If there is only one of these you read this year, read this if you think one of those NO TAX seminars has any merit. It lists over 100 lawyers, CPA's, Financial Advisors, Financial Consultants AND their clients who have gone to jail in two years for tax evasion or conspirasy to evade tax.
ingram
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I have a question for you.
If the US taxes your worldly income, how does the US know about it if you don't report it?
Do Revenue Canada (insert other revenue agency name/country) and the IRS in the States freely share this information? Do they actually match their tape registries of full names SIN's and SSN's? I have a hard to beliving that a US Citizen living as a permenant resident and working in France is claiming their income or that the US would possibly know about it.
How in the world would the IRS possibly know if one of their ex-pat's is earning income in another country?
This just seems pretty hard to believe as I know many ex-pats in Canada that have worked very high paying jobs/careers and never have looked back to the US let alone pay taxes or report income back to the US on their hard earned Canadian income!
Thanks,
----------------------------------------------
david ingram replies:
I likely know of 100 x's more US citizens living in Canada without reporting than you do. Up to this moment, i have never taken advantage of US form 211 which allows someone to report a US citizen and claim a reward of up to 30% OF THE TAX COLLECTED. However, take a look at the form. I have an old acquaintance who makes his living turning in Americans that he meets on golf courses, at Board of Trade Luncheons and other places that wealthier Americans can be found. (For instance, I ran into him at the Bill Clinton Speech at the Centre For The performing Arts in Vancovuer on Nov 1, 2007. If you were watching the National News that night, you may have seen Bill getting into his car with one of my US Canadian Friendship flags in his hand. The black belly unrolling the flag was me.)
You can see the APPLICATION FOR REWARD FOR ORIGINAL INFORMATION form 211 at: http://www.irs.gov/pub/irs-pdf/f211.pdf
You ask if the two governments exchange information. the answer is a clear and resounding 'YES'! Canada and the US have had a pro-active mutual exchange agreement since Jan 1, 1996.
In other words, the IRS does provide the CRA with computer tapes of 1042S payments made to persons with Canadian addresses and the CRA provides the US with copies of information for US recipients of NR4 forms.
You mention France which I find delightful. My very first 'big' case involved a fellow with the initials ML. He was caught by the US embassy in PARIS, FRANCE. Tax bill $218.000 and by the time he was finished, hed lost his house, wife and car (no particular order there but I think the Porche hurt the most).
In my opinion there is 100 x's more chance being caught in France that in Canada because in France, An American in touble has to go to the US Embassy for help with a lost passport, etc., and in Canada, 98% (or so) of Americans in Canda live within 150 miles of the US border and just go south to deal with a problem. Also, there are over 500,000 Americans in Canada and any single individual gets lost in the masses.
However, an American with a $100,000 RRSP who does not file is automatically liable to:
1. A minimum fine for failure to file form TDF 90-22.1 of $10,000 with a maximum of $500,000 plus up to five years in jail
(the record in my office was a 105 year old lady with a $10,000 fine). (This form is filed with the Dept of the Treasury)
2. A fine of 35% of the amount in the RRSP PLUS 5% per year for every year not reported for failure to file form 8891 with the IRS.
Form TDF 90-22.1 must be filed for each and every foreign account when the combined total of all foreign accounts exceeds $10,000 US.
Over 1,000 US citizens are in the process of being fined or censured on this item alone becaus eof their dealings with a Vancouver Consultant named Jerome Schneider. Jerome Schneider was arrested on holiday in San Francisco. As part of his plea bargain for a $100,000 fine and six months in jail, he agreed to turn over his 1,072 clients to the IRS and Treasury.
------------------------------------
The following contains names of OVER 100 tax advisors and attorneys AND THEIR CLIENTS who have been jailed and is one of my older answers with a link to more Jerome Schneider and offshore information. It starts with American Advisors and ends way down there with brief mentions of Canadians Hofman, Masee, Bown and Schneider. I also have to say that I have met 20 to 30 of these promoters over the years. At one time I had offices in 30 states and attended many seminars on how to avoid tax. I do not know of a single one of them that worked. Jeropme Schneider had a lot of my paperwork in the materials he handed out. He even handed out exact copies with the same spelling or other identifying error, some of which are put in intentionally for copyright purposes.
Do NOT stop here. You asked and I answered. Read about just how efficient the CRA and IRS are. The CRA extradited Hofman from Austalia an dthe IRS extradited a fellow from Madagaskar. It is very difficult to forever remain somewhere with no extradition.
david ingram
[Income Tax Help - CEN-TAPEDE] taxation, and secrecy - Jerome Schneider - Hoffman, Brown, Masee - a whole bunch of Americans and Canadians sentenced to jail for tax avoidance schemes. - international non-resident cross border income tax help assistance expert preparation & immigrant
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QUESTION:
I am concerned about secrecy in regards to a very legitimate business being
conducted on an international level. Mainly the safety of those employed in
what would be a very profitable endeavour. By forming an offshore llc, say
in Nevis would this secrecy be maintained.
Secondly as an American citizen I have no problems with the payment of
taxes. But I remember working as a merchant marine officer, and almost
fainting when looking at how I was Taxes for what I call blood money
earnings. I put in a lot of time, hours, phsical effort, and mental effort
to be taxed such as I was. It left a bitter taste in my mouth regarding
taxes. I called it legal robbery. As I said I don't really mind reasonable
taxes, but I' afraid that the situation in our society dictates that my
earnings will somehow be shanghied. Can I find some relief of heavy american
taxes through a foreign LLC.
Thank you very much for your time, and consideration Looking forward to
hearing from you as time permits
----------------------------------------------
david ingram replies:
Taxes are all in the eyes of the beholder.
I had a fellow from India yesterday. He was so happy to be here that he
paid significantly more US taxes than he had to for the benefit of being a
legal resident of Canada while working in the United States.
It wasn't his expression but it reminded me of another client who told me
that the best life was to have:
* an Indian Wife
* Chinese food
* A British Home and
* an American salary.
I assure you that there is no way that you can go offshore legally as a US
citizen and exempt all of your income as a ship's officer unless you marry
someone in a tax free zone such as Panama or Costa Rica, father some
children, and return to that home whenever you get a leave. i.e. you
"really" do live there. Establishing a bonefide residence in another country
would allow you to exempt up to $80,000 US from US tax and as long as you
were genuinely living in that jurisdiction, you would only be taxable by the
US on amounts over $80,000 US. See form 2555 as part of your US 1040 Income
Tax Package - www.irs.gov forms will let you see it.
Three years ago a fellow named Jerome Schneider set some 1,070 US citizens
up with offshore corporations over a 12 year period. Jerome was charged and
convicted and plea bargained a possible 20 years in jail down to less than a
year by turning over the accountants and lawyers who had helped him and over
1070 clients to the IRS - you can read more from an old Q & A as follows:
--------------------------------------
I attended a seminar a couple of nights ago which dealt with a Corporation
Sole as a method of avoiding Income tax - Is this a good deal. Will it work?
