FOR IMMEDIATE RELEASE|
FRIDAY, APRIL 22, 2005
FOUR DEFENDANTS SENTENCED IN $120 MILLION INTERNATIONAL TAX SHELTER CASE
WASHINGTON, D.C.-Eileen J. O’Connor, Assistant Attorney General for the U.S. Department of Justice’s Tax Division; John L. McKay, U.S. Attorney for the Western District of Washington; and Mark W. Everson, Internal Revenue Service (IRS) Commissioner, announced today that Chief U.S. District Court Judge John C. Coughenour sentenced Anderson Ark defendants Keith E. Anderson, Wayne Anderson, Richard Marks, and Karolyn Grosnickle to terms of imprisonment ranging from eight to 20 years. The defendants received the following sentences:
·Keith Anderson, age 62, a former resident of Hoodsport, Washington, was sentenced to 20 years imprisonment, to be followed by three years supervised release and a $63,525,860 fine;
·Wayne Anderson, age 64, a resident of Fresno, California, was sentenced to 15 years imprisonment, to be followed by three years supervised release, a $25,000 fine, and ordered to pay restitution of $63,525,860;
·Richard Marks, age 60, an accountant from Los Osos, California, was sentenced to 15 years imprisonment, to be followed by three years supervised release and a $42,311,742 fine;
·Karolyn Grosnickle, age 62, formerly from Hoodsport, Washington, was sentenced to eight years imprisonment, to be followed by three years supervised release and a $42,311,742 fine.
Each of the defendants was also ordered to pay costs of prosecution in the amount of $66,288. In addition, the Court ordered forfeited seven properties located in Costa Rica, the AAA Administrative Office in Hoodsport, WA and $28 million in laundered funds.
On December 27, 2004, after seven weeks of trial, those defendants and two other persons associated with Anderson’s Ark and Associates (AAA), were convicted in connection with one of the most far ranging tax schemes ever prosecuted. With administrative offices in Hoodsport, Washington, the organization spanned five countries and over 1,500 clients. The Andersons, Mr. Marks, and Ms. Grosnickle were convicted on charges of conspiracy to defraud the government, mail and wire fraud, money laundering, and aiding and assisting the filing of false tax returns.
“People who develop and use schemes to hide income and assets from the IRS should expect to spend a substantial amount of time in prison and also to pay civil penalties and interest in addition to any unpaid taxes,” said Assistant Attorney General O’Connor.
“The activities Mr. Anderson and his co-conspirators were involved in were blatantly illegal and they are being appropriately held accountable for these crimes,” said IRS Commissioner Mark W. Everson. "People who are inclined to participate in schemes like those promoted by Mr. Anderson should know we are rebuilding our enforcement efforts and we are increasingly likely to catch them."
The evidence introduced at trial established that, from 1997 through early 2001, the defendants earned tens of millions of dollars in fees from the sale of several fraudulent tax shelter plans over the Internet. The two predominant plans were called the “Look Back” and the “Look Forward” programs. The evidence showed that through the Look Back program, the defendants assisted AAA clients in taking $120 million in false income tax deductions for advertising expenses associated with AAA’s “Tax Magic” project. The evidence revealed that the defendants charged AAA clients anywhere between $50,000 to $250,000 each to buy into the Look Back Program. AAA members were instructed to take out a loan from La Maquina Blanca a Costa Rican lender. According to the trial evidence, La Maquina Blanca was merely a Costa Rican bank account used by AAA. Although the funds borrowed from La Maquina Blanca were purportedly to be invested with another AAA entity, Mason Advertising, the evidence at trial established that the loans were illusory. Instead, AAA simply transferred millions of dollars between an account at Costa Rican banks to create the appearance that these loans were actually being funded. Accordingly, the tax deductions arising from these loans were false.
Evidence introduced at trial established that in the Look Forward program, client funds that were moved to foreign bank accounts and falsely deducted on their income tax returns as consulting or management expenses. To make the deductions appear to be legitimate, clients were instructed to send money (through an AAA partnership) to a shell company called “Sawtooth,” which had bank accounts in Nevada and Arizona. Sawtooth was operated by defendant Richard Marks, who transferred the funds to Austrian accounts operated by defendant Wayne Anderson. Ultimately, the money was wired to Costa Rican bank accounts, where it could be withdrawn by clients through the use of international Visa debit cards or wire transfers (handled by AAA personnel in Costa Rica). In total, over $11 million in income evaded taxation in this manner, according to evidence introduced during the trial.
Defendants Keith Anderson, Wayne Anderson, Richard Marks, and Karolyn Grosnickle were also convicted on charges of conspiracy to commit wire and mail fraud, and 19 counts of wire and mail fraud for defrauding clients out of over $7 million in fees for the non-existent loans associated with the AAA Look Back program. According to the trial evidence, clients were told that these fees were necessary to process the non-existent investment loans. Once deposited in AAA accounts in Costa Rica, the defendants split the money by transferring it to bank accounts at the Bank of Montreal in Canada and the Riga Bank in Latvia.
Defendant Keith Anderson was also convicted of defrauding AAA clients out of an additional $21 million in an investment program he called “Loan 4.” Loan 4 was represented to be a short term lending investment being operated by Charles McCormick of New Jersey. At trial, Mr. McCormick, who had been previously convicted by New Jersey state authorities, testified that the Loan 4 program was nothing more than a pyramid scheme he operated in conjunction with the defendant Keith Anderson.
Finally, defendants Keith and Wayne Anderson were convicted of international money laundering. From 1996 through early 2001, the Andersons sent money collected in domestic AAA accounts to the La Maquina Blanca account, in Costa Rica, to promote AAA tax shelters.
Two remaining Anderson Ark defendants, James Moran and Pamela Moran, are scheduled to be sentenced April 26, 2005. Defendant Richard Grosnickle pleaded guilty to a charge of obstruction of justice on April 13, 2005, and is also awaiting sentencing.
Assistant Attorney General O’Connor and U.S. Attorney John L. McKay thanked Tax Division Trial Attorneys Corey J. Smith, Krista Tongring, and M. Kendall Day, who prosecuted the case. They also thanked the special agents of the IRS, whose assistance was essential to the successful investigation and prosecution of the case.
Additional information about tax fraud schemes to watch out for may be found on the IRS Criminal Investigation website <http://www.treas.gov/irs/ci/index.htm>. 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>.