News and Press Releases

Jury convicts four in multimillion-dollar conspiracy to defraud the government through sham trusts and phony debt elimination scheme



FOR IMMEDIATE RELEASE
June 20, 2011


 

NEWARK, N.J. – Two principals of Mid-Atlantic Trustees and Administrators (MATA) and two of their employees were convicted today of perpetrating a conspiracy to defraud the United States through the marketing of two fraudulent products designed to conceal assets from the IRS and fraudulently discharge debt, U.S. Attorney Paul J. Fishman announced.

The jury returned guilty verdicts against all four defendants on all counts charged in the Indictment against them. The jury reached a decision following four hours of deliberation at the conclusion of a four-week trial before U.S. District Judge William J. Martini in Newark federal court. Each of the defendants – Ronald Ottaviano, 65, of Lewes, Del.; Harriet Foster, 67, of Tuckerton, N.J.; Michael Balice, 61, of Metuchen, N.J.; and Angel Done, 53, of Queens, N.Y. – was convicted of one count each of conspiracy to defraud the United States, mail fraud and wire fraud. In addition, Ottaviano was convicted of two counts of tax evasion and one count of money laundering; Balice was convicted of one count of tax evasion; and Foster was convicted of two counts of failing to file a tax return and one count of money laundering. The jury also returned a special verdict forfeiting a home in Lewes, which the jury found was purchased using the proceeds of the fraud.

A fifth defendant, Wilson Calle, 54, of Queens, pleaded guilty during trial to one count of mail fraud.

According to documents filed in this case and the evidence at trial:

Ottaviano and Balice were the principals of MATA, a company formed in 2005 and based in Bayville, N.J. At various times, Foster, Done and Calle were employees of MATA who, in exchange for referral fees and commissions, recruited customers for the companies.

At no time did MATA conduct legitimate business. Instead, MATA marketed two products to its customers: Pure Trust Organizations (“PTOs”) and Beneficiaries in Common (“BIC”).

PTOs

On the Internet, in promotional materials, and elsewhere, MATA, its principals, and employees held themselves out to be trust experts who employed a team of attorneys, Certified Public Accountants, Certified Financial Planners, and other tax professionals who were equipped to establish legal trusts for their clients. MATA also claimed to have established thousands of trusts and to be one of the leading authorities in the creation of “pure trusts.” Ottaviano frequently identified himself as a non-practicing attorney and the leading authority on trusts in the United States. The company also touted that its trusts had been assigned Trust Identification Numbers by the IRS, and were therefore legal. According to the evidence at trial, none of those statements was true.

From the formation of MATA through July 2010, the defendants established several hundred PTOs for their customers, the express design of which was to conceal their customers’ income and other assets from the IRS, thereby impeding the IRS in its tax collection efforts. In creating, marketing, and selling PTOs, the defendants made concerted efforts to make it appear that PTO customers had no control over the assets in the account and the trustees had complete control. The customers, however, always maintained unfettered access to their assets. Each PTO customer was provided with a debit card and checkbook in the name of the PTO and signature stamps bearing the signatures of Ottaviano and Balice – which enabled the customer to use the assets in his PTO as he chose.

BIC

In May 2007, MATA began to market and sell a second product, BIC, as a debt elimination program. For thousands of dollars per customer, MATA, its principals, and its employees manufactured false and fictitious bonds, often with face amounts of tens of millions of dollars, which were sent directly to the United States Treasury Department. According to MATA, once a customer’s bonds were sent to the Treasury Department and accepted, the customer was “bonded,” and, with MATA’s help, could draw down that bond to pay “public” debt, including mortgage debt, credit card debt, and tax obligations.

As part of the BIC process, customers paid MATA to send hundreds of bonds to the U.S. Treasury, the IRS, and other government agencies in an attempt to discharge their tax and other debts. In total, MATA flooded the U.S. Treasury, IRS, and other government agencies with hundreds of billions of dollars in worthless paper.

                                                                                                          * * *
Through the marketing and sale of PTOs and BIC, the defendants collectively made over $3.5 million in illicit gross receipts, most of which was hidden in PTOs controlled by the defendants. None of the defendants paid income taxes on the proceeds, and, in many cases, filed no federal income tax returns at all. In the case of Ottaviano and Foster, they spent a portion of their illicit proceeds, over $500,000 in total, to purchase the Lewes home – in cash.

Each defendant faces a maximum potential penalty of five years in prison on the conspiracy charge and 20 years in prison on each of the mail and wire fraud charges, as well as a maximum $250,000 fine per charge. The money laundering count with which Ottaviano and Foster were convicted carries a maximum potential penalty of 10 years in prison and a fine of up to twice the purchase price of the Delaware home. Sentencing is scheduled for October 18, 2011.

Three other defendants originally charged in the scheme pleaded guilty in November 2010. Richard MacFarlane, 63, of Doylestown, Pa.; and Paula Mariani, 51, and Patrick Potopowicz, 62, both of Bensalem, Pa., pleaded guilty to conspiring with each other and others named in the Indictment to obstruct the IRS in its tax collection efforts, admitting they marketed two fraudulent products designed to conceal assets from the government and fraudulently discharge debt.

The investigation was led by the Treasury Inspector General for Tax Administration, under the direction of Special Agent in Charge Robert Geary, and IRS - Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, as well as the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge Philip R. Bartlett.

The government is represented by Assistant U.S. Attorneys Gurbir S. Grewal and Christopher J. Kelly of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

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Defense counsel:
Ottaviano: pro se; Michael V. Calabro Esq., Newark (stand-by counsel)
Balice: Joseph R. Donahue Esq., River Edge, N.J.
Foster: Gary Leo Cutler Esq., Newark
Done: Alexander Booth Esq., Union City, N.J.
Calle: Richard Verde Esq., West Caldwell, N.J.

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