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Convicted
FOR IMMEDIATE RELEASE
THURSDAY, SEPTEMBER 8, 2005
WWW.USDOJ.GOV |
TAX
(202) 514-2007
TDD (202) 514-1888 |
FIVE DEFENDANTS CONVICTED OF TAX CRIMES
IN CONNECTION WITH PROMOTION OF ABUSIVE TRUST SCHEME
WASHINGTON, D.C.—Five persons associated with Innovative Financial Consultants
(IFC) were convicted of tax crimes in connection with the promotion of a tax
evasion scheme utilizing abusive trusts called “pure trust organizations,”
the Justice Department and Internal Revenue Service (IRS) announced today. Today’s
convictions resulted after a six-week trial that was prosecuted by attorneys
in the Justice Department’s Tax Division.
IFC, a consulting company based in Tempe, Arizona, advanced its scheme through
several avenues, including domestic and offshore seminars; a promotional website;
and an interactive telephone conference line. As a result of the prosecution,
the following individuals were convicted:
-
Dennis Poseley, a former resident of Phoenix, Arizona and co-founder of
IFC on charges of conspiracy to defraud the government and willful failure
to file tax returns;
-
Patricia Ensign, a former resident of Phoenix, Arizona and co-founder of
IFC on charges of willful failure to file tax returns;
-
David Trepas, a former resident of Scottsdale, Arizona and consultant for
IFC on charges of conspiracy to defraud the government and willful failure
to file tax returns;
-
Rachel McElhinney, a resident of Scottsdale, Arizona and consultant for
IFC on charges of willful failure to file tax returns;
- Keith Priest, a former resident of Tempe, Arizona and a “trustee”
for IFC on charges of willful failure to file tax returns.
Ensign and Priest were acquitted on other charges and the jury was not able
to reach a verdict as to the conspiracy charge against McElhinney.
“People in the business of encouraging others to evade their tax obligations
and to hide income and assets from the IRS can expect to be prosecuted and convicted,”
said Assistant Attorney General Eileen J. O’Connor of the Justice Department’s
Tax Division. “Attorneys with the Justice Department’s Tax Division
are working tirelessly to investigate and prosecute the promotion and use of
tax evasion schemes.”
According to evidence the government presented at trial, from 1996 through early
2003 the defendants received $4.7 million dollars in fees from their sale of
2,000 “pure trusts,” falsely claiming that their customers could
lawfully avoid income taxes by placing their income and assets into either an
“onshore” or “offshore” trust package. Evidence introduced
at trial showed that IFC’s trusts enabled customers to retain the use,
control, and dominion of any income and assets they placed into their respective
trusts, while making it difficult for the IRS to track the true ownership of
assets or income assigned to the “trusts” or deposited into trust
bank accounts. The evidence revealed that the defendants charged IFC customers
approximately $10,500 for the offshore trust package and approximately $4,154
for the onshore trust package. Trial evidence showed that IFC was a prominent
vendor with the Institute of Global Prosperity (IGP). At offshore seminars hosted
by IGP, defendant Dennis Poseley promoted IFC’s trust schemes to thousands
of people.
“The IRS has ramped up its enforcement efforts, particularly in the area
of offshore and domestic trusts established for the purpose of escaping tax
obligations,” said Nancy Jardini, IRS Chief, Criminal Investigation. “We
will continue to pursue promoters of this unlawful activity to assure the taxpaying
public that when they pay their taxes, they can be confident that neighbors
and business competitors are doing the same.”
The defendants were also convicted of willful failure to file tax returns reporting
the substantial amount of gross income they received from the sale of their
trust schemes. Defendant Dennis Poseley was convicted of five counts of willful
failure to file tax returns for the 1997–2001 tax years. Patricia Ensign
was convicted of two counts of willful failure to file tax returns for the 2000-2001
tax years. Defendants David Trepas and Rachel McElhinney were convicted of four
counts of willful failure to file tax returns for the 1998–2001 tax years.
Defendant Keith Priest was convicted of two counts of willful failure to file
tax returns for the 2000–2001 tax years.
“I applaud the efforts of these Department of Justice attorneys. By working
diligently on prosecuting these types of complicated tax cases, they allow us
to dedicate our resources here in Arizona to prosecute more violent crimes,”
said Paul K. Charlton, U.S. Attorney for the District of Arizona. “This
type of relationship allows more cases to be brought to justice in our district.”
At trial, the government called approximately 35 witnesses, including an undercover
IRS investigator and introduced over 300 exhibits. Three cooperating co-defendants
who earlier pleaded guilty to the conspiracy charge John Poseley, Mark Poseley,
and Jeffrey Lewis, also testified, describing their respective roles in the
sale and promotion of the trust schemes.
On the conspiracy count, each defendant faces a maximum sentence of five years
imprisonment and/or a $250,000 fine. On each count of willful failure to file
an individual income tax return, the defendants face a maximum sentence of 12
months and/or a $100,000 fine.
“This verdict reaffirms that establishing trusts for the purpose of evading
taxes is a crime,” said Debra King, Special Agent in Charge, IRS Criminal
Investigation, Field Office in Phoenix. “This field office will continue
to actively pursue investigations on those individuals selling or using abusive
trusts.”
This case was tried by Department of Justice Tax Division attorneys Larry J.
Wszalek and Mark T. Odulio, and investigated by agents of the IRS Criminal Investigation
Division.
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05-465