It was going to be set up in New Mexico because they have some old Spanish
Law which makes it work in New Mexico.
=======================
david ingram replies:
Forget it - there is no such thing as a corporation sole making your tax
liability go down unless you are a legitimate religion. You can read more
specifically about Corporation Sole scams at the IRS site at:
http://www.irs.gov/newsroom/article/0,,id=121566,00.html
Stay away from any offshore schemes or set-ups. I guarantee that the IRS
and CRA have covered just about everything and are prosecuting people from
Miami to Alaska, from Los Angeles to St John's Newfoundland. The ones I
have shown are all American but there have been an amazing number in Canada
in the last two years as well.
If you go to
http://www.irs.gov/compliance/enforcement/article/0,,id
You will get the following.
You will notice that a lot of accountants and lawyers have gone to jail for
the false advice and work they have done. Vancouver's own Jerome Schneider
is mentioned twice. He pled guilty and is already out of jail but he is
cooperating fully with the IRS in helping them track down and prosecute over
1,000 of his clients and the attorneys and accountants who assisted him. A
lot of the paperwork he handed out at his seminars was taken from my stuff
complete with the same printing errors.
You can read more specifically about Schneider at:
http://www.quatloos.com/schneider_witmeyer_guilty.htm
FY2005 Examples of Abusive Tax Scheme Investigations
The following examples of abusive tax schemes and fraud investigations are
excerpts from public record documents on file in the courts in the judicial
district in which the cases were prosecuted.
Two Reno-Area Accountants Plead Guilty to Tax Crimes in Connection With
Client's Use of Abusive Offshore Scheme
On September 29, 2005, in Las Vegas, NV, Roger Steele, owner of Steele
Accountancy, Inc., pleaded guilty in connection with the advice and
assistance he gave to a client, Dale Brown, regarding Brown's 1998
individual income tax return and the 1998 income tax return of Brown's
domestic corporation. Kimberly Steele pleaded guilty in connection with her
obstructive conduct while representing Brown during the course of the IRS's
1999 civil audit. Brown, an author, previously pleaded guilty in April 2004
to filing a false 1998 corporate tax return on which he falsely claimed more
than $450,000 in bogus business expenses as a result of his participation in
the offshore scheme promoted by Roger Steele. According to documents filed
with the court, in 1998 and 1999, Roger Steele assisted Brown in forming two
offshore corporations. He advised Brown to transfer monies from his
domestic corporation to the offshore corporations and to record bogus
expenses on the domestic corporation's records for services that were never
performed or provided by the offshore corporations. Roger Steele also
advised Brown that he could bring the monies transferred to the offshore
corporations back into the country disguised as loans or by using a credit
card issued by an offshore bank. Steele admitted that as part of the
scheme, he knowingly prepared two false tax returns for Brown: a false 1998
income tax return for Brown's domestic corporation that included fraudulent
business deductions of more than $450,000, and a false 1998 individual
income tax return for Brown that understated Brown's income tax liability by
approximately $223,000. Kimberly Steele admitted that during the IRS's 1999
audit, she assisted Brown in presenting to the IRS auditor a false
explanation about Brown's use of an offshore credit card. To support the
fictitious explanation, she knowingly signed and presented to the IRS
auditor a false affidavit.
$8 Million Foreign Investment Nets Prison Terms for Central Coast
Father-and-Son Team
On September 27, 2005, in Los Angeles, CA, James Carroll Sexton was
sentenced yesterday to 88 months in federal prison. His son, James Carroll
Sexton Jr. was sentenced yesterday to 21 months in prison. The Sextons each
pleaded guilty on March 10, 2005, Sexton Jr. pleaded guilty to four counts
of mail fraud and a conspiracy to launder money. The elder Sexton pleaded
guilty to 11 counts of mail fraud, two counts of wire fraud, four counts of
money laundering, and one count of conspiracy to money launder. The elder
Sexton posed as an attorney and told victims he would establish a "bank
within a bank," or a trust account, at banks in Liechtenstein, a country
near Switzerland with strict bank secrecy laws. Victims testified that they
were told their money would be safe, secure and held under their sole
control. Bank records and witnesses showed that between May 1998 and
February 1999 victims transferred more than $8 million to the accounts
ostensibly established on their behalf by Sexton. In reality, Sexton was the
sole owner and controller of the accounts. When foreign bankers began to
question Sexton about the true owners of the funds, he misrepresented the
source of funds and, with the assistance of Sexton Jr., withdrew the
victims' funds and moved the money through various other foreign bank
accounts under fictitious names and nominees in an effort to conceal and
disguise ownership. Liechtenstein law enforcement authorities provided
extensive and prompt assistance to United States authorities and returned
more than $4 million of the fraud proceeds to the U.S.
Two CPA's Sentenced in $120 Million International Tax Shelter Case
On September 16, 2005, in Seattle, WA, two Anderson's Ark & Associates (AAA)
accountants were sentenced for aiding and assisting in the preparation and
filing of fraudulent income tax returns. Tara LaGrand, of Naples, FL, was
sentenced to 24 months in prison, to be followed by one year of supervised
release. Lynden Bridges, of Wheat Ridge, CO, was sentenced to 18 months in
prison, to be followed by one year of supervised release. LeGrand and
Bridges, each a Certified Public Accountant, were part of AAA, an
organization through which fraudulent tax shelters and investment scams were
promoted and sold. From 1996 through 2001, AAA had approximately 1,500
clients, nearly 300 of whom reported over $120 million in fraudulent income
tax deductions. In their plea agreements, they admitted that they each
assisted AAA clients by preparing and filing the partnership agreements,
promissory notes, and income tax returns required to implement the "Look
Back" program-one of two fraudulent schemes promoted by the AAA
organization.
Indictments also have been returned against 15 AAA clients nationwide,
several of whom have pleaded guilty. Most recently, on September 13, 2005, a
jury in Milwaukee, Wisconsin, convicted one AAA client, Glen J. Murphy, of
seven counts of filing false tax returns and three counts of wilfully
failing to file income tax returns.
Five Defendants Convicted of Tax Crimes in Connection With Promotion of
Abusive Trust Scheme
On September 8, 2005, in Phoenix, AZ, five persons associated with
Innovative Financial Consultants (IFC) were convicted of tax crimes in
connection with the promotion of a tax evasion scheme utilizing abusive
trusts called "pure trust organizations. IFC advanced its scheme through
several avenues, including domestic and offshore seminars; a promotional
website; and an interactive telephone conference line. As a result of the
prosecution, the following individuals were convicted:
1. Dennis Poseley, a former resident of Phoenix, Arizona and co-founder of IFC
on charges of conspiracy to defraud the government and wilful failure to
file tax returns;
2. Patricia Ensign, a former resident of Phoenix, Arizona and co-founder of IFC
on charges of wilful failure to file tax returns;
3. David Trepas, a former resident of Scottsdale, Arizona and consultant for
IFC on charges of conspiracy to defraud the government and wilful failure to
file tax returns;
Rachel McElhinney, a resident of Scottsdale, Arizona and consultant for IFC
on charges of wilful failure to file tax returns;
Keith Priest, a former resident of Tempe, Arizona and a "trustee" for IFC on
charges of wilful failure to file tax returns.
