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Court'S Order Backs Irs-Justice Department Crackdown

WASHINGTON, D.C.– The Justice Department announced that a federal court in Chicago today enjoined Michael D. Richmond from selling fraudulent trust plans used to evade federal income taxes, and told him to post the court's order on the Internet. The court also ordered Richmond to turn his customer list over to the Justice Department, and permanently banned him from preparing federal income tax returns.

The order applies not only to Richmond, but also to affiliated organizations Richmond has used to promote the trust schemes—The Liberty Network, Liberty Estate Planning, The Liberty Institute, Fiduciary Management Group, The National Council of Certified Estate Planners, Association for Certified Estate Planning Attorneys and Eagle Publications Trust. The same court entered a similar order against Richmond's co-defendant, Rex E. Black, last June. Black is currently in prison for civil contempt for failing to comply with that order.

"We are pleased that the court has shut down this major scam, and that Mr. Richmond was ordered to post the court's order on his Internet sites," said Eileen J. O'Connor, Assistant Attorney General for the Department's Tax Division. "Shutting down these scams and holding their promoters and participants accountable is a high priority for the Tax Division."

Last year, 45 people were convicted for tax evasion for selling or using phony trusts. Defendants who were sentenced to prison faced sentences averaging more than five years. The IRS estimates that fraudulent trust schemes cost the public about $3 billion in lost revenue each year.

According to papers the Justice Department filed in the case, Richmond, Black and their organizations helped customers violate federal tax laws by purporting to transfer their income and assets to bogus trusts. They also advised customers to claim tax deductions for such non-deductible items as depreciation on their homes.

The government's court papers further claimed that Richmond and Black's "Liberty Institute" had trained over 2,500 people nationwide through "certification" courses resulting in a "Certified Estate Planner" designation. Upon "certification," Liberty agents then sold trust packages to customers for fees as high as $3,750, plus additional annual charges for tax return preparation, "trustee services," and secretarial services. Court papers showed that the National Association of Certified Estate Planners claims to have 730 Certified Estate Planners in 39 states. The IRS estimates that Richmond and Black's activities cost taxpayers more than $9 million per year.

Today's court order requires Richmond to:

•give the Justice Department his complete customer list;

•mail a copy of the injunction and government complaint to all his customers and all people who, since 1995, attended Liberty Institute courses, which had titles such as "The Certified Estate Planner," "The Master Certified Estate Planner," "Charitable Planning Specialist," and "Elder Planning Specialist"; and

•prominently display the injunction order on the first page of his organizations' Websites.

The Justice Department obtained a similar injunction last July in a federal court in Boston against Kevin Mahoney, allegedly an associate of Black and Richmond.