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.
Promoter of Abusive Trust Arrangements Sentenced to 65 Months in Prison
On September 19, 2008, in Philadelphia, Pa., Anthony Trimble was sentenced to 65 months in prison, to be followed by three years of supervised release, and ordered to pay $5.7 million in restitution and a $200 special assessment. According to court documents, Trimble was a top salesman for a Texas-based group called Commonwealth Trust Company (CTC). The group (not affiliated with the Wilmington, Delaware firm by the same name) encouraged investors to place income and assets into trusts for the purpose of evading federal income taxes. CTC marketed two domestic trusts and one offshore trust to its clients. Based on CTC instructions, many of the clients did not file tax returns or filed materially false tax returns. As part of the scheme, CTC told clients they could escape paying income taxes by diverting income through CTC’s series of trusts. CTC also instructed clients to transfer their assets into one of CTC’s domestic trusts to conceal and protect property from IRS liens and seizures. In particular, Trimble assured an undercover law enforcement officer that CTC could assist the agent move a “substantial six-figure” amount of cash to off-shore accounts tax-free. John Crim, the leader of the conspiracy, was convicted in a jury trial in January 2008 along with co-defendants John Brownlee and Constance Taylor. Crim received a sentence of 96 months in prison and Brownlee received a sentence of 78 months in prison. Defendant Taylor is awaiting sentencing.
Three Accountants Sentenced To Prison in $20 Million Offshore Tax Fraud Conspiracy
On September 5, 2008, in Salt Lake City, Utah, Certified Public Accountant (CPA) Stephen F. Petersen was sentenced to 35 months in prison and ordered to forfeit $1.1 million; accountant Brent Metcalf was sentenced to 24 months in prison; and CPA Reed H. Barker of Littleton, Colo., was sentenced to 18 months to prison and ordered to pay $167,608 in restitution. The three accountants were indicted in November 2005 by a federal grand jury in Salt Lake City for promoting a tax fraud scheme that cost the federal treasury more than $20 million. The fraud scheme took multiple forms, including the use of false documentation for fictitious currency transaction losses, false insurance expense deductions and bogus capital losses, all for the purpose of fraudulently offsetting taxable income for clients. The scheme utilized, among other things, offshore companies, offshore bank accounts in the Cayman Islands and Nevis, the services of offshore nominees and opinion letters that purported to give legal authority to the fraudulent transactions. Barker, Metcalf and Petersen pleaded guilty for their roles in the scheme in January 2008. Each admitted that, from 1996 until April 2005, he conspired with Evanson and others to conceal portions of customers’ income from the IRS and to create false deductions for the purpose of reducing the income tax paid by customers. The defendants admitted that they knew that the deductions on the tax returns were false and fraudulent. Petersen also admitted that as part of the scheme, he and Evanson were paid a fee that was equal to 30 percent of the tax evaded by their customers as a result of false deductions created by Evanson and Petersen. Also as part of his plea, Petersen admitted to causing a false tax return to be filed with the IRS on behalf of one of his customers.
Utah Attorney Sentenced to 120 Months in Prison in $20 Million Offshore Tax Fraud Conspiracy
On August 15, 2008, in Salt Lake City, Utah, Attorney Dennis B. Evanson was sentenced to 120 months in prison and three years of supervised release. The court also ordered Evanson to forfeit four pieces of real property, a Hummer and a Toyota Tundra, and entered a money judgment in the amount of $2,774,133. A federal jury convicted Evanson of conspiracy to commit mail and wire fraud, tax evasion and assisting in the filing of false tax returns in February 2008. Evidence introduced during trial showed that Evanson’s scheme cost the U.S. Treasury more than $20 million in taxes. His fraud scheme took multiple forms, including the use of false documentation for fictitious currency transaction losses, false insurance expense deductions and bogus capital losses, all for the purpose of fraudulently offsetting taxable income for clients. The scheme utilized, among other things, offshore companies, offshore bank accounts in the Cayman Islands and Nevis, the services of offshore nominees and opinion letters that purported to give legal authority to the fraudulent transactions. According to the evidence, Evanson, along with his co-defendants, conspired between 1996 and April 2005 to conceal portions of his clients’ income from the IRS and to create false deductions for the purpose of reducing the income tax paid by clients. Evidence presented at trial showed that Evanson and his co-conspirators knew that the deductions on the tax returns were false and fraudulent. Evanson and a co-conspirator were paid a fee for their services that was typically equal to 30 percent of the tax evaded by the clients. Brent Metcalf, Graham R. Taylor, Stephen F. Petersen, and Reed H. Barker have all pleaded guilty to various tax charges and are awaiting sentencing.
