Bank officers sentenced in pure trust scam

[Demosthenes]

Two Officers of California Bank Sentenced
To Prison for 'Pure Trust' Anti-Tax Scheme

The former president and vice president of First Mountain Bank in Big Bear Lake, Calif., were sentenced to federal prison March 19 for their roles in a conspiracy to defraud the Internal Revenue Service by offering customers fraudulent trust documents through their Freedom Education Center, the Justice Department announced (United States v. Miller, C.D. Calif., No. 5:03-cr-00018-ABC-2, sentenced 3/19/07).

According to DOJ, Dennis Shollenburg, former president and chief executive officer of First Mountain, was sentenced by the U.S. District Court for the Central District of California to 37 months in federal prison followed by three years of supervised release. Hazel Hagy, the bank's former vice president and chief financial officer, was sentenced to 21 months followed by three years of supervised release for her role in the conspiracy, it said.

In December 2006, Thomas Miller was sentenced to 44 months in federal prison for his role in the scheme, DOJ said.

Shollenburg and Hagy, in association with Miller, formed the Freedom Education Center as part of an apparent anti-tax movement and opened an office across the street from their bank in Big Bear, DOJ said. Through the center, the bank officers offered "pure trust" documents and anti-tax books and literature for sale, it said.

DOJ said Shollenburg, Hagy, Miller, and others instructed individuals on strategies they claimed would allow their clients to lawfully stop paying taxes. They assisted clients in forming "pure trusts," falsely claiming there would be no tax consequences for funds placed into them, it said.

The three instructed First Mountain employees to open "pure trust" accounts using trust identification numbers which were intended to look like taxpayer identification numbers issued by IRS, DOJ said. The actions made it difficult, if not impossible, to identify ownership of $11 million in funds deposited into the "pure trust" accounts.

[grixit]

I think the FDIC should take temporary control of the bank and examine its operations to make sure that they haven't compromised any of their account holders.

[notorial dissent]

I agree, I think either the state or federal bank examiners should at the very least have a thorough look through the books to see if there is anything else out in la la land. I have a feeling, that if they were playing fast and loose with the tax laws they were probably playing somewhere else as well, and I would be seriously worried about the bank if I were sitting on the board, although how they managed to let this go on is beyond me too, and that is scary.