IRS Successfully Prosecuting Tax Evaders
August 6, 2010
In the past two weeks, the IRS has announced lengthy prison sentences in cases involving conspiracy to defraud the U.S. government and related charges. Acting Assistant Attorney General John A.Dicco of the Justice Departments Tax division believes that recent sentences send a powerful message stating that, “Those who promote tax fraud schemes will be investigated, prosecuted and convicted, and they also face substantial prison sentences.”
On Thursday, July 29, the IRS announced that four out of eight Pinnacle Quest International (PQI) defendants have been sentenced to prison terms for charges relating to tax fraud, wire fraud, and money laundering. These individuals were sentenced between five to twelve years in prison.
PQI was an umbrella organization for a number of businesses operating tax and credit card debt elimination scams. One PQI company sold phony strategies for tax evasion and worked with clients to create sham businesses in the U.S. and Panama. Another provided a “reliance defense” in the form of frivolous correspondence to show good faith if prosecuted. Still other PQI vendors charged customers for ineffective letters to creditors, claiming to reduce credit card debt. Vendor MYICIS operates a “warehouse bank” where customers are able to make deposits into a joint bank account to hide assets from the IRS.
PQI claimed to sell only CDs and tickets to offshore conferences, but the government demonstrated that vendor customers were required to join PQI at a rate of $1,350 to $18,750. Four more PQI defendants are expected to be sentenced in the next two months.
Within a week, the IRS announced that John S. Lipton has been sentenced to 70 months in prison and ordered to pay restitution of $2,915,427.16 to the IRS after pleading guilty to conspiracy to defraud the United States and tax evasion on April 8th.
Lipton was a founder and principle member of the Genesis Fund which operated a ponzi scheme from May 1998 to June 2002. The Genesis Fund lured investors by falsely claiming returns of 4% monthly while actually utilizing investments to make “profit” distributions to its founders and early investors. The Genesis Fund also averred no reporting obligations to the IRS. Members advised investors to create offshore bank accounts, corporations, and trusts in order to conceal disbursements from the IRS and maintained “disclosed” and “undisclosed” accounts.
To obscure their operations, the Genesis fund maintained no financial statements, destroyed electronic data, and relocated its administrative offices and paper documents to Costa Rica. Lipton admitted to personally directing the transfer of 19 boxes of subpoenaed material outside the United States.
Co-defendants Richard B.Leonard, Victor H.Preston and Teresa R.Vogt have entered guilty pleas, and four remaining defendants will face trial in April 2011. A separate trial related to the Ponzi scheme is scheduled for September 2011.
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