Man Sentenced to 80 Months in Prison for Tax Evasion, Obstruction of Justice, and Conspiracy to Defraud the United States
Las Vegas, Nev. - Daniel G. Bogden, United States Attorney for the District of Nevada, Eileen J. O'Connor, Assistant Attorney General of the Department of Justice Tax Division, and Byram Tichenor, Special Agent-in-Charge of the IRS Criminal Investigation Division for Nevada, announced that Palle "Pono" Bognaes was sentenced to 80 months in prison today for his participation in a scheme to defraud the IRS. The sentence was handed down in Reno by U.S. District Court Judge David W. Hagen.
Following a two-week jury trial, Bognaes was convicted last August of conspiracy to defraud the United States, evading over $2 million in federal taxes, and obstructing and impeding the IRS in the collection of those taxes. Bognaes was also convicted of failing to file income tax returns for the years 1990 through 1992. Bognaes was sentenced to 80 months in prison and three years of supervised release, ordered to pay $29,598 in restitution to the IRS, ordered to pay $107,752.33 in restitution to the client from whom he took unauthorized withdrawals, and also ordered to pay costs of prosecution in the amount of $4,861. Another defendant, Jose Gastanaga, also scheduled to be sentenced today, failed to appear. Judge Hagen ordered a bench warrant for his immediate arrest.
The evidence at trial demonstrated that Palle Bognaes, a lawyer, engaged in a scheme in which he created Unincorporated Business Organizations (UBO's) for his clients. Bognaes then instructed his clients to transfer title of their assets into the UBO's and told them that they did not have to pay personal income taxes on those assets. Bognaes collected significant fees for his services. Bognaes referred to these UBO trusts by various names, including Massachusetts Trust, Common Law Trust, and Pure Trust Organizations. Bognaes utilized a panoply of tactics in conjunction with the UBO's to defraud and obstruct the IRS. Bognaes assisted co-defendant Jose Gastanaga in setting up a UBO. Together they conspired to evade the payment of more than $2 million in taxes owed by Gastanaga. Bognaes then assisted Gastanaga by attempting to prevent the IRS from seizing two homes for non-payment of those taxes. Bognaes also obstructed the IRS sale of Gastanaga's interest in a ranch located in Paradise Valley, Nevada. Bognaes also created UBO's for several other clients, including doctors and chiropractors. Bognaes instructed his clients on how to conduct their transactions through the use of nominees and by wiring funds offshore to the Turks & Caicos Islands, a known tax haven. For another client, Bognaes generated fake receipts to support $67,000 of false deductions during an IRS audit.
From 1990 to 1992, Palle Bognaes received income from selling the UBO's, and from taking $107,752.33 in unauthorized withdrawals from one of his clients' accounts for whom he acted as the trustee. This unreported income was the basis of his three convictions for failing to file income tax returns. In fact, Bognaes has not filed an income tax return since 1980.
"Taxpayers should be extremely wary of promoters who market schemes they claim will eliminate the obligation to file tax returns or pay taxes," said Eileen J. O'Connor, Assistant Attorney General of the Justice Department's Tax Division. "The Department of Justice will prosecute the promoters of fraudulent tax schemes and their clients. As happened here, the person who claims to be liberating you from your tax bill might in fact be leading you to prison."
The prosecution and conviction of the defendant is the result of an extensive investigation by Special Agents with the Internal Revenue Service Criminal Investigation Division. The case was prosecuted by Department of Justice Trial Attorneys Anastasia Enos and Lori Hendrickson, who report that the IRS is cracking down on schemes involving abusive and sham trusts devised to evade lawful taxes, and that other investigations into similar tax evasion schemes using bogus trusts are underway. The IRS maintains a web site which contains a warning notice to the public concerning abusive trust programs. The web site address is www.treas.gov/irs/ci.