Two Brothers Sentenced for Using Abusive Trusts Arrangements to Evade Taxes
On August 11, 2008, in East St. Louis, Ill., Dennis and Douglas Frichtl, brothers, were sentenced to prison for their roles in a conspiracy to impair and impede the Internal Revenue Service (IRS) in the ascertainment and collection of income taxes. Dennis Frichtl was sentenced to 26 months in prison and three years of supervised release. Douglas Frichtl was sentenced to 39 months in prison and three years of supervised release. On release from prison, each defendant will be required to cooperate with the IRS in the payment of all taxes owed and in filing all tax returns due. Information presented in court indicated that Douglas Frichtl, prior to sentencing, made a payment in excess of one million dollars towards his back taxes owed. The brothers are also cooperating with the IRS to educate others to avoid fraudulent tax evasion schemes. Dennis and Douglas pleaded guilty to utilizing the AEGIS system in an attempt to conceal their true taxable income. AEGIS instructed the defendants to use various fraudulent foreign and domestic trusts arrangements, as well as common law business organizations and International Business Organizations to hide income. The defendants filed tax returns which made it appear they had passed their business income through a series of trust or Asset Management Companies which ultimately paid little or no taxes. They also used foreign bank accounts and filed frivolous documents with the IRS. In an attempt to thwart IRS inquiries into the AEGIS trust scheme, the defendants were advised to withhold information from IRS revenue agents, to respond to IRS inquiries or civil summonses for financial records with obstructive letters and questionnaires that AEGIS drafted and to resist IRS civil summonses by filing meritless motions to quash the summonses.
Hawaiian Architect Sentenced for Hiding Income Using Abusive Trust Arrangement
On August 11, 2008, in Honolulu, Hawaii, Hamlet C. Bennett was sentenced to 78 months in prison and ordered to pay $1,368,593 in restitution to the Internal Revenue Service (IRS) and to pay $35,330 to cover the costs of prosecution. Bennett was convicted in April 2008 by a jury of conspiracy and income tax evasion for the years 1999 through 2003. According to evidence introduced during the trial, Bennett conspired with others, including convicted tax offender Royal Lamar Hardy, to impede and impair the function of the IRS in ascertaining and collecting taxes. The evidence at trial essentially revealed that Bennett purchased “products” from Hardy and Hardy’s organization, The Research Foundation, which promoted wide scale “non-filing” of federal income tax returns. Other information produced in court revealed that Bennett established a domestic trust to hide his income and, even after Hardy was convicted, brought a frivolous lawsuit against the IRS and continued to send frivolous mailings to the IRS that were based on materials provided by Hardy.
Florida Man and New Jersey Man Sentenced in $7 Million Human Growth Hormone and Tax Scheme
On July 30, 2008, in Miami, Fla., Patrick Bronder, a personal trainer residing in Boca Raton, Florida, and Michael Manno, a former chiropractor living in Lodi, New Jersey, were sentenced for their participation in a scheme to illegally distribute human growth hormone and other pharmaceuticals and to commit tax evasion. Bronder was sentenced to 87 months in prison, to be followed by three years of supervised release, and ordered to forfeit $325,913 in illegal proceeds. Manno was sentenced to 38 months in prison, to be followed by three years supervised release, and ordered to pay a $10,000 fine and to forfeit $128,533 in illegal proceeds. As outlined in court documents, from April 2001 through June 2002, Bronder purchased prescription drugs, including human growth hormone and drugs for the treatment of cancer, high cholesterol and other medical conditions from Manno. Manno purchased these drugs from individuals who acquired the drugs, directly and indirectly, from patients who had obtained the drugs through clinics in New York City through Medicaid. Bronder and Manno sold the drugs to a pharmaceutical wholesaler located in Boca Raton, Florida for more than $6.8 million. At the same time, Bronder received additional compensation of $325,000 from the same pharmaceutical wholesaler for the sale of prescription drugs. Bronder directed that more than $3.3 million of the money received from the pharmaceutical wholesaler be wired into bank accounts in the Bahamas established by him and another co-conspirator, Michael Sherman. Bronder caused most of that money to be repatriated into the United States through more than 3,000 withdrawals from automatic teller machines in southern Florida.