According to evidence the government presented at trial, from 1996 through
early 2003 the defendants received $4.7 million dollars in fees from their
sale of 2,000 "pure trusts," falsely claiming that their customers could
lawfully avoid income taxes by placing their income and assets into either
an "onshore" or "offshore" trust package. The evidence revealed that the
defendants charged IFC customers approximately $10,500 for the offshore
trust package and approximately $4,154 for the onshore trust package. Trial
evidence showed that IFC was a prominent vendor with the Institute of Global
Prosperity (IGP). At offshore seminars hosted by IGP, defendant Dennis
Poseley promoted IFC's trust schemes to thousands of people.
Husband and Wife Sentenced for Tax Evasion Schemes
On August 31, 2005, in Honolulu, HI, Royal Lamarr Hardy was sentenced to
156-months in prison, followed by 36 months supervised release, ordered to
pay a fine in the amount of $59,267.88, costs of prosecution in the amount
of $59,267.88, and $197,555 in restitution to Internal Revenue Service for
selling tax evasion schemes and failing to file his own income tax returns.
Hardy's wife and co-defendant, Ursula Supent, was also sentenced to 60
months in prison, followed by 36 months of supervised release, and
restitution of $197,555. Two other co-defendants, Michael L. Kailing, a
self-styled tax accountant, and Fred M. Ortiz, a tax-return preparer, were
each sentenced yesterday to 36 months confinement and three years of
supervised release. On May 13, 2005, a federal jury convicted Hardy and his
co-defendants of conspiring to defraud the United States by selling various
tax-evasion schemes over several years for the purpose of impeding the
functions of the Internal Revenue Service. Hardy and Supent were each
convicted of a second conspiracy to defraud the United States with respect
to their own income taxes. Hardy was also convicted of three counts of
wilfully failing to file his own income tax returns for 1995, 1996, and
2001. Hardy and his co-defendants were convicted of promoting what they
called the Reliance Defense from 1985 to 2002, which consisted of books and
binders filled with materials purporting to show a studied conclusion that
the federal income tax laws were voluntary. By "voluntary," the defendants
meant that the laws imposed no legal obligation to file a return or pay a
tax. The defendants marketed these materials throughout the United States
under the business names The Research Foundation and-earlier-The
Cornerstones of Freedom. In addition, Hardy's organization promoted the use
of trusts and bankruptcy proceedings to evade the collection of income
taxes. Senior U.S. District Court Judge Edward Rafeedie found that these
schemes cost the United States treasury more than $8,600,000.
Attorney Sentenced for Using Aegis Offshore Trust Program to Evade Taxes
On August 11, 2005, in Houston, TX, James S. Quay was sentenced to 15 months
in prison to be followed by one year supervised release. Quay was also
ordered to pay a fine of $4,000 and to cooperate with the IRS to determine
the amount of taxes he evaded which, according to his plea agreement, is
believed to be approximately $61,880. In his plea agreement, Quay admitted
to diverting $221,000 in income from his personal tax return to an offshore
company via intervening transfers to intermediary domestic and foreign
trusts under a foreign abusive tax shelter program called Aegis.
Tulsa Man Sentenced in Pennsylvania Tax Case
On July 19, 2005, in Philadelphia, PA, Robert Singleton was sentenced to 60
months in prison and ordered to pay $2.78 million in restitution after
pleading guilty to a one count Indictment charging him with conspiracy to
defraud the United States. Singleton, through his company, The Worthington
Group, established domestic and foreign trusts in order to transfer clients'
money to off-shore accounts. Singleton conspired with William Perkins, a tax
return preparer from St. George, Utah, to file false income tax returns on
behalf of their clients in connection with the abusive, off-shore trust
scheme. The IRS has calculated the total tax loss stemming from Singleton's
off-shore scheme at approximately $3.1 million.
Tax Preparer Sentenced on Conspiracy in Trust Scheme
On July 1, 2005, in Phoenix, AZ, James D. Sherriffs was sentenced to 12
months and a day, ordered to pay restitution in the amount of $482,252.68
and was given a four year restriction against preparing tax returns and
doing bookkeeping services. According to the plea proceedings, Sherriffs
agreed to participate through PROTEC Services Trust in the promotion and
marketing to taxpayers a system of trusts and to prepare tax returns for
these taxpayers for the intended purpose of defrauding the United States by
impeding the IRS from collecting the proper amount of federal taxes.
Sherriffs admitted to making false statements to a potential client related
to his business background and admitted that he knew the PROTEC trust system
was set up to evade the payment of federal taxes.
Owner of Insurance Company Convicted of Using Abusive Trust Arrangements to
Evade Taxes
On July 1, 2005, in Urbana, IL, Denny R. Patridge, operator of Patridge
Insurance Services, Inc., was convicted of tax evasion, wire fraud, and
money laundering. The evidence presented at trial established that Patridge
established "trusts" which he used to conceal his earnings, hide the origin
of his income, deceive the IRS, and circumvent personal income taxes.
Patridge placed funds in bank accounts which bore the names of his "trusts"
and claimed on trust tax returns that the funds had been distributed to an
offshore trust. At all times, however, Patridge retained full control over
funds in the trust bank accounts and enjoyed the beneficial use of those
funds, which made the income taxable to him personally.
The trial evidence also established that Patridge did not report a
substantial amount of his income on returns he filed for 1996 and 1997. In
2000, after the IRS notified Patridge that it had made a formal assessment
of the 1996 and 1997 back taxes he owed, Patridge liquidated his investment
accounts, set up an "offshore" account, and placed approximately $200,000 in
the offshore account. Patridge also evaded approximately $19,523 in taxes
for calendar year 1999 on taxable income of approximately $76,796. He
evaded those taxes by, among other things, transferring money he earned as
income to a foreign account, concealing that money from the IRS, using the
money to pay personal expenses, and failing to file an individual income tax
return.
According to the evidence presented at trial, shortly after the IRS informed
Patridge that a lien could be placed on his property if he failed to pay his
1996 and 1997 income taxes, Patridge set up a system to hide his assets from
the IRS. He began to move his money offshore to an account that was under
his control but not under his name. He established a new account at Edgar
County Bank and Trust in Paris, Illinois, in his own name, through which
funds could be directed offshore. In October, 2000, he wired approximately
$200,000 in funds from the account at Edgar County Bank to an account at a
bank in St. Kitts held in the name of Nevis American Trust Company, an
entity which maintained the funds on behalf of Sultan Services, Ltd. Sultan
was under Patridge's direction.
