HOUSTON - After a four-day bench trial in the Southern District of Texas, U.S. District Court Judge Lynn N. Hughes today convicted Madison Lee Oden of filing false tax returns for tax years 2000 through 2002, the Justice Department announced. Judge Hughes also convicted Richard D. Davis of aiding or assisting in the preparation of these same false tax returns. Oden is a former high-level executive with Sterling McCall Automotive Group in Houston, and Davis is a former owner of Skydive Houston in Waller, Texas.
According to the indictment returned in October 2006, Davis purported to run his skydiving business through various partnerships, including Skydive Houston LLC, Skylakes Aviation LLC, and Aircraft Aloft LLC. Davis also prepared tax returns and provided financial services for clients out of his home in Spring, Texas. He performed these services under various business names including R.D. Davis & Associates, R.D. Davis Investments, and Financial Management Services.
As the evidence during trial established, Oden used Davis to prepare his tax returns beginning as early as 1991. In response to an audit of his 1993 tax return, which Davis prepared, Oden refused to cooperate and instead sent frivolous correspondence to the Internal Revenue Service (IRS). This audit resulted in a tax liability of $74,000, which Oden paid in 1997.
The evidence also established that, for tax years 1998 through 2002, Oden made purported "investments" to Davis of approximately $340,000 in exchange for fraudulent losses on his income tax returns. The losses on Oden’s 1998 through 2002 tax returns were similar to the losses that were disallowed during two previous audits of his tax returns. During tax years 1998 through 2002, Oden reported wages totaling $3,982,955. For the same years, the total tax paid by Oden was $327,164. According to the evidence at trial, Oden underpaid his income taxes for those years by approximately $1 million.
Davis and Oden used false partnership losses related to Davis’s skydiving business to fraudulently offset income on Oden’s 1998 through 2002 tax returns. Other fraudulent losses included a false auto finance sole proprietorship and false losses related to Oden Family Limited Partnership, which Davis set up and through which Oden purported to manage property and assets. As a result of these fraudulent losses on his tax returns, Oden’s tax liability was significantly understated for the years charged.
"Those who fly in the face of the tax laws by preparing or filing false and frivolous tax returns or failing to pay taxes risk criminal prosecution resulting in conviction, substantial penalties and time in prison, as well as being required to pay their taxes, interest and penalties," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "The Tax Division remains committed to devoting resources to prosecuting tax defier conduct through its National Tax Defier Initiative (TAXDEF Initiative)."
"Filing false and fraudulent federal tax returns to avoid paying taxes is a crime that defrauds our government. This practice is unfair to those who willingly pay their fair share of taxes," said Eileen Mayer, Chief, IRS Criminal Investigation (IRS-CI). "The conviction of these individuals underscores the determination of investigators and prosecutors to uncover and bring tax wrong-doers to justice."
The court dismissed three other charges against each defendant. Each defendant faces up to nine years in jail and $750,000 in fines. Sentencing has been set for Sept. 8, 2008.
Assistant Attorney General Hochman thanked IRS-CI which investigated this case, and Tax Division trial attorneys Jennifer Ihlo and Jenny Grus who prosecuted this case.