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Kansas City Star
April 13, 2002
Former IRS agent pleads guilty
in pyramid scheme case
By DAN MARGOLIES
The Kansas City Star
A former Internal Revenue Service agent pleaded guilty Friday to
charges stemming from his work for Renaissance The Tax People Inc.,
which authorities say is a pyramid scheme that markets bogus tax-reduction
Blue Springs resident Thomas Steelman Sr., 65, pleaded guilty before
U.S. District Judge Carlos Murguia to one count of conspiracy to
commit mail fraud, commit wire fraud and defraud the IRS. He also
pleaded guilty to nine counts of aiding and assisting the filing
of false tax returns.
Steelman, who was charged in a criminal complaint filed Friday,
is the first person to be charged and convicted of a crime in connection
with the activities of Renaissance The Tax People, a Topeka-based
tax-plan marketer that recruited thousands of adherents nationwide.
The group, which remains under investigation by state and federal
authorities, offered plans showing clients how to create home-based
businesses and reap thousands of dollars in tax deductions by selling
the plans and persuading others to join them.
Steelman admitted that from November 1997 to January 2001 he conspired
with others to prepare tax returns that prosecutors said defrauded
the IRS of more than $120,000 in individual and corporate income
taxes and defrauded clients of more than $100 million.
Kena Rice, a spokeswoman for the U.S. attorney's office in Wichita,
said no additional details were available on how prosecutors arrived
at the $100 million figure.
In court Friday, Steelman admitted that he counseled clients to
take excessive W-4 exemptions, ultimately resulting in their owing
substantial federal income taxes at the end of the year. He also
admitted that he helped clients overstate their Schedule C business
losses, resulting in excessive tax deductions.
Renaissance promotional material boasted that its "tax team"
included Steelman, a "meritoriously recognized IRS Revenue
Agent for 28 years," according to the criminal complaint. Prosecutors
contended that Steelman and Renaissance pointed to Steelman's experience
as an IRS agent to allay client concerns about the propriety of
Renaissance's tax program.
"The IRS will not tolerate dishonest tax preparers or promoters
of fictitious tax deductions and credits," said Al Patton,
special agent in charge of IRS criminal investigations, in a prepared
statement. "IRS special agents will aggressively investigate
those who intentionally cause the preparation and filing of false
Steelman could receive up to five years in prison and $250,000
in fines on the conspiracy count and up to three years in prison
and $100,000 in fines on each of the remaining counts. Assistant
U.S. Attorney Scott Rask told Murguia that the government would
recommend a sentence on "the low end" of sentencing guidelines
if Steelman cooperates with the continuing investigation.
Murguia set a sentencing date of Oct. 21.
Renaissance was founded about seven years ago by Michael Cooper,
a Topeka native and former Marine. In 1994, the Kansas attorney
general accused Cooper and another person of running an illegal
pyramid scheme by fraudulently promising investors huge financial
rewards for recruiting customers for a Topeka specialty foods enterprise
called Truly Special Inc.
The civil case was settled in 1996 when Cooper and the other person
agreed, without admitting or denying culpability, not to violate
state consumer protection laws in the future.
Renaissance and Cooper remain defendants in a consumer protection
lawsuit filed 18 months ago by Kansas Attorney General Carla Stovall.
In May, a Shawnee County judge issued a temporary restraining order
barring Renaissance from operating in Kansas and freezing bank accounts
belonging to Cooper. The case is awaiting trial.
Mark Ohlemeier, a spokesman for Stovall's office, said Steelman's
guilty plea "confirms what we've been alleging all along in
our case, and we intend to use it when our case comes to trial."
Cooper and other Renaissance officials have denied wrongdoing.
The investigations of Renaissance involve multiple federal and
state agencies, including the tax division of the Justice Department,
the IRS, the U.S. Postal Inspection Service and the Kansas attorney