Who will be this year's tax season indictment?

[Demosthenes]

INTERNAL REVENUE SERVICE
FOR IMMEDIATE RELEASE
TAX
TUESDAY, APRIL 3, 2007

JUSTICE DEPARTMENT AND INTERNAL REVENUE SERVICE
HIGHLIGHT TAX ENFORCEMENT RESULTS

WASHINGTON – The Department of Justice and the Internal Revenue Service (IRS) today announced highlights of their work during the past year to defend and enforce federal tax laws.

Since 2001, the Justice Department’s Tax Division has brought to justice hundreds of people who evaded their federal taxes or otherwise violated the internal revenue laws. The division has obtained hundreds of civil injunctions to stop the promotion of tax scams and the preparation of false and fraudulent tax returns, and has criminally prosecuted numerous tax fraud scheme promoters.

To curb the marketing of tax shelters to corporations and individuals, the Justice Department’s Tax Division has helped the IRS to identify and pursue nearly every customer who engaged in certain abusive tax shelter transactions, while at the same time pursuing the professionals who designed, facilitated or accommodated the underlying tax shelter transactions.

“Taxes are how we pay for what we ask our government to do for us. People who pay what the law requires deserve the assurance that those who don’t, and those who promote or facilitate tax evasion, will not get away with it,” said Eileen J. O’Connor, Assistant Attorney General for the Tax Division. “The Tax Division is using all available law enforcement tools to identify and punish tax offenders and to recover tax revenues.”

“The vast majority of Americans pay their taxes honestly and accurately,” said IRS Commissioner Mark W. Everson. “We enforce the law because people deserve to know their neighbors and competitors are doing the same.”

Bringing Fraudulent Tax Return Preparation to a Halt

The Tax Division continues to bring civil injunction suits to stop tax preparers who habitually prepare bogus tax returns. In response to the government’s efforts, courts across the country have barred tax preparers from preparing inaccurate returns.

Since January 2001, the Justice Department has sought and obtained injunctions against more than three dozen tax return preparers, including 18 since January 2006. It expects to obtain many more injunctions throughout the year. The United States recently has obtained injunctions that barred the following schemes by tax preparers:

Filing tax returns that falsely report “zero income”;
Claiming that only income from a foreign source is taxable, using a spurious interpretation of Section 861 of the Internal Revenue Code;
Claiming personal living expenses as business expenses;
Preparing amended tax returns to claim tax refunds without customers’ knowledge or consent; and
Asserting that casino gaming proceeds paid to Native Americans are exempt from federal income tax.

The Department of Justice also has obtained injunctions against employers who fail to withhold, account for, and pay over employment and withholding taxes and against return preparers who prepare related false returns.

Stopping Tax Evasion

During fiscal year 2006, the Justice Department’s Tax Division authorized prosecutions of nearly 1,200 defendants for tax crimes, an increase of more than 34 percent over the number authorized for prosecution in 2001. The Tax Division’s criminal enforcement priorities include investigating schemes that involve:

Using trusts or other entities to conceal control over income and assets;
Shifting assets and income to hidden offshore accounts;
Making false statements to the IRS in order to claim tax refunds;
Selling and promoting fraudulent tax avoidance schemes;
Using frivolous justifications for not filing truthful tax returns;
Failing to withhold, report and pay payroll and income taxes;
Failing to report income on individual and corporate returns; and
Failing to file tax returns.

Stopping the Promotion of Tax Fraud Schemes

Since April 2006, the Justice Department and the IRS have vigorously pursued the promoters of tax fraud schemes to stop their activity and to warn would-be promoters that promoting tax fraud schemes leads nowhere but to a federal court injunction or to a long stay in jail.

Since January 2001, the Justice Department has sought and obtained injunctions against nearly 200 promoters of tax fraud schemes, including 66 since January 2006. These injunctions have stopped promoters from selling tax evasion schemes on the Internet, at seminars, or though other means. The tax-scam promoters the government has sought to enjoin have cost the U.S. Treasury an estimated $2.5 billion, and have had an estimated 500,000 customers. Among the government’s results in this area are:

In May 2006, David Carroll Stephenson was sentenced to eight years in prison in connection with his promotion of a tax evasion scheme using “pure equity trust” organizations.
In June 2006, a federal judge sentenced five defendants, Dennis Poseley (seven years), David Trepas (five years), Patricia Ensign (18 months), Rachel McElhinney (16 months), and Keith Priest (18 months), to prison terms for their respective roles in promoting a tax evasion scheme that used offshore trusts and bank accounts.
On June 22, 2006, District Judge Elizabeth Kovachevich issued an injunction permanently barring Douglas Rosile, a former certified public accountant whose clients included Wesley Snipes, from preparing federal income tax returns for others and from promoting a frivolous tax argument based on Section 861 of the Internal Revenue Code. Among the documents the government filed in court was a return submitted to the IRS on behalf of Snipes claiming a bogus $7.3 million tax refund.
In November 2006, a federal judge sentenced Milton H. Baxley II to 18 months in prison and fined him $10,000 for contempt of court. On August 9, a jury convicted Baxley on two counts of violating an injunction order barring him from promoting a tax fraud scheme.
In December 2006, a federal judge sentenced Thomas Miller to nearly four years in prison for conspiring to defraud the United States in connection with a “pure trust” tax fraud scheme. Miller operated Freedom Education Center, a business in California that sold anti-tax literature and helped people create bogus trusts.

