WaterOz Founder David R. Hinkson Receives 43-Year Prison Sentence

Stephen Barrett, M.D.

David Roland Hinkson, 48, who made millions of dollars selling mineral waters, has been sentenced to 43 years in prison [1]. In January 2005, he was convicted of soliciting the murders of a federal judge, a federal prosecutor, and an IRS agent in retaliation for a prior criminal case brought against him. After a three-week trial in Boise, Idaho, a jury took two days to find him guilty of soliciting the murders of U.S. District Judge Edward J. Lodge, Assistant U.S. Attorney Nancy D. Cook, and Internal Revenue Service Special Agent Steven M. Hines. The jury found that Hinkson had offered $10,000 per killing to murder the federal officials [2]. Cook was the prosecutor from the Office of the U.S. Attorney for the District of Idaho who was initially assigned to prosecute Hinkson in the tax case. Hines was the lead investigating agent for the Internal Revenue Service. Judge Lodge handled various aspects of the tax case and dismissed a civil case Hinkson had filed alleging that Cook and Hines had violated his constitutional rights. The case was investigated by the Federal Bureau of Investigation together with the Treasury Inspector General for Tax Administration.

Backgound History

Hinkson owned and operated business in Grangeville called WaterOz, which markets products via the Internet and a "buyer's club." Its Web site claims that its products are effective against a wide variety of human ailments. In the summer of 2000, the IRS launched a criminal investigation based on evidence that Hickson had willfully failed to file income tax returns or pay employment taxes for his workers. That investigation ultimately produced a 43-count indictment charging him with failure to file income taxes, failure to pay employment taxes, mislabeling his water products to overstate their mineral content, marketing adulterated drugs, selling misbranded and adulterated ozone generators, and structuring financial transactions to avoid bank currency reporting requirements. The indictment stated that from 1997 through 2001, WaterOz grossed $11.9 million, netted $7.4 million, and paid $2.4 million to Hinkson, who should have paid federal income tax of $938,602. The indictment said that Hinkson actually had his tax returns professionally prepared and submitted them to secure loans, but he failed to file them with the IRS or the Idaho State Tax Commission! [3] He also failed to withhold income and Social Security taxes from his 40 employees or pay these taxes to the U.S. Government.

In May 2004, Hinkson pleaded guilty to two of the product-violation charges and a jury found him guilty on 26 counts of failing to file income tax returns, failing to collect federal taxes, and structuring transactions to avoid reporting requirements [4]. In his plea, Hinkson admitted not labeling his lithium water a drug, as required by law, as well as operating a facility not licensed to manufacture drugs. WaterOz also sold ozone generators and body suits which the company claimed had health benefits. In his plea, Hinkson admitted that the generators were not labeled as medical devices, and that he had not applied for approval to market them as such. Testimony at this trial also indicated that Hinkson did not file tax returns and routinely paid his employees in silver dollars or other cash, without withholding federal taxes. Other testimony indicated that the company regularly obtained its payroll cash in multiple withdrawals, keeping each withdrawal under the $10,000 limit that triggers federal reporting requirements.

The Sentencing Hearing

In a two-day sentencing hearing that lasted 19 hours and concluded at 8 p.m. on June 3, visiting judge Richard C. Tallman of the Ninth Circuit Court of Appeals heard testimony from prosecution and defense witnesses, one of the victims and Hinkson himself.  He concluded that Hinkson showed a “complete lack of remorse,” continued to blame others for his crimes and was “not amenable to any form of rehabilitation.”  He also determined that Hinkson had obstructed justice by perjuring himself during the solicitation case in “a willful attempt to influence the jury,” and by attempting to solicit a fellow Ada County Jail inmate to commit the murders. Calling Hinkson “an intelligent man who could have made a tremendous contribution,” Judge Tallman acknowledged that one side of Hinkson wants to do good in the world, but he said Hinkson’s inability to control his “evil side,” coupled with his lack of remorse, required a lengthy sentence to protect the community, deter others, and safeguard public servants.

Prosecutor Tom Bradley, formerly of the Justice Department’s Tax Division, who prosecuted Hinkson on the tax charges along with Idaho Assistant U.S. Attorney Wendy Olson, characterized Hinkson as a “very intelligent man,” who migrated from the Las Vegas desert after trouble with local officials and settled in Idaho County, where he hoped to avoid government regulation.  Bradley said he brought with him an idea for health products that he built into “an extremely successful business” that earned him millions of dollars. “But he just wouldn’t follow the rules,” Bradley said, and structured his entire business to avoid income and employment taxes.  Those actions triggered an investigation by the IRS, which caused Hinkson to launch a legal and financial attack on the federal officials involved in investigating and prosecuting him, and finally to the solicitations for their murders.  Bradley said it was the worst case he had ever seen.

