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Quatloos! > Tax Scams > Tax Protestors > EXHIBIT: Constitutional/Pure Trusts

EXHIBIT: Constitutional Trusts & Pure Trusts

NEW! -- United States v. Peter Anthony Bond

Jutice Department Sues to Shut Down Alleged Tax Scams

California Attorneys Plead Guilty to Promoting Tax Fraud Scheme in Utah

Aegis Trust Principals and Others Indicted in $68 Million Tax Fraud Conspiracy Following Nationwide Undercover Investigation

Defendant Sentenced for Role in Tax Evasion Scheme

Common aliases by scam artists who sell these: Pure Trusts -- Patriot Trusts -- Contract Trusts -- Freedom Trusts -- Business Trust -- Unincorporated Business Trust -- Equipment Trust -- Service Trust -- Final Trust -- Common Law Trust Organizations (COLATOS) -- Foreign Common Law Trust Organizations (FORCOLATOS) -- GPG Trust -- Complex Trust System


In 1996, the IRS didn't have any convictions in this area. By 1999, the agency had scored 35, and in 2000, it added 52 more.Courts treat these cases seriously. In November, John Modena of Michigan was sentenced to 5 years in prison for promoting ''sham'' trusts. His clients, five members of the Russell family, each got jail sentences, as well.Adds Dale Hart, an IRS deputy commissioner: ''We don't lose these cases. The legal history is that these are shams. This is a slam-dunk when we get to court.''

Source Article: IRS puts spotlight on willful tax evaders - Criminal investigation division reduces focus on narcotics cases, by Greg Farrell of USA Today, 27 January 2000

On February 23, 2001, the New York Times reported that a California couple were convicted of helping their clients evade $13.8 million in federal income taxes by using Pure Trusts.

  • Dorothy Henderson, 56, got 11 years in prison.
  • George Henderson, 59, got 6 and 1/2 years in prison.The federal courts have abolished parol, meaning that Mrs. Henderson, for example, will spend AT LEAST eight years in prison.The Hendersons in their defense asserted the typical "tax protestor" arguments, such as that income couldn't be defined and that Section 861 excludes most Americans for taxes. The judge thought these arguments were so good that he gave Mr. Henderson an extra 8 months prison time.According to Mrs. Henderson's lawyer: "She wouldn't listen [to reason]. She insisted on speaking and telling the judge about the 861 position and how as a sovereign citizen of California the federal courts had no jurisdiction and all sorts of gibberish." For her efforts, Mrs. Henderson got an extra five months.

Source Article: California couple sentenced for helping clients evade taxes, by David Cay Johnston of The New York Times, 23 February 2001, Article


Generally

We call these things "Con-Trusts" for short, because that's just what they are: a pure con for the misguided and the naive. No legitimate US or state court will recognize them, period the end. The are a nothing, a non sequitur, a joke. Are we getting our point across here? Well, to properly illustrate let's look at their record of successes:

# of Wins by Constitutional Trusts / Pure Trusts
# of Wins
versus Creditors
(in any state of any type)
0
versus the IRS
0
versus Ex-Spouses
in divorce proceedings
0
versus Anybody for Anything
0
 
=====
TOTAL NUMBER OF WINS
0

Pretty impressive record, huh? Thousands of these things have been sold for the last 5 years, and yet they haven't had a single win. Is this something you really want to protect your worldly goods behind? We would call these things the New Orleans Saints of asset protection, but at least the Saints win sometimes.Well, then, how about their record for saving taxes? It is every bit as impressive:

Type of Tax
Total Tax Money Saved
Income Taxes
$0
Estate Taxes & Probate Taxes
$0
Property Taxes
$0
Other Taxes
$0
 
=====
TOTAL TAX MONEY SAVED
$0

Actually, this chart is somewhat misleading, because not only have they not save any money in taxes ever, but those who have attempted to assert Pure Trusts or Constitutional Trusts as a defense to tax liability have usually ended up being sanctioned and fined by the IRS and the Courts. So, really, to make this an accurate chart, the "Total Tax Money Saved" should be a NEGATIVE figure -- we just haven't had the time to figure up how many thousands of dollars in sanctions and fines (not to mention defense fees and the suffering of families when the family breadwinner went to the penitentiary) which have resulted from Pure Trusts and Constitutional Trusts.O.K., so they don't protect you against anybody, and they don't save you any taxes. Then why in the world would anybody buy one of these things? The answer is simple: Because they are suckers.Don't believe us? Then see below for A BUNCH of cases where "Pure Trusts" were annihilated in court.

Read IRS-CID Warning on Abusive Trusts The Idiotic Sham Basis Behind This Fraud

These are variously hawked as "Pure Trusts", "Patriot Trusts", "Freedom Trusts", and "Constitutional Trusts" -- but we simply call them "Con-Trusts" as that is a doubly-apt term, as it refers as accurately to the typical character of the sellers as it does to the theory behind them.Con-Trusts are premised on the clause in the U.S. Constitution which says, essentially, that no state shall impair the "obligation of contracts". It is then argued that because this is in the Constitution, any contract which you make is absolutely unassailable, never mind that no modern court decision has upheld the clause in such a fashion, any more than the courts have protected child pornography under the 1st Amendment. The argument is, essentially, that if you contract to do it, no matter what it is, it absolutely cannot be broken. For example, if you and I decide to rob a bank and enter into a contract to do that, we can then go rob the bank and there is nothing the state can do about it. This is, as you can see, logical diarrhea and these arguments do not stand up any more in the real world than the arguments of those who claim that. Second, and this is where it is interesting, there are actually court cases and IRS rulings which hold that these Constitutional and Pure Trusts do not pay taxes! This, correctly, is what the promoters tell you; trouble is they don't tell you why. The reason Constitutional or Pure Trusts do not pay taxes is because they have been adjudged to be nothings: that is, they don't exist. Therefore, correctly, Constitutional or Pure Trusts do not pay taxes, because taxes are paid by the persons creating them under their own income tax. In other words, if you convey property or income to a Constitutional or Pure Trust, the Courts and the IRS will simply treat that property or income as if it had never been given away in the first place, and you have to pay taxes on it just like you would have in the first place.The same holds true for asset protection: Because these trusts don't legally exist, you haven't really transferred anything to them and so you still own everything, creating a convenient target for your creditor's collection efforts.So, if they don't provide any tax benefits at all, nor do they provide any asset protection at all, why are they created? Money. They are a scam to separate fools from their money. The bad thing is that there have actually been people buy these things (something else we can't understand since even if you believed in them they would be easy enough to form yourself without paying someone to do it), who think they have protection and are getting tax benefits, when they have simply dug themselves into probably another hole.Don't expect a real court or the IRS to give these things any more than a chuckle. But if you want these Constitutional or Pure Trusts to hold up, you better get an agreement from the IRS or your creditors that they will litigate any controversies before a posse comitatus in a trailer home somewhere, because no legitimate tribunal will recognize them. So, if you're going to hide behind a Con-Trust, you better have your little cabin in the mountains sand-bagged and your bullets ready (don't forget your cigarettes: remember that the shortage of those and no TV is what caused the rugged Montana Freemen to give up), because these things aren't going to do anything except monetarily benefit the people who sell them. See also Anti-IRS Theories

The Letter

The scam artists who hawk pure trusts will almost always pull out the following letter as "proof" that pure trusts can shelter income:

Letter

Please note that the letter states that a "Pure Trust organization has no tax requirements." It does NOT say that income to the Pure Trust is not taxable. It does NOT say that income earned by a Pure Trust can be retained in the Pure Trust. It does NOT even say if a Pure Trust exists!What the IRS doesn't explain in this letter is that the IRS treats Pure Trust organizations as if they do not exist, and that the individuals who are involved with it are themselves responsible for the tax. In other words, if you transfer your business earnings to a Pure Trust organization and it makes $100,000 in a year, then YOU (and NOT the Pure Trust) are responsible for paying taxes on the $100,000. If you do not pay the tax on any income or other taxable activity within the Pure Trust then you are committing criminal tax evasion! Anyone who claims differently is a liar and a scam artist.Additionally, please note that private letters, such as the one given above, do not have either precedent or evidentiary value -- i.e., you cannot introduce the above letter in court to prove that you are not guilty of criminal tax evasion.The Upshot: Anybody who presents this letter to you as "proof" that no taxes have to be paid for these entities is either a scam artist or is incredibly ignorant.What does the IRS really say about these trusts? Read below.

