Jesse Cota pleads guilty!

[Demosthenes]

FOR IMMEDIATE RELEASE
TAX

THURSDAY, APRIL 26, 2007

FORMER IRS DISTRICT DIRECTOR PLEADS GUILTY TO $1.3 MILLION TAX FRAUD

WASHINGTON – A former Internal Revenue Service (IRS) district director, pleaded guilty today to conspiring to defraud the United States through his involvement in a tax fraud scheme promoted by the Topeka, Kansas-based “Renaissance, The Tax People, Inc.,” the Justice Department and the Internal Revenue Service announced. During a hearing before U.S. District Judge Carlos Murguia in Kansas City, Kan., Jesse Ayala Cota admitted defrauding the U.S. Treasury of more than $1.3 million and to earning more than $300,000 from his participation in the scheme.

Cota, 65, of Vista, Calif., admitted in his plea agreement that from 1997 though April 2002, the conspirators, through Renaissance, operated a scheme to defraud the government and individuals by marketing a program designed to sell illegal tax deductions through false and misleading representations. His co-conspirators, Todd Eugene Strand and Daniel Joel Gleason, previously pleaded guilty to the same fraudulent scheme. Additionally, Cota admitted that during his participation in the conspiracy, those involved prepared or had others prepare false federal income tax returns resulting in a tax loss of approximately $1.3 million.

“The Justice Department’s Tax Division has made it a priority to stop tax fraud schemes by identifying, investigating and prosecuting those who promote them and those who use them,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “These schemes are a fraud on the federal Treasury, and an insult to all who pay the taxes the law requires.”

Cota also admitted that he and his co-conspirators falsely assured their clients and others that Renaissance’s tax system was legal. Cota acknowledged that on Oct.16, 2000, a co-conspirator sent an e-mail message to customers falsely asserting that there existed written endorsements from “over 2,000 tax attorneys, enrolled agents and CPAs (certified public accountants) that every strategy contained in the Tax Relief System is absolutely sound, unassailable and proven over the past 40 years.” The e-mail also falsely claimed that “[t]he

training offered by Renaissance, the Tax People, through the Tax Relief System . . . was approved for continuing education credit for CPAs in all 50 states.”

“Mr. Cota was the director of Renaissance’s so-called ‘Tax Dream Team,’” said Eric Melgren, U.S. Attorney for the District of Kansas. “Renaissance used Cota’s credentials as a former district director for the Internal Revenue Service to lend the tax fraud scheme legitimacy and to induce people to join and to remain members.”

Renaissance used Cota’s IRS credentials, including his prior service as District Director, to induce people to join Renaissance, to assuage their concerns, and to keep them as members.

“This is an example of someone implying he has ‘insider information’ to help others enrich themselves by buying into his bogus tax avoidance system. However, what he sold was long-term legal and financial problems for those who bought his advice,” said IRS Criminal Investigation Chief Eileen C. Mayer. “Don’t be misled by promises of some secret path known only to insiders that is supposed to lead you to freedom from paying income taxes. There is no such path and there are no such secrets.”

Today’s plea brings the number of individuals who have pleaded guilty to felony charges in this and other Renaissance-related cases to seven, including Strand, Gleason, Thomas Steelman, Frankie Ruth, Elizabeth Crotts, and Alexander Federico.

Cota faces a potential maximum sentence of five years in prison followed by up to three years of supervised release, a $250,000 fine, and liability for the costs of prosecution. U.S. District Judge Carlos Murguia scheduled sentencing for January 2008. This case was investigated by the Internal Revenue Service, Criminal Investigation Division and the U.S. Postal Inspection Service.

[jkeeb]

Cota faces a potential maximum sentence of five years in prison followed by up to three years of supervised release, a $250,000 fine, and liability for the costs of prosecution.

How about 5 years at Mr. Ed's place?

[Demosthenes]

How lame can the DOJ get?

Cota was re-indicted in December on 104 felony counts and they cut a deal with him for 1 single count of conspiracy?

[Quixote]

Jesse Ayala Cota admitted defrauding the U.S. Treasury of more than $1.3 million and to earning more than $300,000 from his participation in the scheme.

I hope he wasn't spending much time on the scheme. He would have done much better by joining one of the big accounting firms.

[LAprosecutor]

I don't know anything about this plea other than what I've read, but it's common to get a plea to a single count even where an indictment contained many more than that. If the loss amount is just over $1 million, then it won't matter under the advisory Sentencing Guidelines whether there were 100 counts or 1 -- he would be looking at less than 5 years in any event given his (presumed) criminal history category of 1. The loss amount, not the number of counts, generally drives a sentence. If a judge follows the Guidelines, then a defendant convicted of 100 counts of tax evasion totaling 1 million dollars in losses will receive the same sentence as someone convicted of one count of tax evasion with a loss of 1 million dollars. All this one-count plea instead of a 100-count plea does, is limit the judge's ability to go way beyond the sentencing guidelines, which rarely happens in any event. It's a non-issue.

