The Justice Department announced today that a federal court has permanently barred Cash Management Systems, a Virginia corporation, from promoting two tax schemes that allegedly involve disguising wages as tool-reimbursement or tool-rental payments. Also subject to the civil injunction order were Cash Mangement’s marketing arm, Xell Enterprises, incorporated in Kansas; its principals, Bruce Lemay and Richard Herson Mills; and Allen Davison, of Overland Park, Kan. According to the government complaint, Davison provided legal opinion letters regarding the schemes and served on Cash Management’s board of directors.
Judge Eric F. Melgren of the U.S. District Court for the District of Kansas entered the permanent injunction, which the defendants consented to without admitting to the allegations against them. Davison was enjoined from promoting other tax schemes in 2010.
The complaint alleges that defendants promoted and implemented two fraudulent tax schemes to employers and employees in the automotive, construction and trucking industries across the United States. In the first, employers allegedly re-characterize a portion of employees’ wages as purported reimbursements for tools in order to evade federal income and employment taxes. The second plan allegedly involves re-characterizing a portion of wages as purported tool rental payments. The suit alleges that both plans are specifically designed and promoted as ways to reduce reported income and employment taxes.
The government asserts in its complaint that from 2004 through 2010 the schemes cost the U.S. Treasury an estimated $17 million.
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 .