IRS Warnings

The U.S. Internal Revenue Service has repeatedly warned about these types of trusts (and, despite promoter's claims, the IRS has NEVER lost a case against the so-called Constitutional Trust or Pure Trust), so if you get caught using one you're either going have to shoot it out with the Service, flee the country, or -- more likely -- pay hefty fines and perhaps spend some time in the joint for tax evasion.See IRS Warnings About Fraudulent and Abusive TrustsSee IRS-CID Warning on Abusive Trusts

Other Lies About Pure Trusts and Constitutional Trusts

The scammers who sell these things make all sorts of misleading, and often bizarre claims regarding purpose trust. For instance:

  • That the "ultra-wealthy" use Pure Trusts.

This is a lie. No "ultra-wealthy" anywhere use Pure Trusts. Reason #1: As shown above, the IRS doesn't recognize them, so there are no possible tax benefits from using a Pure Trust. Reason #2: No other courts recognize them, either, so they provide no asset protection advantages. Let's look at a couple of the "ultra-wealthy": Bill Gates and Warren Buffett -- The two richest men in America. Do either of them use a Pure Trust? Hell no. Bill Gates simply owns a bunch of Microsoft stock in his own name, and Warren Buffett simply owns a bunch of Berkshire Hathaway stock in his own name. Proof? Call these two companies and ask for their 10-K filings.Wanna have some fun with the scammers? Tell them that you are amazed that they have copies of the trusts of the "ultra-wealthy", AND THAT YOU'D LIKE TO SEE THEM!

  • That Texaco and a few other companies are organized as Pure Trusts.

This is another lie. Texaco is a corporation, and its shares (and not trust units) are traded on the New York Stock Exchange. The fact that these scam artists are so dumb that they would make such a claim speaks volumes. Apparently, somewhere in the past, Texaco either won or lost an antitrust suit, and so the losers who sell Pure Trusts then concluded that Texaco was a trust. This is somewhat akin to the lady who called me up in my younger years when I was an antitrust litigation attorney, and wanted me to handle her divorce. I told her that I didn't do domestic relations work, and asked her why she had called me in the first place. She replied that she saw that I was an antitrust attorney -- and that she "sure as hell didn't trust her husband!"

  • That the Rockefellers, Astors, and other ultra-wealthy
    families were organized as Pure Trusts
    .

This is both a lie and misleading. In the past, the wealthy families often organized themselves as proper trusts under state trust laws. They did not organize themselves as "Pure Trusts" under the mythical theories advanced by today's scam artists. Additionally, the laws have since changed! Even assuming that it was possible to create a Pure Trust around the turn of the century (it wasn't), the existing Internal Revenue Code has completely obliterated any possible benefits from using such a trust. This is a point that the scam artists can't quite get through their seedy little heads: Laws change. Geez -- It used to be lawful to keep blacks as slaves, the Senate was elected by the state legislatures, and it was unconstitutional to sell liquor anywhere -- but these laws changed too. Indeed, most of the authorities which relate to the so-called Pure Trust are from before ratification of the 16th Amendment, which allows for the individual income tax.

Cases! Cases!

Visit any of the sites which hawk Pure Trusts and/or Constitutional Trusts and you're likely to see a long list of "authorities" -- a couple of pages long and two- or three-hundred cites relating to "Pure Trusts" and such. Don't be misled by these -- they are NOT authority for, really, anything. What they are is a strange hodgepodge of court cases which seem to relate to "Pure Trusts", but almost all of which are taken out of context.Many of these authorities consider situations where the court was faced with a business entity which was half-partnership and half-trust, or half-corporation and half-trust, i.e., so called "hybrid" entities. To distinguish these from entities which are 100% partnership, corporation or trust, the courts used language such as "that is a 'pure' trust" for the non-hybrid entities. This would be like the court comparing a bucket of water & oil with a bucket of water and saying that the bucket of water & oil is different from the bucket of "pure" water. Does that mean that there is a difference between "pure" water and water? Of course not -- and it is ridiculous to assert such a thing. But that is exactly what the scam artists have done to create a "pure" trust.Moreover, going through the pure trust and constitutional trust websites, you see quite a few authorities from the turn of the century, but very, very few cases from the last 25 years, and almost no cases from the last decade. This is because, additionally, the laws have changed to make trusts overall (and not any particular breed of trust) less attractive for any planning purposes. As discussed above, even if you could create a pure trust or constitutional trust (you can't), it wouldn't give you ANY benefit because the Internal Revenue Code has obliterated any possibly tax benefit from using them, and no state court will recognize them for asset protection purposes.Which brings me to my point: What's the use of even arguing about these authorities when no court will recognize them. The scam artist might argue until he is blue in the face and convince you that there might be a thing called a pure trust or a constitutional trust, but what's the point of having one if no court will recognize them? So, how do you deal with the scam artists who sell these? Easy:THE BOTTOM LINE: ASK THE SCAM ARTIST WHO IS TRYING TO SELL YOU A PURE TRUST OR CONSTITUTIONAL TRUST TO GET YOU AN IRS DETERMINATION LETTER STATING THAT THE TRUST WILL GIVE YOU THE TAX BENEFITS THE SCAMMER IS PROMISING YOU. OR, MAKE HIM GET YOU A LEGAL OPINION LETTER FROM ONE OF THE BIG 5 ACCOUNTING FIRMS. IF HE CAN'T GET YOU ONE OF THOSE, YOU CAN ACCURATELY JUDGE THE LEGITIMACY OF THE TRUST HE IS TRYING TO SELL YOU (WHICH IS NONE).

If you are approached about setting up a
"Pure Trust" or "Constitutional Trust"

Do the rest of us a BIG favor. Contact the following:

  • Your local office of the Federal Bureau of Investigations; and

  • Your local office of the Criminal Investigative Division of the Internal Revenue Service.

If you don't alert the scammers that you have contacted these authorities, you might be able to help them "sting" the scammers, and at least then prevent other people from being hurt by this scam.

If you have been scammed into forming a
"Pure Trust" or "Constitutional Trust"
(or "Business Trust" as described in the IRS warning, etc.)

Contact your local tax attorney immediately (be careful about going to a CPA because you communications might not be protected by an effective privilege, and now you are in a possible criminal circumstance).

IRS Victorious Against Pure Trust Promoters And Users

Against the "trusts that the U.S. government are afraid to take to court" (according to the Pure Trust sellers' BS), the Internal Revenue Service in the year 2000 has had an impressive and unbeaten string of victories. Read the following article:

The crackdown on abusive trust schemes by the IRS's Criminal Investigation Division and the Justice Department produced 28 convictions in the first 11 months of fiscal 2000, Mark E. Matthews, chief of the IRS's criminal investigation division, told Tax Analysts. The IRS first identified abusive foreign and domestic trust schemes as an emerging area of concern in 1996. The criminal investigation division's enforcement strategy focuses primarily on promoters and clients who have willfully used the promotion to egregiously evade tax. Because of the design and inherent complexity of the schemes, it typically takes the IRS's criminal investigation division two years to fully develop its cases. But by the end of fiscal 1999 the division's work on abusive trusts had produced 35 indictments. "We are seeing results in the courtroom now that show we recognize the problem with abusive trusts and that we are actively taking steps to address this area," Matthews said. One of the more dramatic convictions came last week in a September 26 verdict against a California couple who operated amassive trust scam that enlisted about 300 wealthy professionals. The convictions of Dorothy Henderson and her husband George Henderson followed a two-week jury trial in Sacramento before U.S. District Court Judge Garland E. Burrell. The Hendersons were convicted of conspiracy to defraud the IRS and three counts of aiding in the presentation of false tax returns by their clients to the IRS. Dorothy Henderson was also convicted of two counts of perjury. Under federal sentencing guidelines each of the Hendersons could be sentenced to more than nine years in prison. Both were immediately remanded into custody following the verdict. "The message should be clear: the IRS will aggressively pursue those who are promoting illegal and abusive trust schemes," said Dwight J. Sparlin, the special agent in charge of the IRS Criminal Investigation Division in Northern California. According to Assistant U.S. Attorney Benjamin B. Wagner, from 1993 through 1998 the Hendersons sold packages of bogus trusts through an entity and advised their clients on how to use the trusts to generate fraudulent tax deductions. The clients would transfer their businesses, homes, and other assets into the trusts, but according to Wagner, evidence at trial established that the clients - - who were appointed managers of the trusts -- in fact continued to control their assets. On their returns the clients claimed various personal expenses, including items such as home repairs, lawn care, and house cleaning as deductible expenses of the trusts. They also deducted all mortgage payments and depreciated the value of their residences, frequently passing these losses from the trusts onto their personal tax returns. That resulted in negative income and, in keeping with the scheme, allowed clients who made more than $150,000 to claim the earned income credit. Evidence at trial also showed the Hendersons operated a scheme for high-income clients that concealed additional income from the IRS by passing client income through a series of bank accounts in both the United States and in tax havens in the Caribbean. The funds flowed through accounts controlled by the Hendersons and ultimately were transferred back to the clients -- after the Hendersons took their 5 percent fee. On their returns the clients took deductions for the distribution of the funds to offshore entities, but didn't report the return of the funds. During the trial an IRS special agent testified to tracking more than $1 million in client funds that had flowed through the series of accounts. The Hendersons resisted IRS efforts to audit the trusts, refused to comply with IRS summonses, and covered their tracks by using cashier checks to transfer funds and by breaking up the funds returning from offshore accounts into numerous smaller accounts. The evidence at trial also established that the Hendersons earned more than $1 million in fees from clients, while marketing the scheme during the period from 1994 through early 1998. During that time the Hendersons filed no returns and paid no taxes. Also last week, U.S. District Court Judge Robert Holmes Bell sentenced a Michigan dentist to 27 months in prison for willfully evading taxes on $1 million in income by funneling it through sham trusts and failing to report the income to the IRS. Lyle Hotchkiss funneled the money through the bogus trusts during the period from 1994 to 1996. He was also convicted of failing to file a return for 1993, after earning $550,821 that year. At the September 27 sentencing, the judge ordered Hotchkiss -- a self-described former tax resister -- to buy a full page ad in The Grand Rapids Press featuring his photo with an admission of guilt and a note urging readers to pay their taxes. Earlier this year the newspaper quoted Hotchkiss predicting he would beat the IRS, and promising to bring "enlightenment and benefit to all."

