IRS Makes More Arrests from Grand Jury Indictments
April 15, 2002
On April 2, 2002, I posted a piece on several individuals who have been indicted and/or arrested for assisting in tax preparation based on the 861 argument, filing for refunds, off-shore accounts and so forth. If you missed this post, please go to:
The Feds are on the move, here's the latest:
FOR IMMEDIATE RELEASE
FRIDAY, APRIL 12, 2002I
TDD (202) 514-1888
Justice Department Files Lawsuit to Halt Tax Return Preparer
From Preparing Tax Returns for His Clients
Washington, D.C. - The Department of Justice filed a lawsuit in federal court in Nashville today seeking to stop James L. Wray of Nashville, Tennessee from preparing income tax returns. The papers filed in the lawsuit allege that Wray solicits clients by claiming he will obtain tax refunds, which he refers to as "found money." For a flat fee or a percentage of the refund, Wray prepares tax returns that report fictitious expenses, or claim tax deductions that are not allowable under the Internal Revenue Code. The complaint also alleges that Wray has falsely represented that he is a former employee of the Internal Revenue Service.
"Tax return preparers who prepare false income tax returns and claim bogus refunds should be put out of business," said Eileen J. O'Connor, Assistant Attorney General of the Justice Department's Tax Division.
According to the complaint, many of Wray's clients have been audited by the Internal Revenue Service and have been required to pay additional taxes and penalties. In a statement filed in court, one client said that Wray prepared a tax return for her claiming she had paid alimony, when in fact, she had received alimony. As a consequence of the false claim, the client ended up owing the government several thousand dollars. To date, the Internal Revenue Service has identified 126 returns prepared by Wray which have claimed refunds of almost $300,000.
For a listing of press releases by DoJ on these arrests/indictments, go to:
And, this one:
April 15, 2002
Lynn Meredith arrested
Tax Fraud Promoters Associated with We the People Arrested by IRS Agents for Selling Bogus Trusts That Falsely Promised to Protect Income From Taxes
Seven individuals associated with a tax fraud group know n as "We the People" and Sovereignty Pure Trusts were arrested this morning on various federal charges related to the promotion of bogus tax shelters that falsely promised to limit exposure to federal income taxes.
A federal grand jury in Los Angeles on Thursday returned a 35-count indictment that includes charges of conspiring to defraud the Internal Revenue Service and fraudulently using Social Security Numbers and passports.
The California residents arrested this morning are:
Lynne Meredith, 52, of Sunset Beach, the owner and operator of We the People and Sovereignty Pure Trusts;
Gayle Bybee, 54, of Sunset Beach;
Gregory Paul Karl, 52, of Solana Beach;
Teresa Manharth Giordano, 39, of Murrieta;
Willie Watts, 43, of Murrieta;
Betty Erickson, 57, of Windsor; and
Nora Moore, 53, of Huntington Beach.
These defendants are expected to make their initial court appearances this afternoon in various federal courthouses in California.
According to the indictment, from October 1994 to November 2001, Meredith sold books and bogus trusts to people with the purpose of leading them to believe they could legally protect income and assets from taxation. The defendants allegedly encouraged and assisted taxpayers by forming phony trusts, opening bank accounts with phony Taxpayer Identification Numbers, filing fraudulent income tax returns and encouraging taxpayers not to file income tax returns.
We the People sold the "trusts" for approximately $500 at seminars that were held throughout the United States and internationally. To entice potential trust purchasers at seminars, Meredith represented that the trusts were "professional and affordable" and that each trust was customized with the "combined efforts of attorneys, paralegals, CPAs and other professional staff for its execution."
When purchasers complained about the trusts, We the People which was also known as Free the People, Sovereignty Pure Trusts and Liberty International refused to issue refunds.
Meredith also encouraged taxpayers to file frivolous tax returns that, for example, accurately reported income but fraudulently requested a refund of all income taxes paid. The defendants also encouraged taxpayers to send protest correspondence to the IRS with the purpose of impeding and obstructing the IRS.
Meredith wrote books, including How To Cook A Vulture and Vultures In Eagle's Clothing, in which she falsely claimed that individuals could lawfully stop paying income taxes, stop their employer from withholding income taxes, and refuse to produce books and records to the IRS. The books contained examples of frivolous tax returns and protest letters.
From 1994 to 1997, according to the indictment, Meredith caused taxpayers to file fraudulent income tax returns with the IRS. Those fraudulent tax returns sought refunds for as much as $21,855, but the IRS did not issue any refund checks.