Three Founders and Two Principals of the Institute of Global Prosperity Sentenced for Tax Crimes
On July 28, 2008, in Seattle, Wash., three founders and two principals of the Institute of Global Prosperity (IGP) were sentenced for various tax crimes committed while partners in IGP. David Struckman, a founder of IGP, was sentenced to 70 months in prison after being tried and convicted of conspiracy to defraud the United States and tax evasion. Struckman moved to Panama prior to his indictment in 2004 and was deported back to the United States by Panamanian authorities in January 2006. Daniel Andersen, a founder of IGP, was sentenced to 30 months in prison after pleading guilty to conspiracy to defraud the United States in July 2004. Lorenzo Lamantia, a founder of IGP, was sentenced to 27 months in prison after pleading guilty to conspiracy to defraud the United States and tax evasion in December 2005. Dwayne Robare, who became affiliated with IGP in 1997 and maintained IGP’s teleconferencing system, was sentenced to three years of probation after pleading guilty to tax evasion in April 2005. Kuldip Singh, common-law wife of Lamantia, was sentenced to three years of probation after pleading guilty to willfully failing to file tax returns in December 2005. According to documents filed with the court and evidence introduced at trial, IGP sold “wealth building” products through audiotapes, CDs and tickets to offshore seminars. The proposed wealth-building methods marketed to clients included placing client assets into purported foreign and common law “trusts” while maintaining control of the assets. IGP generated gross receipts of over $45 million from the sale of “wealth building” products from its inception in the fall of 1996 until May 2002. Struckman, Andersen and Lamantia maintained the anonymity of IGP 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. All five defendants concealed personal income earned from IGP and placed personal income in a secondary series of bogus trusts, nominee entities and offshore bank accounts. None of the five defendants reported the income they earned to the IRS and none filed individual income tax returns, trust tax returns, partnership returns or declared a financial interest in, or signature authority over, a foreign bank account as required by law.
Tax Fraud Results in Eight Year Prison Sentence for Company Co-Founder
On June 27, 2008, in Philadelphia, Pa., John Michael Crim was sentenced to 96 months in prison for conspiring to defraud the United States and corruptly endeavoring to obstruct/interfere with the Internal Revenue Service (IRS), causing tax losses of up to approximately $10 million. In addition to the prison sentence, Crim was ordered to pay $17.2 million restitution, a $175,000 fine, and serve three years of supervised release. Crim was co-founder of a Texas-based group called Commonwealth Trust Company (CTC). The group (not affiliated with the Wilmington, DE firm by the same name) persuaded investors to place income and assets into trusts to avoid paying federal income tax. CTC marketed two domestic trust packages and one offshore trust package to its clients. Based on CTC instructions, many of clients did not file tax returns or filed materially false tax returns. As part of the scheme, CTC told clients they could escape paying income taxes by diverting income through a series of trusts. CTC also instructed clients to transfer their assets into CTC’s other domestic fraudulent trust package to conceal and protect real and personal property from IRS liens and seizure attempts.
Former South Carolina Chiropractor Sent to Prison for Tax Evasion
On July 10, 2008, in Columbia, S.C., John D. Fitzgerald, of Las Vegas, Nevada, was sentenced to 12 months in prison for tax evasion. Fitzgerald failed to report $930,848 in income from his Accurate Chiropractic Clinic in Mt. Pleasant, South Carolina and evaded $263,381 in federal income taxes. Fitzgerald committed the tax evasion by transferring his income to a fraudulent trust and then to an offshore bank account in the Bahamas. Fitzgerald paid the full amount of tax due prior to sentencing.