Pure Trust Promoters

Some of the groups that promote the Pure Trust scam (Our friends in law enforcement please take note!). A few of these people are just too stupid to know what they are selling, and the rest are pure scam artists:

  • 4 Your Success Group, Address Unknown, Phone Unknown, http://www.incometaxfreedom.com/ Website Taken Down!

  • Allison Research Foundation, 713 Burma Dr.NE, Albuquerque, NM 87123, Phone Listed as 505-296-6252, link Website Taken Down!

  • Alpha Services, 1926 Contra Costa Blvd. #204 Pleasant Hill, CA 94523, No Phone Listed, http://www.jpar.net Website Taken Down!

  • American Beauty Rose, PO Box 560 Yelm, Wa. 98597, Phone Listed as 360-894-3218, http://www.yelmtel.com/~trusts/ Website Taken Down!

  • American Freedom (sell "Liberty Pure Trusts"), Address Unknown, Phone Listed at 507-289-2723, link Website Taken Down!

  • American Legacy Resources, P.O. Box 2299, Gilbert, AZ 85299, Phone Listed as 602-926-8665, link Website Taken Down!

  • American Sovereign, The, Freedom Bound International, c/o 3939 South Sixth Street #138, Klamath Falls, OR, Phone Listed as 888-878-8436 / 1-661-725-2411 (international) , http://americansovereign.com/trust.htm

  • Apollo Publishing International, P.O. Box 1937, Port Orchard, WA 98366, Phone Listed as 360-876-5362, link Website Taken Down!

  • http://www.assetpro.us -- 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! | link

    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%

  • BizNet Equity Management Trust, 6030 Barranco Avenue, Port St. John, FL 32927, Phone Listed as 407-636-1235, http://www.bemt.com/ -Now a Porn Site!-

  • Christopher Financial & Marketing Group WW., 8030 E. Lakeside Pkwy. #4106, Tucson, Az. 85730, Phone Listed as 520-513-1664, http://www.angelfire.com/biz/ superiorpromotion/ puretrust.html Website Taken Down!

  • Compass Company NW, Address Unknown, Phone Listed as 888-869-4973, link

  • Entrepreneur Holdings Management Trust, International Division - PMB 327, 2457-A. South Hiawassee Road, Orlando, FL 32835, Phone Listed as  407-226-9164, http://www.ehmt.com/ usa.htm Website Taken Down!

  • Executive Round Table, Address Unknown, Phone Unknown, http://www.encode.com/ exec/ purecont.htm Website Taken Down!

  • Financial Fortress Associates, Address Unknown, Phone Listed as 877-286-4101, http://www.f-f-a.com/report.html

  • Freedom Bound International, c/o 3939 South Sixth Street #138, Klamath Falls, OR, Phone Listed as 888-878-8436 / 1-661-725-2411 (international) , http://americansovereign.com/trust.htm

  • Freedom Trust Group, 2435 East North Street #105, Greenville, SC 29615, No Phone Listed, http://www.moneytrust.com/ book /ftgbk.htm also http://freedomtrustgroup.com

  • Freedom Enterprises, 4718 Meridian Ave. #287, San Jose, CA 95118, Phone Listed as (408) 264-8101, http://u2.netgate.net/ ~airtech/ Website Taken Down!

  • Free World Order, Address Unknown, Phone Unknown, http://www.buildfreedom.com

  • Heritage Living Trust ,-- Claims they are a "Contract Trust" instead of a "Pure Trust", but their theory is the same as the "Pure Trust" (i.e., that the Contacts Clause of the U.S. Constitution will somehow protect you from the tax man or creditors, which is totally bogus. A tax scam by any other name will still land you in jail. Address listed as P.O. Box 66972, Scotts Valley, CA 95067, Tel: 831-438-5047, Fax: 831-438-3004, http://www.heritagelivingtrust.com/ html/ Complex/ page0.htm
  • View the PowerPoint presentation used to perpetrate this Pure Trust scam. Although the scam artists attempt to disclaim that their "Private Contract" structure has any relationship to an illegal "Common Law Pure Trust", somewhat humorously the file name for their PowerPoint presentation is "CommonLawPureTrust". Not the brightest scam artists, eh? ppt

  • Innovative Financial Consultants, c/o 4747 E. Elliot #29-418, Phoenix, AZ 85044, Phone Listed as 480-994-8382, http://www.i-f-c.com Website Taken Down!
    (DOJ Press Release)

New! - Five Defendants Convicted of Tax Crimes in Connection With Promotion of Abusive Trust Scheme

  • International Order of Self-Sustaining Business Societies, P.O. Box 97272
    Las Vegas, NV 89193, Phone Listed as 702-314-1251, link Website Taken Down!

  • J.A.L. Financial, 3399 E. 19th St. Long Beach, CA 90804, http://www.jalfinancial.com/ Website Taken Down!

  •  New Scam!  The JoY Foundation, 13936 W. Hillsborough Ave. Tampa, FL 33635, Phone Listed as 813-855-1266, http://www.joyfoundation.com/

  • Liberty Pure Trusts, Address Unknown, Phone Listed as 888-I-GOT-OUT, http://www.puretrust.com Website Taken Down!

  • Linkco,  P.O. Box 66781, Phoenix, AZ 85082, Phone Unknown,
    http://www.best-of-all.com/trusts.htm Website Taken Down!

  • Money Trust www.moneytrust.com

  • National Trust Services (the Roy Fritts website), at www.purecontract.org
    Website Taken Down!

  • New Day Publishers, P.O. Box 411, Crowley, TX 76036, Phone Listed as
    800-648-9124, link

  • Offshore Financial Services Ltd., Address Unknown, Phone Listed as
    508-881-4670, http://www.offshorestrategies.com
    Website Taken Down!

  • Osworth Consulting & Marketing, PO Box 419, Williams, OR 97544-0419, No Phone Listed, link

  • Passport Society, Saint Maarten, Netherlands Antilles, Phone Listed as
    599-52-8057, http://www.passportsociety.org

  • Phoenix Group, 61535 S. Hwy 97 Ste. 9 PMB 143, Bend, OR 97702, Phone Listed as 918-222-7066, http://www.mysticbird.com Website Taken Down!

  • ProtectYourSelf.com, No Address Listed, Phone Listed as 918-222-703, http://www.protectyourself.com Website Taken Down!

  • R & H Publishers, P.O. Box 52663, Tulsa, OK 74152, Phone Listed as
    918-599-8811, http://www.puretrusts.com  Website Taken Down! also http://www.givemeliberty.com

  • !SOLUTIONS! Group, 8190A Beechmont Ave.#333, Cincinnati, OH 45255,
    Phone Listed as 513-624-7340, http://www.no1040s.com/

  • Solutions International, Address Unknown, Phone Unknown

  • Sovereignty Pure Trusts, 16585 Pacific Coast Hwy - 2nd Floor, Sunset Beach, CA 90742, Phone Listed as 562-592-9047, link Scammers Indicted Website Taken Down!

  • R-Safe, P.O. Box 7720, Arlington, VA. 22207, Phone Listed as 703-532-3219, http://users.erols.com/scambos/

  • Tax Research Foundation, P. O. Box 1034, Manvel, TX 77578, Phone Listed as 281-585-2211, http://www.trustsnow.com/ order.htm Website Taken Down!

  • TNT Co., Address Unknown, Phone Unknown, http://web.ulysium.net/ ~tntco/ Website Taken Down!

