their case.
The January 9, 2012 decision states:
“All property receives protection, security, and services from the government, such as fire and police protection, and public schools. These governmental services carry with them a corresponding obligation of pecuniary support in the form of taxation. When property is exempt from taxation, the effect is to shift the amount of taxes a property would have paid to other parcels that are not exempt.”
The Jesters submitted exhibits A-Q that included previous tax applications and documents, IRS approval letters and a list of U.S. National Masonic Appendant bodies. Presenting their case were attorney Paul M. Jones of Ice Miller LLP and Alex Rogers, executive director, who both argued that the Jesters deserved both charitable and fraternal property tax exemptions because:
- The property is owned, occupied and used for charitable, educational and religious purposes.
- A previous consent order granted exemption based on fraternal claims.
- They are part of Masonry.
- The Jesters are exempt from federal taxation as both a 501c3 charity and 501c10 fraternity made up of 191 “courts” with 20,500 members.
All Jester courts correspond to 191 Shriner temples. One must first be a Master Mason before joining groups like the Scottish Rite, the Knights Templar and the Shriners. One must be secretly invited from the Shriners to join the Jesters.
Rogers testified that the Masons were the “highest respected fraternal organization in the world” and that that “The purpose of the Jesters is spreading the gospel of mirth, merriment and cheerfulness, promoting fellowship and fraternity among members, and extending good cheer and assistance to the general public, which furthers the Masonic principles of brotherly love, belief and truth. Mirth is king explains to the world the purpose of our existence.”
The Jesters submitted Exhibit Q, a list of national Masonic groups. The Grand Lodge of Indiana does not include the Jesters on their own page of affiliated groups.
The Jesters referred to two cases that supported Masonic property tax exemption. The first case was 150 years old and the second case was issued by the Court of Appeals in 1969.
Jones’ and Rogers’ claims were countered by John C. Slatten, the attorney for the Marion County Assessor, who successfully argued that the Jesters’ property should be 100% taxable because:
- The Jesters building is used for administrative purposes only such as collecting financial information, sending out reports to the various subordinate courts and answering questions about the bylaws.
- The Jesters failed to prove the property was predominantly used for any exempt purpose.
- The Jesters failed to show they provided a public benefit that would justify the loss of tax revenue.
- The Jesters do not serve the class of people that are legitimate subjects of charity.
- The property does not relieve any government burden.
- The Jesters are a recreational group that is predominantly a social club.
- The Jesters aren’t engaged in any charitable activities.
- Jester educational activities are limited to the membership.
- The second case used to support their argument was overturned.
- The government has no obligation to provide entertainment, merriment or “mirth.”
If you were at the IRS, would you have approved “mirth” as an exempt purpose?
IRS documents like the 1023 application for tax exemption and the last three years of a nonprofit group’s tax returns are, by law, to be disclosed within 30 days of request. A first request for the Jesters’ 1023 was sent on December 20, 2007 and two times since. They have not complied and, at the rate of $20 a day, could be fined nearly $30K.
Slatten then pointed out that the Jesters provided no evidence that the Masonic fraternity, as it exists today, operates in the same manner, performs the same functions and retains the same position in society as it did 150 years ago. He continued that the Jesters also failed to prove that today’s exemption statute is the same or substantially similar to the exemption statute applied by the court in 1865.
“Likewise,” the decision reads, “the Petitioner failed to show that the Jesters operate in the same manner, performs the same functions and retains the same position in society as the Masons. Though to the extent that the Grand Master of the Grand Lodge of Indiana remains good law 150 years later, the case merely found property owned by the Free Masons to be exempt. Nowhere in that decision was there any analysis of property owned and used by the Jesters.”
Slatten then argued that the Jesters had not established an educational or charitable purpose because the museum was not advertised or promoted as being open to the public, had no signage and was not on the national museum registry.
The Jesters property has now been classified as “commercial.”
And, as a result, they must now dissolve.
According to a source at the IRS, “This decision means the Jesters are no longer considered a tax exempt group. They must now dissolve and start to file taxable returns.”
A source with Indiana’s Secretary of State’s office agreed, stating that they had no enforcement power so it is up to the Jesters to dissolve and reincorporate as a taxable group. An Indiana expert on nonprofit dissolution stated “If the IRS says that’s what this group must do, then that’s what they must do.”
So, what does this mean for the Jesters and other Masonic organizations in Indiana who own tax exempt property? And will the Jesters appeal?
1) The Jesters must now dissolve their charity as well as their 191 “courts” because Jones and Rogers failed to prove either deserved tax exemption. This article explains the dissolution process, including asset distribution.
2) The Jesters can’t give their assets to themselves so, most logically, will donate their cash and assets to their corresponding Shriner temples.
3) The Jesters’ failure now provides Indiana’s assessors with a blueprint to challenge Masonic related property tax exemption applications as potential sources of revenue.
It’s safe to speculate that the leaders of the Grand Lodge of Indiana aren’t going to be too happy after learning that the Jesters threw them under the bus. Projected 2012 income tax revenues for Indianapolis are down 30%, or $85 million, from 2010. The Grand Lodge of Indiana’s building is worth $4.2 million and if taxed at a rate of 3%, the county could take in $126,500 from this one building alone.
