Michigan Attorney and Client Sentenced for Tax Crimes in Connection with a Fraudulent Insurance Tax Shelter

WASHINGTON - John A. Campbell, a resident of Portage, Mich., was sentenced to 60 months in prison today by the Honorable Janet T. Neff of the U.S. District Court in the Western District of Michigan for conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced. In April 2008, Campbell, who is a former partner in and resident director of the Kalamazoo, Mich., office of the law firm of Miller, Canfield, Paddock & Stone P.L.C., pleaded guilty to one count of conspiring to defraud the United States.

Campbell’s client, Oskar René Poch, a resident of Hickory Corners, Mich., was sentenced today to one year of probation and ordered to pay restitution of $217,830.44 and a fine of $100,000. Poch, who owned and operated Trillium Staffing, an employee-leasing company in Kalamazoo, pleaded guilty to corruptly endeavoring to obstruct the administration of the Internal Revenue laws in April 2008 and cooperated with the government’s investigation.

According to statements made in court and public documents, Campbell admitted that from at least 1999 through at least 2006 he agreed with the four principals and associates of an insurance company in the U.S. Virgin Islands known as Security Trust Insurance Company to market, promote, sell and implement fraudulent tax shelters, including so-called "loss of income" or "general business risk" insurance policies. The purpose of the tax shelters that Campbell and the others promoted and sold was to defraud the United States and impede the lawful functions of the IRS in computing the income taxes of the defendants’ U.S. taxpayer clients. Three of the tax shelter promoters, Peter J. Peggs of Prides Crossing, Mass.; Robert D. Larsen of Winter Park, Colo.; and Craig M. Stone, formerly of Fort Pierce, Fla., were convicted of conspiracy and other tax crimes in October 2009 after a four week jury trial before Judge Neff. The fourth tax shelter promoter, Anthony G. Merlo, a former resident of Fort Worth, Texas, and the U.S. Virgin Islands, pleaded guilty to conspiracy in May 2009 and is scheduled for sentencing later this month.

According to statements made in court and public documents, Campbell admitted that he conspired with the tax shelter promoters to sell these purported insurance policies to U.S. taxpayers as a tax deductible product, with the understanding that the purchasers would have most of their premiums returned to them in a non-taxable manner, such as through the use of "loans" from offshore foreign corporations which the defendants helped the U.S. taxpayers set up in tax haven countries like Nevis and the Bahamas. Campbell also admitted that he and the tax shelter promoters agreed to conceal from the IRS several key facts about the returned funds, and that they agreed to alter, conceal and destroy documents regarding the program as well.

According to statements made in court and public documents, after Campbell introduced Poch to the product, Poch caused his companies to purchase more than $3.9 million of this insurance product in the years 1999, 2000 and 2001. Poch improperly deducted the premiums as a business expense, fraudulently saving over $1.63 million in taxes for the three year period. Finally, Poch paid Campbell’s firm to set up a foreign corporation and trust in Nevis and later the Bahamas, through which Poch later had access to over $3 million of his insurance premiums. As part of the conspiracy, Campbell arranged for Poch to receive millions in the form of "loans" to Poch and his businesses, which were never repaid by Poch.

According to statements made in court and public documents, Poch knowingly provided misleading, incomplete and false answers to IRS revenue agents during a June 2002 interview conducted in a civil audit of his 1999 tax return. Poch admitted that he provided these answers in order to obstruct the IRS audit. However, Poch cooperated with the government’s investigation and testified at the trial of Campbell’s co-conspirators. Since pleading guilty, Poch has repaid the $1.63 million in taxes to the IRS, using, in part the funds left in the foreign corporation’s bank account.

Acting Assistant Attorney General John A. DiCicco thanked U.S. Attorney Donald A. Davis and the U.S. Attorney’s Office for the Western District of Michigan for their assistance in the prosecution of this case. Acting Assistant Attorney General DiCicco also thanked Tax Division trial attorneys Richard M. Rolwing, Patrick J. Murray and Jessica Nuzzelillo who prosecuted the case, as well as the IRS-Criminal Investigation agents who investigated the case.

Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax .