FOR IMMEDIATE RELEASE|
MONDAY, DECEMBER 8, 2003
TDD (202) 514-1888
JUSTICE DEPARTMENT FILES SUIT TO STOP
ALLEGED NATIONWIDE TAX SCAM
With Help From Florida Lawyer And Texas Accountant
WASHINGTON, D.C. - The Justice Department today announced that it has filed a lawsuit asking a federal court to stop several alleged tax scams. According to court papers filed in the case, the scams include selling counterfeit checks, setting up sham corporations to help customers hide income and assets, and helping customers obstruct Internal Revenue Service investigations and collections. The civil injunction case, filed in the U.S. District Court for the Middle District of Florida, is part of the Justice Department’s nationwide crackdown on promoters who sell fraudulent tax advice and help customers evade taxes.
The suit names as defendants Eddie and Kathleen (“Kookie”) Kahn of Sorrento, Florida; their businesses Milton Hargraves Baxley II, a lawyer from Gainesville, Florida; David Stephen Lokietz of Mt. Dora, Florida and Bryan Malatesta, a certified public accountant in Cleburne, Texas. Eddie Kahn’s businesses - American Rights Litigators, Guiding Light of God Ministries and Eddie Kahn and Associates - are also named as defendants.
“Tax scam promoters cheat the federal government and all law-abiding Americans when they encourage and enable others to violate the tax laws,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “They also cheat their customers, who can expect to pay back taxes, interest and penalties, as well as face criminal prosecution for tax evasion and for presenting counterfeit documents. The Justice Department is committed to shutting down tax evasion scams at their source.”
The complaint and other court papers filed today allege that Eddie Kahn and two of his businesses sell counterfeit checks and bonds for customers to send to the Internal Revenue Service. According to the complaint, the federal government has thus far received bogus checks totaling at least $2.2 million. Kahn also allegedly sells sham entities known as “corporations sole,” falsely advising customers that their income will become tax-exempt and their assets collection-proof if they use a corporation sole, call themselves a “ministry,” and take a “vow of poverty.” The government’s court papers also allege that Kahn was convicted of federal tax crimes in 1985.
Court papers filed in an earlier injunction case against Douglas Rosile, a Florida-based former accountant, showed that Kahn sent customers to Rosile for preparation of tax returns making frivolous claims that wages are not income. In June 2002, a federal court in Tampa, Florida barred Rosile from preparing tax returns for others. Information about the Rosile case and copies of the complaint and preliminary injunction papers in that case are available at <http://www.usdoj.gov/archive/opa/pr/2002/March/02_tax_145.htm>, as well as <http://www.usdoj.gov/tax/02_tax_352.htm>.
Court papers filed in today’s lawsuit also allege that the defendant, in an effort to obstruct Internal Revenue Service investigations of customers’ tax liabilities and thwart collection actions, charge their customers $50 to send frivolous complaints against Internal Revenue Service employees to the Treasury Department Inspector General. The complaints are allegedly signed by the Florida lawyer (Baxley) and the Texas accountant (Malatesta) and assert frivolous arguments challenging the Internal Revenue Service’s authority to enforce the tax laws and make baseless complaints against Internal Revenue Service employees. The government also alleges the defendants have filed more than 1,500 of these frivolous complaints against Internal Revenue Service employees with the Treasury Inspector General for Tax Administration in an attempt to intimidate Internal Revenue Service agents.
Finally, the complaint alleges that the Kahn’s have marketed fraudulent tax schemes on the Internet and through seminars nationwide, most recently in Newport News, Virginia; Dania Beach, Florida; New Cumberland, Pennsylvania; Portland, Oregon and Denver, Colorado. The government filing says that the Internal Revenue Service has identified American Rights Litigators and Guiding Light of God Ministries customers across the country.
The Justice Department has sought and obtained injunctions recently against a number of tax-scam promoters. More information about these cases is available on the Justice Department website at www.usdoj.gov/tax/taxpress2003.htm <http://www.usdoj.gov/tax/taxpress2003.htm>.
Information on another recent injunction suit involving alleged sham “corporations sole” can be found at: <http://www.usdoj.gov/tax/03_tax_554.htm>.
More information about the Justice Department’s Tax Division can be found at www.usdoj.gov/tax <http://www.usdoj.gov/tax>.