Dear Mr. Ingram
A short question.
Is it true that ownership of foreign annuities doesn't have to be reported to the government (as ownership of foreign bank accounts must be) . . .even if they have investment income, dividends, etc inside of them?
Thank you sir!
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david ingram replies:
Not that I know of in either the US or Canada.
Various people tried to come up with such an animal but so far as i know, they all lost.
Many went to jail as Jerome Schneider did. His specialty was setting Americans up with Offshore entities. I am old that over 1,000 of his clients were fined a minimum of $10,000. Unfortunately, no one appealed so we only have his conviction on rcord. However, he turned 1072 clients over to the IRS and Department of the Treasury in his plea bargain.
read on!
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QUESTION:
I am thinking of opening a brokerage account to trade commodities on the US market, however I am considering establishing a company or trust in a "tax-haven" country such as the British Virgin Islands to open the trading account. I remember hearing Mr. Ingram on the radio a few years ago and he gave some cautionary advice on this subject. So my question is as follows. What are the benefits, negatives, and risks associated with opening a company in a tax-haven country and what are the legal implications as far as Canadian tax is concerned. Any other related comments would be most welcomed. Thank you very much.
--------------------------------
david ingram replies:
This question was asked by a Canadian resident but i am going to answer it for a US or Australian or New Zealand or Great Britain and another 150 countries as well.
When you are a resident of a country with an income tax act, you are taxable on your world income.
A lot of Canadians living in Mexico are not reporting their offshore accounts and are clearly risking their freedom and liberty by evading Mexican Income Taxes.
Costa Rica, Panama, the Bahamas, Grand Caymans, Dubai, etc. do not care about your offshore income.
BUT!
If you live in Canada or the US or Mexico, etc.you are taxable on any income earned anywhere in the world.
Therefore, a BVI account is perfectly legal as long as you report your capital gains, interest and dividends from the accounts. In addition, if the accounts total over $10,000 US, you have to file US forms TDF 90-22.1 and maybe 3520 to report these accounts and the internal earnings. Failure to file the US form and check off 'yes' to question 7a on schedule B of your 1040 can result in a fine from $10,000 to $500,000 PLUS five years for US residents or US Citizens no matter where they live.
Canadians have to file form T1135 if the total investments out of Canada are over $100,000. the minimum penalty is $100 for failure to file and the maximum is $2,500 (plus interest) when the form is 100days late at $25.00 a day.
The worst part about Offshore investing is that people get mixed up with sharks and the shark disappears with their money OR the shark gets arrested and turns his or her clients over tot he IRS or the CRA to get out of jail sooner as happened with Vancouver's own Jerome Schneider.
Vancouver's Jerome Schneider turned over 1000 of his clients over to the IRS for penalty when he plea bargained himself from a 99 year to an 8 month jail sentence plus a $100,000 fine.
Over the years i have likely run into over 100 people who have set up accounts in the BVI, Jamaica, Montserrat, Grand Caymans, Vanuatu, etc and never seen their money again. The sharks - guys like Scott Brown or Hoffman and maybe Nike Masee just ran off with their money because they had set up the secret accounts.
------------------------------------------
I am regularly asked - How do i pick a tax preparer? The IRS has some helpful hints below.
Beware of all of those claims some make. Better safe than sorry.
-
News release
Creative accounting sends tax preparer to jail for fraud
Vancouver, British Columbia, December 13, 2007.Stanley Nisbet was sentenced today in Robson Square Provincial Court after pleading guilty to 17 counts of income tax and goods and services tax (GST) fraud, and 6 counts of theft and 4 counts of fraud under the Criminal Code. Nisbet was sentenced to 4 years in jail on the tax related and fraud counts, and 18-months in jail, to be served concurrently, on the 6 theft counts. In addition he was fined $254,910. The fine represents 100% of the federal tax evaded and GST he fraudulently obtained. In addition to the fine, Nisbet still has to pay the full amount of tax owing, plus interest, and any other penalties the Canada Revenue Agency (CRA) assesses.
This is Nisbet's second conviction for tax-related fraud. He pleaded guilty on August 5, 2004, and was fined $7,500 for filing a false tax return on behalf of a client.
