FOR IMMEDIATE RELEASE |
TUESDAY, APRIL 26, 2005
TWO MORE DEFENDANTS SENTENCED IN ANDERSON’S ARK AND ASSOCIATES
INTERNATIONAL TAX SHELTER CASE
WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division; John L. McKay, U.S. Attorney for the Western District of Washington; and Nancy Jardini, Chief, Internal Revenue Service (IRS), Criminal Investigation Division, announced today that Chief U.S. District Court Judge John C. Coughenour sentenced Anderson’s Ark and Associates (AAA) defendants James Moran, age 57, and Pamela Moran, age 53, both residents of Montrose, Colorado, to seven years imprisonment, to be followed by three years supervised release, and ordered them to pay restitution of $42,311,742. The defendants were ordered to pay costs of prosecution totaling $66,488. The court also ordered the Morans to forfeit $850,863 in proceeds they earned from AAA, as well as their Montrose, Colorado home, and their Jeep Cherokee automobile.
“Helping others to commit tax fraud is a ticket to prison and the wealth it creates is temporary,” said Assistant Attorney General O’Connor.
“Those involved with the Anderson Ark organization not only promoted tax schemes, they also attempted to hide money derived from those illegal activities,” stated Nancy Jardini, Chief Criminal Investigation. “Today's sentencing should send a loud message that IRS Criminal Investigation is actively pursuing promoters of schemes such as this.”
Last Friday, April 22, 2005, Chief Judge Coughenour sentenced Anderson Ark defendants Keith E. Anderson, Wayne Anderson, Richard Marks, and Karolyn Grosnickle to terms of imprisonment ranging from eight to 20 years and ordered them to pay millions of dollars in restitution.
On December 27, 2004, after seven weeks of trial, the defendants were convicted in connection with one of the most wide-ranging tax schemes ever prosecuted. With administrative offices in Hoodsport, Washington, the organization spanned five countries and had over 1,500 clients. The defendants were convicted on a variety of charges, including conspiracy to defraud the IRS, mail and wire fraud, money laundering and aiding and assisting the filing of false tax returns.
The evidence introduced at trial established that, from 1997 through early 2001, the defendants earned tens of millions of dollars in fees from the sale of several fraudulent tax shelter plans over the internet. The Morans were the AAA Executive Education Officers. As such, they trained Information Officers, who were the primary sales force. In addition, the Morans promoted the fraudulent tax shelter plans domestically and internationally. The Morans cultivated their own AAA clients, with whom they worked closely to further the AAA schemes.
The two predominant AAA plans were called the “Look Back” and the “Look Forward” programs. The evidence showed that through the Look Back program, the defendants assisted AAA clients in taking $120 million in false income tax deductions for advertising expenses associated with AAA’s “Tax Magic” project. The evidence revealed that the defendants charged AAA clients anywhere between $50,000 to $250,000 each to buy into the Look Back Program. AAA members were instructed to take out a loan from La Maquina Blanca, a Costa Rican lender. According to the trial evidence, La Maquina Blanca was merely a Costa Rican bank account used by AAA. Although the funds borrowed from La Maquina Blanca were purportedly to be invested with another AAA entity, Mason Advertising, the evidence at trial established that the loans were illusory. Instead, AAA simply transferred a few million dollars between account at Costa Rican banks to create the appearance that these loans were actually being funded. Accordingly, the tax deductions arising from these loans were false.
Evidence introduced at trial established that in the Look Forward program, client funds that were moved to foreign bank accounts were falsely deducted on their income tax returns as consulting or management expenses. To make the deductions appear to be legitimate, clients were instructed to send money to a shell company called “Sawtooth,” which had bank accounts in Nevada and Arizona. Sawtooth was operated by defendant Richard Marks, who transferred the funds to Austrian accounts operated by defendant Wayne Anderson. Ultimately, the money was wired to Costa Rican bank accounts, where it could be withdrawn by clients through the use of international Visa Debit cards or wire transfers (handled by AAA personnel in Costa Rica). In total, over $11 million in income evaded taxation in this manner, according to evidence introduced during the trial.
Defendants Keith and Wayne Anderson, Richard Marks, Karolyn Grosnickle, James and Pamela Moran were also convicted on charges of conspiracy to commit wire and mail fraud, and 19 counts of wire and mail fraud for defrauding clients out of over $7 million in fees for the non-existent loans associated with the AAA Look Back program. According to the trial evidence, clients were told that these fees were necessary to process the non-existent investment loans. Once deposited in AAA accounts in Costa Rica, the defendants split the money by transferring it to bank accounts at the Bank of Montreal in Canada and the Riga Bank in Latvia.
On April 13, 2005, defendant Richard Grosnickle pleaded guilty to a charge of obstruction of justice. He is awaiting sentencing.
Assistant Attorney General Eileen J. O’Connor and United States Attorney John L. McKay thanked Tax Division Trial Attorneys Corey J. Smith, Krista Tongring, and M. Kendall Day, who prosecuted the case. They also thanked the special agents of the Internal Revenue Service, whose assistance was essential to the successful investigation and prosecution of the case.
Additional information about tax fraud schemes to watch out for may be found on the IRS Criminal Investigation website. <http://www.treas.gov/irs/ci/index.htm>. Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at www.usdoj.gov/tax <http://www.usdoj.gov/tax>.