The indictment also alleges that Meredith earned more than $6.2 million from 1994 through 1999 as a result of the scheme. Meredith did not file a Federal income tax return during these years, and she did not pay any federal income taxes.
The indictment further alleges that six of the other defendants did not file nor pay any income taxes on income they earned in the scheme.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Eileen J. O'Connor, Assistant Attorney General in charge of the Justice Department's Tax Division, said: "The Department of Justice and the IRS are committed to stopping promoters of illegal tax schemes from selling false promises, obstructing lawful IRS functions and cheating honest taxpayers."
Michael S. Kochmanski, Special Agent in Charge of the Los Angeles Field Office of IRS-Criminal Investigation, stated: "Meredith misled numerous people into believing that the tax shelters she was selling would legally keep them from having to pay income taxes. Instead many of these people now find themselves owing back taxes, penalties and interest. The public should be wary of anyone who says that they have away to keep you from having to pay income taxes."
All seven defendants are charged with conspiracy and 11 counts of mail fraud (both charges carry potential five-year prison sentences). Meredith is additionally charged with two counts of false representation of a social security number (five-year maximum sentence), one count of passport fraud (potential 10-year sentence), and five counts of failing to file a tax return (each count carries a maximum penalty of one year in prison). Bybee is accused in three counts of failing to file; Giordano is named in two counts of failing to file; Watts faces three counts of failing to file; Erickson allegedly failed to file for three years; and Moore is named in three counts of failing to file.
The indictment names an eighth defendant in the case, Toni Smith Silva, 49, of Cypress, who is charged with one misdemeanor count of failing to file a tax return. Smith will be summoned to appear in court for an arraignment.
Today's arrests come two days after the Department of Justice and IRS filed a civil law suit against individuals in San Diego, Boston and Cincinnati for selling bogus trusts to hundreds of taxpayers. The IRS has been cracking down on promoters of abusive trusts by filing civil law suits and launching criminal investigations. On Thursday, IRS Commissioner Charles O. Rossotti testified before the Senate Finance Committee that identifying and combating actively promoted tax schemes was the IRS' "highest compliance priority."
The case against the promoters of We the People and Sovereignty Pure Trusts is the result of a continuing investigation by IRS-Criminal Investigation. Victims who purchased trusts or books issued by this group are encouraged to contact IRS-Criminal Investigation at (949) 389-4466.
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Lynn Meredith's "We the People" is in no way affiliated with, associated with or aligned in any way with Bob Schulz' We the People Foundation.
While it has made me, Larry Becraft, Bill Benson and several others unpopular in the tax guru circles, we have warned people for years about Lynn Meredith's books and how dangerous the information in them is to unsuspecting, desperate folks. I have been told to 'stick it.'
That has never deterred me from warning people to stay away from her two books: How To Cook A Vulture and Vultures In Eagle's Clothing. I have told people for years that these books are indictments just waiting to happen and the only ones going to get cooked are those who follow her misleading and legally flawed arguments.
If you participated in any programs offered by Ms. Meredith, I recommend you get a good criminal defense attorney right away because the federal suits either have or will have all her computer records. It's just a matter of time before everyone on all these client lists are contacted by the feds or hauled in front of a grand jury.
Those of us who have done the hard research know that most Americans are not required under any law, if you give the IRS any legitimacy at all, which I don't, to file these so called income tax returns. That isn't the basis for my concern here.
I am posting this information to warn people who may have been suckered into all these schemes to get legal help as soon as you can. It is exactly this kind of show of force that has kept the American people in line since 1913 with the income tax hoax - FEAR. This is what most people will see, not Bob Schulz' hearings or this web site unless people like my devoted readers continue to get the information out to as many of their friends, neighbors and colleagues as possible.
Larry Becraft is frantically trying to finish his research in between case loads. Bob Schulz has done so much in three short years in this effort to close down these criminals operating the IRS, backed up by gun toting hoods in the DoJ. I know the situation is intolerable and all of us are frustrated, but short of a damned armed war with the government, millions of Americans are all working on this problem in a lawful, non-violent fashion but it ain't gonna happen overnight.
The liars in Congress, IRS, DoJ and the White House know the pressure is building big- time. I continue to pray to Almighty God for help and guidance in this battle against evil because what this govmint and its agencies are doing to the American people is evil.