A CRA investigation revealed that Nisbet used a variety of schemes to defraud the CRA and his clients, including:
a.. claiming GST refunds that his clients were not entitled to;
b.. creating fictitious business or rental losses to offset employment income to generate a refund;
c.. claiming T4 income, including tax deductions from that income, to generate refunds for clients who did not owe tax;
d.. advising clients that they owed CRA money but should pay him directly- Nesbit would then keep the money and claim a refund from the CRA on behalf of his client;
e.. simply stealing refunds that clients were genuinely entitled to.
What each of Nisbet's schemes had in common was that he asked the CRA to deposit all of his clients' refunds directly into his own bank account.
>From 1995 to 2004, Nisbet operated a tax preparation business in Delta, B.C., called Acura Financial Management and claimed to have multiple offices and a bachelor's degree in accounting. In fact his "degree" was a certificate that he had purchased from the Virgin Islands and Delta was his only office. Soon after his first conviction, he closed his business and moved to Powell River.
CRA conducted a search of Nisbet's Powell River residence as part of the investigation of his income tax and GST fraud. Nisbet then moved to the United Kingdom, but was extradited back to Canada on August 3, 2007. He has remained in custody since his extradition.
"CRA pursues tax evaders to maintain public confidence in the integrity of the tax system," said William V. Baker, Commissioner of the Canada Revenue Agency. "Canadians have to trust that our self-assessment system is working and that it is fair."
When individuals or corporations are convicted of tax evasion and GST fraud, they have to pay the full amount of tax owing, GST fraudulently obtained, plus interest, and any penalties the CRA assesses.
The information in this news release was obtained from court records.
Further information on convictions can also be found in the Media room on the CRA Web site at www.cra.gc.ca/convictions.
Back to menu
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That was just one of the many convicted in Canada.
The following is a year old IRS bulletin dealing with US tax preparers - .
Tax Return Preparer Fraud
FS-2007-12, January 2007
Return preparer fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients. This includes inflated requests for the special one-time refund of the long-distance telephone tax. Preparers may also manipulate income figures to obtain tax credits, such as the Earned Income Tax Credit, fraudulently.
In some situations, the client (taxpayer) may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on their tax returns. However, when the IRS detects the false return, the taxpayer - not the return preparer - must pay the additional taxes and interest and may be subject to penalties.
The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution and/or asserting appropriate civil penalties against unscrupulous return preparers.
While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. Taxpayers should be as careful as they would be in choosing a doctor or a lawyer. It is important to know that even if someone else prepares a tax return, the taxpayer is ultimately responsible for all the information on the tax return.
Helpful Hints When Choosing a Return Preparer
a.. Be careful with tax preparers who claim they can obtain larger refunds than other preparers.
b.. Avoid preparers who base their fee on a percentage of the amount of the refund.
c.. Stay away from preparers who claim that many, if not most, phone customers can get hundreds of dollars or more back under the telephone tax refund program.
d.. Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
e.. Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
f.. Review your return before you sign it and ask questions on entries you don't understand.
g.. No matter who prepares your tax return, you (the taxpayer) are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
h.. Find out the person's credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
i.. Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
j.. Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
Reputable preparers will ask to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so, they are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
Further, tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine.
Criminal Investigation Statistical Information on Return Preparer Fraud
FY 2006
FY 2005
FY 2004
Investigations Initiated
197
248
206
Prosecution Recommendations
153
140
167
Indictments/Informations
135
119
121
Sentenced
109
118
90
Incarceration Rate*
89.0%
85.6%
84.4%
Avg. Months to Serve
18
18
19
*Incarceration may include prison time, home confinement, electronic monitoring or a combination.
Criminal and Civil Legal Actions
Some return preparers have been convicted of, or have pleaded guilty to, felony charges.
Additionally, the courts have issued 175 permanent injunctions against abusive tax scheme promoters and abusive return preparers since 2003. The following case summaries are excerpts from public record documents on file in the court records in the judicial district in which the legal actions were filed.
California Tax Preparers Sentenced to Prison Terms for Operating Tax Fraud Schemes
On Oct. 6, 2006, in San Diego, Calif., Susan E. O'Brien, a professional tax preparer who operated "The O'Brien Group," was sentenced to ten years and five months in prison and ordered to pay $113,179 in restitution. She was convicted on May 2, 2006, for tax evasion, defrauding the United States and aiding and assisting in the filing of fraudulent tax returns. Co-defendants Robert Richard Evans and William Dean Cook were also sentenced to prison terms of 78 and 24 months, respectively. In July 2003, O'Brien, Evans, Cook and five others were charged in a 78 count indictment with various tax crimes related to tax years 1996-2002. According to the indictment and trial evidence, O'Brien prepared numerous income tax returns that claimed false business deductions and Evans promoted, sold and managed domestic trusts used by clients to hide their income and assets from the IRS. O'Brien also was convicted of evading the payment of tax on her own income. The tax evasion scheme resulted in a tax loss to the United States of more than $1 million.
