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Tax Fraud Schemes
|FOR IMMEDIATE RELEASE
THURSDAY, APRIL 11, 2002
TDD (202) 514-1888
JUSTICE DEPARTMENT WARNS PEOPLE
TO AVOID TAX FRAUD SCHEMES
WASHINGTON, D.C. – This tax season, the Department of Justice
is joining the Internal Revenue Service in encouraging taxpayers
to file truthful income tax returns, to beware of illegal tax schemes,
and to report suspected tax fraud.
Deputy Attorney General Larry D. Thompson stated, "The events
of the past year have united Americans in a way that makes each
of us acutely aware of our responsibilities as citizens of this
great nation. Among those responsibilities is our duty to honor
our legal obligation to pay taxes. People who cheat on their taxes
are cheating all Americans."
Justice Department prosecutors, working with IRS agents, recently
have convicted many tax cheats and secured lengthy prison sentences.
The Justice Department also is cracking down on promoters of tax
fraud schemes by obtaining federal injunctions to stop them from
selling bogus tax advice. In addition, Justice Department attorneys
have obtained court orders for the IRS to obtain records of offshore
credit cards used by the people who transfer assets overseas to
evade their tax obligations.
"Recent enforcement actions taken by the Department of Justice
and the IRS increase the likelihood that tax cheaters will be caught
and punished. In addition to paying civil fines, interest and penalties,
people do go to prison for tax evasion," said Eileen J. O'Connor,
Assistant Attorney General for the Justice Department's Tax Division.
"Promoters of tax fraud schemes tell people what they want
to hear: that they don't really owe taxes, or that if they do, they
can get out of paying them. Don't believe it."
Here are just a few of the tax criminals sentenced so far this
In Billings, Montana, Donald Fletcher was sentenced to 78 months
in prison and 3 years supervised release, and ordered to pay
restitution of $10,000 and a fine of $100,000. Fletcher pled
guilty to conspiracy to prepare false tax returns and commit
mail fraud. Acting as a tax consultant, he held seminars and
assisted taxpayers in setting up abusive trust arrangements.
He falsely claimed that the trusts would permit taxpayers to
deduct personal expenses.
In Wilton, New Hampshire, Richard V. Richelo, Jr. was sentenced
to serve 18 months in prison for failing to file individual
income tax returns. Richelo was convicted after a two-day trial.
The evidence at trial established that Richelo was a software
engineer who earned approximately $116,000 in 1994 and $98,000
in 1995, but did not file federal income tax returns. Richelo
claimed that he had studied the tax code and believed he was
not required to file income tax returns because the compensation
he received did not constitute income under the Internal Revenue
Code. The judge ruled that Richelo's compensation did indeed
constitute income. The judge further noted that the argument
Richelo used has been consistently rejected by courts across
Melody J. Bohrer of New Berlin, Wisconsin, was sentenced to
serve four months in prison for failing to file an Employer's
Quarterly Federal Tax Return, Form 941. Bohrer owned a company
that provided landscaping, lawn care and snow plowing services.
In Miami, Florida, John P. Ellis, Sr. was sentenced to serve
10 and a half years in prison. The evidence showed that Ellis
marketed sham "common law" trusts and fraudulently
claimed that the trusts were tax-exempt because they were "foreign"
to the United States. More than 150 customers were identified
as having purchased more than 360 trusts or trust packages,
at prices of $20,000 and more.
In New Haven, Connecticut, William N. Jackson was sentenced
to serve 42 months in prison, followed by a period of supervised
release. Jackson was convicted on multiple counts of aiding
and assisting in the preparation of false federal income tax
returns. The evidence showed that Jackson created fraudulent
business expenses to offset reported income for his clients,
and that he reported fictitious dependents and inflated expenses,
including gifts to charity. The judge also found that Jackson
gave false testimony at trial.
In Reno, Nevada, Palle "Pono" Bognaes was sentenced
to serve 80 months in prison and 3 years supervised release,
and to pay $29,598 in restitution to the IRS for conspiring
to defraud the United States, evading more than $2 million in
federal taxes, and obstructing and impeding the IRS in the collection
of those taxes. He also was ordered to pay $107,752 in restitution
to a client from whom he took unauthorized withdrawals and to
pay $4,861 for costs of his prosecution.
In Sacramento, California, Lonnie D. Crockett was sentenced
to 42 months in prison followed by 36 months probation and ordered
to pay a fine of $67,500. Crockett pled guilty to defrauding
the IRS in a nationwide tax evasion conspiracy that involved
the concealment of income through a chain of domestic and foreign
bank accounts and trust arrangements. Three doctors from northern
California also pled guilty in connection with the scheme. Daniel
Bullock, an orthopedic surgeon, Richard D. Pfeiffer, an orthodontist,
and Richard Shearer, an ear, nose and throat specialist, were
sentenced to prison for 18 months, 27 months and 24 months,
respectively, and ordered to pay fines and back taxes.
In Greenville, North Carolina, Charles James Payton was sentenced
to serve 78 months in prison followed by 3 years supervised
release. In addition, Payton was ordered to pay restitution
to the IRS in the amount of $87,073. Charles Payton was convicted
on of seven counts of willfully aiding and assisting in the
preparation of false income tax returns and one count of conspiracy.
Assistant Attorney General O'Connor encouraged people who have
information about tax fraud to report it to the IRS tip line at
1-800-829-0433. The IRS Criminal Investigation web site provides
additional information about fraudulent tax schemes. http://www.ustreas.gov/irs/ci/
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Practice & Policy and Tax Shelters Practical
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-- Offers the "Federal Contract Trust" which is simply
a re-packaged Pure Trust scam. Very cheesy website, and they charge
an absurd $4,995 for a type of trust that doesn't even exist! |
Claims to be run by Richard Young, 2915 W. Charleston
Blvd., #7, Las Vegas,
Nevada 89102, Ph: 702-383-6566 (Toll Free 1-800-330-3140). Hint:
If we know
about this group, so does the IRS and the conviction rate for those
using Pure Trusts (whether titled "Federal Contract Trust"
or otherwise) is 100%
Indicts Nine Promoters of Alleged Abusive Trust Scheme
-- Operators, Salesmen of Innovative Financial Consultants Charged
with Tax Fraud.
of Abusive Trust Schemes -- Released by the IRS Criminal
Source Income Scam -- Douglas P. Rosile, Sr., is chased
by Justice Department for tax scam based on "an absurd reading
of Section 861 of the Internal Revenue Code", which supposedly
allowed people to not report their income unless it was from outside