  • Trust Educational Services, 1925 Palomar Oaks Way, Suite 203, Carlsbad, CA 92008, Phone Listed as 760-476-0290, http://www.trusts.org Website Taken Down!

  • Trust Enterprises, P.O. Box 637, Solana Beach, CA 92075, Phone Listed as 619-755-3357, link Website Taken Down!

  • Wealth4Freedom, Address Unknown, Phone Unknown, http://www.wealth4freedom.com

  • Webtrust.com, Address Unknown, Phone Unknown, http://www.webtrust.com/

  • West El Paso Information Network, Address Unknown, Phone Unknown, Link

  • Worldwide Wealth Systems, Ltd., 3102 Classen Blvd. #286, Oklahoma City, OK, 73118, link

  • Young, Green and Rifkin, 4139 Highlander Ave., Lake Havasu, AZ 86406, Phone Listed as 520-680-9179, http://www.assetpro.us/ New Website Webpage makes this group look like a law firm, which it is not.

  • Name Unknown, Phone Listed as 215-357-1346, http://www.best-solutions.com/ puretrust/ Website Taken Down!

If you know of other groups which are promoting this scam, please advise us by our online form. If you have a "Pure Trust" from any of the above groups, there is a good chance that you have committed felony tax evasion. You should consult with a licensed tax attorney in your area immediately to try to back you out of the structure before you get caught

COLATOS AND FORCOLATOS

Some of the scam artists who sell Pure Trusts have figured out that there is too much information available on Pure Trust scams, so they have re-named their Pure Trusts as "COLATOS" (Common Law Trust Organizations) and "FORCOLATOS" (Foreign Common Law Trust Organizations). Don't be mislead: A scam by any other name is still a scam. Although the fraudsters will try to tell you that their "COLATOS" are "better" or "superior" to the old Pure Trusts, it just ain't so. The "COLATOS" and "FORCOLATOS" are every bit the worthless junk that Pure Trusts are, and essentially the very same scam.

CASES WHERE PURE TRUSTS WERE ANNIHILATED

The following is a partial list of cases where Pure Trusts were blown up. The scam artists who sell Pure Trusts will tell you the lies that "They have never lost in court" and "The IRS and creditors are afraid of them." Of course they have to tell you that because if they didn't there is no way you would buy one from them. But as shown, these are complete and total lies, and there is no merit whatsoever to the Pure Trust, as the following cases show what REALLY happens when the Pure Trust meets the IRS (and it ain't pretty for the people who have formed Pure Trusts:

  • Alsop v. Commissioner, T.C. Memo. 1999-172   

  • Arcadia Plumbing Trust v. Commissioner, T.C. Memo. 1994-453

  • Brittain v. Commissioner, T.C. Memo. 1992-277

  • Bixby v. Commissioner, 58 T.C. 757 (1972)

  • Buckmaster v. Commissioner, T.C. Memo. 1997-236 (§ 6673 sanctions imposed)

  • Buelow v. Commissioner, T.C. Memo. 1990-219 (§ 6673 sanctions imposed)

  • Chase v. Commissioner, T.C. Memo. 1990-164, aff'd, 926 F.2d 737 (8th Cir. 1991)

  • Cheek v. Commissioner, T.C. Memo. 1987-84 (§ 6673 sanctions imposed)

  • Christal v. Commissioner, T.C. Memo. 1998-255

  • Clifford v. Helvering, 309 U.S. 331 (1940)(lead case)

  • The Colby B. Foundation v. United States, 1997 U.S. Dist. LEXIS 17698

  • Dombrowski v. Commissioner, T.C. Memo. 1980-261

  • Edwards Family Trust v. United States, 572 F. Supp. 22 (E.D. N.M. 1983)

  • Estrada v. Commissioner, T.C . Memo. 1997-180

  • Fogle v. Commissioner, T.C. Memo. 1986-74

  • Furman v. Commissioner, 45 T.C. 360 (1966), aff'd per curiam, 381 F.2d 22 (5th Cir. 1967)

  • United States v. Geissler, 94-1 USTC ¶ 50,060 (D. Ida. 1993)

  • George v. Commissioner, T.C. Memo. 1999-381 (1999)

  • Ghalardi Income Tax Education Foundation v. Commissioner, T.C. Memo. 1998-460 (1998) (§ 6673 sanctions imposed)

  • Gran v. Commissioner, T.C. Memo. 1980-558

  • Hanson v. Commissioner, 696 F.2d 1232 (9th Cir. 1983), aff'g T.C. Memo. 1981-675

  • Harrold v. Commissioner, T.C. Memo. 1991-274

  • Holman v. United States, 728 F.2d 462 (10th Cir. 1984)

  • Itz v. United States, 85-1 USTC ¶ 9345 (W.D. Tex. 1985); also, Itz v. United States Tax Court and United States Internal Revenue Service, 87-2 USTC ¶ 9497 (W.D. Tex. 1987)

  • Jacobson v. Commissioner, T.C. Memo. 1981-261

  • Keefover v. Commissioner, T.C. Memo. 1993-276; see also, Keefover v. Commissioner, T.C. Memo. 1989-151, aff'd per curiam, 923 F.2d 857 (8th Cir 1990)

  • Kelley v. Commissioner, T.C. Memo. 1983-322

  • Leonard v. Commissioner, T.C. Memo. 1998-290 (§ 6673 sanctions imposed)

  • Lucas v. Earl, 281 U.S. 111 (1930)(lead case)

  • Luman v. Commissioner, 79 T.C. 846 (1982)

  • Markosian v. Commissioner, 73 T.C. 1235 (1980)

  • Miller v. Commissioner, T.C. Memo. 1986-278

  • Morgan v. Commissioner, T.C. Memo. 1978-401

  • Muhich v. Commissioner, T.C. Memo. 1999-192

  • Neely v. United States, 775 F.2d 1092 (9th Cir. 1985)

  • United States v. Noske, 117 F.3d 1053 (8th Cir. 1997)

  • O'Donnell v. Commissioner, T.C. Memo. 1986-14

  • Para Technologies Trust v. Commissioner, T.C. Memo. 1994-366

  • Paulson v. Commissioner, T.C. Memo. 1991-643

  • Photo Art Marketing Trust, T.C. Memo. 2000-57

  • Prindle International Marketing v. Commissioner, T.C. Memo. 1998-164

  • Professional Services v. Commissioner , 79 T.C. 888 (1982)

  • Reynolds v. Commissioner, T.C. Memo. 1987-261

  • Sampson v. Commissioner, T.C. Memo. 1986-231 (§ 6673 sanctions imposed)

  • Sandvall v. Commissioner, 898 F.2d 455 (5th Cir. 1990), aff'g T.C. Memo. 1989-189 (§ 6673 sanctions imposed)

  •  Schauer v. Commissioner, T.C. Memo. 1987-237 (§ 6673 sanctions imposed)

  •  Schulz v. Commissioner, T.C. Memo. 1980-568, aff'd, 686 F.2d 490 (7th Cir. 1982)

  •  United States v. Scott, 37 F.3d 1564 (10th Cir. 1994)

  •  Smith v. Commissioner, T.C. Memo. 1986-487 (§ 6673 sanctions imposed)

  •  Smith v. Commissioner, T.C. Memo. 1998-91

  •  Stoecklin v. Commissioner, T.C. Memo. 1987-453

  •  Stokes v. Commissioner, T.C. Memo. 1999-204

  •  Swayze v. Commissioner, T.C. Memo. 1983-168 (§ 6673 sanctions imposed)

  •  Tatum v. Commissioner, T.C. Memo. 1988-579 (§ 6673 sanctions imposed)

  •  Taylor v. Commissioner, T.C. Memo. 1983-34

  •  Vercio v. Commissioner, 73 T.C. 1246 (1980)

  •  Vnuk v. Commissioner, 621 F.2d 1318 (8th Cir. 1980), aff'g T.C. Memo. 1979-164

  •  Wesenberg v. Commissioner, 69 T.C. 1005 (1978)

  •  Whitehead v. Commissioner, T.C. Memo. 1992-455

  •  Wilbur v. Commissioner, T.C. Memo. 1993-442

  •  Yeoham  Estate v. Commissioner, T.C. Memo. 1986-487 (§ 6673 sanctions imposed)

  •  Zmuda v. Commissioner, 731 F.2d 1417 (9th Cir. 1984), aff'g 79 T.C. 714 (1982)

FURTHER INFORMATION ON PURE TRUST SCAMS
The following articles reveal the pure trust scam for the illegal and always-unsuccessful tax evasion scheme that it is.Bob Sommer's Trust Scams Series

Well-respected tax attorney Bob Sommers has put together a series of articles dealing with these inane and ineffective trusts.