After he transferred $200,000 to St. Kitts, Patridge then took steps to
prevent the IRS from obtaining a first lien on his real estate. He caused
the mortgage on his home in Strasburg to be recorded with the clerk of
Shelby County, Illinois, with a $100,000 "loan" from a corporation
controlled by Patridge. In October 2000, Patridge wired $100,000 from an
offshore location to a corporation he controlled in the U.S. The purpose of
the transfer was to provide the corporation with sufficient funds to "loan"
Patridge $100,000, using his home in Strasburg as security for the loan.
Then, after Patridge transferred $100,000 from offshore to the U.S. and
established a false mortgage, he transferred the money back offshore and was
able to use the money as he personally desired.
The evidence also showed that Patridge had obtained the sham trusts that he
used to conceal assets and evade taxes from an entity known as Aegis,
located in Palos Hills, Illinois, and that Patridge assisted in the sale of
at least one Aegis trust package. Patridge also utilized a business, known
occasionally as Offshore Consulting Services (OCS) and Laughlin, Inc., run
by Terry Neal out of Portland, Oregon to set up a nominee company in St.
Kitts, and Nevis and one in Reno, Nevada.
Business Owner Pleads Guilty to Submitting False Claim for Employment Tax
On June 27, 2005, in Los Angeles, CA, George Henry Jesson, owner of No Time
Delay Electronics, Inc., pleaded guilty to submitting a false claim to the
Internal Revenue Service for the 1997 federal employment tax withholding for
himself and his wife in the amount of $61,388. Jesson admitted that in May
2000 he signed and filed a false, fictitious, and fraudulent IRS Form 941c,
Supporting Statement to Correct Information, and amended Forms W-2c,
Corrected Wage and Tax Statements, for No Time Delay Electronics for 1997
which falsely reported that $0 in wages had been paid to employees of his
company. In reality, No Time Delay Electronics, Inc. paid wages of
$177,083.22 to Jesson and $273,236.20 to Jesson's wife in 1997, which Jesson
acknowledged to be taxable income. Based on the false statement that No
Time Delay Electronics had paid $0 wages in 1997, Jesson falsely claimed
that the total amount of all employment taxes paid by the company in 1997
should be refunded. In fact, the total refund requested for all employees
of No Time Delay Electronics was $215,454, although only $61,388 was
attributable to the employment tax withholding from the wages of Jesson and
his wife. Jesson also admitted that prior to filing the false form 941c for
1997, he had attempted to obtain a refund of $61,388 by filing an IRS form
1040X (an amended federal income tax return) for himself and his wife,
claiming a refund of the $61,388 based on an assertion that wages were not
taxable income. Jesson also admitted that he had filed an IRS Form 843,
Claim for Refund and Request for Abatement, requesting a refund of the
$61,388. Jesson also admitted that the IRS did not refund any money to him
based upon those claims, but rather issued him a bill for additional taxes,
penalties and interest on the wages that defendant and his wife earned in
1997. As part of the plea agreement, Jesson has agreed to pay restitution
to the IRS in the amount of $215,454, the amount originally refunded to
Jesson, and to file true and accurate tax returns for 1997 through 2004 and
pay over to the IRS all taxes, penalties, and interest assessed on such tax
returns.
Husband and Wife Sentenced for Using Abusive Trust Scheme to Evade Taxes
On June 27, 2005, in Denver, CO, Charles William Ledford was sentenced to
serve 24 months in prison for conspiracy to defraud the United States.
Ledford was also ordered to pay restitution totalling $506,000 to the
Internal Revenue Service. Ledford pleaded guilty on April 11, 2005.
According to the plea agreement, Ledford and his wife were co-owners of
Service Engineering, Ltd., a heating ventilation air conditioning (HVAC)
service and sales business in Colorado Springs, Colorado. The business
later operated as Service Engineering Trust. In June 1992 the defendants
joined the Pilot Connection, a known organization that advocated that
individuals could "untax" themselves by hiding income through the use of
trusts. Thereafter, the Ledfords created and recorded a number of trusts
within the State of Utah. The Ledfords then began moving various personal
and business assets into these trusts to hide those assets and income from
the Internal Revenue Service. >From 1992 through 1995, the Ledfords failed
to file personal income taxes or under reported their income to the IRS. As
part of the conspiracy the defendants took distributions from the various
trusts for cash and personal expenses. These distributions were not
reported to the IRS as income. Some of the distributions were used to build
a new home, pay for their son's college tuition, and to pay Teller County
property taxes. In 1998 the IRS notified Charles Ledford that he owed
$531,268 in taxes for years 1993 through 1995. This amount was based on the
money he and his wife personally received from their business.
Owner of Apartment Complexes Sentenced to 100 Months for Conspiracy, Tax
Evasion, and Bankruptcy Fraud
On June 22, 2005, in Salt Lake City, UT, Stanley L. Wade was sentenced to
100 months in federal prison to be followed by three years of supervised
release. In addition, Wade was ordered to file accurate tax returns within
18 months of his sentencing. Wade was convicted by jury in March 2005 on
one count of conspiracy to defraud the United States, four counts of tax
evasion, one count of bankruptcy fraud and one count of making a false
statement in a bankruptcy proceeding. According to evidence introduced at
trial, Wade owned eight residential apartment complexes which contained more
than 400 rental units. Wade, along with his wife, conspired to hide
ownership of the rental units so they could conceal the income from the
rental units and avoid paying taxes. The Wades transferred ownership of the
apartments to sham entities which they called Unincorporated Business
Organizations (UBO) and opened more than 40 bank accounts with signature
authority in their own names or nominees. The Wades advised their
accountant that they had no income from the apartments because, having
transferred the rentals to the UBO, they no longer owned the rentals. They
then filed false tax returns, failing to report the income derived from the
apartments, together with other sources of income. Evidence at trial also
showed that Wade submitted documents as a part of a bankruptcy filing that
fraudulently omitted bank and brokerage accounts he had maintained within
two years immediately preceding the filing of a bankruptcy petition, real
estate he owned, residences, vehicles, boats, and wages. During the years
of the conspiracy, the Wades failed to pay more than $5 million in federal
taxes.
Promoters of "We the People" Tax Fraud Group Sentenced
On June 7, 2005, in Los Angeles, CA, five individuals associated with a tax
fraud group known as "We the People" were sentenced for promoting bogus tax
shelters that falsely promised to limit exposure to federal income taxes.
1. Lynne Meredith, the leader of the operation, was sentenced to 121 months in
prison.
2. Gayle Bybee was sentenced to 60 months in prison;
3. Teresa Manharth Giodano was sentenced to 40 months in prison;
4. Willie Watts was sentenced to 36 months in prison; and
5. Gregory Paul Karl was sentenced to 20 months in
prison. Two more defendants in this case,
6. & 7. Nora Moore and Betty Erickson,are scheduled to be sentenced on June 20, 2005.
On May 3, 2004, all seven individuals were convicted on various counts in
the indictment including failure to file income tax returns, conspiracy, and
mail fraud. During the 13-week trial, evidence showed that the defendants
assisted taxpayers in forming phoney "pure trusts" to conceal income and
assets from the government. Also, the defendants falsely told their
customers that paying taxes was "voluntary" and that they should file a W-4
or W-8 form with their employer claiming to be exempt from federal tax
withholding and encouraged taxpayers to send protest correspondence to the
IRS with the purpose of impeding and obstructing the IRS from collecting
these taxpayer's taxes.
