WASHINGTON, D.C. - A federal grand jury in Buffalo, New York indicted tax and financial advisor Richard A. Muto for his involvement in a tax fraud scheme that cost the Treasury at least $1.9 million in taxes, the Department of Justice and the Internal Revenue Service (IRS) announced today. The two-count indictment charges the defendant with attempting to obstruct the administration of the internal revenue laws and filing a false federal income tax return for 1998.
The indictment alleges that Muto, a former resident of Lewiston, New York, promoted and sold schemes that fraudulently reduced or eliminated clients’ federal income tax liabilities. The indictment further alleges that Muto personally used the scheme to fraudulently reduce his own income tax liability. Initially, Muto promoted and sold tax fraud schemes marketed by American Asset Protection, an entity based in Palm Beach County, Florida. Later, he promoted and sold tax fraud schemes marketed by The Aegis Company (Aegis), which is based in Palos Hills, Illinois.
“Most people obey the tax laws - they report their income to the IRS and pay the taxes due,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “Honest taxpayers deserve the assurance that the government will investigate and prosecute those individuals who promote and use tax fraud schemes.”
The indictment alleges that Muto promoted and sold the tax fraud schemes through seminars, mailings, and personal meetings with clients. The Aegis scheme involved the use of multi-layered domestic and foreign trusts. As part of the scheme, Muto instructed clients how they could create the appearance that they transferred their income and assets from their businesses to a series of multi-layered trusts, while maintaining complete control over the income and assets. Muto told clients that by transferring the income and assets through a series of trusts, the clients could avoid paying taxes on that income, or could significantly reduce the amount of taxes they owed, when in fact the transfers did not affect their true income tax liabilities.
"The IRS is aggressively investigating individuals who promote the use of offshore and domestic trusts for the purpose of escaping tax obligations," said Nancy Jardini, IRS Chief, Criminal Investigation. "The indictment today reinforces that message."
Each count of the indictment separately carries a maximum penalty of three years imprisonment and a $250,000 fine. The charges contained in the indictment are only allegations. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt. This prosecution is one of several involving Aegis trust schemes and promoters. In July 2005, Denny Partidge of Shelby County, Illinois was convicted of tax evasion, wire fraud, and money laundering in connection with his use of Aegis trust schemes. In April 2004, a grand jury in Chicago, Illinois returned an indictment charging eight Aegis principals in connection with their promotion and sale of the Aegis trust schemes. In April 2005, a grand jury in Cincinnati, Ohio returned an indictment charging six other Aegis trust promoters. The Ohio and Illinois defendants are awaiting trial. Assistant Attorney General O’Connor thanked Tax Division attorneys Thomas W. Flynn, Jared E. Dwyer and John Kane, who are handling the case. She also thanked the special agents of the IRS whose assistance was essential to the successful investigation of this case.