FOR IMMEDIATE RELEASE|
MONDAY, JUNE 7, 2004
TDD (202) 514-1888
PROMOTER OF SHAM TRUSTS PLEADS GUILTY
TO TAX FRAUD CHARGES IN ARIZONA
Defendant Sold Tax Schemes Through “Innovative Financial Consultants”
WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, Department of Justice; Paul K. Charlton, U.S. Attorney for the District of Arizona; and Nancy Jardini, Chief, Internal Revenue Service Criminal Investigation Division, announced today that at the federal courthouse in Phoenix, Arizona, before U.S. District Judge Mary H. Murguia, Mark D. Poseley pled guilty to a felony charge of conspiracy (18 U.S.C. §371) to defraud the Internal Revenue Service (IRS) for his role in marketing bogus trusts through an organization known as Innovative Financial Consultants (IFC). Mr. Poseley also pled guilty to a charge of willfully failing to file his 2000 income tax return, despite having earned substantial income from his work with IFC.
On April 4, 2003, Mr. Poseley was indicted - along with Dennis O. Poseley, Patricia Ann Ensign, John F. Poseley, David W. Trepas, Rachel McElhinney, Jeffrey G. Lewis, Keith D. Priest, and Frank C. Williams - for conspiring to defraud the IRS. Mr. Poseley faces a maximum potential sentence of six years in jail, followed by up to four years of supervised release, $500,000 in fines and liability for the costs of prosecution. Judge Murguia scheduled sentencing for September 13, 2004.
“Putting money into a trust does not exempt it from taxation,” said Assistant Attorney General Eileen J. O’Connor. “People who act as though it does risk criminal prosecution and jail. And in the end, they will still owe the taxes, with interest and penalties added.”
“IRS Criminal Investigation has made the investigation of individuals who market or who intentionally buy into abusive tax schemes a national priority. It is a matter of maintaining public confidence in the fairness of the tax laws,” said Nancy Jardini, IRS Chief, Criminal Investigation. “Trusts established to hide the true ownership of assets and income or to disguise financial transactions are considered sham trusts.”
The indictment alleges that from 1995 to 2003, IFC, based in Tempe, Arizona, created and sold over 3,000 bogus “onshore” and “offshore” trust packages by falsely claiming that taxpayers could avoid paying income taxes if they placed their income and assets into such trusts. IFC allegedly sold each onshore trust package for approximately $4,154, and each offshore trust package for approximately $10,500. According to the indictment, IFC enabled its clients to retain control and use of any income and assets they placed into the trusts, while making it more difficult for the IRS to track the true ownership of income and assets.
In his plea agreement, Mr. Poseley admitted he worked as an IFC salesman and sold both onshore and offshore trust packages. He admitted that he falsely represented to taxpayers that they could lawfully avoid paying income taxes by placing their income and assets into trusts, despite remaining as the trusts’ “managing directors.” Mr. Poseley acknowledged he knew the IFC clients, as “managing directors,” retained control over any income and assets they placed into their trusts. He admitted he ignored written publications from the IRS and other sources which directly contradicted the false claims he made. He also admitted that for the year 2000, he earned substantial gross income from the sale of IFC’s trust packages but willfully failed to file an income tax return and report that income to the IRS.
Assistant Attorney General O’Connor thanked Tax Division Trial Attorneys Larry J. Wszalek and Mark T. Odulio, who prosecuted the case. She also thanked the special agents of the Internal Revenue Service, whose assistance was essential to the successful investigation and prosecution of the case.
On December 11, 2003, John F. Poseley pled guilty to the conspiracy charge and is awaiting sentencing. Trial of the remaining defendants is scheduled to begin in August 2004. The charges contained in the indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.