WASHINGTON – David J. Orr and former attorneys, Todd Cannon and Michael Behunin, were sentenced in federal court in Salt Lake City, Utah, in connection with the promotion of a tax and investment fraud scheme, the Justice Department and Internal Revenue Service (IRS) announced today. U.S. District Judge Ted Stewart sentenced Orr to 60 months in prison, Behunin to 29 months in prison, and Cannon to 36 months in prison. In addition, all three defendants were ordered to serve three years of supervised release upon the completion of their terms of imprisonment. Cannon was also ordered to pay more than $1.2 million in restitution.
In April 2003, Orr, Cannon, Behunin, Lanny White, who pleaded guilty on November 27, 2006, and certified public accountant Max Lloyd were indicted for promoting and selling a fraudulent trust scheme to over 300 clients that defrauded the United States of millions of dollars in tax revenue. All three defendants pleaded guilty to a felony charge of conspiracy to defraud the United States and to commit mail and wire fraud, in connection with the promotion of the tax and investment fraud scheme. In total, 11 individuals, including four attorneys and one certified public accountant, have pleaded guilty in this case.
“Tax professionals who help others commit tax evasion pay a steep price for their crimes,” stated Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “They forfeit not only the privilege of their professional livelihood, but also their liberty when they are sentenced to lengthy prison terms.”
According to papers filed with the court, Orr was the lead promoter, salesperson and organizer for the fraud scheme. Orr admitted that his actions cost the federal Treasury between $5 million and $10 million in lost tax revenue. Orr also admitted that he obtained between $5 million and $7 million from clients by misrepresenting his investment experience and the safety and expected return on the investments he marketed.
“Concealing income from the government through the use of fraudulent trust arrangements is not financial planning; it’s criminal activity,” said John H. Imhoff, Jr., Acting Chief, IRS Criminal Investigation. “Those who promote these activities will be held accountable.”
Orem, Utah, attorney Todd Cannon was legal counsel for the fraud scheme and falsely represented to clients that the trust scheme was legal. Cannon admitted that his actions cost the federal Treasury almost $3 million in lost tax revenue. Cannon also admitted that he allowed his fellow conspirators to fraudulently use and invest over $1 million of clients’ funds for purposes other than those promised to the clients. As a condition of his guilty plea, Cannon agreed to surrender his law license.
Sandy, Utah attorney Michael Behunin prepared numerous false tax returns for the fraud scheme, costing the federal Treasury between $950,000 and $1.5 million in lost tax revenue. Behunin also admitted to participating in a fraudulent railroad bond investment scheme, causing clients to lose between $350,000 and $450,000. As a condition of his guilty plea, Behunin agreed to surrender his law license. Behunin also holds an advanced degree in taxation.
The case was prosecuted by Tax Division trial attorney Nicholas D. Dickinson. Special agents of the Internal Revenue Service and FBI assisted with the investigation and prosecution of this case.