FOR IMMEDIATE RELEASE|
MONDAY, MAY 16, 2005
TDD (202) 514-1888
HAWAII JURY CONVICTS FIVE TAX FRAUD PROMOTERS
Defendants Made and Sold Reliance Defense Falsely Claiming Taxes Were Voluntary
WASHINGTON, D.C. - Eileen J. OConnor, Assistant Attorney General for the Justice Departments Tax Division; Edward H. Kubo, Jr., U.S. Attorney for the District of Hawaii; and Nancy Jardini, Chief, Internal Revenue Service (IRS) Criminal Investigation announced today that, following an eight-day trial, a federal jury in Honolulu, Hawaii convicted Royal LaMarr Hardy (a.k.a. Royal LaMarr Sounet), Ursula A. Supnet (a.k.a. Ursula Ann Sounet), Michael L. Kailing, Fred M. Ortiz, and Terry Leroy Cassidy (a.k.a. Shawn Michaels) for conspiring over a twenty-year period to defraud the United States for the purpose of impeding the IRS. The defendants promoted and sold tax evasion schemes that caused a total tax loss of more than $8.7 million. Mr. Hardy and Ms. Supnet were also convicted of a separate conspiracy to defraud by hiding income they earned from their promoter activities. Mr. Hardy was also convicted of failing to file his own income tax returns. Sentencing was scheduled for August 29, 2005.
The maximum penalty for each conspiracy charge is five years imprisonment followed by up to three years supervised release, and a fine of $250,000. The maximum penalty for each failure to file charge is one year imprisonment followed by up to one year supervised release, a fine of $100,000 and costs of prosecution.
This is one of many pending criminal prosecutions involving schemes to hide income and assets from the IRS, said Assistant Attorney General OConnor. People who promote or use fraudulent tax schemes face federal prison, along with penalties and interest on any unpaid taxes.
According to the indictment and the evidence introduced at trial, Mr. Hardy and Ms. Supnet managed the conspiracy, serving as executive director and administrator, respectively, of The Cornerstones of Freedom Research Foundation. The defendants promoted tax fraud schemes which included fraudulent use of trusts, fraudulent IRA rollovers, and a so-called Reliance Defense. The Reliance Defense scheme offered reliance letters and other materials purporting to support the purchasers claim that he or she believed the filing of income tax returns was voluntary and that the Internal Revenue Code made no one liable for individual income taxes. Mr. Kailing and Mr. Ortiz provided opinion letters for the Reliance Defense scheme. Mr. Cassidy marketed that and the other schemes in Washington State.
Mr. Hardy was also convicted of willfully failing to file individual income tax returns for tax years 1995, 1996, and 2001. In 1995 and 1996, he earned $491,000 and $397,000, respectively, from the sale of the fraudulent schemes. In 2001, Mr. Hardy earned $257,000 from an offshore investment.
Assistant Attorney General OConnor and U.S. Attorney Kubo thanked Assistant U.S. Attorney Clare Connors and Tax Division Trial Attorney Brian D. Bailey, who prosecuted the case. They also thanked the special agents of the IRS whose assistance was essential to the successful investigation and prosecution of the case.
Additional information about the Justice Departments Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.