Mark Pitcavage Expose of Pure Trusts

Mark Pitcavage, PhD, of the MilitiaWatchdog group, has written an excellent expose of the Pure Trust promotes and the lies they spin to sell Pure Trusts.

Vern Jacobs and Richard Duke

Two of America's best planner discuss Pure Trust scams at great length.

Roger M. Wilcox

Has written an excellent expose of the scam trusts sold by National Trusts Services ("NTS") a/k/a Trust Educational Services ("ETS") a/k/a several other aliases, at http:// home.netcom.com/ ~rogermw/ nts.html This page is good reading about the pure trust scam in general, and de-bunks much of the marketing materials distributed by these crooks.

Internal Revenue Service

The IRS has issued numerous warnings about Pure Trusts, and now even sponsors the "Abusive Trust Project" to alert IRS enforcement attorneys and collection agents about this scam, and how to quickly bust through it.

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Detroit Free Press
April 30, 2002

E. Lansing couple
charged with tax evasion

IRS says pair hid $671,000
in sham trust funds
By Katie Matvias

An East Lansing couple charged with hiding more than $600,000 in sham trust funds and failing to file their taxes could face more than 15 years in prison and $1 million in fines.

Gerald Thomas Mann, a 51-year-old Lansing dentist, and Laurel Rose Mann, 49, are charged with three felony counts of tax evasion and three misdemeanor counts of failure to file taxes.

They are expected to be arraigned Friday in a Grand Rapids federal court.

"The sham trusts are increasing problems throughout the country resulting in increased IRS attention,'' Assistant U.S. Attorney Donald Davis said Monday.

The Manns are charged in the 1993, 1994 and 1995 tax years, said Mark Kroczynski, special agent for the Internal Revenue Service. During that time, they earned about $671,000, he said.

But they also didn't file federal or state income tax returns from 1993 through 2000, he said.

"Our investigations normally take awhile and many times by the time they are completed you may have subsequent years that are past,'' Kroczynski said.

Gerald Mann is being held in Newaygo County Jail and couldn't be reached for comment. He was arrested Thursday in his Lansing office by IRS agents.

Laurel Mann, who works for Michigan State University, was at one of her children's sporting events when she was arrested. Officials didn't hold her because she's not a flight risk, Davis said.

Mann said her husband did the taxes. She said she doesn't know how they will plead.
"I'm totally in shock about what's happening here," she said from her home Monday night. "I'm confused about the whole ordeal."

The couple had a court hearing Monday but nothing happened because they didn't have a lawyer, Davis said. It will continue Friday.

IRS officials say the Manns put the dental practice into the "Holmes Dental Clinic Trust," the business real estate into the "Burroughs Holding Trust," a personal residence into the "Nazareth Security Trust," and a business checking account into the "Red Cedar Audubon Trust'' in Belize.

According to the indictment, the couple put money from the dental practice and their retirement into the Belize fund, then transferred that to a Swiss bank account.

Kroczynski said many people, in similar cases, say the trust earned money rather than themselves.

"The people feel consequently that they are not liable for tax,'' he said.
Trusts are legal, but normally the person who sets it up can't have an interest in the trust, he said.

"It will be up to a jury to decide if they are subject to the tax laws of this country,'' he said. "Our contention is they are. That's why we recommended prosecution."

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Forums

Tax Protestors, Pure Trusts, and Other Stupid De-Tax Schemes & Scams
Have a stupid theory why you shouldn't have to pay taxes? 861? Non-Filer? Sovereign Citizen? Believe that the federal courts are actually admiralty courts or that the only real citizens of the USA live in Puerto Rico, Guam, and the District of Columbia, then this forum is for you.

Tax Practice & Policy and Tax Shelters   Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc.

New Scam!

http://www.assetpro.us -- 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! | link

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%

Articles

Justice Indicts Nine Promoters of Alleged Abusive Trust Scheme -- Operators, Salesmen of Innovative Financial Consultants Charged with Tax Fraud.

Summary of Abusive Trust Schemes -- Released by the IRS Criminal Investigation Division.

Foreign 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 the U.S.

Pure Trusts/Common Law Trusts = More Convictions -- Recap of about a dozen people so far this year who have sent to the pokey for selling Pure Trusts or Common Law Trust Organizations. So far, Pure Trusts are batting .000 career against the IRS.

Liberty Estate Planning Network, Association for Certified Estate Planning Attorneys and Eagle Publications Trust -- U.S. Justice Department sues to stop fraudulent organizations run by Michael D. Richmond and Rex E. Black of the Chicago area from marketing sham trust packages employing bogus "Pass-Through Technology".

Justice Department Slams Pure Trust Promoters -- The trusts that the U.S. government was supposed to be "afraid to challenge" are once again slammed, this time by the Justice Department, and no doubt supported by the IRS to get the names of tax evaders who have been using Pure Trust Organizations and Business Trusts, with the idea of collecting lots of back taxes, interests, and penalties.

Justice Department Cracks Down on Pure Trusts -- Pure trust promoters around the country are charged with criminal tax evasion and serious prison terms for selling Pure Trusts a/k/a Freedom Trusts, Constitutional Trusts, Common Law Trust Organizations (COLATOS), and similar names.

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FOR IMMEDIATE RELEASE
TUESDAY, OCTOBER 5, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

JUSTICE DEPARTMENT SUES TO SHUT DOWN ALLEGED TAX SCAMS

Sham Trusts, False Claims of Tax-Exempt Status
Allegedly Used to Hide Income and Assets

WASHINGTON, D.C. - The Justice Department announced today that it has filed a civil suit seeking to stop Raymond Leo Bell, American Beauty Rose, and The Best Way, Inc., all of Yelm, Washington, from promoting fraudulent tax schemes that use sham trusts and other sham entities.

According to the government's complaint, Bell helps his customers set up sham trusts and corporations that customers use illegally to eliminate or reduce their federal tax liabilities and to evade IRS collection efforts. The complaint also alleges that the defendants advise customers to falsely claim tax-exempt status for their businesses and to fabricate and inflate improper deductions in a fraudulent attempt to evade income and employment taxes.

The government's complaint seeks to prohibit defendants from selling any type of arrangement that advocates or facilitates tax evasion or non-compliance with the income tax laws. The complaint also seeks an order directing the defendants to notify their customers of the complaint and any injunction entered by the court, and to provide to the Department of Justice the names, mailing and e-mail addresses, phone numbers, and Social Security or employer identification numbers of any customers who had purchased the firms' products.

"Stopping tax-scam promotions is a high priority for the Justice Department," said Eileen J. O'Connor, Assistant Attorney General for the Department of Justice's Tax Division. "In addition to shutting down tax scams, we are committed to identifying those who, by using them, have risked civil penalties and, where appropriate, criminal prosecution." Misuse of trusts tops the IRS's recent list of "Dirty Dozen" tax schemes. Information about the "Dirty Dozen" tax schemes is available at: http://www.irs.gov/newsroom/article/0,,id=120803,00.html.

More information about the Justice Department's efforts against tax-scam promoters can be found at: http://www.usdoj.gov/tax/taxpress2004.htm. Information about the Justice Department's Tax Division can be found at http://www.usdoj.gov/tax.


CALIFORNIA ATTORNEYS PLEAD GUILTY TO PROMOTING
TAX FRAUD SCHEME IN UTAH

Defendants Fraudulently Claimed Placing Assets in Trust Would Reduce Taxes

WASHINGTON D.C. - Eileen J. O'Connor, Assistant Attorney General for the Tax Division, Department of Justice; Paul Warner, U.S. Attorney for the District of Utah; Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division; and James H. Burrus, Jr., Special Agent-in-Charge, SLC Division, Federal Bureau of Investigation announced today that at the federal courthouse in Salt Lake City, Utah, California attorneys Martin Arnoldini and Jerrold Boschma each pled guilty to a felony charge of conspiracy to commit mail and wire fraud and to defraud the Internal Revenue Service (IRS) (18 U.S.C. § 371).

Arnoldini and Boschma each face a maximum potential sentence of five years imprisonment followed by up to three years supervised release, a $250,000 fine and liability for the costs of prosecution. No sentencing dates were set.

"People who try to conceal their income from the IRS can lose their money to con artists who make a living selling tax scams," said Assistant Attorney General Eileen J. O'Connor. "Participants in fraudulent tax schemes may face criminal prosecution, and they still will have to pay their taxes, along with interest and civil fraud penalties."

"As this year's tax filing deadline approaches, the pleas taken in this case serve as timely reminders that fraudulent tax schemes such as these will be investigated and prosecuted to the fullest extent of the law," said U.S. Attorney Paul M. Warner. "Residents of Utah who have filed or are now filing their state and federal tax returns and paying their fair share of taxes need to be reassured that we will aggressively pursue those who do not."