Maryland Doctor Sentenced for Defrauding Medicare and Other Health Care Programs; Evaded $781,193 in Taxes
On July 1, 2008, in Greenbelt, Md., Ndubuisi Joseph Okafor, M.D., of Mitchellville, Md., was sentence to 65 months in prison followed by three years of supervised release for tax evasion and health care fraud. Okafor was ordered to pay $769,192 in restitution to federal and state taxing authorities and $33,060 in restitution to Medicare. According to his plea agreement, Okafor operated a medical practice named “The Okafor Group,” which provided primary care medicine in the Washington D.C. metropolitan area. From 1997 through 2005, Okafor evaded his taxes by reporting false information to the Internal Revenue Service and tax preparers regarding his personal income and the gross receipts from his medical practice. He established sham corporations in the Bahamas to create false expenses and disguise personal income. Additionally, he diverted money from his medical practice by writing checks from the corporate bank account for personal expenses. He also caused his medical practice to file false income tax returns. Specifically, in January 1997, Okafor hired Universal Corporate Services (UCS) to incorporate an off-shore corporation in the Bahamas named "Eziafa International Investment Co." (Eziafa). UCS was a company that promoted asset protection through the formation of off-shore companies. According to its literature, UCS protected assets of taxpayers by "getting as many assets out of your personal name as possible" through transfers of "money, investments and assets into a corporation...you control." In or about October 2000, Okafor hired UCS to incorporate an off-shore corporation named "Omni Ventures Corporation" (Omni) in the Bahamas. Both Eziafa and Omni were "sham" corporations in that these entities neither provided services nor sold products, but were simply used as vehicles through which Okafor evaded reporting and payment of income taxes to the United States. Okafor diverted personal income to Eziafa and Omni in order to engage in securities trading on his own behalf and to buy property in his native country of Nigeria. Okafor defrauded Medicare and other health benefit programs by filing false claims for reimburse from Medicare by billing for hospital services that Okafor did not render and, in many instances, when Okafor was on vacation or not even present in the hospital. Okafor obstructed both the tax and health care fraud investigations by creating fraudulent documents such as post-dated patient notes in his medical files and phony invoices related to his medical practice.
Husband and Wife Sentenced on Tax Evasion and Conspiracy Charges
On June 20, 2008, in Lexington, Ky., Richard Thornton Burks III was sentenced to 24 months in prison and ordered to pay $233,472 in restitution to the Internal Revenue Service (IRS) for conspiring to defraud the United States and for tax evasion. Norma Ball Burks, Richard Burks's wife, was sentenced to 36 months probation and six months home detention on a conspiracy charge. In March 2008, Richard and Norma Burks pleaded guilty and admitted that they conspired with each other to create corporate and trust entities and to transfer money between the entities so they could conceal over $480,000 of Richard Burks’s income from the IRS. Richard Burks also admitted that he evaded the payment of prior unpaid tax assessments of nearly $150,000. As a result, Richard Burks owes $233,472 to the IRS in addition to penalties and interest.
Banker Pleads Guilty to Helping American Real Estate Developer Evade Income Tax on $200 Million
On June 19, 2008, in Ft. Lauderdale, Fla., Bradley Birkenfeld, an American citizen employed by a Swiss bank, pleaded guilty to conspiring with an American billionaire real estate developer, Swiss bankers and his co-defendant, Mario Staggl, to help the developer evade paying $7.2 million in taxes by assisting in concealing $200 million of assets in Switzerland and Liechtenstein. Birkenfeld admitted that between 2001 and 2006, while he was employed as a director in the private banking division of a large Swiss banking firm, he routinely traveled to, and had contacts within, the United States to help wealthy Americans conceal their ownership in assets held offshore and evade the payment of taxes on the income generated from those assets. According to court documents, Birkenfeld, managers and bankers at the Swiss bank, and U.S. clients prepared false and misleading IRS forms that claimed that the owners of the accounts were off-shore entities and failed to prepare and file IRS forms that should have identified the true U.S. owner of the accounts. To prevent the risk of losing the approximately $20 billion of assets, which earned the bank approximately $200 million per year in revenues, clients were advised to place cash and valuables in Swiss safety deposit boxes, and purchase jewels, artwork and luxury items using the funds in their Swiss bank account while overseas. Additionally, clients were advised to misrepresent the receipt of funds from the Swiss bank account in the United States as loans from the bank; destroy all off-shore banking records existing in the United States; utilize Swiss bank credit cards that they claimed could not be discovered by U.S. authorities; and file false U.S. individual income tax returns that omitted income earned by the clients and fraudulently misrepresented that the clients did not have an interest in and signature authority over accounts held offshore.
Four South Dakota Men Sentenced for Submitting False Tax Returns
On June 18, 2008, in Pierre, S.D., four men were sentenced for willfully filing false income tax returns. Kurt Bowers was sentenced to 36 months in prison and ordered to pay $89,041 restitution for unpaid taxes from 1999. James Bowers was sentenced to 10 months custody and was ordered to pay $40,000 in fines. Jon Bowers was sentenced to 10 months in prison and ordered to pay a $30,000 fine. Kent Bowers was sentenced to 12 months in prison and ordered to pay a $50,000 fine. The four men admitted to participating in a complicated scheme designed to unlawfully hide assets and income from the IRS. The scheme was marketed and sold by Aegis Corporation of Chicago, Illinois, through its local representative, Kerwin Miller from Mitchell, South Dakota. It involved placing an individual’s assets and income in management companies and trusts to reduce income tax liability. Miller previously pleaded guilty to conspiring to defraud the United States in this tax matter and was sentenced in 2007 to 30 months in prison.