Trial evidence also illustrated that beginning in 1991 and continuing until
April 2002, Meredith conducted seminars at which she sold books and bogus
"pure trusts" to people with the purpose of leading them to believe they
could legally shield income and assets from taxation. Meredith also wrote
books including "How to Cook a Vulture" and "Vultures in Eagle's Clothing,"
in which she falsely claimed that individuals could lawfully stop paying
income taxes, stop their employer from withholding income taxes, and refuse
to produce financial books and records to the IRS. The books contained
examples of frivolous tax returns and protest letters. Meredith earned more
than $8.5 million as a result of the scheme and, as with the other
defendants, did not file a Federal income tax return during these years.
Veterinarian Convicted of Tax Fraud
On June 3, 2005, in Erie, PA, Daniel Leveto, a veterinarian, was convicted
by jury on one count of conspiring to defraud the United States for the
purpose of impeding the IRS and on two counts of filing false individual
federal income tax returns. According to the testimony presented at trial,
Leveto failed to disclose on his 1994 and 1995 federal tax returns more than
$2.5 million in gross receipts from his veterinary practice. He also failed
to disclose on the tax returns that he controlled accounts in financial
institutions in the Cayman Islands and the Turk and Caicos Islands. Leveto
has been incarcerated since his arrest on March 24, 2004.
Three CPAs Plead Guilty in Anderson's Ark and Associates International Tax
Scheme
On May 16, 2005, in Seattle, WA, Tara Lagrand of Naples, FL; Gary Kuzel of
Downers Grove, IL; and Lynden Bridges of Wheat Ridge, CO, pleaded guilty to
aiding and assisting in the filing of false income tax returns. The
estimated tax loss as a result of the defendants filing false income tax
returns was between $2.5 and $5 million for each defendant. These three
accountants were part of Anderson's Ark and Associates (AAA), an
organization through which fraudulent tax shelters and investment scams were
promoted and sold. In their plea agreements, each defendant admitted that
they assisted AAA clients, from their respective states, by preparing and
filing the partnership agreements, promissory notes, and income tax returns
required to implement the "Look Back" program -- one of the two fraudulent
schemes promoted by the AAA organization.
Grass Valley Woman Sentenced in Tax Fraud Scheme
On May 9, 2005, in Sacramento, CA, Karen Louise Younce was sentenced to 37
months in prison followed by three years of supervised release and ordered
to pay a special assessment of $100 for her role in a large-scale abusive
trust scheme. Younce previously admitted, as a part of her plea, that during
1992 through August 2002, she participated in a conspiracy to impair, impede
and obstruct the IRS in the computation, assessment and collection of more
than $2 million in federal income tax liabilities. For a fee, Younce advised
and assisted her clients in transferring assets and income-generating
entities into domestic and foreign trusts, which she created and marketed
for the purpose of evading federal income taxes. Younce also advised and
assisted her clients in cycling their U.S. income through off-shore bank
accounts she controlled and then returned the income to the clients.
Tax Attorney Sentenced to Prison for 15 Years
On May 5, 2005, in Little Rock, AR, Bobby Keith Moser, a former Little Rock
tax lawyer, was sentenced to serve 15 years in prison. Moser was sentenced
for violations of tax evasion, obstruction of justice, and money laundering.
He was ordered to pay $2.25 million in restitution for sophisticated schemes
carried out between 1996 and last year. Part of the restitution included
$212,648 to the IRS. Moser was scheduled to enter a guilty plea in Detroit,
Michigan, but instead, he drove to Montreal, boarded a plane to Paris, and
then flew to Madagascar, where federal agents tracked him down in March
2004 - about the same time they discovered he had been bilking his clients'
trust funds. Moser admitted that he arranged for about $9 million in
profits from the sale of a 1996 communications company to be hidden from the
IRS. The $9 million was funnelled into a trust represented as a tax
qualified retirement plan which would, in theory, owe no taxes on the trust
money until it was distributed. The trust funds were made to appear to be
in the control of a third party, when in fact, they were controlled and
accessible by the client. More than $1 million in Moser's assets have been
recovered by the government and forfeiture proceedings are pending. These
funds will be used to repay some of his victims.
Jury Convicts Two Colorado Tax Fraud Promoters - Scheme Used Offshore Bank
Accounts, Phoney Loans and Debit Cards to Hide Income and Assets from IRS
On April 27, 2005, in Denver, CO, Paul D. Harris and Lester R. Retherford
were convicted on charges of conspiracy and wilfully aiding and assisting in
the preparation of fraudulent tax returns. The jury did not reach a
unanimous verdict as to the third defendant, Robert N. Bedford. According
to the indictment, Harris, Retherford, and Bedford set up shell corporations
for small business owners that were used to conceal nearly $9 million in
taxable income in secret accounts in the Turks and Caicos Islands and other
foreign countries from 1992 through 1999. The indictment also alleged that
although the defendants made it appear as though the offshore transfers were
payments for consulting services, most members used debit cards and loans to
spend the money they had concealed offshore. To make use of this service,
many members allegedly paid an initiation fee of $50,000, according to the
indictment.
Two Colorado Defendants Sentenced in $120 Million Anderson's Ark and
Associates International Tax Shelter Case
On April 26, 2005, in Seattle, WA, James and Pamela Moran, residents of
Montrose, Colorado, were each sentenced to seven years imprisonment, to be
followed by three years supervised release, ordered to pay restitution of
$42,311,742, costs of prosecution totalling $66,488 and also ordered to
forfeit $850,863 in proceeds they earned from Anderson's Ark and Associates
(AAA), as well as their Colorado home and their Jeep Cherokee automobile.
On December 27, 2004, the defendants were convicted in connection with one
of the most wide-ranging tax schemes ever prosecuted. The defendants were
convicted on a variety of charges, including conspiracy to defraud the IRS,
mail and wire fraud, money laundering and aiding and assisting the filing of
false tax returns. The evidence introduced at trial established that, from
1997 through early 2001, the Moran's earned tens of millions of dollars in
fees from the sale of several fraudulent tax shelter plans over the
internet. The Moran's were the AAA Executive Education Officers. As such,
they trained Information Officers, who were the primary sales force. In
addition, the Morans promoted the fraudulent tax shelter plans domestically
and internationally. The Morans cultivated their own AAA clients, with whom
they worked closely to further the AAA schemes.
Four Defendants Sentenced in $120 Million International Tax Shelter Case
On April 22, 2005, in Seattle, WA, four Anderson's Ark and Associates (AAA)
defendants were sentenced to prison terms ranging from eight to 20 years.
