Department of Justice Seal Department of Justice
(202) 514-2007
TDD (202) 514-1888


Scheme Used Offshore Bank Accounts, Phony Loans And Debit Cards
To Hide Income And Assets From Irs

WASHINGTON D.C.-Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division; William J. Leone, U.S. Attorney for the District of Colorado; and Nancy Jardini, Chief, Internal Revenue Service (IRS) Criminal Investigation Division, today announced that following a nine-week trial, a federal jury in Denver, Colorado convicted Paul D. Harris and Lester R. Rutherford on charges of conspiracy and willfully aiding and assisting in the preparation of fraudulent tax returns. The jury did not reach a unanimous verdict as to the third defendant, Robert N. Bedford.

“This is one of many pending criminal prosecutions involving the use of foreign bank accounts, trusts and other schemes to hide income from the IRS,” said Assistant Attorney General O’Connor. “Promoting fraudulent tax schemes is a ticket to federal prison.”

“Individuals who promote and participate in abusive trust schemes in order to hide the true ownership of assets and income will be held accountable and punished for their crimes,” said Nancy Jardini, Chief, IRS Criminal Investigation Division. “The IRS is committed to maintaining public confidence in the fairness of tax laws.”

In November, 2002, Harris and Retherford, residents of Colorado, together with Bedford, a resident of Florida, were charged with conspiring to defraud the United States. In addition, Harris and Retherford were charged with 26 counts of aiding and assisting the filing of false income tax returns for the years 1996 through 1999. According to the indictment, Harris, Retherford, and Bedford set up shell corporations for small business owners that were used to conceal nearly $9 million in taxable income in secret accounts in the Turks and Caicos Islands and other foreign countries from 1992 through 1999. The indictment also alleged that although the defendants made it appear as though the offshore transfers were payments for consulting services, most Tower members used debit cards and loans to spend the money they had concealed offshore. To make use of this service, many members allegedly paid an initiation fee of $50,000, according to the indictment.

On June 28, 2002, in Massachusetts, John Mikutowicz, a Tower member, was convicted on charges of conspiracy, tax evasion and filing false corporate tax returns and was sentenced to a term of imprisonment.

Assistant Attorney General O’Connor and U.S. Attorney Leone thanked Assistant U.S. Attorney Thomas O’Rourke and Tax Division Trial Attorney Robert J. Livermore, who prosecuted the case. They also thanked the special agents of the IRS whose assistance was essential to the successful investigation and prosecution of the case.

Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at <>.