South Carolina Food Broker and Florida Accountant Sentenced in Tax Evasion Scheme
On May 5, 2008, in Greenville, S.C., Michael W. Fuller, of Odessa, Florida, and Carl L. Perry, of Greenville, S.C., were sentenced for their parts in a conspiracy to defraud the United States by evading taxes. Fuller, an accountant from Odessa, Florida, was sentenced to 12 months and one day in prison, to be followed by six months in a half way house and 12 months of home confinement. Perry, a food broker from Greenville, was sentenced to three years probation with conditions that required him to pay his back taxes as well as any penalties and interest that may be assessed. Evidence presented during Fuller’s trial revealed that during the period from the late 1990’s until the middle of 2001, he conspired to assist Perry in the evasion of taxes. The evidence demonstrated that Fuller established a series of offshore trusts and entities through which Perry routed much of his income in order to conceal the income from the Internal Revenue Service. In addition, Fuller also set up a credit card account with another offshore bank which was funded with Perry’s untaxed income, thereby permitting Perry to use the untaxed income for his personal benefit. Fuller also supplied misleading tax returns and information to the IRS to conceal the scheme.
Washington State Man Sentenced to 54 Months in Prison for $13 Million Fraud Scheme
On March 21, 2008, in Seattle, Wash., Joseph C. Lavin, of Woodinville, Wash., was sentenced to 54 months in prison and ordered to pay $11.6 million in restitution for wire fraud and money laundering in connection with an investment fraud scheme. Lavin operated a series of investment funds known as the Global Asset Management Short Term Fund, Medium Fund and Long Term Fund. The funds were offered to wealthy investors by a company Lavin established in 2001, Global Asset Partners, LLC. Lavin claimed investments in the funds were backed by assets such as foreign currency, bonds or liens, and were making consistent, high rates of return. In fact, the money was used for Lavin’s personal expenses, to pay off earlier investors or to invest in business ventures that had not been approved by investors. The amount of fraud is estimated at $13 million. Lavin pleaded guilty in November 2007 to making numerous fraudulent representations, including claims that the funds would earn between 1.5 and 2.5 percent each month, and he claimed in written materials that he would only be compensated if the fund exceeded these targeted returns. Lavin represented to investors that he was an accomplished financial executive who was responsible for having consistently earned for many years returns in excess of 2 percent per month in the funds. In fact, Lavin was not a successful financial executive and entrepreneur. In 1998, he had filed for personal bankruptcy. Lavin also never made the promised targeted returns. Lavin obtained $13 million from 176 investors. Prosecutors dubbed Lavin’s fraud “a garden-variety ponzi scheme” that paid off early investors with money from later investors.
Former IRS Revenue Agent Sentenced to 34 Months for Tax Evasion and Fraud
On February 21, 2007, in Newark, N.J., Bohdan Senyszyn, a former Internal Revenue Service (IRS) revenue agent, was sentenced to 34 months in prison, followed by five years of supervised release, and ordered to pay a $12,500 fine. Senyszyn pleaded guilty on September 20, 2007, and admitted that, while working for the IRS, he agreed to assist a real estate developer in sheltering his business income. According to the Superseding Information, Senyszyn created a number of companies for the purposes of embezzling from the developer and evading taxes on the income derived from an Andover Township real estate development and other real estate projects. As an IRS employee, Senyszyn, a certified public accountant, was responsible for auditing large and mid-size businesses in the New Jersey area. In 2002, Senyszyn agreed to assist a friend, who was a real estate builder and developer in Sussex County. Contrary to IRS regulations, Senyszyn provided tax and business services to his friend in exchange for substantial home improvements and renovations to Senyszyn's home. To perpetrate his fraud scheme, Senyszyn created a series of related companies, partnerships and a trust in an effort to conceal his embezzlements and avoid detection by law enforcement. In preparing and filing the 2002 tax returns for these entities, Senyszyn fraudulently misrepresented capital contributions and over-inflated business losses, thereby enabling the partners, shareholders, or entities to avoid the payment of taxes on future income. Federal law specifically prohibits revenue agents from making or signing any fraudulent tax return. Separate from the fraudulent tax returns he was preparing for the various businesses and shell companies, Senyszyn pleaded guilty to tax evasion for his failure to report approximately $250,000 in personal income in 2003 that he embezzled from the sale of the Andover Township property. In total, Senyszyn stipulated in his plea agreement to an actual and future tax loss to the government of nearly $720,000.