Curbing High-End Tax Shelters

During the past year, the Justice Department and the IRS have continued their vigorous enforcement efforts against the promoters and facilitators of abusive tax shelters. Abusive shelters for large corporations and high-income individuals have cost the U.S. Treasury billions annually, according to Treasury Department estimates. The Tax Division also has had great success in federal court defending the U.S. Treasury against tax shelter-related claims of large companies and individual investors. The Tax Division is currently litigating approximately 86 tax shelter cases or groups of cases, including 47 separate cases involving the Son of BOSS tax shelter. Among the successes during the past year in this area are the following:

In December 2006, Utah businessman Chandler S. Moisen pleaded guilty to conspiracy and wire fraud in connection with a criminal probe of tax shelters promoted by a group of KPMG, LLP executives.
In January 2007, Steven Michael Acosta, a former KPMG manager, pleaded guilty to four felony tax charges in connection with his involvement in KPMG’s promotion of tax shelter transactions.
The Supreme Court let stand the decision of the U.S. Court of Appeals for the 6th Circuit that the COLI (corporate-owned life insurance) program The Dow Chemical Company used to claim more than $33 million of tax deductions was an economic sham.
The Supreme Court also let stand the decision of the U.S. Court of Appeals for the Federal Circuit that the IRS was right to disallow the $375 million loss Coltec Industries claimed from its “contingent liability” tax shelter.
The U.S. Court of Appeals for the 2nd Circuit held that the IRS properly disallowed the losses General Electric Capital Corporation claimed from its participation in an equipment leasing tax shelter, resulting in $62 million in additional income taxes.
The U.S. District Court for the Middle District of North Carolina granted summary judgment for the United States in the first Lease In - Lease Out (LILO) tax shelter to go to court, BB&T Corporation v. United States.
The U.S. Court of Appeals for the Federal Circuit ruled for the United States on an issue raised by tax shelter participants in several tax shelter refund suits in A D Global Fund, LLC v. United States. The court ruled that the statute of limitations on the return of a person who participates in a tax shelter partnership does not expire at least before the statute of limitations on the partnership’s return does.

Coordinated Civil and Criminal Proceedings

The government brings both its civil and its criminal tools to bear in the fight against tax fraud. An ongoing tax scam causes continuing harm to the federal Treasury and it leaves participants owing taxes, interest, and often, penalties. The government does not wait until a criminal case has been developed to take action to stop the scam. Rather, the Justice Department brings civil injunction suits to stop both the promotion of tax scams and the preparation of false or fraudulent returns. Additionally, in appropriate cases, the Justice Department brings criminal charges against the promoters, preparers, and scam participants to punish them for their unlawful conduct.

Further details about these and other tax enforcement cases are available on the Tax Division’s Web site http://www.usdoj.gov/tax/ , on the IRS’s Web site http://www.irs.gov/, and on the IRS Criminal Division’s Web site http://www.ustreas.gov/irs/ci/ .

The Justice Department encourages anyone who has information about suspected tax fraud to report it to the IRS Web site at http://www.irs.gov and click on the links “Contact IRS” and “How Do You Report Suspected Tax Fraud Activity.”

[.]

And the winner (corporate division, with publicity value worthy of an indictment based on an individual tax return) is:

Joe Francis, the "Girls Gone Wild" founder, was indicted on federal tax evasion charges "for illegally deducting more than $20 million in phony business expenses from his 2002 and 2003 corporate tax returns," reports the Smoking Gun.com.

Francis, 34, sought to conceal income through the use of offshore companies and nominees as outlines in the court documents, link below.

Allegedly Francis "transferred $15 million from one offshore bank account to a California brokerage account in the name of a Cayman Islands corporation he controlled."

Below you'll find a link to the Smoking Gun where a copy of the indictment filed against Francis is posted. Francis, if convicted of the federal charges, faces a maximum of 10 years in prison and fines of up to $500,000.

Article

[LPC]

The DOJ Press Release:

FOR IMMEDIATE RELEASE
WEDNESDAY, APRIL 11, 2007
http://WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

Creator of Girls Gone Wild Indicted for Tax Evasion

WASHINGTON - A federal grand jury in Reno, Nev., returned an indictment charging Joseph R. Francis with tax evasion, the Justice Department and Internal Revenue Service (IRS) announced today. The indictment alleges that Francis, whose companies Mantra Films Inc. and Sands Media Inc. produce and sell the Girls Gone Wild videotapes and DVDs, deducted more than $20 million in false business expenses on the companies’ 2002 and 2003 corporate income tax returns.

According to the indictment, Francis used offshore bank accounts and entities purportedly owned by others to conceal income he earned during 2002 and 2003. The indictment also alleges that Francis transferred more than $15 million from an offshore bank account to a brokerage account in Irvine, Calif., held in the name of Rothwell Limited, a Cayman Islands corporation, that Francis controlled.

If convicted, Francis faces up to ten years in prison and fines of up to $500,000. Francis is scheduled to appear on May 22, 2007 at 3 p.m. before U.S. Magistrate Judge Robert A. McQuaid Jr. in Reno, Nev.

The charges contained in the indictment are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.

More information about the Justice Department’s efforts against income tax evaders can be found at http://www.usdoj.gov/tax/taxpress2007.htm.

###

07-237

[grixit]

... after downing several beers in quick succession, and egged on by chants of "show us!", the island bankers gleefully exposed the account records.

[The Observer]

... after downing several beers in quick succession, and egged on by chants of "show us!", the island bankers gleefully exposed the account records.

No, no, no - you were watching the other show - "Bankers You Thought You Could Trust Gone Wild."

[grixit]

Ooh, there's a plot for a movie. A scammer discovers that a fast moving forest fire recently overran a national park and killed a couple dozen people at a family reunion. Scammer uses the personal information of the deceased to get money. Surviving family members find out. Turns out said family was heavily into voodoo. Next night, scammer is awakened by pounding on the door and moaning voices outside...

[Neckbone]

Well, of course the dead are entitled to refunds. It goes with the right to vote (Chicago), the right to drive (McAllen) and the right to be elected Senator from Missouri.

Neckbone