Two Sentenced for Preparing False Tax Returns
On Sept. 20, 2006, in Monroe, La., Eddie Ferrand and William Kennedy were sentenced for aiding and assisting in the preparation of false income tax returns and conspiracy. Ferrand was sentenced to 60 months in prison to be followed by three years supervised release. Ferrand was also ordered to pay $255,890 in restitution to the IRS and a $900 assessment. Kennedy was sentenced to 27 months in prison to be followed by three years supervised release. Kennedy was also ordered to pay $39,020 in restitution to the IRS and an $800 assessment. According to the indictment, Ferrand, as the owner and operator of Mr. Ed's Tax Service, hired, trained and supervised tax preparers employed at Mr. Ed's, including co-defendant Kennedy. Ferrand, Kennedy and other co-defendants prepared income tax returns and amended prior year returns by inflating Schedule A deductions and creating false Schedule C businesses in order to increase taxpayer's refund. The defendants prepared more than three thousand returns expanding over 26 states and generating refunds in excess of $6 million.
Minnesota Tax Preparer Sentenced for Filing False Tax Returns
On March 23, 2006, in Minneapolis, Minn., Richard Reiss was sentenced to 41 months in prison for aiding and assisting in the preparation of 84 false tax returns. Reiss was also ordered to pay a $7,500 criminal fine and $198,958 in back taxes. Reiss prepared tax returns for more than 30 clients and claimed fraudulent and false deductions such as unreimbursed employee business expenses, mileage expenses, meals and entertainment, charitable contributions, medical expenses and tax preparation fees, and business losses resulting from business expenses that were fabricated or inflated. In total, he overstated expenses and deductions for numerous clients by more than $1 million, which resulted in tax losses of about $198,000.
Tax Preparer Who Used Bogus Business Losses to Wipe Out Clients' Income Taxes Sentenced to 11 Years in Prison
On Feb. 21, 2006, in Los Angeles, Calif., James Earl Wynn was sentenced to 11 years in federal prison following his April 22, 2005 conviction of 24 counts of aiding and advising in the preparation of false income tax returns. Evidence presented in court showed that Wynn solicited his clients by telling them that he operated a number of businesses in which they could invest. Wynn told his clients that if the businesses turned a loss, the clients could claim the loss on their tax return. As part of this arrangement, Wynn offered to prepare the clients' tax returns charging his clients a percentage of their tax refunds in addition to a return preparation fee. Wynn did not tell his clients that many of the businesses listed on their tax returns did not exist at all. None of the businesses listed on their tax returns as part of the tax fraud scheme ever existed as a partnership, ever filed a partnership tax return or ever sustained the losses claimed on the taxpayers' returns. Wynn caused more than 2,000 tax returns to be filed with the IRS claiming more than $75 million in false partnership losses. The tax loss to the government exceeded $10 million. On July 18, 2005, Linda M. Hall, who once worked for Wynn, was sentenced to 70 months imprisonment and was ordered to pay restitution of $6,339,023.
Rockford Tax Preparer Sentenced to 56 Months in Federal Prison for Preparing False Tax Returns
On Feb. 13, 2006, in Rockford, Ill., John H. Bell was sentenced to 56 months in prison, followed by one year supervised release, for preparing false federal income tax returns for others and for filing a false federal income tax return for himself. According to the indictment, Bell, the owner of Bell's Income Tax Service and of Real Estate Investors (REI) #2462, Inc., prepared false income tax returns for others. In order to support the returns, Bell attached W-2s to the returns that falsely stated the amounts of income the taxpayers received from REI and falsely stated the REI had withheld federal income tax from the taxpayers when, in fact, no such taxes had been withheld by Bell or his corporation. The indictment also charged that Bell filed an income tax return for himself that falsely stated that $8,360 in federal income tax had been withheld from him, when no federal income tax had been withheld by REI. As a result of his own false return, Bell wrongfully attempted to obtain a refund of $8,701.