Michigan Bookkeeper Goes To Federal Prison
On February 14, 2008, in Grand Rapids, Mich., Robert Lee Mosher was sentenced to 51 months in prison and ordered to pay $75,000 in restitution to the Internal Revenue Service (IRS) and to file accurate prior year federal income tax returns. Mosher was convicted by a jury in September 2007 for contempt of court for violating a 2004 civil injunction prohibiting him from providing tax advice or acting as an income tax return preparer. Mosher was also sentenced to serve a concurrent 36 months sentence in connection with an October 2007 guilty plea to obstructing the IRS and tax evasion. Mosher pleaded guilty in 2005 and served prison time for violating a preliminary injunction that had been entered against him. Following his release, Mosher continued to act as an income tax preparer, and on March 7, 2007, a federal grand jury charged him with those violations, failing to comply with a grand jury subpoena, and with witness tampering. According to court records, Mosher was a self-employed bookkeeper who also prepared tax returns. During the 2000 through 2003 tax years, Mosher significantly under-reported his business receipts, which totaled over $382,000, while claiming “$0.00” in taxable income in each year. In order to conduct his personal financial and business affairs, Mosher created four sham trusts. During this time period, more than $500,000 was deposited into the bank accounts of these sham trust which included income payments to Mosher. During 2000 through 2002, Mosher filed false Forms 1041, Returns for Estates and Trusts, falsely claiming “losses” in each year with “$0.00” in taxable income. According to court records, Mosher also created and sold sham trusts to others and falsely represented himself to be a former IRS agent, police officer, and CPA.
Former Coldwater, Michigan Businessman Used Sham Trusts to Evade Taxes
On January 30, 2008, in Grand Rapids, Mich., William Neesley, of Coldwater, Mich., was sentenced to 72 months imprisonment and ordered to pay $532,203 in restitution for obstructing the Internal Revenue Service (IRS), tax evasion and failure to pay taxes. Neesley was convicted in October 2007 following a four-day trial and after one hour of jury deliberations. According to court records, Neesley, owner of a manufacturing company, bought seven sham trusts in May1998 from Lynne Meredith, of California. Meredith has since been prosecuted and convicted for her role in various tax crimes including her marketing of these trusts. Neesley used the trusts and bank accounts in attempts to hide $2.7 million his income and financial transactions from 1998 through 2003. In November 2000, Neesley sold his business for more than $1.1 million and another commercial property for $894,000, and failed to report the transaction to the IRS. When he was contacted by the IRS in September 2002, Neesley claimed that his name was protected by copyright laws and he returned the summons as “accepted for value”. In May 2003, Neesley filed five frivolous form 1041s claiming that all his income was offset by expenses, that is, payments to himself. According to court records, after receiving a $930,000 tax bill, Neesley “paid” his federal tax bill with a false financial instrument payable to the United States and drawn on the United States, known as a sight draft.
Two Massachusetts Men Receive Prison Terms for Tax Violations
On January 7, 2008, in Boston, Mass., Joseph A. Yerardi and John J. Toyias were sentenced for conspiring to defraud the United States by engaging in a scheme to divert income from their businesses to their personal benefit without reporting that income to the Internal Revenue Service. Yerardi was also sentenced for tax evasion for failing to pay $180,000 in taxes for the 2002 tax year. He was sentenced to 30 months in prison and ordered to pay $454,639 in restitution. Toyias was also sentenced for filing a false tax return for tax year 2000 that understated his total taxable income by over $100,000. He received a year and a day prison sentence and ordered to pay $115,093 in restitution. Yerardi and Toyias conspired to divert proceeds from their respective businesses to several sham bank accounts, which they used to pay themselves and their employees without reporting the income to the IRS. In some instances, Toyias created fictitious invoices to make it appear that the payments to the hidden bank accounts were for legitimate business purposes. Yerardi and Toyias diverted at least $1.4 million to themselves and their employees through the hidden bank accounts.
