News and Press Releases

Scheme Allegedly Hid Income from IRS in Offshore Bank Accounts

November 3, 2005

Russell J. Brown, of Jackson, Wyoming, was indicted on tax fraud charges, the Department of Justice and Internal Revenue Service (IRS) announced today. On November 3, 2005, a federal grand jury sitting in Seattle, Washington indicted Brown on one count of conspiring to defraud the United States between 1991 and 2005.

The indictment alleges that Brown participated in a lengthy and elaborate scheme to evade: (1) federal estate taxes pertaining to his grandmother's estate; (2) his own federal income taxes and the federal income taxes for certain corporations which he controlled; and (3) the federal income taxes of his business associate Paul D. Bekins and the federal income taxes for corporations which Bekins controlled.

In the early 1990's, Brown joined an organization based in Denver, Colorado, which eventually became known as Tower Executive Resources (Tower). Tower assisted its clients to evade federal income taxes through the use of several different methods, including a false invoicing scheme and a false option agreement scheme. By using these schemes, Brown was able to surreptitiously send several hundred thousand dollars into secret offshore bank accounts to evade federal taxes. He also created numerous trusts and corporations to hide his assets from the IRS if the IRS ever attempted to collect any of these taxes due and owing.

The indictment further alleges that Brown assisted fellow Tower member Paul D. Bekins use of fraudulent Tower schemes such as the false option scheme to evade federal income taxes. Bekins sent Brown millions of dollars from his businesses which Brown then deposited into Bekins's secret offshore bank accounts without paying federal income taxes. Bekins pleaded guilty in federal district court in 2004 for his role in this offense. In addition, two of the promoters of Tower, Paul D. Harris and Lester R. Retherford, were convicted after a trial in Denver, Colorado, earlier this year. They are scheduled to be sentenced on December 1, 2005. A third promoter, Robert N. Bedford, is scheduled to be tried in Denver in January 2006. Numerous other Tower clients from across the country have either pleaded guilty or have been found guilty of tax offenses for engaging in similar conduct as Brown.

If convicted, Brown faces a maximum of five years imprisonment followed by up to three years supervised release and a fine of $250,000 or twice the tax loss.

The charges contained in the indictment are only allegations. A defendant is entitled to a fair trial in which it will be the government's burden to prove guilt beyond a reasonable doubt.

Click here for additional information about the Justice Department's Tax Division and its enforcement efforts.

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