WASHINGTON, D.C.-The Justice Department announced today that Joseph W. Flickinger was sentenced yesterday to a total of 70 months in prison, followed by a term of three years of supervised release, and ordered to pay more than $3 million in restitution to his investment fraud victims, for committing conspiracy and mail and wire fraud offenses in connection with his tax preparation business, American Financial.
The total 70-month sentence has two parts. The first part relates to Flickinger’s conviction for conspiracy and mail fraud in connection with his attempts to defraud the IRS by mailing counterfeit and fraudulent cashiers’ checks from a fictitious foreign bank to the IRS, to “pay” the delinquent tax liabilities of several clients. For the conspiracy and mail fraud convictions, Flickinger was sentenced to 60 months in prison. The second part of the sentence relates to Flickinger’s convictions for committing mail and wire fraud offenses in connection with a tax fraud and an investment fraud scheme. In these schemes, he defrauded his clients out of their investment funds by making false statements, helping his clients to create fraudulent trusts and submit false documents to the IRS, and preparing frivolous tax returns on his clients’ behalf. For these mail and wire fraud convictions, Flickinger was sentenced to 60 months in prison, to be served concurrently with the first sentence for conspiracy and mail fraud. Further, because he committed the investment wire fraud offense after he was indicted and was awaiting trial on the conspiracy and mail fraud charges, Flickinger was sentenced to an additional 10 months, to be served consecutively to the 60-month concurrent sentences.
“People who prepare or assist in the preparation of fraudulent tax returns are cheating all law-abiding taxpayers,” said Assistant Attorney General Eileen J. O’Connor. “Those who engage in such criminal conduct should expect to be prosecuted by the Department of Justice and spend time in jail.”
“Fulfilling individual tax obligations is a legal requirement and those who willfully evade that responsibility will be held accountable for their actions," stated Nancy J. Jardini, IRS Chief, Criminal Investigation. “The federal courts have continuously held that anti-tax arguments have no merit.”
On April 14, 2005, Flickinger pleaded guilty to charges of conspiracy and mail fraud. During his plea proceeding and during his testimony at a trial in May 2005 of one of his co-conspirators, Flickinger admitted that he conspired to commit mail fraud and to defraud the IRS by mailing seven counterfeit and fraudulent cashiers checks from a fictitious bank to the IRS in an attempt to “pay-off” his clients’ and his co-conspirator’s tax liabilities. The fraudulent cashiers’ checks, from a fictitious foreign bank called Euro Credit and Exchange Bank, Ltd., were purported to be worth $112,000 in total. American Financial, of which Flickinger was formerly the owner and operator, located in Ohio and Utah, provided tax, financial and estate planning services. He also admitted that, along with these counterfeit and fraudulent cashiers checks, he and others mailed what purported to be legal orders, called “Writs of Praecipe,” allegedly from a so-called common law court. These writs directed the IRS to cash the checks and refund the remainders to his clients or suffer damages in excess of $10,000,000. Flickinger also admitted to forging some of the clients’ endorsements on the back of the fraudulent cashiers’ checks and forging other signatures on these writs.
On April 14, 2005, Flickinger was also convicted of mail and wire fraud against both the IRS and his clients. With regard to the mail fraud conviction, he admitted that he conducted seminars through American Financial during which he made false statements about the IRS. He also asserted that he could “detax” his clients, purportedly by having them work without having taxes withheld and income taxes paid. He helped his clients submit to the IRS and sometimes to employers various false and frivolous documents, including documents to stop the withholding of income taxes from clients’ wages; claims to the IRS for refunds of withheld taxes; and documents to thwart the IRS’ efforts to enforce the employers’ and employees’ tax obligations. Over a four-year period, Flickinger admittedly prepared approximately 384 zero tax returns, which listed the number zero on all lines for reporting items of income or deductions, except for the lines claiming refunds. These zero tax returns claimed refunds totaling approximately $2,320,545. Flickinger admitted that instead of the refunds claimed, his clients owed approximately $1,100,000 in income taxes, in addition to the $2,320,545 that had been withheld and paid to the IRS.
With respect to the wire fraud conviction, Flickinger also admitted that, from 2000 through August, 2004, he had defrauded the IRS and 34 of his clients of more than $3.6 million. He admitted that he induced American Financial clients to create what Flickinger falsely called “pure family trusts.” He falsely claimed that these trusts were beyond the reach of law or regulation. In addition, he induced his clients to invest their personal or trust funds with him through American Financial. He falsely characterized the investments as “loans,” and falsely stated that none of the gains or interest paid had to be reported to the IRS because the transactions were “private.” He lied to his clients, telling them he was investing their monies in at least six separate funds that he knew did not exist. He also prepared and sent to his clients’ fictitious performance charts, client statements, and account summaries.
Flickinger also admitted that, instead of investing his clients’ monies in these funds, he traded in international currency markets, where he suffered significant losses. He used clients’ monies to purchase Jaguar and Hummer automobiles, including a stretch Hummer limousine and a condominium located in Norwalk, Ohio, and to pay for travel by private plane to Antigua. He also transferred some of the clients’ monies to third parties in Utah and elsewhere pursuant to various agreements.
Finally, Flickinger also agreed to forfeit and surrender to the United States various assets worth an estimated $323,333-and any other assets that may be recovered in the future from third parties-to be used to pay restitution to the victims of this wire fraud scheme. The court ordered him to pay restitution in the amount of $3,167,034.07 and special assessments in the amount of $400.
Assistant Attorney General Eileen O’Connor, U.S. Attorney Gregory G. Lockhart, and U.S. Attorney White thanked Assistant U.S. Attorney John M. Siegel and Tax Division Trial Attorneys Richard M. Rolwing and John T. McAdams, 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 the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.