Michael P. Sullivan of the Department of Justice’s Criminal Division, who prosecuted the solicitation case along with fellow DOJ attorney Michael Taxay, said that Hinkson did everything he could to affect the deaths of the three people. “There is nothing more serious than trying to kill someone except actually killing them,” he said, characterizing Hinkson’s crimes as “an assault of the federal criminal justice system.”  Calling Hinkson “relentless and remorseless,” he told the judge that “real people were terrorized,” and asked for the maximum sentence. Victim Steve Hines acknowledged that tax collection agents are not popular, but said “never in my 22 years as an IRS employee have I received a threat of this magnitude.” 

The hearing was briefly interrupted near its end when Hinkson cursed the Judge, pushed items including a TV monitor off the defense table onto the floor, and attempted to come over the top of the defense table toward the Judge’s bench.  He had to be restrained and removed from the courtroom by Deputy U.S. Marshals.  A few minutes later, with spectators removed from the courtroom and Hinkson in shackles, sentencing was completed. Judge Tallman sentenced him to a total of 10 years on the tax, structuring and Food & Drug Administration (FDA) counts, 10 years each on the three counts of solicitation, and an additional three years because the solicitation crimes were committed while Hinkson was on pre-trial release on the tax charges. The judge also fined him $100,000 and ordered him to pay what the IRS would determine he owed. In addition to income tax, he estimated that Hinkson had failed to pay federal payroll taxes of between $1 and $1.5 million.

Hickson's sentences will run consecutively. There is no parole in the federal system, although Hinkson could earn a few years off for good behavior. The Judge also indicated he would recommend to the Bureau of Prisons that Hinkson be considered a high-risk inmate because of his continued hatred of federal officials and his financial ability to carry out his threats and to flee the country if he escaped.

U.S. Attorney Tom Moss called the lengthy sentence “appropriate.”  “Violence against judges and others in the justice system is on the rise,” he said.  “The idea that a criminal can get revenge or even get out of paying for his crimes through violence and intimidation constitutes a very real threat to public safety.  As this sentence demonstrates, we and the courts take these threats extremely seriously.”

Illegal Health Claims

Archived versions of the WaterOz Web site show the extraordinary extent to which Hinkson violated federal law. Before his prosecution took place, the site contained For about two years between 2000 and 2002, versions of the site contained "recommended protocols" for using 22 mineral products to treat about 70 or 100 "specific health issues" including AIDS, appendicitis, cancers, Down's syndrome, epilepsy, multiple sclerosis, and parasites. The site also offered an ozone generator and "ozone body suit" with claims such as:

The medical benefits of using an ozone suits with the ozone generator have been seen in cases of simple muscle fatigue to severs infections such as limb threatening gangrene. Sitting in the body suit (with or without clothing, it is a personal choice) cleans the skin, helps remove odor, oxygenates the skin, helps increase circulation and helps remove viruses from the body and attacks cancer cells.

Hinkson also operated the WaterOz Buyer's Club (formerly called Fountain of Life Buyer's Club), which was described in its 60-page October 2002 catalog [5] as a "buyer's club/multilevel" said to "not only insure [sic] the best physical health through our mineral products, but . . . also insure [sic] sound financial health through commissions paid to our WaterOz Buyer's Club distributors." The catalog offered about 200 products with false claims that more than 100 diseases and conditions are caused by mineral deficiency and can be effectively treated with the products. It also offered "essential oils" with claims of effectiveness against more than 100 problems.

Despite the 2004 product-violation conviction, the site still advertises most of the mineral products with unsubstantiated health claims. Its "Gold" solution, for example, is said to promote a general euphoric feeling; enhance the body's natural defenses against illness; promote vitality and longevity; improve glandular function; and help the body to relax. In addition to direct claims, the site also contains illegal testimonial claims. Hinkson has been in jail for about a year. It is not clear whether or not he still owns the company.

Hinkson's anger toward Judge Lodge reportedly stretched back to the judge's dismissal of charges against an FBI sharpshooter who killed Vicki Weaver during a standoff with white separatists at Ruby Ridge, Idaho, in 1992 [7]. Federal prosecutors also said Hinkson was affiliated with Idaho militia groups who shared his hatred of Lodge [6]. ADL considers Hinkson to be a "an extremist and longtime activist in the anti-government sovereign citizen and tax protest movements." [7]

References

  1. Hickson gets 43 years. U.S. Department of Justice news release, June 4, 2005.
  2. Grangeville, Idaho man convicted of soliciting murder of federal officials. U.S. Department of Justice news release, Jan 28, 2005.
  3. Indictment CR02-0142, USA v David Roland Kinkson, filed July 18, 2002.
  4. Hinkson found guilty on tax charges. U.S. Department of Justice news release, May 5, 2004.
  5. WaterOz Retail /Buyer's Club Catalog, Oct 2002.
  6. Williams P. Idaho man plotted to kill 3 federal officials. MSNBC News, Jan 28, 2005.
  7. Anti-government extremist convicted in plot to kill federal officials. ADL Web site, Feb 2, 2005

This article was posted on June 7, 2005.

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