"One of the IRS's enforcement priorities is to ensure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the laws," said Nancy Jardini, Chief, IRS Criminal Investigation. "Concealing income from the government through the use of fraudulent trust arrangements is not financial planning; it is illegal. Those who promote these activities or willfully invest in these schemes will be held accountable."

Arnoldini and Boschma, who were charged by Information, admitted that they, along with previously indicted coconspirators, promoted and sold a fraudulent "trust" scheme to approximately 300 clients. The Information alleges that Arnoldini and Boschma are attorneys licensed to practice law in California, partners in Century Law Offices in Valencia, California, and that Mr. Arnoldini also holds an advanced degree in taxation. It also alleges that they and their coconspirators defrauded investors of approximately $7 million. As a condition of their guilty pleas, Arnoldini and Boschma agreed to surrender their law licenses.

Arnoldini and Boschma admitted in their plea agreements that beginning in 1997, they promoted and sold a fraudulent "trust" scheme designed to evade federal income taxes. They admittedly marketed the scheme through their Century Law Offices, and as licensees of World Contractual Services and, later, through CornerStone West. They also admitted that, with their coconspirators, in seminars and through promotional materials and opinion letters, they fraudulently misrepresented to customers that their tax liabilities could be lawfully reduced by placing businesses, homes, investments and other assets into a trust's name. They admitted that they, with their coconspirators, caused the preparation of false and fraudulent federal income tax returns. Messrs. Arnoldini and Boschma admitted their actions caused losses of federal tax revenue totaling approximately $3.6 million.

Arnoldini and Boschma also admitted participating in fraudulent investment schemes, helping cause customers to lose approximately $1.3 million. They said most of the customer funds were allegedly wired to offshore banks, purportedly to be placed in a foreign investment. They admitted they knew the investment would place the customers funds at considerable risk and would never pay any return.

Assistant Attorney General O'Connor thanked Tax Division trial attorneys Albert Kleiner, Nicholas Dickinson, and Kevin Downing, who prosecuted the case. She also thanked the special agents of the Internal Revenue Service and Federal Bureau of Investigation whose assistance was essential to the successful investigation and prosecution of the case.

On March 18, 2004, Todd Cannon and Lance Hatch pleaded guilty to a conspiracy charge in connection with this case. On April 6, 2003, David Orr and Michael Behunin, an attorney with an advanced degree in tax law, also pled guilty to conspiracy charge. Lanny White and Max Lloyd are under indictment and awaiting trial on related charges. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until proven guilty in a court of law.


FOR IMMEDIATE RELEASE
THURSDAY APRIL 8, 2004
AUSA/PIO (312) 353-5318

Kerry Hannigan,
IRS-CID (312) 566-4503

AEGIS TRUST PRINCIPALS AND OTHERS INDICTED IN $68 MILLION
TAX FRAUD CONSPIRACY FOLLOWING NATIONWIDE UNDERCOVER INVESTIGATION

CHICAGO - Internal Revenue Service agents today began arresting seven defendants, including an attorney and tax return preparers, in Illinois, Indiana, New York and Alabama who, along with an eighth defendant in South Carolina, were indicted in Chicago on federal tax fraud charges. Six of the defendants allegedly participated in a nearly decade-long conspiracy to market and sell sham domestic and foreign trusts through The Aegis Company, based in suburban Palos Hills, to some 650 wealthy taxpayer clients throughout the United States to hide hundreds of millions of dollars in income, resulting in a tax loss to the United States of at least $68 million, making the case one of the largest of its kind.

Following a lengthy undercover investigation by IRS agents, code-named "Operation Trust Me," and the seizure of roughly 1.5 million documents, computer files and related materials, a federal grand jury in Chicago today returned a 51-count indictment against six of the defendants. Indicted separately in connection with the so-called "abusive trust" scheme were two Chicago area certified public accountants who were being arrested today, and another accountant/tax preparer who was charged last month. Nationwide, the Chicago-based investigation has resulted in six convictions in central Illinois and Tampa, Fla., and pending charges against another defendant in Buffalo, N.Y. Additional charges are expected, Treasury and Justice Department officials said.

The charges were announced by IRS Commissioner Mark W. Everson; Eileen J. O'Connor, Assistant Attorney General for the Tax Division of the Justice Department; Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; and James W. Martin, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago.

Today's main indictment charges all six defendants with one count of tax fraud conspiracy - specifically conspiracy to defraud the United States by impeding the IRS in the collection of tax revenue and conspiracy to aid and assist the preparation and filing of false returns on behalf of others. The defendants are identified in the indictment, with additional charges, as follows:

Michael A. Vallone, 44, of Orland Park, one of the founders of Aegis, which marketed and sold trust packages throughout the country through a network of promoters, sub-promoters, managers, attorneys and accountants. Vallone was the executive director of Aegis and a principal in the company. He was also charged with 24 counts of aiding and assisting the filing of false tax returns, 3 counts of personal income tax evasion, 7 counts of mail fraud and two counts of wire fraud;

Edward B. Bartoli, 74, of Little River, S. Car., a former attorney, who was also one of the founders of Aegis, the legal director, and a principal in the company. He was also charged with 24 counts of aiding and assisting the filing of false tax returns, 4 counts of personal income tax evasion, 7 counts of mail fraud and two counts of wire fraud;

Robert W. Hopper, 58, of Gadsden, Ala., also one of the founders of Aegis, the managing director, and a principal in the company. He was also charged with 19 counts of aiding and assisting the filing of false tax returns, 4 counts of personal income tax evasion, 2 counts of mail fraud and 1 count of wire fraud;

Timothy Shawn Dunn, 44, of Chesterton, Ind., a certified financial planner, who was a promoter and manager of Aegis trusts, and the managing Director of the Aegis Management Company, which he created with Vallone, Bartoli, and Hopper. He was also charged with 11 counts of aiding and assisting the filing of false tax returns, 1 count of personal income tax evasion, 2 counts of filing false tax returns, 7 counts of mail fraud and 2 counts of wire fraud;

William S. Cover, 67, of Naperville, also a promoter and manager of Aegis trusts, and the president of Sigma Resource Management, Inc., which provided management services to purchasers of Aegis trusts. He was also charged with 13 counts of aiding and assisting the filing of false tax returns, 3 counts of filing false tax returns, 7 counts of mail fraud and 2 counts of wire fraud; and David E. Parker, 51, of Williamsville, N.Y., an attorney who was the legal director of the Aegis Management Company, through which he assisted in the promotion, sale, and management and defense of Aegis trust systems. He was also charged with 2 counts of mail fraud and 1 count of wire fraud.

The indictment also seeks forfeiture of $4,125,000 from Vallone, Bartoli, Dunn and Cover. In addition, it seeks forfeiture of Vallone's residence; Dunn's residence and two other properties in northwest Indiana, as well as three Lincoln limousines and a Lotus automobile from Dunn; and Cover's residence.

Arrest warrants were issued for each of these defendants except Bartoli, who will arraigned at a later date.

Arrest warrants were also issued for Laura M. Baxter, 38, of Monee, a certified public accountant who operated Baxter Accounting in Frankfort, and Donald J. Todd, 67, of South Holland, also a certified public accountant who operated Donald J. Todd, CPA, in Calumet City. They were charged today in separate indictments alleging that they aided and assisted the preparation and filing of false tax returns by Aegis trust clients. Another tax preparer defendant, Robert J. Clausing, 53, of Lansing, was indicted last month on similar charges.

The defendants being arrested were expected to appear initially in Federal Court in various locations, including Chicago.

According to the Vallone indictment, between July 1994 and December 2003, the defendants organized, promoted and sold domestic and foreign/offshore trusts, primarily to self-employed individuals, for fees ranging between $10,000 and $75,000 for a package of one or more Aegis trusts with the purpose and effect of defrauding the government. The abusive use of trusts attempted to fraudulently conceal trust purchasers' true assets and income from the IRS and to illegally reduce or eliminate their income tax liability. The IRS first cautioned taxpayers in April 1997 that such trust arrangements were illegal. The trusts, in fact, provided no tax shelter and had no effect on transferring assets or reducing or eliminating the clients' income tax liabilities, according to the indictment.

"The government will not tolerate schemes by wealthy people to funnel millions of dollars offshore to illegally escape taxes," said IRS Commissioner Everson. "All Americans who pay their taxes should be assured that when they pay honestly and accurately, we will hold accountable those who do not."

Assistant Attorney General O'Connor said: "A tax scheme designed to conceal the truth from the IRS isn't worth a cent of what you pay for it. People who promote or participate in tax fraud should prepare to face civil penalties, criminal prosecution, or both."

