Department of Justice Seal Department of Justice
FOR IMMEDIATE RELEASE
WEDNESDAY, JUNE 24, 2009
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FEDERAL COURT ENJOINS LAS VEGAS MAN WHOSE TAX-FRAUD SCHEME IS ESTIMATED TO HAVE COST TREASURY $31 MILLION

Sham Trust Scheme Helped More Than 180 Customers Fraudulently Conceal Income


WASHINGTON A federal court has permanently enjoined Reinhold Sommerstedt, a Las Vegas-based promoter of a sham trust tax scam, the Justice Department announced today. According to papers filed in the case, Sommerstedt created phony domestic and foreign trusts to move customers’ assets from the United States to offshore banks located in the West Indies. Customers allegedly used phony loans and gifts to repatriate their money while concealing it from the Internal Revenue Service (IRS). Customers paid as much as $14,500 to participate in the scheme.

In granting the injunction, Judge Brian E. Sandoval of the U.S. District Court for the District of Nevada said that Sommerstedt failed to present “any evidence to refute the government’s indication that Sommerstedt’s trust scheme was organized and operated solely for the purpose of improperly reducing his customers’ federal tax liabilities.” The injunction bars Sommerstedt from promoting the trust scheme or any similar scheme. He must also give the government a list of his customers’ names, addresses, e-mail addresses, telephone numbers and Social Security numbers.

The court found that Sommerstedt’s actions were “not an isolated act of misconduct” and that the scheme “involved more than 180 customers.” The government complaint in the case alleged that the scheme cost the U.S. Treasury more than $31 million in lost tax revenue. The court said that it was “not persuaded by Sommerstedt’s self-serving statement that an injunction is unnecessary because he will voluntarily refrain from future fraudulent conduct,” noting that Sommerstedt has “never acknowledged the wrongfulness of his actions.”

The other three defendants in the case previously consented to permanent injunctions. They are Daniel Young of Las Vegas, who allegedly created phony domestic and foreign trusts to move customers’ assets from the United States to offshore banks located in the West Indies; Lynn Lakers of Boulder City, Nev., a tax-return preparer who allegedly prepared false tax returns for the phony trusts used in the scheme; and Stephen Nestor of Boise, Idaho, a former IRS revenue officer who allegedly signed false tax returns on behalf of customers’ bogus trusts.

Offshore transactions and trust misuse are two of the IRS’s Dirty Dozen tax scams for 2009.

John DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, thanked Robert Metcalfe, the Justice Department trial attorney who handled the case.

In this decade the Justice Department has obtained injunctions against more than 410 tax-fraud promoters and tax-return preparers. More information about these efforts can be found on the Justice Department Web site.

Related Documents:

  United States v. Reinhold V. Sommerstedt, et al.
Order

(PDF document)


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