WASHINGTON – A federal court in Seattle has permanently shut down a nationwide “warehouse bank” tax defier scheme used to help customers evade federal taxes, the Justice Department announced today. The warehouse bank, known as Olympic Business Systems, was operated by Des Moines, Wash., resident Robert Arant.
The court said the warehouse bank was used by customers “who owe substantial tax debts or have failed to file federal tax returns.” Evidence in the court record showed that Arant commingled nearly $28 million in customer deposits made over a four-year period and held these funds at a number of commercial banks. Customers had Arant use their deposited funds to pay customers’ bills, which made it difficult or impossible for the IRS to identify customers’ expenditures.
The permanent injunction order follows an earlier preliminary injunction that the court entered last year. Judge Robert Lasnik of the U.S. District Court for the Western District of Washington found that Arant falsely told customers they could legally hide their income, assets, expenditures and identities from the Internal Revenue Service (IRS) through the warehouse bank. The court said that Arant “knew or had reason to know” that his promises were false because “courts have repeatedly held that warehouse banks are tax evasion schemes.”
In a separate order, Judge Lasnik held that federal tax liens, totaling more than $250,000, which relate to penalties the IRS assessed against Arant for operating his scheme have priority over the claims of warehouse bank depositors to funds currently held by the operation. Those funds, held at a number of commercial banks, have been frozen since last year’s preliminary injunction. The court ordered that they remain frozen.
The court also ordered Arant to give the Justice Department a list of all customers who used the warehouse bank—with customers’ addresses, Social Security numbers and telephone numbers.
“Courts have repeatedly held that this so-called ‘warehouse bank’ tax defier scheme is illegal,” said Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division. “Anyone tempted to put their money in such an operation should know that, in addition to getting themselves in serious legal trouble, they could also lose all their money.”
Since 2001 the Justice Department’s Tax Division has obtained injunctions against more than 320 tax-fraud promoters and unscrupulous tax preparers. Information about these cases is available on the Justice Department website, as is information about the Justice Department’s Tax Division.