FOR IMMEDIATE RELEASE |
THURSDAY, JUNE 10, 2004
TDD (202) 514-1888
FEDERAL BANKRUPTCY COURT PERMANENTLY BARS TELEMARKETING FIRM “NATIONAL AUDIT DEFENSE NETWORK” FROM
SELLING TAX SCAMS AND PREPARING TAX RETURNS
Justice Department to Obtain NADN's Claimed 640,000-Person Customer List;
WASHINGTON, D.C. - The Department of Justice announced today that on June 9 a federal bankruptcy court in Las Vegas entered a permanent injunction against Las Vegas-based telemarketing firm National Audit Defense Network, known as NADN. The injunction order, submitted jointly by NADN’s bankruptcy trustee and by the Justice Department, prohibits NADN from selling abusive tax schemes and from preparing federal income tax returns. The order also gives the Justice Department “full and complete access” to NADN’s records, including customer information.
NADN’s earlier court papers acknowledged that the company’s database had more than 640,000 customers. Court papers filed by the United States estimate that customers who followed NADN’s tax advice have underpaid $324 million in federal income taxes over the past three years alone. NADN ceased operating on May 27, 2004, and filed a petition to liquidate its operations under Chapter 7 of the bankruptcy code.
The Justice Department, in cooperation with the bankruptcy trustee, William Leonard, Jr., and the Internal Revenue Service, intends to contact NADN’s customers who purchased NADN’s tax schemes or to whom NADN may have given false tax advice. This communication will inform the customers of the entry of the permanent injunction and provide information about amending tax returns containing erroneous NADN-initiated credits and deductions.
“Shutting down a tax scam promotion prevents further harm to the tax system. But it is only step one,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “In the next steps, the Department of Justice and the Internal Revenue Service will seek to repair the harm by following the scam to its users and seeking to recover the losses it caused to the federal treasury.”
The Justice Department continues to seek permanent injunctions against ten other defendants in this suit: Weston Coolidge, NADN’s former president; Al Rodrigues, NADN’s former general manager; Robert Bennington, NADN’s former owner; Adam Mangabang, a former NADN sales manager; Christine Reid, a former NADN employee; Mary Orie, NADN’s former return-preparation department manager; ALR, Inc., operating as Success Matrix Group; Lee Panelli; Ric Klingenberg; and Jeff Klingenberg. The other six defendants named in the lawsuit, Oryan Management and Financial Services, Robert Goetsch, Daniel Porter, Joseph Prokop, Michelle Herandez, and ADA Adventure, Inc., agreed to a permanent injunction, which was entered by a Nevada federal court on May 7, 2004. This injunction and a related press release are available at http://www.usdoj.gov/tax/txdv04309.htm.
A copy of the Justice Department’s complaint, motion for temporary restraining order, and reply brief are posted at http://www.usdoj.gov/tax/txdv04233.htm.
Assistant Attorney General O’Connor thanked Department of Justice Tax Division trial attorneys Evan J. Davis and Phyllis Jo Gervasio, who represent the United States in this case. She also thanked the agents of the IRS’s Small Business/Self-Employed Division who investigated it.
This case is part of the Justice Department’s strategy to stop the promotion and use of fraudulent tax schemes. More information about the Justice Department’s Tax Division is available at http://www.usdoj.gov/tax/index.html.