The defendants received the following sentences:
. Keith Anderson was sentenced to 20 years of prison to be followed by three
years supervised release and ordered to pay restitution of $63,525,860;
. Wayne Anderson was sentenced to 15 years of prison to be followed by three
years supervised release and ordered to pay restitution of $63,525,860 and a
fine of $25,000;
. Richard Marks was sentenced to 15 years of prison to be followed by three
years supervised release and ordered to pay restitution of $42,311,742 and a
fine of $25,000;
. Karolyn Grosnickle was sentenced to eight years of prison to be followed
by three years supervised release, and ordered to pay restitution of
$42,311,742.
Each of the defendants was also ordered to pay costs of prosecution of
$66,288. Additionally, seven properties located in Costa Rica, the AAA
Administrative Office, and $28 million in laundered funds were ordered
forfeited. AAA spanned five countries and over 1,500 clients. Both
Andersons, Marks and Grosnickle were convicted on charges of conspiracy to
defraud the government, mail and wire fraud, money laundering and aiding and
assisting the filing of false tax returns. From 1997 through early 2001,
the defendants earned tens of millions of dollars in fees from the sale of
several fraudulent tax shelter plans over the Internet.
In addition to the sentencing on these four individuals, Richard
Grossnickle, executive director of two AAA entities, pleaded guilty on April
13, 2005, to a charge of obstruction of justice and is currently awaiting
sentencing.
"Institute of Global Prosperity" Principal Pleads Guilty to Tax Charges
On April 12, 2005, in Seattle, WA, Dwayne Robare pleaded guilty to a
superseding information charging him with income tax evasion for the 2000
tax year. The information alleges that Robare became affiliated with the
Institute of Global Prosperity (IGP) in 1997 and for several years
thereafter operated and maintained its teleconferencing system located in
Marlboro, MA. IGP members subscribed to the teleconferencing services by
remitting fees to a nominee entity named Independent Diversity Entrepreneurs
and Associates (IDEA). Robare was a partner of IDEA and shared in the
profits generated from fees paid to IDEA. In a statement of facts provided
to the court, Robare admitted to receiving income from his work with IGP
from approximately 1997 through 2002. He further admitted that he used
various means to conceal his income from the IRS. This included a false
trust with a domestic bank account which he obtained from Innovative
Financial Consultants in Arizona and an offshore trust and foreign bank
account which he obtained from Prosper International League Limited in the
Bahamas. Robare admitted that the resulting tax loss totalled between
$120,000 and $200,000. Robare agreed to cooperate fully with the IRS in the
ascertainment, computation, and payment of his correct federal and state
income tax liabilities.
Chiropractor was Client of Anderson's Ark & Associates
On March 23, 2005, in Sacramento, CA, Dr. David R. Funk, a former
chiropractor, was sentenced to a year in prison to be followed by one year
of supervised release. Funk was also ordered to pay costs of $1,227 and an
assessment of $200. Funk pleaded guilty to two counts of filing false
income tax returns on November 3, 2004. Funk admitted in his plea agreement
that he filed false tax returns reporting negative adjusted gross income
which reflected his use of two tax evasion schemes that involved the
creation of shell companies to hide taxable income and create paper losses.
In one of the schemes, taxable income was diverted away from Funk on paper
through a series of corporate entities that in fact had no economic
substance. Although Funk earned and used income, he did not report it on
his returns. The other scheme, Funk created a joint venture entity which
reported bogus losses which he reported on his personal tax return. Funk
admitted evading over $183,000 in federal income taxes for tax years 1997,
1998, and 1999. Funk was a client of Richard Marks, who was a leader of the
Anderson's Ark and Associates organization. Marks was sentenced to 81
months in prison on November 14, 2002.
San Diego County Inventor Sentenced for Failing to Pay Taxes on Sale of
Company
On January 31, 2005, in Los Angeles, CA, John Zentmyer was sentenced to 33
months in prison for failing to pay income taxes on money generated from the
sale of his company. Zentmyer was found guilty of tax evasion, one count of
loan fraud and three counts of structuring cash transactions to avoid
federal reporting requirements. Zentmyer invented a wheel-locking device to
be used on four-wheel-drive off-road vehicles. After forming a company to
market his product, he sold the company for $1,008,000. Zentmyer failed to
file a tax return that reported any of the funds generated by the sale, nor
did he pay any taxes on the income. Instead, he placed the funds into
offshore bank accounts, used bank accounts in the names of other persons and
entities, and conducted financial transactions using large amounts of cash.
Zentmyer owes $264,335 in back taxes. The loan fraud conviction was based
on the submission of a false employment letter in connection with a loan
application to purchase a house. Zentmyer, who represented himself at the
beginning of the trial and later represented himself jointly with an
advisory counsel, argued that he was not guilty of tax evasion because he
believed in good faith that he did not have to pay income taxes after
reviewing old Supreme Court cases. He also claimed that he structured his
financial transactions only because the bank required his social security
number to file its report with the government and his religious beliefs
prevented him from divulging his social security number.
Man Sentenced to Prison for Filing False Tax Return
On January 4, 2005, in Cedar Rapids, IA, Troy Davis was sentenced to 21
months in prison, followed by one year supervised release and ordered to pay
$318,000 in restitution to the IRS. Davis admitted that he filed his 1996
tax return knowing he falsely understated his income by excluding income he
received from the sale of his business, Excel Medical. Davis attempted to
hide his taxable gain through the use of off-shore trusts.
For more information on these convictions, see U.S. Department of Justice
press release.
Offshore Tax Shelter Promoter Sentenced to Prison
On December 6, 2004, in San Francisco, CA, Jerome Schneider was sentenced to
six months in prison for his role in a conspiracy to defraud the IRS.
Schneider was also ordered to pay a fine of $4,000 and a $100 special
assessment. He had previously paid $100,000 in restitution. Schneider was
indicted on December 19, 2002, on one count of conspiracy and 22 counts of
mail and wire fraud in connection with the marketing and sale to taxpayers
of offshore banks and corporations. He pleaded guilty on February 11, 2004,
to the conspiracy charge. Schneider admitted marketing and selling offshore
entities such as those licensed by the South Pacific Island of Nauru as
international banks. According to Schneider's plea agreement, he would
cooperate with the Government. His plea agreement also stated he would
appear in national media outlets to explain his offshore arrangements were a
sham and urge taxpayers who bought into his scheme or other offshore schemes
to contact the IRS and reconcile their tax matters.
Former Chiropractor, Nutrition Specialist and Syndicated Radio Talk Show
Host sentenced
On October 22, 2004, in West Palm Beach, FL, Bruce E. Hedendal was sentenced
to a term of imprisonment of 36 months, supervised release term of 3 years
and ordered to pay restitution of $717,899 to the IRS. In August 2000, a
federal grand jury charged Hedendal with three counts of income tax evasion
for the years 1993 through 1995. According to the indictment, Hedendal
attempted to evade paying a total of about $180,000 in taxes on income of
about $561,000; failed to file income tax returns; concealed his true income
through the use of sham trusts and made false representations to the IRS.
