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Tax People Case

The 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 plans.

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 tax returns."

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 general's office.