Scams & Frauds Exposed

Spam Free

Financial & Tax Fraud
Education Associates, Inc.

A Non-Profit Corporation

Quatloos! > Tax > Tax Investigation > Xelan

Xelan

IRS reaches agreement with
Doctors Benefit Insurance Company, LTD.

IR-2005-114, Oct. 3, 2005

WASHINGTON – The Internal Revenue Service announced today that it has reached an agreement with Doctors Benefit Insurance Company, Ltd. (“DBIC”), assignee of xélan Insurance Company Limited. The agreement resolves various issues relating to group supplemental insurance programs offered to members of xélan, The Economic Association of Health Professionals, through four separate trusts created by xélan, Inc.

Without admitting or denying wrongdoing or legal liability under the Internal Revenue Code, DBIC agreed to cease operations and return approximately $500 million to participants in the programs. DBIC is being required to withhold taxes on the payments, which will be taxable to the participants when received. Additionally, under the terms of the agreement, DBIC agreed to make a $2.34 million non-deductible payment to the Internal Revenue Service to resolve issues arising in connection with its issuance of the supplemental policies.

The agreement included a disclosure authorization that allowed the IRS to issue this release. Section 6103 of the Internal Revenue Code strictly limits the IRS in disclosing taxpayer information.

* * * * * * * * * * *

DOCTORS BENEFIT INSURANCE COMPANY, LTD.

Dear DBIC Participant:

After substantial negotiations with the IRS, DBIC has entered into a settlement agreement with the IRS regarding its four supplemental insurance policies. Pursuant to the agreed civil settlement, DBIC will commence liquidation proceedings, pay $2.34 million to the IRS, and distribute as follows:

  • Current individual certificate holders will receive their current certificate values, calculated as of the date DBIC receives a Certificate of Intent to Dissolve from the Barbados Registrar of Companies;

  • Individuals whose policies were terminated for failure to make minimum premium payments will receive their certificate values at the time of termination, less the applicable percentage that would have been deducted if they had kept paying minimum premiums (4% or 6% of the minimum $4000 premium);

  • Individuals who have already received their experience adjusted refund benefits will receive the difference, if any, between that refund amount and the certificate value at the time the refund was calculated.

  • Individuals presently receiving claims benefits will receive lump sum distributions rather than continuing with monthly payments; and there will be no downward adjustment because of increases to present value.

After DBIC has met all of its obligations through the liquidation process, if there are funds left over, they will be distributed to the individual certificate holders mentioned above pro-rata. It is contemplated that these distributions will take place no later than December 15, 2005.

The IRS will issue a press release which states that DBIC will cease operations and pay the non-deductible amount set forth above to the IRS, but also makes clear that DBIC is not admitting or denying wrongdoing or legal liability under the Internal Revenue Code. While not addressed in the IRS press release, the agreement also resolves the tax treatment of premium payments for DBIC’s affected certificate holders and their employers.

Current Certificate Holders

  • Current certificate holders will be subject to tax on the full amount of the distributions from DBIC in the year of receipt.

  • If the income is properly reported in the year of receipt, the IRS will allow in full the deductions claimed for premiums paid with respect to the DBIC supplemental insurance policies for all years in which premiums were paid.

    • Certificate Holders Who Have Already Received Experience Adjusted Refunds Prior to DBIC’s Settlement with the IRS

  • The deductions for premiums paid on supplemental insurance policies will be allowed so long as the refunds were reported as income in the year of receipt.

The settlement agreement provides that the certificate holder will obtain the benefit of a single-level tax (that is, the distribution is being made directly to the certificate holder rather than the employer that paid the premium, so there is no tax effect at the employer level). Further, the agreement provides that the distribution will be reportable by the certificate holder on line 21 of the Form 1040 as “other income,” which treatment eliminates potential employment tax consequences (no FICA or FUTA withholding or contributions need by made by the employer). Finally, no penalty will be imposed on either the employer or the certificate holder, nor will any interest be due, provided the certificate holder timely files and pays his/her tax for the year in which the distribution is received.

DBIC has agreed to withhold 20% of the amount paid in 2005 and/or later years to certificate holders and to pay this amount over to the IRS at the time of distribution. The certificate holder will receive from DBIC a 1099MISC form with appropriate detail of this distribution. Each certificate holder will be entitled to claim on his/her tax return for the year of receipt a credit for taxes paid with respect to the withheld amount. Given that marginal tax rates exceed 20%, certificate holders may wish to consult with their tax advisors regarding whether any additional amounts should be paid to the IRS as estimated payments for the year of receipt.

If you have any questions, please feel free to contact Michael C. Durney, an attorney who represents many of the certificate holders, and who is familiar with this settlement. He can be reached by email at office@mdurney.com, or if necessary, by telephone at 202 965-7744.

Press Releases

U.S. Department of Justice Press Releases

November 4, 2004 – Court freezes $500 million that Justice Department alleges was paid to firms running fraudulent insurance and charity schemes -- http://www.usdoj.gov/opa/pr/2004/November/04_tax_732.htm

Doctors Benefit Insurance Co. Ltd.’s Press Releases

December 3, 2004 – Press release after U.S. District Judge ruled against the DOJ’s motion to enter a preliminary injunction in the case; also, the U.S. District Judge dissolved the receivership for xelan.