When summonsed to face tax evasion charges, Hedendal fled to Canada and
ultimately to Australia, where he practiced under the names Erick Hedendal.
In October 2003, the Defendant was located in Australia and was extradited
back to the U.S. On July 2004 Hedendal pled guilty to one count of income
tax evasion.
FY2004 Archive Examples of Abusive Tax Schemes Investigations
FY2004 Examples of Abusive Tax Scheme Investigations
The following examples of abusive tax schemes fraud investigations are
excerpts from public record documents on file in the courts in the judicial
district in which the cases were prosecuted.
Michigan Couple Sentenced for Tax Fraud
On September 27, 2004, in Grand Rapids, MI, Andrew Stuart Ouwenga and Karen
Ann Ouwenga were sentenced following a May 26, 2004, jury conviction on
several tax-related felony offences. Andrew Ouwenga received 60 months
imprisonment and Karen Ouwenga received 51 months imprisonment, which are
each followed by two years' supervised release. They must also cooperate
with the Internal Revenue Service, file back tax returns and make
arrangements to pay all taxes due and owing, along with any interest and
penalties. They must also pay court cost of $5,016. The Ouwengas were
convicted of conspiracy to defraud the United States by impeding and
obstructing the lawful functions of the Internal Revenue Service, evading
their 1997 federal income tax, and two counts of wilfully and unlawfully
disobeying a grand jury subpoena. In addition, Andrew Ouwenga was also found
guilty on three counts of tax evasion involving his 1998, 1999, and 2000 tax
years. The Ouwengas' accountant prepared their 1994 federal income tax
return, which claimed more than $75,000 in income, however, the defendants
instead filed a frivolous tax return claiming they had no income and
requested a tax refund of their 1994 withholdings of more than $10,000.
Andrew Ouwenga informed his accountant that he would not file tax returns or
pay income taxes because "the Sixteenth Amendment was never ratified."
Despite gross deposits of over $6.3 million and gross business receipts of
$1.7 million into their bank accounts, the Ouwengas failed to file their tax
returns. From 1993 through 1999, the Ouwengas created at least nine sham
trusts, which enabled them to conduct their personal and business affairs
while evading their income tax obligation.
Attorney Pleads Guilty for Role in Offshore Tax Evasion Schemes
On September 17, 2004, in San Diego, CA, B. Roland Frasier, an attorney for
a prominent San Diego ophthalmologist, Dr. Glenn Kawesch, pleaded guilty to
tax evasion, filing false returns, and money laundering. Frasier admitted
that he transferred $1.25 million of Dr. Kawesch's profits from his medical
practice to an offshore account at the Bank of Nevis to avoid paying incomes
taxes. Frasier also admitted he underreported $3.3 million of his own
income for the tax years 1997 through 2001, which resulted in a tax loss of
$934,000. In addition, Frasier admitted he entered into a series of sham
agreements involving a business he helped take public. He did not disclose
to the company's president about his ownership of a corporation in Nevis
that received $300,000 and 7 million shares. Frasier had telemarketers sell
more than 1.3 million of the shares which netted more than $1 million.
Consultant Used Abusive Trust Arrangements to Hide Income
On September 16, 2004, in Grand Rapids, MI, John F. Napieralski was
sentenced to 30 months in prison to be followed by 2 years supervised
release and ordered to pay a fine of $5,000. Additionally, Napieralski was
ordered to cooperate with the IRS in filing all back tax returns and paying
all taxes due and owing, along with any interest and penalties.
On June 17, 2004, Napieralski pleaded guilty to four counts of tax evasion
for the tax years 1997 through 2000. He admitted that he created a sham
trust called, "The Educational Systems Trust" (T.E.S.T.) and instructed
payments, from his consulting services to Sto-Ex, Inc., to be made payable
to T.E.S.T. During 1997 through 2003, more than $950,000 was deposited into
T.E.S.T.'s bank account, with more than $600,000 in income coming from
Sto-Ex., Inc. Napieralski admitted that he wilfully attempted to evade and
defeat a substantial portion of his income tax due and owing by failing to
file tax returns reporting his business gross income received from Sto-Ex,
Inc., coupled with affirmative acts of evasion.
Former Owner of California Dietary Supplement Company Sentenced in Federal
Fraud Conspiracy
On September 13, 2004, in Los Angeles, CA, Almon Glenn Braswell was
sentenced to 18 months in prison and ordered to pay $10,455,367 in back
taxes, interest, and penalties. Braswell pleaded guilty on March 2, 2004,
to conspiring to evade millions of dollars in corporate income taxes during
a scheme that overstated the business expenses incurred by one of his
companies, Gero Vita International, Inc. on its federal tax returns.
Braswell acknowledged that his scheme caused Gero Vita to underpay its taxes
by $4,468,460.
Accountant Sentenced to 37-Month Prison Term for Mail Fraud and Tax Evasion
On August 23, 2004, in Miami, FL, Thomas Sewell, a certified public
accountant, was sentenced to 37 months in prison, followed by three years
supervised release, and ordered to pay restitution in excess of $7 million
to the victims. Sewell previously pleaded guilty to conspiracy to commit
mail fraud and for filing false tax returns. Sewell was charged in
connection with his participation in an investment fraud scheme, as a result
of which investors lost over $7 million. Sewell associated himself with
the scheme by recruiting investors from among his accounting practice
clientele. Sewell falsely advised his clients that their investments would
be safe and that he was personally monitoring the funds. Significantly,
Sewell failed to advise his clients that he was receiving commissions on the
investments that he brought in and failed to disclose on his 1997 and 1998
federal income tax returns that he had received additional income of more
than $140,000 from his participation in the scheme.
Four-Week Trial Ends in Five Convictions in Tax Evasion Case
On August 20, 2004, in Salt Lake City, UT, after a four-week trial, a
federal jury convicted five Utahans of conspiring to defraud the United
States through the establishment of an abusive trust scheme involving
offshore entities marketed through the name of Anglo-American International,
Provo, Utah. Convicted of conspiracy were
1. Ozy J. Neeley,
2. Paul J. Young,
3. Kevin J. Crockett,
4. Chad L. Merica, and
5. Robert F. Dodenbeir.
Crockett was also convicted of two counts of aiding and assisting in the filing of false
income tax returns. Eight people have been convicted of participating in
this conspiracy. The leader of the Anglo-American entities,
6. kirk Koskella
is currently serving a 10-year sentence in federal prison. Two other
individuals,
7. Dennis Shaw and
8. Stacie Bateman are awaiting sentencing
following their guilty pleas to conspiracy at an earlier date.
