WASHINGTON -- A federal grand jury sitting in Grand Rapids, Mich., has returned a six-count superseding indictment, charging a Kalamazoo, Mich., attorney, his client, and four alleged tax shelter promoters with tax crimes, the Justice Department announced today.
John A. Campbell of Portage, Mich., a former partner with the law firm of Miller, Canfield, Paddock & Stone P.L.C., was charged with one count of conspiracy to defraud the United States for his alleged conduct in helping four shelter promoters sell fraudulent tax shelters over a ten-year period. Additionally, Campbell’s client, Oskar René Poch of Hickory Corners, Mich., who owned and operated Trillium Staffing, an employee-leasing company in Kalamazoo, was charged with one count of corruptly endeavoring to obstruct the administration of the Internal Revenue laws.
Finally, two of the promoters were also charged with the attempted income tax evasion of Poch’s income tax liability for 1999 and 2000, because he purchased the fraudulent tax shelter in those years and deducted the premiums on his tax returns while the promoters allegedly misled the Internal Revenue Service (IRS) about those transactions. Poch was not charged in the conspiracy or with tax evasion. He entered into a plea agreement with the government, which was also filed today, and is cooperating with the government’s investigation.
The four shelter promoters charged along with Campbell in the conspiracy are from all over the country. The superseding indictment charged that beginning in 1995, Peter J. Peggs of Prides Crossing, Mass., Robert Duane Larsen of Winter Park, Colo., and Anthony G. Merlo of Fort Worth, Texas, and the United States Virgin Islands, were involved in a criminal conspiracy. Along with their tax attorney, John A. Campbell, and Craig M. Stone of Fort Pierce, Fla., who both joined the conspiracy in 1999, allegedly to defraud the United States by promoting, marketing, selling and administering fraudulent tax shelters called loss-of-income (“LOI”) insurance policies. These policies were issued through Security Trust Insurance Company, a now-defunct company formerly known as Caduceus Life Insurance Company that was located in the U.S. Virgin Islands.
According to the superseding indictment, Peggs, Larsen and Merlo, who were officers, directors and owners of Security Trust, and Campbell and Stone, promoted and sold LOI policies to wealthy clients in order to generate phony tax deductions, and subsequently returned nearly all of the premiums to the U.S. taxpayer clients in a manner concealed from the IRS. During the duration of the conspiracy, more than $12,000,000 in premiums was collected.
Additionally, it is alleged that Poch improperly deducted approximately $3.9 million in insurance premiums paid by his companies to Security Trust in the years 1999, 2000 and 2001. The false deductions had the effect of reducing Poch’s individual income taxes in each of these years. In addition, as part of this scheme, the co-conspirators improperly disguised the return of over $3 million to Poch as offshore funds available to him in the form of loans. Peggs and Larsen are also charged for their role in the attempted income tax evasion of the taxes owed by Poch for the years 1999 and 2000.
In furtherance of this scheme, the superseding indictment alleges that Peggs, Larsen and Campbell lied to the IRS during its audit of Poch’s tax returns in 2002 and 2003. In addition, Peggs, Larsen and Campbell also allegedly made material misrepresentations about the facts underlying this scheme to Poch’s tax court representative who was preparing to contest the IRS audit determination in U.S. Tax Court. Moreover, Poch was charged separately with providing false, misleading and incomplete answers to the IRS in a June 2002 interview during the audit of his tax returns. Peggs and Larsen allegedly engaged in similar conduct with other clients and individuals in Massachusetts and Kentucky. One of the named unindicted co-conspirators, Bruce M. Cohen of Louisville, Ky., pleaded guilty in 2007 to conspiracy charges in federal courts in both Ohio and Kentucky for his role in this scheme. Cohen is currently serving a 30 month prison sentence for his Kentucky conduct and is awaiting sentencing in Ohio.
Conspiracy to impede the IRS and tax evasion each carry a maximum punishment of five years in prison and a fine of up to $250,000. Corruptly endeavoring to impede the administration of the Internal Revenue Laws carries a maximum punishment of three years in prison and a similar fine.
Assistant Attorney General Nathan J. Hochman and U.S. Attorney Charles Gross commended the investigative efforts of the IRS agents in the case, as well as Justice Department attorneys Richard M. Rolwing and Patrick J. Murray, and Assistant U.S. Attorney Don A. Davis, who are prosecuting the case.
An indictment is only a charge and is not evidence of guilt. The defendants are entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.