Links to Other Websites Covering the xelan Case
(links added by request to us)

doctorsbenefit.com – Information website by Doctors Benefit Insurance Company, Ltd. – http://doctorsbenefit.com

fraudsandscams.com – Hosts on-going article: Xelan: A Bitter Pill for Doctors, by Bill E. Branscum -- http://www.fraudsandscams.com/Xelan.htm

xelanvictims.com – Informational website for xelan victims by plaintiffs’ attorney Mike Johnston – http://xelanvictims.com

Links to News Articles Covering the xelan Case

The following are links to newspapers and magazines known to be actively following the xelan matter:

San Diego Union TribuneVarious Articles, by Mike Freeman -- http://www.signonsandiego.com (search “xelan”)

New York TimesVarious Articles, by Lynne Browning (search “xelan”)

ForbesThe doctors’ deductions: Hundreds of doctors and dentists are undergoing a painful IRS exam, September 20, 2004, by Janet Novak (search “xelan”)

Washington PostVarious Articles, by Albert B. Crenshaw (search “xelan”)

Tax Analysts – Various Articles, by Sheryl Stratton (search “xelan”)

The DOJ’s Civil Injunction Case

USA v. L. Donald Guess, et al., Case No. 04-CV-2184-W (U.S.D.Ct.So.Cal. at San Deigo, 2004) – The main U.S. Department of Justice case against the xelan companies and promoters.

Follows are some of the key documents filed in the case, in reverse chronological order by YY-MM-DD. We have omitted purely administrative filings. The entire file is available online via Pacer at http://pacer.casd.uscourts.gov/

Notice of dismissal 2004-12-16.pdf NEW!

Ord (Final) on Prelim Inj 2004-12-15.pdf NEW!

04-11-30_USAReplyMemo.pdf

04-11-24_RecPrelimReport_Truncated.pdf

04-11-24_RecPrelimReport_Full.pdf

04-11-24_OrdApptAttyRec.pdf

04-11-24_IntervenAppInjunct.pdf

04-11-23_DebtSumBkrpStatus.pdf

04-11-19_xelanOppInj.pdf

04-11-19_RobertsMemoRespShowCause.pdf

04-11-19_OppXelanFound.pdf

04-11-19_MellonMemoRespInj.pdf

04-11-19_GuestResponseInj.pdf

04-11-19_DrsBenInsCo-MemoRespPI.pdf

04-11-19_Decl-Zimbl.pdf

04-11-19_Decl-Wakefield.pdf

04-11-19_Decl-Pettinger.pdf

04-11-19_Decl-Patton.pdf

04-11-04_BuckRespShowCause.pdf

04-10-29_USAComplaint.pdf

The Selznick Case

Selznick, et al., v. Xelan, Inc., et al., Case No. 04-CV-1038-L (U.S.D.Ct.So.Cal. at San Deigo, 2004) – Civil lawsuit by xelan client for fraud, etc., in connection with an ERISA plan.

Follows are some of the key documents filed in the case, in reverse chronological order by YY-MM-DD. We have omitted purely administrative filings. The entire file is available online via Pacer at http://pacer.casd.uscourts.gov/

04-08-24_IndyLifeAnswer.pdf

04-07-21_GuessMoDism.pdf

04-07-21_GuessMoDismBr_21Jul04.pdf

04-05-20_Complaint.pdf


Xelan Disability Insurance Trusts Examined
- Xelan of San Diego is under investigation for selling tax shelters to physician groups nationwide... Investigation

Tony-the-Wonder-Llama
Have a question for Quatloos?
Ask
Tony-the-Wonder-Llama

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.

Articles

Financial Firm Files Chap. 11 Bankruptcy  Xelan's tax shelter draws IRS attention (July 15, 2004)

Report of investigation of Enron Corporation and related entities regarding Federal Tax and Compensation issues.

Volume 1 | 2 | 3

Spam-Free Site

We do NOT spam. Various multi-level marketers & other criminals have recently sent out spam impersonating us, & having our return email address, so that people would complain about spam and cause us to be shut down (a/k/a "joe job"). These multi-level marketers and other criminals have engaged in this form of cyber-terrorism because our telling the truth about their fraudulent schemes was hurting their ability to sell to new victims. Fortunately, our ISP now recognizes that these fake spams are bogus and ignores them, and additionally we are duplicating this site on numerous other servers (including "hardened" servers as well as our own proprietary servers) so that we cannot be harmed by these multi-level marketers and other criminals. Death to Spammers!

Support Quatloos

bottom
 

© 2002-2008 by Financial & Tax Fraud Associates, Inc.. All rights reserved. No portion of this website may be reprinted in whole or in part without the express, written permission of Financial & Tax Fraud Associates, Inc. This site is http://www.quatloos.com. Legal issues should be faxed to (877) 698-0678. Our attorneys are Grobaty & Pitet LLP (http://grobatypitet.com) and Riser Adkisson LLP (http://risad.com).

Asset Protection Book Accounts Receivable Financing Equity Indexed Annuities Lost Eye Book
www.assetprotectionbook.com www.farbook.com www.eiabook.com Lost Eye Book

Equistrip - Business assets financing
www.equistrip.com

Lost Eye
www.losteye.com

Website designed and maintained by John Barrick

Google
www Quatloos!