Tax returns, available through Guidestar.org, show the national fraternal office reports $1.3 million in assets. Tax returns report the charity has $443,661 in cash. A search of Indiana Secretary of State’s list of registered businesses reveals that the fraternal “courts” are not registered but the charity is.
The Fort Wayne Court #27 is led by Director Larry Freeman, Treasurer David Ballinger and Secretary Dave Goodwin and reports $155.69 in savings. Court #43 operates out of 136 Country Club Dr, La Porte, Indiana, is led by Director Michael C. Woolfington, Treasurer Edwin M, Bowers and Impresario R. William Stoll and reports $42,154 in cash. Terre Haute Court #45 operates out of 9814 Armstrong Place, Terre Haute, Indiana, is led by Impresario William Campbell and reports $13, 404 in cash. The Evansville court operates out of 900 S Meadow Rd, Evansville, Indiana, is led by Director Dr. C. Mike Wood, Impresario Joseph J. Vezzoso Jr., and Treasurer Charles R. McDonald and reports $18,531 in cash.
When the Jester news broke four years ago, we learned from the Buffalo News that a New York state Supreme Court judge resigned after the FBI caught him and two other Jesters in a human trafficking sting. These included his law clerk and a retired Lockport police captain. A retired Erie County Sheriff pleaded guilty last April to driving a limo of prostitutes from the Buffalo New York airport to a national Jester convention in Niagara Falls, Ontario, Canada in April, 2005 and not reporting the felony to authorities. The Judge testified in his plea agreement that he worked with national officials to make sure prostitutes got to a national Jester meeting in Niagara Falls, Ontario. The same plea agreement discloses that the Jesters are under federal investigation for sex trafficking, prostitution and child sex tourism.
So, will the Jesters appeal?
Sources report there was no mention of human trafficking, prostitution or child sex tourism during the property tax hearing.
Would you appeal, knowing how easy it would be to link Jester sex crimes to the building in question?
The other story I broke four years ago reported that a group of 19 Jesters were on a witness list and were expected to testify about their first hand knowledge of sex with minor girls while on a fishing trip to Brazil. The list included national Jester director Samuel “Scutter” Newton.
The former fishing tour operator who organized the Jester fishing trip is currently being prosecuted by Brazilian authorities for trafficking underage girls into prostitution for his North American fishing clients. He is also under criminal investigation by a grand jury in Miami for child sex tourism and has been sued by four Brazilian women who claim he trafficked them into prostitution while minors.
The depositions of five Brazilian girls describe how one was left pregnant at age 13 after one such fishing trip. Fishing guides took pictures of Jesters having sex with minor girls and surrendered them to the Brazilian Federal Police. The fishing guides testified in the same case that the Jesters asked to be called “Masons” and for girls over 13. It is not yet known if these Jesters are among the twenty fishing customers currently under investigation by the Brazilian Senate.
Here is how the feds describe the Jesters in the Sheriff’s plea agreement.
“The Royal Order of Jesters (“ROJ”) is a worldwide fraternal organization whose membership is limited to individuals invited to join by other members. The motto of the ROJ is ‘mirth is king.’ The ROJ has local chapters or ‘courts.’ On occasion, a local court or group of local courts in the same geographical area sponsor social gatherings known as ‘books of the play’ or ‘books.’ The sponsoring courts organize the ‘books’ and arrange for food, lodging, and entertainment at the ‘books.’ The ROJ also sponsors a yearly national ‘book,’ the equivalent of a national convention. In April, 2005, the Jester’s national book was held in Niagara Falls, Ontario, Canada. As set forth below, a typical feature of a ‘book of the play’ is the presence of prostitutes (‘Jester Girls’) who engage in commercial sex acts with members of the ROJ. Arrangements for the prostitutes are generally made by the organizer of the ‘books,’ or the region hosting the national ‘book.’ On occasion, individual Jesters make arrangements to transport prostitutes to ‘books.’”
Indiana officials recently toughened human trafficking penalties in advance of the Super Bowl being held in Indianapolis. The state’s Attorney General worked with the Indiana legislature to create and unanimously pass a bill that Governor Mitch Daniels signed on Monday, January 30, 2012. The bill increases the penalty for forcing an underage person into the sex trade to up to 50 years in prison.
Now it’s time for Indiana investigators to connect the dots with their counterparts in Buffalo and Miami, visit Alex Rogers and ask him a few questions about the link between these sex crimes and the Jesters’ property.
Did you work with Judge Ronald Tills to get the “Jester girls” for the national meeting in Niagara Falls, Ontario?
If you knew, who else knew and when did they know it?
If you knew, how many others have worked with the national office to make sure they got “Jester girls” to their next weekend meeting?
Are you aware that board member Scutter Newton was expected to answer questions about having sex with minors while on a Jester fishing trip to Brazil?
Did you, or anyone else in Jester leadership, sign an out-of-country trip letter, mandated by your bylaws, sanctioning the Jesters’ fishing trip to Brazil?
Can we search your computer, the computers of your board of directors and other officers and all associated Jester emails for child pornography?
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