Former Colorado Lawyer Pleads Guilty to Conspiracy, Tax and Identity Theft Charges for "Asset Protection" Scam
Las Vegas, Nev. – A former lawyer and author who was involved in a scheme to help persons hide their income and assets from the IRS and other creditors, has pleaded guilty to felony conspiracy, tax, and identity theft charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada.
William S. Reed, 61, of Santa Barbara, California, pleaded guilty on Monday, February 13, 2012, to conspiracy to defraud the United States, aggravated identity theft, and attempt to evade or defeat tax. Reed is scheduled to be sentenced on May 14, 2012, at 2:00 p.m., by Senior U.S. District Judge Philip M. Pro, and faces up to 12 years in prison and $750,000 in fines.
Reed, Wendell L.Waite, and Richard C. Neiswonger, were indicted last July. Waite and Neiswonger are awaiting trial. The indictment alleges that from about 1998 to 2006, the defendants were involved in a scheme to enrich themselves through the sale of services and products which would assist persons in concealing their assets from the IRS and creditors. The indictment alleges that the men may have made over $60 million from the scheme.
Reed is a former Colorado attorney whose license to practice was suspended by the Supreme Court for the State of Colorado in 1997 for engaging in misrepresentations and dishonesty. Reed owned at least one residence in Las Vegas, and wrote the book, Bulletproof Asset Protection. Neiswonger was engaged in sales and marketing ventures and resided in Las Vegas. Waite resided in Las Vegas and was a licensed certified public accountant in Nevada, California and Utah.
According to Reed's plea agreement, in about October 1998, Reed and Neiswonger formed Asset Protection Group, Inc. (APG) in Nevada. From 1999 to mid-2006, APG operated from an office in Las Vegas. APG offered and sold a business opportunity program (the APG program) to consumers nationwide. Consumers purchased the APG "asset protection" program typically for $9,800 and became APG "consultants." The consultants then sold the APG asset protection service to clients who wished to conceal assets from potential litigants and creditors, as well as government agencies. In turn, APG consultants received a portion of the fees paid by the clients. Among other things, APG's "asset protection" services allowed clients to place funds in bank accounts that were held in the names of nominees; created and maintained domestic corporations and offshore international business companies with obscured ownership; sold "friendly liens," which created the false impression that a client had little or no equity in a real property; and marketed, with the assistance of Waite's accounting company, "tax savings Nevada corporations" designed to "shift income" from a business outside of Nevada to a Nevada corporation for the purpose of evading state and federal taxes.
APG allegedly sold the business opportunity training program to at least 1,000 persons for about $10,000 each; created approximately 2,500 disguised ownership corporations in Nevada for $795 each; opened over 900 disguised ownership corporate bank accounts; and prepared over 400 fraudulent liens. Waite allegedly received over 180 corporate tax referrals from APG and prepared over 400 tax returns. During 2003 to 2006, APG allegedly received over $63 million in deposits and made over $62 million in withdrawals through one of its bank accounts, and sent over $11 million offshore.
The Federal Trade Commission (FTC) intervened in APG's operations in July 2006. In 2007, the United States District Court in the Eastern District of Missouri entered a permanent injunction against APG prohibiting it from marketing the business opportunity training program.
In September 2010, Reed stipulated in United States Tax Court that he owed over $13 million to the IRS. Between the time of the stipulation and late 2011, IRS Criminal Investigation Agents determined that Reed had made numerous false statements about his assets, income, and place of residence. In December 2010, Reed transferred money from a secret offshore account to an account controlled by Reed but held in the name of his father; between December 2010 and May 2011, Reed made deposits into his son's bank account; in July 2011, following Reed's arrest in southern California, agents discovered that Reed had hidden over $70,000 in cash in his vehicle; in September 2011, Reed disclosed to the IRS that he had offshore accounts in Lichtenstein, Luxembourg, and the Turks & Caicos Islands which contained over $1 million; and also in September 2011, IRS Agents found $427,900 in a storage unit that Reed held in a false name in Las Vegas.
The case is being investigated by IRS Criminal Investigation and prosecuted by Assistant United States Attorney J. Gregory Damm.