Anthony G. Merlo, a former resident of Fort Worth, Texas, and the U.S. Virgin Islands, pleaded guilty today to conspiracy to defraud the United States. Merlo appeared before Magistrate Judge Ellen S. Carmody in Grand Rapids, Mich.
In March 2008, Merlo and five others were indicted by a grand jury in Grand Rapids and charged with conspiring to defraud the United States by promoting, marketing, selling and administering fraudulent tax shelters called loss-of-income insurance policies. These policies were issued through Security Trust Insurance Co., a now-defunct company formerly known as Caduceus Life Insurance Co., that was located in the U.S. Virgin Islands.
Co-conspirator John A. Campbell, a former partner in and resident director of the Kalamazoo, Mich., office of the law firm of Miller, Canfield, Paddock & Stone P.L.C., pleaded guilty to conspiracy in April 2008. Campbell’s client, Oskar René Poch of Hickory Corners, Mich., pleaded guilty to corruptly endeavoring to obstruct the administration of the Internal Revenue laws in April 2008. Poch owned and operated Trillium Staffing, an employee-leasing company in Kalamazoo.
Co-defendants Peter Peggs, Robert Larsen, and Craig Stone, who allegedly promoted fraudulent tax shelters, are scheduled to begin trial in September 2009.
According to the plea agreement and evidence presented at the plea hearing, Merlo became involved with promoting offshore tax shelters in 1995 with co-defendants Peggs and Larsen through Security Trust. Merlo admitted that his level of involvement in this promotion significantly increased from 1999 through mid-2002, when he was also interacting with Defendants Campbell and Stone.
According to the plea agreement and evidence presented at the plea hearing, Merlo agreed with Defendants Peggs, Larsen, Stone, and others to conceal information and documents from the IRS in connection with the marketing, promotion, selling, and administering of Security Trust’s tax shelter products known as "loss-of-income" or "general business risk" insurance and "deferred private annuities." Specifically, Merlo admitted that he and his co-conspirators attempted to impede and impair the IRS by, among other things, hiding from the IRS and others the relationship between the front and back ends of their loss-of-income tax shelter product; paying Campbell’s law firm for an opinion letter to be used in the marketing of this product that omitted any mention of the back-end; altering documents so as to refrain from accurately memorializing the connection between the front and back ends; and discussing, and approving of, the destruction of documents related to the program.
Judge Judge Janet T. Neff has scheduled the sentencing of Campbell and Poch for September 28, 2009. The scheduling of Merlo’s sentencing is pending. Merlo and Campbell face maximum potential sentences of five years’ in prison, followed by terms of supervised release not to exceed three years, fines of up to $250,000, and mandatory special assessments of $100. Poch faces a maximum potential sentence of three years’ in prison, followed by a one year term of supervised release, a fine of $250,000, and a mandatory special assessment of $100.
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.
Acting Assistant Attorney General John A. DiCicco and acting United States Attorney for the Western District of Michigan Donald Davis thanked Tax Division trial attorneys Richard M. Rolwing and Patrick J. Murray, who are prosecuting the case. They also commended the investigative efforts of the IRS agents involved in this case.
Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.