WASHINGTON - A federal judge in Santa Ana, Calif., has permanently barred Thanh Viet Jeremy Cao and his business, Phoenix Financial Management Group, from preparing federal tax returns, the Justice Department announced today. U.S. District Judge James V. Selna of the Central District of California entered the civil injunction order.
The court found that Cao prepared numerous federal tax returns claiming a total of over $200 million in tax refunds based on false representations of tax withholdings. The court noted that in 2010 the Internal Revenue Service (IRS) continued to receive fraudulent tax returns prepared by Cao, including a bogus $82 billion refund claim on his own 2009 income tax return.
The court barred Cao from preparing federal tax returns for others and from filing frivolous IRS tax returns and forms for himself. Cao is required to provide the government with a list of people for whom he has prepared tax returns since Jan. 1, 2005, and notify those people of the court’s order.
The court said that Cao apparently subscribes to "redemption" or "straw man" theories. The alleged basis of these frivolous theories is that in the 1930s the United States created secret accounts in the Treasury Department for each citizen. The proponents of these theories assert that they can draw on the secret Treasury account by issuing an IRS Form 1099-OID or other forms to a creditor of the citizen. Redemption scheme proponents assert that the issuance of the Form 1099-OID or some other form allows a creditor to make a claim with the Treasury Department and receive full payment of the debt.
The injunction suit against Cao was one of seven lawsuits filed last year to stop OID redemption scheme promoters.
Cao was recently indicted in Las Vegas for allegedly filing false liens against federal employees.
John DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, thanked Tax Division Trial Attorney John Monroe and Assistant U.S. Attorney Valerie Makarewicz, who handled the case, and Shauna Henline, of the IRS’s Small Business/Self Employed Division, who conducted the investigation.
In the past decade the Justice Department has obtained injunctions against hundreds of tax preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website.