The gangsters who work for the aforementioned agencies, including Congress, are all fighting for paychecks and power, they care nothing for the truth, law, justice or the Constitution. Congress has the international banking cartel breathing down their cowardly necks.
In the meantime, please look before you get involved with any un-taxing group. We don't want anymore innocent Americans filling up the federal prisons and leaving their families on welfare. If it sounds too good to be true, it probably is, so be careful. Do the research. Use this web site, but better than that, go to Larry's. It is the best legal web site on this issue:
And, one more press release from the feds:
FOR IMMEDIATE RELEASE
WEDNESDAY, APRIL 10, 2002
TDD (202) 514-1888
Department of Justicde Files Suits Across the Country
in Crackdown on so-called "Trust" Schemes
"Trust" Schemes Nationwide Cost Treasury Nearly $3 Billion Annually
WASHINGTON, D.C. - The Department of Justice announced today that it has filed lawsuits in San Diego, Boston, and Cincinnati as part of a campaign to stop the spread of phony trust schemes which the government contends are being used illegally to evade the payment of taxes. The lawsuits are the latest installments in a government crackdown on the promoters of bogus tax scams.
"Today's technology has made marketing tax fraud schemes incredibly easy," said Eileen J. O'Connor, Assistant Attorney General in charge of the Department's Tax Division. "With the filing of these suits, the Tax Division takes another step in its efforts to stop the proliferation of bogus "trusts" and other tax cheating schemes. While the promoters of these schemes say they lead to tax savings, they can lead instead to substantial penalties, including a prison sentence."
In one of the cases filed today, the government alleged that a promoter charged customers several thousand dollars each to set up trusts and transfer the customers' property into the trusts. The complaint alleges that the trusts were then used to illegally claim tax deductions for personal expenses such as utility payments, gardening expenses, and home maintenance costs, and to avoid reporting and paying tax on income.
In the complaint filed in San Diego, the Justice Department alleges that Roderick Prescott, of Solana Beach, California, through businesses named "Trust Educational Services" and "National Trust Services," sold hundreds of sham trust schemes. Prescott and his businesses sold trust packages for as much as $15,500. The complaint also alleges that Prescott's activities have cost the Treasury more than $135 million so far.
In the Boston case, the government alleges that Kevin Mahoney of Attleboro, Massachusetts, promotes sham trust schemes through businesses named "the Citadel Group," "Cornerstone Financial Group," the "National Association of Certified Estate Planning Attorneys," and "the Liberty Network." The complaint alleges that Mahoney sold his trust materials for more than $3,500. The government filed a similar suit in federal court in Chicago last month against two alleged operators of the same schemeMichael D. Richmond and Rex E. Black.
In the suit filed in Cincinnati, the government alleges that Robert Welti, an accountant in Ripley, Ohio, prepared tax returns for clients across the country that claimed improper tax deductions or failed to report income which resulted in estimated tax losses of over $3 million per year. According to the complaint, Welti charged his clients $2,400 to prepare tax returns based on the bogus trust schemes. The complaint states that although Welti's clients come from 20 different states, they all rely on trusts to evade taxes that use the same address in Belize, a "tax haven" country.
Last year, 45 people were convicted for tax evasion because of their participation in phony trusts. Defendants who were sentenced to prison faced sentences averaging more than five years. As of December 31, 2001, the IRS had 160 open criminal investigations involving trust schemes.
If someone claims that a trust will lead to lower taxes, here are some warning signs that the scheme could instead lead to prison:
deductions for personal expenses paid by the trust.
depreciation deductions for a personal residence.
high fees for trust packages, to be made up by promised tax benefits.
lack of an independent trustee.
use of terms like "pure trust," "constitutional trust," "sovereign trust," "unincorporated business
organization," or "common law trust."
IRS Commissioner Charles Rossotti said "Promoters can entice taxpayers into abusive trust schemes by making promises that are too good to be true. Getting involved in such schemes can be a costly mistake for taxpayers. Before entering into any arrangements, make sure you consult with a reputable, trusted tax professional for advice. Taxpayers who want to report possible schemes can call the IRS at 1-800-829-0433." The IRS estimates that abusive trust schemes cost the public about $3 billion every year.
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There are legitimate trusts that are "allowable" under IRS guidelines if one chooses to play ball with a rogue agency that has zip authority to operate in its current capacity under a law that doesn't even exist.
If you haven't already, please read these posts: