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