Operator of Tax Preparation Business Convicted In Fraudulent Tax Shelter Conspiracy
Conspirators Reported Over $22 Million in Bogus Losses On Client Tax Returns;
Instructed Conspirators How to Carry Out Scheme While in Jail
Greenbelt, Maryland - A federal jury convicted Irvin Hannis Catlett, Jr., age 63, of Crownsville, Maryland today of tax offenses in connection with a scheme to prepare individual income tax returns for clients which reported bogus tax losses from a purported car leasing company.
The jury verdict was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Acting Assistant Attorney General John A. DiCicco; Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service - Criminal Investigation; and Special Agent in Charge Robert Geary of the Treasury Inspector General for Tax Administration.
“Trial testimony showed that Irvin Catlett’s ‘tax shelter’ scheme was a fraud,” said U.S. Attorney Rod J. Rosenstein. “People who want to reduce their taxes should seek reliable and independent advice and avoid con artists selling magical schemes that are too good to be true.”
“IRS-Criminal Investigation special agents use their financial expertise to detect and hold accountable abusive tax preparers who file false tax returns for their clients,” stated Rebecca Sparkman, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington DC Field Office. “Today's verdict should send a strong message that tampering with the integrity of our nation's tax system can result in conviction.”
According to testimony at the nine day trial, Catlett operated Tax Resolutions, Inc. located in Laurel, Maryland. He falsely held out Motors Holding Company, Inc., Motors Holding Company II through VI, Inc. and Rentown, Inc., (the tax shelter entities) to his clients as operating businesses involved in automobile leasing and sales. Catlett knew however that these entities were not engaged in automobile leasing and sales, nor in any other legitimate, profit-making business. From 1999 to 2009, Catlett worked with others to sell to clients purported “investments” in the tax shelter entities. These investments were payments to Catlett for the purchase of bogus tax losses, purportedly generated by the tax shelter entities’ automobile leasing operations. Catlett, Walter Cullum and James Unterreiner prepared fraudulent tax returns for their clients which included the fictitious business losses, thereby reducing the amount of taxable income and total tax reported by the clients and resulting in the clients falsely claiming refunds from the IRS.
Trial testimony further showed that Catlett paid Mark Hunt, an IRS revenue officer, for providing Catlett with IRS taxpayer information on Tax Resolutions’ clients and for allowing Catlett to introduce Hunt to clients and potential clients as Catlett’s “connection” at the IRS, in order to assure them that the tax returns prepared by Tax Resolutions would not be the subject of adverse IRS actions.
As part of the scheme, Catlett and Cullum supplied clients with copies of stock certificates to assure the clients of the legitimacy of their investment in the tax shelter, or to be shown to the IRS as proof of their investment in the event of an audit. Catlett and Cullum also provided clients with fraudulent IRS forms on which were reported the clients’ portions of fictitious business losses incurred by the tax shelter entities. Catlett instructed Cullum and Unterreiner to prepare client tax returns by first determining each client’s tax without the tax shelter loss and then adding to the return a fictitious loss from a tax shelter entity that was large enough to reduce to zero the client’s tax due. From November 2002 to September 2004, while incarcerated, Catlett instructed Cullum and Unterreiner on how to prepare false tax returns.
As a result of the scheme, approximately 275 tax returns were filed with the IRS which reported $22,009,021 in bogus Schedule E losses, which resulted in a tax loss to the United States of $3,810,244.
Catlett faces a maximum sentence of five years in prison for conspiracy to defraud the IRS; three years in prison on each of 10 counts of assisting in the preparation of false tax documents; and three years in prison for obstructing Internal Revenue laws. U.S. District Judge Roger W. Titus scheduled sentencing for February 17, 2011 at 9:00 a.m.
Maryland residents Walter Cullum, Jr., age 37, of Columbia; Mark E. Hunt, age 45, of Baltimore; and James Unterreiner II, age 34, of Bowie previously pleaded guilty to their participation in the tax evasion scheme and are scheduled to be sentenced on November 17, 2010; January 24, 2011; and December 20, 2010, respectively.
United States Attorney Rod J. Rosenstein praised the IRS and TIGTA for their investigative work, and thanked Assistant United States Attorney Gregory Bockin and Trial Attorney Shawn T. Noud of the Department of Justice Tax Division, who are prosecuting the case.