Former City of Houston Employee Sentenced to Prison
On Jan. 27, 2006, in Houston, Tex., Jerome Harris was sentenced to 57 months in prison followed by one year supervised release. The judge further ordered that, effective immediately, Harris be prohibited from preparing tax returns or assisting tax payers in audits. Harris was convicted of 21 counts of willfully preparing fraudulent income tax returns for his clients in September 2005. Harris, a full time employee for the City of Houston, also owned and operated Jay's Bookkeeping and Tax Service, located at his residence. It was found that Harris had prepared hundreds of false tax returns for the 1995 through 2000 tax years, resulting in claims for fraudulent tax refunds by his clients totaling almost $1.3 million.
Michigan Man Sentenced For Preparing Tax Returns in Violation of Court Order
On Feb. 16, 2006, in Grand Rapids, Mich., Robert L. Mosher, of Cedar Springs, Mich., was sentenced to 105 days in prison for contempt of court after violating injunctions that barred him from preparing tax returns for customers. Two injunctions were obtained after the Justice Department sued Mosher in 2003 for promoting a tax scheme involving sham trusts and preparing fraudulent returns understating customers' tax liabilities. Mosher continued to prepare income tax returns after these orders were entered.
Federal Court Permanently Shuts Down Louisiana Tax Preparer
On April 18, 2006, Eddie Ferrand of Monroe, La., and two of his employees, Glenda Faye Elliott of Monroe, La., and William Nathaniel Kennedy of Rayville, La., were permanently barred from preparing tax returns. The court found that Ferrand, Elliott and Kennedy regularly understated customers' tax liabilities, by claiming false dependents, reporting fictitious business expenses and deductions and inflating other deductions.
Federal Judge Stops Tax Refund Fraud by Two Florida Tax Return Preparers
On Aug. 8, 2006, a federal court permanently barred Jean-Marie Boucicaut and Marie Thelemarque of Orlando, Fla., and Boucicaut's company, Tax Review Corporation, from preparing federal tax returns for others. The court found that the defendants filed amended income tax returns for persons without their authorization and directed the IRS to send the requested refund checks to them.
Federal Court Bars Louisiana Tax Preparers from Claiming Inflated Deductions on Income Tax Returns
On Oct. 5, 2006, in New Orleans, La., Rodney G. Bourg and Cynthia M. Bourg of Houma, La., were permanently barred from preparing federal income tax returns claiming inflated deductions or asserting unrealistic positions. The court found the Bourgs prepared federal income tax returns with improper per diem expense deductions for customers who worked as mariners, fishermen, merchant seamen and ferry workers.
Where Do You Report Suspected Tax Fraud Activity?
If you suspect tax fraud or know of an abusive return preparer, report this activity using IRS Form 3949-A, Information Referral. You can download Form 3949-A from this Web site or call 1-800-829-3676 to order by mail. Send the completed form, or a letter detailing the alleged fraudulent activity, to Internal Revenue Service, Fresno, CA 93888. Please include specific information about who you are reporting, the activity you are reporting and how you became aware of it, when the alleged violation took place, the amount of money involved and any other information that might be helpful to an investigation. Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential. You may also be entitled to a reward.
Related Items:
a.. Form 3949-A, Information Referral
b.. Compliance & Enforcement
c.. Tax Scams/Consumer Alerts
d.. Standards of Practice for Tax Professionals
Jerome Schneider's story can be seen here
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 time beliving that a US Citizen living as a permanent 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,
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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 Vancouver 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, he had lost his house, wife and car (no particular order there but I think the Porsche 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 trouble has to go to the US Embassy for help with a lost passport, etc., and in Canada, 98% (or so) of Americans in Canada 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 because of 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.
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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, Brown 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. Jerome 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 Australia and the IRS extradited a fellow from Madagascar. 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, physical 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 shanghaied. 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
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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 bone fide 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 willfully
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 willful failure to
file tax returns;
2. Patricia Ensign, a former resident of Phoenix, Arizona and co-founder of IFC
on charges of willful 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 willful failure to
file tax returns;
Rachel McElhinney, a resident of Scottsdale, Arizona and consultant for IFC
on charges of willful failure to file tax returns;
Keith Priest, a former resident of Tempe, Arizona and a "trustee" for IFC on
charges of willful 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
willfully 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 totaling $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 phony "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 funneled 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, phony 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 willfully 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 totaling $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 teleconfere
