The promoter did not file returns while hawking the various schemes. On appeal, he unsuccessfully challenged the government's introduction of evidence that he personally failed to file returns.
The 1041 scheme and the bogus "claim of right" deduction are old news, but the non-profit clubs owning LLCs is a new twist:
The third scheme was more complex. The group formed LLCs for their clients,
which were, in turn, purportedly owned by non-profit clubs. The LLCs had no
obligation to pay tax but rather were mere pass-through entities, required only to
report to the Internal Revenue Service (IRS) the amount of income that had passed
through to the owners, i.e., the non-profit clubs. According to the conspirators, the
clubs had no obligation to pay taxes by virtue of their status, nor could they be audited
by the IRS. Leiter therefore described them as “black hole[s].” Trial Tr. at 719:9-14.
Clients would then use the non-profits’ bank accounts as their own, freely taking
money for their personal use.