[Demosthenes]

I don't know anything about this plea other than what I've read, but it's common to get a plea to a single count even where an indictment contained many more than that. If the loss amount is just over $1 million, then it won't matter under the advisory Sentencing Guidelines whether there were 100 counts or 1 -- he would be looking at less than 5 years in any event given his (presumed) criminal history category of 1. The loss amount, not the number of counts, generally drives a sentence. If a judge follows the Guidelines, then a defendant convicted of 100 counts of tax evasion totaling 1 million dollars in losses will receive the same sentence as someone convicted of one count of tax evasion with a loss of 1 million dollars. All this one-count plea instead of a 100-count plea does, is limit the judge's ability to go way beyond the sentencing guidelines, which rarely happens in any event. It's a non-issue.

How about with a mixed bag of charges?

1 count of conspiracy

vs.

1 count of conspiracy +
56 counts of aiding and assisting in the preparation of false returns +
47 counts of mail and wire fraud

[The Observer]

Jesse Ayala Cota admitted defrauding the U.S. Treasury of more than $1.3 million and to earning more than $300,000 from his participation in the scheme.

I hope he wasn't spending much time on the scheme. He would have done much better by joining one of the big accounting firms.

Except that Mr. Cota had a difficult time getting the attention of the big accounting firms. Apparently they felt he didn't have what it took to be a member of their team. Given the fact that he got involved with this criminal scheme almost immediately upon his leaving the IRS, I would have to say that those accounting firms were appropriate in their discretion.

[LAprosecutor]

I don't know anything about this plea other than what I've read, but it's common to get a plea to a single count even where an indictment contained many more than that. If the loss amount is just over $1 million, then it won't matter under the advisory Sentencing Guidelines whether there were 100 counts or 1 -- he would be looking at less than 5 years in any event given his (presumed) criminal history category of 1. The loss amount, not the number of counts, generally drives a sentence. If a judge follows the Guidelines, then a defendant convicted of 100 counts of tax evasion totaling 1 million dollars in losses will receive the same sentence as someone convicted of one count of tax evasion with a loss of 1 million dollars. All this one-count plea instead of a 100-count plea does, is limit the judge's ability to go way beyond the sentencing guidelines, which rarely happens in any event. It's a non-issue.

How about with a mixed bag of charges?

1 count of conspiracy

vs.

1 count of conspiracy +
56 counts of aiding and assisting in the preparation of false returns +
47 counts of mail and wire fraud

Crimes with economic losses are generally grouped without regard to the number or type of counts of conviction. If you have apples and oranges kinds of charges -- kiddie porn and tax crimes, for instance -- then each category of crimes is grouped and calculated independently, the highest category total is used, and a few additional points may be added for any unused categories.

For example, if the tax crimes resulted in an offense level of 20 and the kiddie porn resulted in an offense level of 15, the court would use the 20 offense level and might, depending on the Guidelines, add a point or two for the kiddie porn charges, bringing the total offense level to 21 or 22. But the number of counts of tax crimes and the number of kiddie porn counts would generally not affect the calculation (whereas the number of victims, number of downloads, amount of loss, etc. would affect each category's calculation).

The bottom line is that conspiracy, mail fraud, and tax charges (all of which are measured by economic loss under the Guidelines) will be grouped together in a single category and the total loss from the entire scheme -- not just the single count of conviction -- will be the basis for the Guideline sentence. The only difference is the statutory maximum -- 5 years versus 500, for example. If the Guideline were 3 years, for example, then it would be unusual for a plea to include more than one five-year count.

[Demosthenes]

And let us not forget what the nature of the deal he cut may be. He gets this sentence but he will be spending a lot of time in court, rolling over on everyone else and making their lives miserable.

In any situation with a large number of perpetrators, the first to make a deal gets off the lightest and everyone else gets progressively hosed. And if it lets the government go after more and bigger fish....... well, you'll have your answer.

My guess is you don't know who Jesse Cota is. Also, he's either the sixth or seventh person to plead guilty in the case.

The fish don't get a whole lot bigger.

[Demosthenes]

You silly goose, you didn't mention that he was the latest in a long line of indicted and convicted conspirators. Nor was there any indication of his size, alhtough his fishiness was self-evident.

Please remember, even the most erudite of people here may not know of, or keep track of every major case that comes along, or who the major players are.

The Renaissance case is huge. The criminal forfeiture being sought by the government is $84 million. They effectively ran a publicly traded tax shelter pyramid scheme and Jesse Cota was the star of their "Dream Team." He had been a high level exec (District Director) at the IRS prior to joining Renaissance.

[Demosthenes]

Smart move.