Missouri Couple Sentenced for False Tax Returns
On January 4, 2008, in Kansas City, Mo., James E. Aldridge, Jr., and his wife, Shirley L. Aldridge, both of Lee’s Summit, Mo. were sentenced by U.S. District Judge Dean Whipple. James Aldridge was sentenced to nine years in federal prison, while Shirley Aldridge was sentenced to five years and three months in federal prison. On May 4, 2007, the Aldridge’s were convicted of all five counts contained in a federal indictment of aiding and abetting each other to file false tax returns from 2001 through 2005. They earned more than $1,685,000 during that five-year period and evaded $654,257 of federal income tax owed. James and Shirley Aldridge were co-owners of Concept Marketing International, which sold American Silver Eagle coins and was based on a complex four-tiered pyramid commission sales strategy. James Aldridge also conducted seminars at which he advised the purchasers of American Silver Eagle coins on how to avoid taxation by establishing a home-based business (the purchase of the coins) in order to deduct personal expenses. James and Shirley Aldridge created several trusts in order to evade federal taxation. Most of their income was funneled into the trusts, none of which was included in any federal tax return filed by any trust or by James and Shirley Aldridge for the period 1999 to 2004. Each of the five counts of the federal indictment charges a separate instance in which James and Shirley Aldridge filed a Form 1040 that contained false information.
Twin Cities Banker Sentenced to 42 Months in Prison on Tax Evasion Charges
On December 20, 2007, in Minneapolis, Minn., Stephen Richards Barker, of Maple Grove, was sentenced to 42 months in prison and three years of supervised release. Evidence presented in trial showed that beginning in 1996, Barker established, owned, controlled and was the beneficiary of several sham trusts which were used to evade the payment of taxes. In addition, Barker owned and controlled offshore and domestic entities for the purpose of evading the payment of taxes, including two that were set up in the West Indies. From at least the mid-1980s until approximately July 2006, Barker also worked in the investment brokerage business. Specifically between 1994 and 1997, he earned in excess of $3.8 million. However, for tax years 1995, 1996 and 1997, Barker did not file income tax returns. Based on information reported to the Internal Revenue Service by his employers and others, Barker was assessed with federal income taxes, penalties and interest due, and owing in the amount of $813,401 for tax year 1995; $979,574 for 1996; and $398,343 for 1997. To avoid paying this debt, Barker placed assets in the names of others and in the names of sham trusts and companies he controlled. He also transferred assets out of the country, avoided holding assets or receiving income in his own name, and paid for personal expenses with cash or assets held by his sham trusts and companies. Moreover, he made false statements to the IRS and attempted to destroy records.
Defendant Used Abusive Tax Schemes to Evade Taxes
On December 14, 2007, in Erie, Pa., Martin D. Jacobs was sentenced to 24 months in prison, to be followed by three years of supervised release, and ordered to pay a $100 special assessment and a $5,000 fine. According to court documents, between the period from 1997 through 2006, Jacobs purposefully evaded paying his federal income taxes. He sought to hide various personal assets from the IRS, failed to disclose the existence of cashier's checks, transferred money to foreign bank accounts, used a false social security number to open bank accounts into which assets were transferred, and established a trust account in New Jersey into which assets were to be transferred.
Two Brothers Sentenced for Tax Evasion Conspiracy
On November 19, 2007, in East St. Louis, Ill., David Frichtl was sentenced to 60 months in prison. The following day, November 20, Donald Frichtl was sentenced to 60 months in prison. David and Donald Frichtl, brothers, were also sentenced to serve three years of supervised release and each ordered to pay a $50,000 fine, plus the costs of their imprisonment and supervision. The brothers were charged along with other family members in April 2007 in a 21-count indictment on conspiracy to defraud the Internal Revenue Service (IRS), tax evasion, failure to file income tax returns and multiple counts of loan application fraud. David, Donald and other indicted members of the Frichtl family were members of the AEGIS system. Using the AEGIS system, the Frichtls relied on foreign and domestic trusts, common law business organizations and International Business Organizations to conceal their true taxable income. They used foreign bank accounts and filed frivolous documents with the IRS in furtherance of their scheme. As a condition of supervised release, David and Donald Frichtl will be required to cooperate with the IRS in the collection of all taxes owed and file all tax returns due.
