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FOR IMMEDIATE RELEASE THURSDAY, APRIL 7, 2005 WWW.USDOJ.GOV |
TAX (202) 514-2007 TDD (202) 514-1888 |
SIX OHIO TRUST PROMOTERS INDICTED FOR TAX FRAUD
Use of False Domestic and Offshore “Aegis” Trust Scheme Allegedly
Caused $20 Million Tax Loss
WASHINGTON, D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, U.S. Department of Justice; Gregory G. Lockhart, U.S. Attorney for the Southern District of Ohio; and Nancy Jardini, Chief, Internal Revenue Service (IRS) Criminal Investigation Division, announced today that in Cincinnati, Ohio, a federal grand jury returned a 28 count indictment charging the following six individuals with conspiracy to defraud the United States by impeding the Internal Revenue Service:
Defendant Wilson Moss Graham is also charged with income tax evasion. Defendant Homer Lee Richardson is also charged with filing fraudulent income tax returns. Defendants Wilson Moss Graham, Homer Lee Richardson, Robert L. West and Robert C. Welti are also charged with aiding and assisting in the preparation of fraudulent income tax returns for their clients. Arrest warrants were issued for each of the defendants.
“People who promote or join in schemes to hide income and assets from the IRS risk criminal prosecution and, upon conviction, significant time in prison,” said Assistant Attorney General O’Connor.
“Attempts by professionals to help clients, whether wealthy or of more modest means, to evade taxes are offensive,” said U.S. Attorney Lockhart. “The Justice Department, with the help of the IRS, will continue to aggressively investigate and prosecute those involved in such schemes.”
“The IRS is ramping up its enforcement efforts, particularly in the area of offshore and domestic trusts established for the purpose of escaping tax obligations,” said IRS Chief Jardini, Criminal Investigation Division. “The indictment today reinforces the message that the IRS is working aggressively to enforce the tax laws.”
According to the indictment, the senior Mr. Graham is a tax return preparer who allegedly misrepresented to clients that he was a certified public accountant. The indictment also alleges that Mr. West is a certified financial planner and Mr. Welti is an accountant. Through seminars, purported “workshops” and other means, they and the other defendants allegedly promoted and sold to 220 clients Aegis trust products, including domestic and foreign trust schemes, and helped clients implement the schemes. In the domestic trust scheme, clients were allegedly advised to divert income from their legitimate businesses through a series of domestic trusts under the clients’ control. The defendants allegedly misled clients into believing that by diverting the income through a series of trusts, the clients could reduce or escape paying taxes on that income, or could significantly reduce the amount of taxes they owed. The foreign trust scheme allegedly used the same initial process for diverting income from the client’s legitimate business, but instead funneled the monies through a series of foreign trusts and other foreign entities that were functionally under the clients’ control. The Grahams and Mr. Welti allegedly prepared fraudulent tax returns for Aegis clients claiming the purported tax benefits of the trust products and fraudulently concealing from the IRS the clients’ receipt of income.
This prosecution is one of several involving Aegis trust schemes. In April, 2004, in Chicago, Illinois, indictments were returned charging eight of the Aegis principals in connection with their alleged promotion and selling of the Aegis schemes. Those defendants are awaiting trial. Information on the indictments may be found at: http://www.usdoj.gov/tax/usaopress/2004/txdv04AgeisNDC.pdf and http://www.usdoj.gov/tax/usaopress/2004/txdv04aegissupersedrel.pdf
The government has sought and obtained injunctions precluding several of these defendants from promoting and selling to clients, and from using the Aegis trust schemes. On February 14, 2003, the court issued an order that prohibited Mr. Welti from preparing or helping to prepare federal income tax returns or other documents to be filed with the IRS, from making false and fraudulent statements regarding the reporting of income, and from engaging in other similar conduct substantially interfering with the proper administration and enforcement of the internal revenue laws. Evidence offered in support of the government’s request for the injunctions established that Mr. Welti had prepared fraudulent returns that understated income and tax based on sham trusts developed by the Aegis Company. On September 25, 2003, the court issued a permanent injunction barring Mr. Welti from preparing tax returns or representing clients. On March 25, 2005, the government alleged that Mr. Welti had continued to prepare income tax returns and income tax extension forms for his clients to submit to the IRS, submitted letters to the IRS challenging its authority to conduct audits and collect taxes, and prepared letters making similar claims for his clients to submit to the IRS. The government asked the court to order a hearing at which Mr. Welti would be required to show cause why he should not be held in criminal contempt of court for violating the preliminary injunction. Information about the preliminary injunction Mr. Welti allegedly violated may be found at http://www.usdoj.gov/tax/txdv03094.htm. Information about the permanent injunction may be found at http://www.usdoj.gov/tax/txdv03525.htm.
If convicted, the defendants face maximum potential sentences on each conspiracy and income tax evasion charge of five years imprisonment and a $250,000 fine, and on each fraudulent tax return and aiding and assisting charge up to three years imprisonment and a $250,000 fine.
The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.
Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at www.usdoj.gov/tax http://www.usdoj.gov/tax.
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