Feb. 24, 2010

LENEXA ATTORNEY SENTENCED FOR TAX FRAUD

KANSAS CITY, KAN. – Scott L. Ruther, 49, an attorney who owns a business in Lenexa, Kan., called Ruther and Associates, LLC, has been sentenced to 48 months in federal prison for preparing false tax returns, U.S. Attorney Lanny Welch said today.

Ruther pleaded guilty to two counts of preparing false tax returns. In his plea, Ruther admitted he devised a scheme using Roth IRAs that he claimed would allow his customers to reduce their individual federal tax liability. Ruther directed clients to invest in “self directed” Roth IRA accounts, which in turn purchased 98 percent of the stock of Nevada shell corporations. Ruther owned the remaining 2 percent of each shell corporation. This made the clients’ Roth IRA the majority owner of one or more shell corporations which had no employees, produced no product and whose only purpose was to illegally reduce the clients’ taxes.

Ruther’s clients income producing entities paid the shell corporations fees for “consulting,” “business management,” or “investment services,” creating an illegal tax deduction for their income generating business. Ruther created more than 70 Nevada shell corporations to divert excess income from his customers’ businesses. Ruther prepared hundreds of tax returns related to this scheme claiming false expenses allowing more than 30 clients to evade taxes totaling more than $3.5 million.

Welch commended the Internal Revenue Service and Assistant U.S. Attorney David Smith for their work on the case.