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Protestors > EXHIBIT:
Constitutional/Pure Trusts > Liberty
|FOR IMMEDIATE RELEASE
MONDAY, MARCH 4, 2002
TDD (202) 514-1888
JUSTICE DEPARTMENT SUES TO HALT PROMOTERS
OF ILLEGAL TRUST TAX SCHEME
Potential Revenue Loss Estimated At More Than $9 Million Annually
WASHINGTON, D.C. – The Department of Justice today filed a civil suit
in Chicago to stop an alleged abusive tax scheme promoted by two Chicago-area
men, Michael D. Richmond and Rex E. Black. The government complaint alleges
that Richmond, Black and their businesses—The Liberty Network, Liberty
Estate Planning, The Liberty Institute, Fiduciary Management Group, National
Council of Certified Estate Planners, Association for Certified Estate Planning
Attorneys, and Eagle Publications Trust—sell sham trust packages that
improperly reduce or eliminate customers' reported federal income taxes. The
suit also seeks to bar the defendants from preparing federal income tax returns
and to require them to turn over their customer lists to the government.
"The IRS and the Justice Department are working closely together to halt
the spread of fraudulent trust schemes," said Eileen J. O'Connor, Assistant
Attorney General in charge of the Justice Department's Tax Division. "The
Internet makes selling tax scams remarkably easy, but the public should be
on guard—using the word ‘trust' doesn't make a scheme legitimate.
Substantial civil and criminal sanctions may be imposed on those who participate
in abusive trust schemes."
According to the complaint filed in the United States District Court in Chicago,
Richmond and Black advise and encourage customers to violate federal tax laws
by transferring their houses and other assets to sham trusts, which defendants
describe as "Pass-Through Technology." The government alleges that
the defendants falsely advise customers that these trusts allow customers to
claim deductions for house payments, utilities, and other non-deductible personal
The defendants allegedly recruit agents and customers through the Internet
and through ostensible "educational" programs conducted by their "Liberty
Institute." The complaint alleges that the Liberty Institute teaches nationwide "certification" courses
offering a "Certified Estate Planner" designation. According to the
complaint, Richmond and Black charge customers trust set-up fees of $3,750
and other annual fees for tax return preparation, "trustee services," and
secretarial services. The complaint alleges that Richmond is currently incarcerated.
The IRS estimates the revenue loss from the scheme at more than $9 million
Taxpayers should look for the following warning signs that may indicate an
abusive trust promotion:
- a promise to reduce or eliminate income and self-employment tax.
- deductions for personal expenses paid by the trust.
- depreciation deductions for a personal residence.
- high fees for trust packages, to be made up by promised tax benefits.
- lack of an independent trustee.
- use of terms like "pure trust," "constitutional trust," "sovereign
trust," "unincorporated business organization," or "common
Taxpayers can find more information about abusive trusts on the IRS website
at www.irs.gov. People hearing about tax benefits that sound "too good
to be true" should check them out with a trusted tax professional or the
IRS. Anyone with information about suspected tax fraud should report it to
the IRS tip line at 1-800-829-0433.