WASHINGTON, D.C. - A federal court in Tampa, Florida has permanently barred Carel A. "Chad" Prater and his associate, Richard Cantwell, both of Sarasota, from promoting tax-fraud scams that allegedly have cost the federal treasury nearly $18 million, the Justice Department announced today. In entering the permanent injunction, Judge Steven D. Merryday of the United States District Court for the Middle District of Florida also ordered that a copy of the injunction prominently be displayed on any website Prater maintains.
The court previously found that Prater promoted tax fraud through a variety of means, including filing invalid "judgments" against the IRS, selling sham trusts, establishing anonymous limited liability corporations designed to hide income, preparing frivolous tax returns, and attempting to persuade employers to stop withholding taxes from his customers' wages. Prater based his scams on the discredited "Section 861" argument, which posits that income from domestic sources is not taxable. Courts nationwide have repeatedly rejected this argument as frivolous. Together with Cantwell, Prater promoted his schemes nationwide through seminars, newspapers advertisements, a book, and a website. Under a previously-entered court order, the government obtained from Prater the names of hundreds of his customers, including their mailing and e-mail addresses, and Social Security and telephone numbers.
"People who buy into tax-fraud schemes are giving up good money for bad prospects: past due tax bills with interest and penalties, along with the possibility of criminal prosecution," said Eileen J. O'Connor, Assistant Attorney General for the Tax Division. "The Justice Department and the IRS are committed to stopping the promotion of tax fraud."
Misuse of trusts tops, frivolous anti-tax positions, and return-preparation fraud top the IRS's list of "Dirty Dozen" tax schemes. The full list is available at http://www.irs.gov/newsroom/article/0,,id=136337,00.html. More information about this case is available at http://www.usdoj.gov/tax/txdv02652.htm. More information about the Justice Department's Tax Division is available at http://www.usdoj.gov/tax/taxpress2005.htm.