Department of Justice Seal Department of Justice
FRIDAY, JULY 16, 2004
(202) 514-2007
TDD (202) 514-1888


Conspirators Used Bogus “Pure Trust Organizations” To Hide Income Offshore

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, announced today that at the federal courthouse in Phoenix, Arizona, Frank C. Williams, an accountant, pled guilty to two felony tax charges of aiding and assisting in the preparation of fraudulent tax returns (26 U.S.C. §7206(2)). U.S. District Judge Mary Murguia has scheduled sentencing for September 27, 2004.

Mr. Williams faces a maximum potential sentence of six years imprisonment followed by up to two years supervised release, fines totaling $500,000, and liability for the costs of prosecution.

“Professionals who peddle tax scams undermine the integrity of our tax system,” said Assistant Attorney General Eileen J. O’Connor. “In addition, they put themselves and their clients at serious risk of financial loss, civil penalties, and criminal prosecution.”

“The IRS takes abusive trust arrangements seriously. 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 fraudulent trusts and IRS is actively investigating the promoters of these sham trusts.”

The superseding information alleges that Mr. Williams, age 54, of Houston, Texas, prepared the fraudulent tax returns through an organization known as Innovative Financial Consultants (IFC), based in Tempe, Arizona. Mr. Williams was once licensed by the State of Texas as a certified public accountant.

On April 4, 2003, the alleged founders of IFC -- Dennis O. Poseley and Patricia Ann Ensign -- were indicted, along with John F. Poseley, Mark D. Poseley, David W. Trepas, Rachel McElhinney, Jeffrey G. Lewis, and Keith D. Priest, for conspiring to defraud the IRS. The conspiracy charge alleges that from 1995 to 2003, IFC created and sold over 3,000 bogus “onshore” and “offshore” trust packages, falsely claiming that taxpayers could avoid paying income taxes by placing their income and assets into such trusts. The scheme allegedly entailed creating a shell Limited Liability Company (LLC) and two bogus “Pure Trust Organizations” that purportedly owned the LLC and were falsely marketed as having no tax filing requirements. In reality, the IFC client owned and maintained full control of assets and income earned and distributed by the LLC.

In a statement of facts provided to the court, Mr. Williams admitted preparing false Forms 1065 for the LLCs that reported distributions of income to the “Pure Trust Organizations” rather than the individual IFC clients. Mr. Williams admitted he knew the trust organizations were alter egos for the individual clients. Mr. Williams further admitted that he falsely advised IFC clients that they did not have to report their share of the LLC income on their IRS Form 1040 Individual Income Tax Returns because the distributions had been made to the trust organizations. Mr. Williams also admitted his actions caused a tax loss totaling $412,442. John F. Poseley pled guilty to the conspiracy charge in his indictment on December 11, 2003, and awaits sentencing. On June 7, 2004, Mark D. Poseley pled guilty to the conspiracy charge and one count of willfully failing to file his 2000 income tax return. He also awaits sentencing. Trial of the remaining defendants is scheduled to begin in December 2004.

The charges contained in an 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.

Assistant Attorney General O’Connor thanked Tax Division Trial Attorneys Edward Groves, Larry Wszalek and Mark 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.