Mr. Fitzgerald said: "All Americans have an obligation to pay taxes when they earn income. The notion that persons with training in the professions -- attorneys and accountants -- would engage in massive efforts to help high-income earners to not pay their fair share of taxes, to the tune of $68 million, is offensive." Domestic Trusts

Regarding domestic trusts - known as "common law business organizations," "business trusts," and "CBOs" - the Vallone indictment alleges that the defendants and their associates conducted seminars and distributed Aegis promotional materials to recruit clients. After selling trusts and trust management services to these clients, they assisted in hiding clients' income in various trusts and in transferring the clients' businesses, homes, and other assets into trusts, or to bank accounts corresponding to trusts. They further counseled their clients in making it appear on trust tax returns that the clients had passed their business income through a series of trusts which ultimately paid little or no taxes. Many clients allegedly were given falsely notarized trust documents, and in some cases, clients were given trust documents that were backdated, enabling them to benefit from the purported tax advantages before the date that the trusts were actually purchased from Aegis.

The defendants allegedly designed the trusts by naming Bartoli and Parker or another Aegis attorney as nominal trustees. At virtually the same time, or even before, a client transferred assets and/or income to a trust, the Aegis attorney resigned and appointed the client as the new trustee, effectively giving the client management and control of the assets in the trust and the trust's bank accounts, as well as the full use and benefit of the income that was assigned to the trust.

As part of the conspiracy, the defendants allegedly helped their clients claim false deductions on the trusts' federal tax returns. These deductions included such ordinary living expenses as household utility expenses, repairs and lawn maintenance costs for the clients' personal residences, which had been designated the "world headquarters" of the trusts. Other allegedly false deductions included the cost of college tuition for the clients' children, under the guise that the children would become directors of the trusts in the future. The defendants also helped clients claim false charitable deductions on trust returns, purportedly for money given to legitimate charities. Such false deductions included the costs of vacations taken by Aegis clients to places such as Hawaii, under the guise that, during their vacations, the clients were looking for legitimate charities to which to donate money. In reality, the charitable trusts established by defendants for their clients were simply additional entities under the control and management of the clients, which served as vehicles for the clients to invest or spend their untaxed income, according to the indictment.

Foreign Trusts

The indictment alleges that the defendants aided some of their most wealthy clients in participating in a program they marketed as an offshore trust system. Assisted by a contact in Belize, this trust system, in fact, was an elaborate scheme for concealing clients' income from the IRS through the use of multiple domestic and foreign bank accounts, domestic and foreign trusts, and international business companies ("IBCs"). The defendants sometimes received additional fees for the clients' use of these trusts system -- approximately 3 percent of any funds sent out of the United States by the clients and then repatriated through a phony "demand note" process.

According to the indictment, the offshore trust system involved a series of sham transactions, through which clients' income was purportedly transferred through foreign trusts and then returned to the clients. Often, the transfer of income did not actually take place, but was made to appear to have occurred through a series of trust tax returns showing distributions of income from trust to trust. These purported income distributions ended at a foreign trust or IBC, the bank accounts of which were secretly controlled by the Aegis clients. The defendants further advised their clients that untaxed income should first be transferred to trust bank accounts in the United States controlled by the clients and then wire transferred from those accounts to offshore bank accounts in Antigua in the names of the foreign trusts secretly controlled by the clients, and subsequently transferred again by each client to a second offshore bank account in Antigua in the name of an IBC that they also secretly controlled. Clients were then provided with credit cards linked to the IBC bank accounts and were instructed by the defendants that they could use the credit cards to make purchases or to receive cash advances through automatic teller machines in the United States without any record of these transactions clearing in the United States. The indictment further alleges that the defendants told clients they could also repatriate their untaxed income through purported "loans" or "gifts" from their IBCs, assuring them that the IRS would not be able to link the clients to the control or management of the IBCs or IBC bank accounts.

Aegis Audit Arsenal

The indictment further alleges as part of the conspiracy that the defendants advised their clients on how to manage their Aegis trust systems to conceal income from the IRS. Some of the defendants assisted clients in preparing personal, business, and trust tax returns that falsely concealed such income, and they referred clients to particular tax return preparers who the defendants knew would perpetrate and conceal the scheme. The defendants also allegedly assisted clients in obstructing IRS audits and in thwarting IRS inquiries into the Aegis trust scheme through the use of what they called the "Aegis Audit Arsenal." They advised clients to withhold information from IRS revenue agents, to respond to IRS inquiries or civil summonses for financial records with obstructive letters and questionnaires that they had drafted and given to clients, and to resist IRS civil summonses by filing meritless motions, according to the indictment.

It alleges that the defendants created a law firm in Washington, D.C., called Parker & Associates, of which Vallone, Hopper, Dunn and Parker were the principal partners. Parker & Associates allegedly was established to represent Aegis clients during IRS audits and examinations, to further implement the Aegis audit arsenal strategies, and to obtain additional fees from Aegis clients. The defendants also allegedly filed frivolous lawsuits against the IRS and individual IRS revenue agents and special agents.

Finally, the indictment alleges that the defendants concealed their own income from the sale of and management of the fraudulent Aegis trust systems, by placing their assets in domestic and foreign trusts they created, by diverting their income into those trust bank accounts, and by using those bank accounts to pay personal living expenses. They further concealed their income from the IRS by failing to file federal income tax returns or by failing to report their true income to the IRS, the charges allege.

The government is being represented by Assistant U.S. Attorneys Stephen L. Heinze and Barry Rand Elden, and DOJ Tax Division trial attorneys Thomas W. Flynn and John J. Kaleba.

If convicted, each count of tax fraud conspiracy, tax evasion, mail fraud and wire fraud carries a maximum penalty of 5 years in prison and a $250,000 fine. Filing a false tax return, or aiding and assisting the preparation and filing of a false tax return, carries a maximum penalty of 3 years in prison and a $250,000 fine. In addition, defendants convicted of tax offenses must pay the costs of prosecution and remain liable for any taxes, penalties and interest owed. As an alternative maximum fine on the fraud counts, the Court may order a fine totaling twice the gross loss to any victim or twice the gain to the defendant, whichever is greater. Restitution is mandatory. The Court, however, would determine the appropriate sentence to be imposed under the United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the United States has the burden of proving guilt beyond a reasonable doubt.


For Immediate Release
February 6, 2004

DEFENDANT SENTENCED FOR ROLE
IN TAX EVASION SCHEME

Tampa - On February 6, 2004, United States District Judge Richard A. Lazzara, sitting in Tampa, Florida, sentenced MICHAEL J. MARICLE, age 48, of Palm Harbor,

Florida, to a term of imprisonment of thirty (30) months upon his conviction of two counts of aiding in the preparation and filing of false income tax returns, in violation of Title 26, United States Code, Section 7206(2).

MARICLE, a Certified Public Accountant in Clearwater, Florida, pled guilty to those two charges on March 5, 2003. He pled guilty to assisting two different tax payer clients in filing false income tax returns which disguised large sums of income which those tax payers had earned in 1998. MARICLE had prepared their tax returns in connection with his role as a promoter of the AEGIS system, a scheme which entailed the use of abusive trusts in order to hide income and evade the payment of income taxes.

In addition to his sentence of imprisonment, MARICLE was ordered to assist the Internal Revenue Service in the computation and collection of all taxes due and owing on the part of his two clients.

This case was prosecuted by Jay L. Hoffer, Assistant United States Attorney, Deputy Chief, Special Prosecutions Section of the Tampa Division. This case was investigated by the Internal Revenue Service - Criminal Investigation Division.

 

FOR IMMEDIATE RELEASE
TUESDAY, APRIL 8, 2003
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

JUSTICE INDICTS NINE PROMOTERS
OF ALLEGED ABUSIVE TRUST SCHEME

Operators, Salesmen of Innovative Financial Consultants
Charged with Tax Fraud

WASHINGTON, D.C. - Eileen J. O'Connor, Assistant Attorney General of the Justice Department's Tax Division, Paul K. Charlton, U.S. Attorney for the District of Arizona, and David B. Palmer, Chief, Internal Revenue Service, Criminal Investigation, today announced the indictment of nine individuals for conspiracy to defraud the Internal Revenue Service by marketing alleged abusive trusts through an organization known as Innovative Financial Consultants (IFC).

On April 4, 2003, a federal grand jury sitting in the District of Arizona indicted the following individuals for conspiracy to defraud the United States in violation of 18 U.S.C. Section 371:

  • Dennis O. Poseley of Phoenix;
  • Patricia Ann Ensign of Phoenix;
  • John F. Poseley of Casa Grande, Ariz.;
  • Mark D. Poseley of Chandler, Ariz.;
  • David W. Trepas of Scottsdale, Ariz.;
  • Rachel McElhinney of Scottsdale, Ariz.;
  • Jeffrey G. Lewis of Scottsdale, Ariz.;
  • Keith D. Priest of Tempe, Ariz.; and
  • Frank C. Williams of Houston.

