WASHINGTON, D.C. - A federal jury in Las Vegas, Nevada convicted Irwin Schiff and two associates, Cynthia Neun and Lawrence Cohen, of aiding and assisting in the preparation of false income tax returns filed by other taxpayers in connection with a tax scam, and convicted Schiff and Neun of conspiring to defraud the United States, the Department of Justice and the Internal Revenue Service (IRS) announced today. Schiff was convicted on all counts, including income tax evasion and of filing false income tax returns for the years 1997 through 2002, and Neun was convicted of willfully failing to file federal income tax returns, Social Security disability fraud, and theft of government property in connection with Neun’s improper receipt of Social Security disability benefits.
According to the indictment and the evidence introduced at trial, beginning in 1995, the defendants directed thousands of taxpayers to file false federal income tax returns with the IRS that reported zero taxable income in spite of the taxpayers earning large amounts of reportable income. The defendants operated the scam through Freedom Books-a business owned by Schiff-that sold books, tapes, and packets encouraging customers not to pay income tax. According to a government witness who testified at trial, between 1997 and 2002 Freedom Books sold more than $4.2 million in products that promoted Schiff's “anti-tax” scheme.
“People who evade their tax obligations, or encourage or enable others to do so, are cheating all law-abiding taxpayers,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “The Department of Justice will prosecute these crimes, and juries will convict the offenders.”
The Justice Department filed a civil suit in the same court against Schiff,
Neun, and Cohen in March 2003, and the court granted a temporary restraining
order barring them from advertising or selling Schiff's “zero-income tax
return” plan; preparing tax returns for others; and assisting others to violate
the tax law, including by “selling services, books or other materials that
provide direction about how to fill out fraudulent or false tax forms. . . .”
The preliminary injunction was affirmed after the defendants’ appeal to the
U.S. Court of Appeals for the Ninth Circuit. The U.S. Supreme Court this month
declined to hear Schiff's challenge to the Ninth Circuit decision. The Justice
Department will ask the district court to convert the preliminary injunction
into a permanent one. More information about the injunction may be found on
the Tax Division website at http://www.usdoj.gov/tax/txdv03357.htm
The evidence presented at trial also proved that Schiff evaded the payment of more than $2 million in taxes he owed the IRS from 1979 through 1985. Schiff concealed income he earned from Freedom Books, in part by using offshore bank accounts and conducting financial transactions through secret “warehouse” banking services. The evidence also showed that Schiff used debit cards issued by offshore banks to obtain funds he transferred offshore, that he opened bank accounts using multiple tax identification numbers, and that he titled his ownership of a car in the name of a Pennsylvania corporation.
This marks the third time Schiff has been convicted of tax offenses. “Paying taxes is the price of citizenship. After three strikes, I would hope that even Mr. Schiff realizes that he has struck out,” said IRS Commissioner Mark W. Everson.
Mr. Schiff-who faces a maximum sentence of 43 years in prison and $3.25 million in fines-was remanded to the custody of the U.S. Marshals Service and is scheduled to be sentenced on January 20, 2006 at 10:30 A.M. Ms. Neun-who faces up to 50 years in prison and up to $3.3 million in fines-was remanded pending a bail hearing tomorrow. Neun’s sentencing is scheduled for January 27, 2006 at 9:00 A.M. Mr. Cohen-who was released on bond-is due to be sentenced on January 27, 2006 at 9:30 A.M. He faces three years incarceration and up to a $250,000 fine. Assistant Attorney General O’Connor thanked Tax Division Trial Attorneys Jeffrey A. Neiman and David J. Ignall, who prosecuted the case, as well as the Special Agents of the IRS, other Tax Division Attorneys, and the U.S. Attorney's Office for the District of Nevada for their assistance during the investigation and trial of this matter.