Kentucky Businessman Sentenced for $2.4 Million Tax Evasion Scheme
On October 17, 2007, in Louisville, Ky., Larry H. Joel was sentenced to 41 months in prison to be followed by three years of supervised release. Joel pleaded guilty on February 2, 2007, to evading the payment of nearly $2.4 million in federal income taxes dating back to 1991. Joel owed the Internal Revenue Service (IRS) these taxes based on audits of his 1991 through 1994 income tax returns. In particular, the IRS discovered that in 1991 he failed to report on his federal income tax return over $7 million that he received from a consulting agreement. The consulting agreement was part of a 1991 sale of a business, Ophthalmic Research Group International, partially owned by Joel that he sold to Pearl Vision in 1991. In his plea agreement, Joel admitted to using a number of financial schemes to hide his ownership of assets and receipt of income. These schemes included his use of shame trusts, nominee corporations, nominee bank accounts, and various other fraudulent means of holding and titling assets. Specifically, Joel used a trust to conceal his ownership of a 72' Leopard Sport yacht docked in St. Petersburg, Fla. He also fraudulently used various business entities, including Sunshine Motorcar Company, GM Leasing, and Red Carpet Leasing, to hide his ownership of luxury motor vehicles. In addition, Joel also fraudulently used various bank accounts, including MEC, Inc., Lab Components, Inc., and A. J. Trust, to hide his personal income and expenditures. As part of his plea agreement, Joel agreed to forfeit numerous vehicles and yacht valued at an estimated $1 million, as well as bank accounts and jewelry.
Maryland Man Sentenced for Filing a False Tax Return
On October 15, 2007, in Greenbelt, Md., Andrew Isaac Chance was sentenced to 27 months in prison to be followed by two years of supervised release for his conviction for filing a false tax return. According to court testimony, in August 2006, Chance sent to the Internal Revenue Service (IRS) a tax return for 2005 in the name of the “ANDREW CHANCE TRUST” and listed “Andrew Isaac Chance” as the beneficiary. In this return, Chance claimed that the trust had income of $920,259 and a deduction of $920,259 for fiduciary fees. He claimed an exemption amount of $7,950, even though the proper exemption amount was $300. Chance also claimed that $306,753 in federal income tax withheld had been paid to the IRS, and therefore the Trust was owed a refund of $306,753. Chance did not include any trust documents, designation of beneficiaries, proof of income, or proof of withholding with the return when he submitted it to the IRS.
Defendant Sentenced on Three Counts of Filing Fraudulent Tax Returns
On October 11, 2007, in Reno, Nev., Lisa M. Getas, of Carson City, was sentenced to 24 months in prison, to be followed by one year of supervised release, and ordered to pay $48,792 in restitution to the Internal Revenue Service (IRS). Getas was convicted of three counts of filing fraudulent income tax returns on July 2, 2007. According to court documents, Getas controlled an offshore corporation in Nevis, West Indies. Getas wire-transferred funds to her offshore corporation’s “warehouse” bank account and caused these funds to be fraudulently characterized as business expenses and mortgage payments to reduce her income taxes. After sending the money offshore, she repatriated the funds back to the United States and avoided paying taxes on them by fraudulently calling them loan proceeds. As a result, Getas falsely understated her income on her Individual Income Tax Returns for the tax years 1999, 2000, and 2001. The evidence further established that Getas falsely overstated the business expenses of Lisa Bray Getas, Ltd., her chiropractic business, on the company’s Form 1120S income tax returns for the tax years 1999, 2000 and 2001. This resulted in the company taking improperly large deductions.
Promoter of Abusive Trust Arrangements Sentenced to 87 Months in Prison
On October 1, 2007, in Raleigh, N.C., Howell W. Woltz, president of Sterling Trust Ltd. in Nassau, Bahamas, was sentenced to 87 months in prison, to be followed by three years of supervised release. Woltz pleaded guilty to tax fraud and money laundering charges. According to his plea agreement, Woltz promoted offshore "dual trust" arrangements to individuals in the United States for the purpose of evading federal income taxes. As part of these arrangements, customers opened off-shore bank and debit card accounts. From on or about September 23, 2004, through March 2005, approximately $20 million was transferred to offshore bank accounts controlled by entities in Anguilla created by Woltz and his wife through Sterling Trusts Ltd. Woltz admitted he knowingly laundered or caused to be laundered approximately $7 million for his clients.
FY2007 Examples of Abusive Tax Schemes Investigations
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