CALIFORNIA ATTORNEYS PLEAD GUILTY TO PROMOTING
TAX FRAUD SCHEME IN UTAH

Defendants Fraudulently Claimed Placing Assets In Trust Would Reduce Taxes

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, Department of Justice; Paul Warner, U.S. Attorney for the District of Utah; Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division; and James H. Burrus, Jr., Special Agent-in-Charge, SLC Division, Federal Bureau of Investigation announced today that at the federal courthouse in Salt Lake City, Utah, California attorneys Martin Arnoldini and Jerrold Boschma each pled guilty to a felony charge of conspiracy to commit mail and wire fraud and to defraud the Internal Revenue Service (IRS) (18 U.S.C. § 371).

Arnoldini and Boschma each face a maximum potential sentence of five years imprisonment followed by up to three years supervised release, a $250,000 fine and liability for the costs of prosecution. No sentencing dates were set.

“People who try to conceal their income from the IRS can lose their money to con artists who make a living selling tax scams,” said Assistant Attorney General Eileen J. O’Connor. “Participants in fraudulent tax schemes may face criminal prosecution, and they still will have to pay their taxes, along with interest and civil fraud penalties.”

“As this year’s tax filing deadline approaches, the pleas taken in this case serve as timely reminders that fraudulent tax schemes such as these will be investigated and prosecuted to the fullest extent of the law,” said U.S. Attorney Paul M. Warner. “Residents of Utah who have filed or are now filing their state and federal tax returns and paying their fair share of taxes need to be reassured that we will aggressively pursue those who do not.”

“One of the IRS's enforcement priorities is to ensure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the laws,” said Nancy Jardini, Chief, IRS Criminal Investigation. “Concealing income from the government through the use of fraudulent trust arrangements is not financial planning; it is illegal. Those who promote these activities or willfully invest in these schemes will be held accountable.”

Arnoldini and Boschma, who were charged by Information, admitted that they, along with previously indicted coconspirators, promoted and sold a fraudulent “trust” scheme to approximately 300 clients. The Information alleges that Arnoldini and Boschma are attorneys licensed to practice law in California, partners in Century Law Offices in Valencia, California, and that Mr. Arnoldini also holds an advanced degree in taxation. It also alleges that they and their coconspirators defrauded investors of approximately $7 million. As a condition of their guilty pleas, Arnoldini and Boschma agreed to surrender their law licenses.

Arnoldini and Boschma admitted in their plea agreements that beginning in 1997, they promoted and sold a fraudulent “trust” scheme designed to evade federal income taxes. They admittedly marketed the scheme through their Century Law Offices, and as licensees of World Contractual Services and, later, through CornerStone West. They also admitted that, with their coconspirators, in seminars and through promotional materials and opinion letters, they fraudulently misrepresented to customers that their tax liabilities could be lawfully reduced by placing businesses, homes, investments and other assets into a trust’s name. They admitted that they, with their coconspirators, caused the preparation of false and fraudulent federal income tax returns. Messrs. Arnoldini and Boschma admitted their actions caused losses of federal tax revenue totaling approximately $3.6 million.

Arnoldini and Boschma also admitted participating in fraudulent investment schemes, helping cause customers to lose approximately $1.3 million. They said most of the customer funds were allegedly wired to offshore banks, purportedly to be placed in a foreign investment. They admitted they knew the investment would place the customers funds at considerable risk and would never pay any return.

Assistant Attorney General O’Connor thanked Tax Division trial attorneys Albert Kleiner, Nicholas Dickinson, and Kevin Downing, who prosecuted the case. She also thanked the special agents of the Internal Revenue Service and Federal Bureau of Investigation whose assistance was essential to the successful investigation and prosecution of the case.

On March 18, 2004, Todd Cannon and Lance Hatch pleaded guilty to a conspiracy charge in connection with this case. On April 6, 2003, David Orr and Michael Behunin, an attorney with an advanced degree in tax law, also pled guilty to conspiracy charge. Lanny White and Max Lloyd are under indictment and awaiting trial on related charges. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until proven guilty in a court of law.

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