Three Sentenced for Using Sham Trusts and Corporations to Hide Business
Profits from IRS
On July 20, 2004 in Akron, OH, Gary Harris was sentenced to 151 months in
prison to be followed by 3 years supervised release and fined $95,000. On
June 23, 2004, Michael Kotula was sentenced to 70 months in prison to be
followed by 3 years supervised release. In addition, Kotula was ordered to
pay a $100,000 fine, the costs of prosecution, and $82,806.83 in restitution
to the Internal Revenue Service. Also sentenced was Tamara Schwentker
Harris receiving 15 months imprisonment to be followed by 2 years supervised
release, and ordered to pay $17,054 in restitution to the Internal Revenue
Service. In March 2004, after a four-week trial, the jury found all three
defendants guilty of conspiring to defraud the United States. In addition,
the jury convicted Harris and Kotula on three counts and one count of income
tax evasion, respectively. At trial, the evidence proved the defendants
used a maze of trusts and corporations to try to hide approximately $18
million in income generated by various businesses they controlled. Between
January 1, 1994 and July 8, 2003, they paid little or no taxes on the income
earned. Nonetheless Mr. Harris lived lavishly, acquired several homes, a
jet way for his ranch in Conneaut, and an antique Mercedes sports car which
he claimed was worth $250,000. Mr. Harris has been in federal custody since
his arrest in July 2003. He had previously been convicted of tax evasion
for tax years 1987, 1989, and 1990. In addition, between 1998 and 2002,
when Mr. Harris was in federal prison after convictions for racketeering and
income tax evasion, Mr. Kotula and Ms. Schwentker Harris kept Mr. Harris'
businesses running and continued to operate this illegal conspiracy to
conceal income from the IRS.
Co-Founder of Global Prosperity Pleads Guilty to Tax Fraud
On July 15, 2004, in Seattle, WA, Daniel Andersen, co-founder of Global
Prosperity, pleaded guilty to tax charges of conspiracy to defraud the
United States by impeding the Internal Revenue Service. In a statement of
facts submitted to the court, Andersen admitted that he conspired with
others to defraud the IRS by utilizing a system of bogus trusts, nominee
entities and related domestic and offshore bank accounts to conceal millions
of dollars in income generated from the sale of Global Prosperity products.
Andersen admitted that he and his accomplices maintained the anonymity of
Global Prosperity by changing the name of the business, using mail drops to
conceal its location, conducting financial transactions in cash, and
discouraging the use of Social Security numbers to escape notice by the IRS.
Also, Andersen admitted that he failed to file individual income tax,
corporate income tax, trust income tax and partnership returns; and
declarations of a financial interest in, or signature authority over, a
foreign bank account, as required by law. Finally, Andersen admitted that
his actions caused a tax loss of between $2.5 and $7 million.
Nevada Author Sentenced for Promoting Tax Fraud Schemes
On July 14, 2004, in Reno, NV, Lawrence Turpen pleaded guilty to conspiracy
to defraud the IRS. In his plea agreement, Turpen admitted that he became a
full-time financial consultant specializing in international investing and
tax planning. He solicited clients at speaking engagements; through his
1990 book, "Offshore Options for Small Business;" and through a website
advertising his products and services. Turpen advised clients to conceal
their personal and domestic business income in offshore entities located in
countries that did not provide financial information to the United States.
He also helped his clients structure sham business transactions to make it
appear as if their personal or domestic business income interested in
offshore entities and to use nominees or administrators to further conceal
the true ownership and control. Turpen helped his clients repatriate the
untaxed money by advising them to create fictitious loans from their
offshore entities to pay for personal purchases, including cars and homes,
as well as having the offshore entities pay for personal vacations or give
untaxed "educational grants" to their children. On December 13, 2004,
Turpen was sentenced to three years probation and six months of home
detention with electronic monitoring. In addition, Turpen was ordered to
pay a $10,000 fine, serve 300 hours of community work service, and must
cooperate with IRS concerning the back taxes that he owes.
Promoter of Sham Trusts Pleads Guilty to Tax Fraud Charges in Arizona
On June 7, 2004, in Phoenix, AZ, Mark D. Poseley pleaded guilty to
conspiracy to defraud the Internal Revenue Service for his role in marketing
bogus trusts through an organization known as Innovative Financial
Consultants (IFC). Poseley also pleaded guilty to wilfully failing to file
his 2000 income tax return, despite having earned substantial income from
his work with IFC. Poseley admitted he worked as an IFC salesman and sold
both onshore and offshore trust packages. He admitted that he falsely
represented to taxpayers that they could lawfully avoid paying income taxes
by placing their income and assets into trusts, despite remaining as the
trusts' "managing directors." Poseley admitted he ignored written
publications from the IRS and other sources which directly contradicted the
false claims he made.
Pinellas County Man Sentenced for Tax Evasion Scheme
On May 7, 2004, in Tampa, FL, William Timer was sentenced to five years' in
prison, to be followed by three years supervised release. Timer was also
ordered to pay restitution to the Internal Revenue Service of $928,864 and
imposed a fine of $25,000. Timer was convicted of four counts of income tax
evasion and three counts of filing false corporate income tax returns.
Timer purchased the AEGIS trust system promoted out of Chicago, IL. He then
used a series of domestic and foreign companies to divert and conceal
corporate profits in order to evade the payment of taxes on those profits.
As a result of these actions, Tiner failed to report in excess of $2.5
million in income between 1996 and 1999 and thus evaded the payment of over
$900,000 in income taxes.
Tax Cheaters Headed to Prison and will Pay Government $570,000
On April 1, 2004, Helen M. Smith and her brother Leroy Sbrusch were
sentenced to serve two years in federal prison for tax evasion, failure to
file returns, and conspiracy to defraud the IRS. On Wednesday, March 24,
co-defendant Ken Smith was sentenced to serve 15 months for his role in the
conspiracy. All three defendants were convicted of conspiracy to defraud
the IRS. Helen Smith and Leroy Sbrusch were also each convicted of failure
to file 1996, 1997, and 1998 income tax returns, and also of evading Helen
Smith's 1998 income taxes. Sbrusch was also convicted of one count of
structuring financial transactions to avoid currency transaction reporting
requirements in 1998. Helen Smith and Leroy Sbrusch were ordered to pay
over $485,000 in restitution to the United States for back taxes, fined each
of them $25,000, and ordered them to pay over $35,000 in costs of
prosecution. After serving their prison terms, each defendant will be on
supervised release for three years, and will be required to file tax returns
and cooperate with IRS examinations of their tax liability.
The evidence at trial showed that Helen Smith owned two laundromats. Her
gross income was over $440,000 for 1996, over $540,000 for 1997, and over
$700,000 for 1998. Despite this income, she failed to file a tax return for
any of these years, or any year since. Neither Helen Smith nor Leroy
Sbrusch had in fact filed a return since 1990. After the sale of Wasilla
Wash Day for $700,000 in April 1998, the evidence showed that the defendants
engaged in a complicated scheme to launder the profits to evade collection
by the IRS. The three defendants used various means to conceal the
proceeds, including the purchase of $45,000 in gold and silver under a
third-party name, the purchase of land in Texas under false names, and
simply having large-denomination cashier's checks issued to nonexistent
entities and keeping them in their office for six months to a year. Sbrusch
's structuring conviction arose from his withdrawal of $8,000 cash on April
15, 1998, followed by withdrawals of $8,500 o
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