The indictment, which was unsealed today, alleges that the defendants sold various trust packages for financial gain by falsely claiming that taxpayers could lawfully avoid income taxes by placing their income and assets into either an "onshore" or "offshore" trust package. IFC sold the offshore trust package for approximately $10,500 and the onshore trust package for approximately $4,154, according to the indictment. The indictment states that IFC records reflect the creation of approximately 3,000 "pure trust organizations," which the government alleges were bogus trusts, between September 1996 and February 2001. However, according to the indictment, IFC enabled their clients to retain the use, control and dominion of any income and assets they placed into their respective trusts while making it difficult or impossible for the IRS to track the true ownership of assets or income assigned to the "trusts" or deposited into trust bank accounts.

The indictment alleges that Dennis Poseley and Patricia Ensign, were the founders and operators of IFC, and that Jeffrey G. Lewis and Keith D. Priest were "trustees." John F. Poseley, Mark D. Poseley, David W. Trepas, Rachel McElhinney allegedly worked as IFC salespeople; Frank C. Williams prepared tax returns for IFC clients referred to him by the sales team, according to the indictment.

The IFC trust packages were promoted and sold at presentations throughout the United States and internationally, as well as through telephone conference calls for prospective clients and at an Internet website.

An indictment is merely an accusation. Defendants are presumed innocent until and unless proven guilty.

This prosecution is the result of an investigation by the IRS Criminal Investigation. The prosecution is being handled by trial attorneys Edward E. Groves, Larry J. Wszalek, and Mark T. Odulio of the Justice Department's Tax Division.

To search the ABA-PTL archives online or manage your subscription, go to http://mail.abanet.org/ archives/ aba-ptl.html

 

FOR IMMEDIATE RELEASE
FRIDAY, JUNE 14, 2002
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

CHICAGO FEDERAL COURT BLOCKS
NATIONWIDE FRAUDULENT TAX SCHEME

Court's Order Backs IRS-Justice Department Crackdown

WASHINGTON, D.C.- The Justice Department announced that a federal court in Chicago today barred Rex E. Black of Beecher, Ill. from selling fraudulent trust plans used to evade federal income taxes, and told him to post the court's order on the Internet. It also ordered him to turn over his lists of customers, and banned him from preparing federal income tax returns.

In addition, the order applies to affiliated organizations that Black has used to promote the trust schemes-The Liberty Network, Liberty Estate Planning, The Liberty Institute, Fiduciary Management Group, The National Council of Certified Estate Planners, Association for Certified Estate Planning Attorneys and Eagle Publications Trust.

"We are pleased that the court shut down this major scam, and that Mr. Black was ordered to post the injunction on his Internet sites. The Internet makes selling these kinds of tax scams remarkably easy, but the Department's Tax Division is going to use the Net to find and shut them down," said Eileen J. O'Connor, Assistant Attorney General for the Department's Tax Division. "People who are thinking of cheating on their taxes should be on guard - substantial civil and criminal sanctions may be imposed on those who participate in abusive schemes, and we will continue to pursue promoters who sell them."

Last year, 45 people were convicted for tax evasion for selling or using phony trusts. Defendants who were sentenced to prison faced sentences averaging more than five years. As of December 31, 2001, the IRS had 160 open criminal investigations involving trust schemes. The IRS estimates that fraudulent trust schemes cost the public about $3 billion in lost revenue each year.

According to papers the Justice Department filed in the case, Black and his organizations help customers violate federal tax laws by purporting to transfer their income and assets to bogus trusts. They also advise customers to claim tax deductions for such non-deductible items as depreciation on their homes.

The government's court papers further claimed that Black's "Liberty Institute" has trained over 2,500 people nationwide through "certification" courses resulting in a "Certified Estate Planner" designation. Upon "certification," Liberty agents then sell trust packages to customers for fees as high as $3,750, plus additional annual charges for tax return preparation, "trustee services," and secretarial services. Court papers showed that Black's National Association of Certified Estate Planners claims to have 730 Certified Estate Planners in 39 states. The IRS estimates that Black's activities cost taxpayers more than $9 million per year.

Today's court order requires Black to:
  • give the IRS his complete customer list,


  • mail a copy of the injunction and government complaint to all his customers and all people who, since 1995, attended Liberty Institute courses, which had titles such as "The Certified Estate Planner," "The Master Certified Estate Planner," "Charitable Planning Specialist," and "Elder Planning Specialist"; and


  • prominently display the injunction order on the first page of his organizations' Web sites.

The Justice Department has moved in the same case for a preliminary injunction against one of Black's associates, Michael D. Richmond. The court has allowed Richmond, who, according to court papers is currently in prison, additional time to respond to the lawsuit. A similar injunction case is pending in federal court in Boston against Kevin Mahoney, allegedly one of Black and Richmond's associates.

###

02-355

      

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 05-4656

UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
PETER ANTHONY BOND,
Defendant - Appellant.

Appeal from the United States District Court for the Western District of North Carolina, at Charlotte.

Richard L. Voorhees, District Judge. (CR-03-168)

Submitted: April 19, 2006 Decided: May 16, 2006

Before NIEMEYER, MICHAEL, and TRAXLER, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Noell P. Tin, TIN, FULTON, GREENE & OWEN, P.L.L.C., Charlotte, North Carolina, for Appellant. Gretchen C. F. Shappert, United States Attorney, Charlotte, North Carolina; Amy E. Ray Assistant United States Attorney, Asheville, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit. See Local Rule 36(c).

PER CURIAM:

Peter Anthony Bond pled guilty without benefit of a plea agreement to one count of tax evasion, 26 U.S.C. §7201 (2000), and was sentenced to a term of fifteen months imprisonment. Bond appeals his sentence, contending that the district court clearly erred in finding that the offense involved sophisticated concealment, as defined in U.S. Sentencing Guidelines Manual §2T1.1(b)(2) (1998), and making a two-level enhancement on that basis. We affirm.

In the late 1990's, Bond set up a number of so-called "pure trusts" and transferred his money and assets into these trusts with the intent of evading income tax, as he acknowledged in connection with his guilty plea. Bond professed initially that he believed income from the trusts was not taxable. Among other things, he used money from one of the trusts to purchase a Mercedes-Benz and bought a restaurant with money from another trust. He also established a Nevada limited liability corporation which was owned by one of the trusts, and through this company bought a Cessna aircraft and attempted to buy a helicopter. In addition, Bond concealed ownership of his home by having another person buy it in the name of one of his companies. The house was then sold to Bond's brother, who rented it to him. Bond also made extensive use of credit cards which were in his administrative assistant's name. Eventually, when the charges could not be paid, she was forced to file for bankruptcy.

Prior to sentencing, Bond objected to the probation officer's recommendation for an enhancement for sophisticated concealment. As defined in Application Note 4 to USSG §2T1.1, "'sophisticated concealment' means especially complex or especially intricate offense conduct in which deliberate steps are taken to make the offense, or its extent, difficult to detect." The examples provided are: "hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore bank accounts ... ." (Id.).

At the sentencing hearing, Bond submitted several affidavits in support of his objection. One was by a forensic accountant who opined that Bond could have taken more effective steps to hide his tax evasion, and did not seem to have made any effort to mask his involvement in the tax evasion scheme. Another was by his attorney, who said he had advised Bond, when the North Carolina Department of Revenue was seeking to collect back taxes from Bond, that he should file amended tax returns that accurately reflected his income because a "pure trust" was not a legal tax shelter and that Bond did so. The third affidavit was by Bond's administrative assistant, who said she helped set up the trusts, making no effort to hide Bond's involvement. She also said that she willingly let Bond use credit cards in her name "for business purposes," and did not consider herself a victim.

The district court's determination that Bond used sophisticated methods of concealment is reviewed for clear error. United States v. Kontny, 238 F.3d 815, 821 (7th Cir. 2001). Bond maintains that his use of "pure trusts" did not involve any concealment, and could not have been sophisticated since these trusts are marketed to many people. He asserts that his conduct, including under-reporting and concealing the amount of stock he owned in certain businesses, did not go beyond the level of concealment that is inherent in tax evasion. However, because Bond used trusts and corporations to mask his ownership of automobiles, an airplane, a restaurant, and his attempted purchase of a helicopter, we are satisfied that he tried to hide his assets and he engaged in "deliberate steps ... to make the offense, or its extent, difficult to detect." Therefore, we conclude that the district court did not clearly err in finding that the enhancement was warranted in his case.

We therefore affirm the sentence imposed by the district court. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the court and argument would not aid the decisional process.

AFFIRMED

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