FOR IMMEDIATE RELEASE|
THURSDAY, APRIL 11, 2002
TDD (202) 514-1888
JUSTICE DEPARTMENT WARNS PEOPLE TO AVOID TAX FRAUD SCHEMES
WASHINGTON, D.C. - This tax season, the Department of Justice is
joining the Internal Revenue Service in encouraging taxpayers to file truthful
income tax returns, to beware of illegal tax schemes, and to report suspected
Deputy Attorney General Larry D. Thompson stated, "The events of the past year
have united Americans in a way that makes each of us acutely aware of our
responsibilities as citizens of this great nation. Among those
responsibilities is our duty to honor our legal obligation to pay taxes.
People who cheat on their taxes are cheating all Americans."
Justice Department prosecutors, working with IRS agents, recently have
convicted many tax cheats and secured lengthy prison sentences. The Justice
Department also is cracking down on promoters of tax fraud schemes by
obtaining federal injunctions to stop them from selling bogus tax advice. In
addition, Justice Department attorneys have obtained court orders for the IRS
to obtain records of offshore credit cards used by the people who transfer
assets overseas to evade their tax obligations.
"Recent enforcement actions taken by the Department of Justice and the IRS
increase the likelihood that tax cheaters will be caught and punished. In
addition to paying civil fines, interest and penalties, people do go to prison
for tax evasion," said Eileen J. O'Connor, Assistant Attorney General for the
Justice Department's Tax Division. "Promoters of tax fraud schemes tell people
what they want to hear: that they don't really owe taxes, or that if they do,
they can get out of paying them. Don't believe it."
Here are just a few of the tax criminals sentenced so far this year:
- In Billings, Montana, Donald Fletcher was sentenced to 78 months in prison and
3 years supervised release, and ordered to pay restitution of $10,000 and a
fine of $100,000. Fletcher pled guilty to conspiracy to prepare false tax
returns and commit mail fraud. Acting as a tax consultant, he held seminars
and assisted taxpayers in setting up abusive trust arrangements. He falsely
claimed that the trusts would permit taxpayers to deduct personal expenses.
- In Wilton, New Hampshire, Richard V. Richelo, Jr. was sentenced to serve 18
months in prison for failing to file individual income tax returns. Richelo
was convicted after a two-day trial. The evidence at trial established that
Richelo was a software engineer who earned approximately $116,000 in 1994 and
$98,000 in 1995, but did not file federal income tax returns. Richelo claimed
that he had studied the tax code and believed he was not required to file
income tax returns because the compensation he received did not constitute
income under the Internal Revenue Code. The judge ruled that Richelo's
compensation did indeed constitute income. The judge further noted that the
argument Richelo used has been consistently rejected by courts across the
- Melody J. Bohrer of New Berlin, Wisconsin, was sentenced to serve four months
in prison for failing to file an Employer's Quarterly Federal Tax Return, Form
941. Bohrer owned a company that provided landscaping, lawn care and snow
- In Miami, Florida, John P. Ellis, Sr. was sentenced to serve 10 and a half
years in prison. The evidence showed that Ellis marketed sham "common law"
trusts and fraudulently claimed that the trusts were tax-exempt because they
were "foreign" to the United States. More than 150 customers were identified
as having purchased more than 360 trusts or trust packages, at prices of
$20,000 and more.
- In New Haven, Connecticut, William N. Jackson was sentenced to serve 42 months
in prison, followed by a period of supervised release. Jackson was convicted
on multiple counts of aiding and assisting in the preparation of false federal
income tax returns. The evidence showed that Jackson created fraudulent
business expenses to offset reported income for his clients, and that he
reported fictitious dependents and inflated expenses, including gifts to
charity. The judge also found that Jackson gave false testimony at trial.
- In Reno, Nevada, Palle "Pono" Bognaes was sentenced to serve 80 months in
prison and 3 years supervised release, and to pay $29,598 in restitution to
the IRS for conspiring to defraud the United States, evading more than $2
million in federal taxes, and obstructing and impeding the IRS in the
collection of those taxes. He also was ordered to pay $107,752 in restitution
to a client from whom he took unauthorized withdrawals and to pay $4,861 for
costs of his prosecution.
- In Sacramento, California, Lonnie D. Crockett was sentenced to 42 months in
prison followed by 36 months probation and ordered to pay a fine of $67,500.
Crockett pled guilty to defrauding the IRS in a nationwide tax evasion
conspiracy that involved the concealment of income through a chain of domestic
and foreign bank accounts and trust arrangements. Three doctors from northern
California also pled guilty in connection with the scheme. Daniel Bullock, an
orthopedic surgeon, Richard D. Pfeiffer, an orthodontist, and Richard Shearer,
an ear, nose and throat specialist, were sentenced to prison for 18 months, 27
months and 24 months, respectively, and ordered to pay fines and back taxes.
- In Greenville, North Carolina, Charles James Payton was sentenced to serve 78
months in prison followed by 3 years supervised release. In addition, Payton
was ordered to pay restitution to the IRS in the amount of $87,073. Charles
Payton was convicted on of seven counts of willfully aiding and assisting in
the preparation of false income tax returns and one count of conspiracy.
Assistant Attorney General O'Connor encouraged people who have information
about tax fraud to report it to the IRS tip line at 1-800-829-0433. The IRS
Criminal Investigation web site provides additional information about
fraudulent tax schemes. http://www.ustreas.gov/irs/ci/