WASHINGTON, D.C. - Louis Wayne Ratfield, a Lake Worth, Florida tax return preparer, was arrested on tax fraud charges, the Justice Department and the Internal Revenue Service (IRS) announced today. On April 13, 2006, a federal grand jury in West Palm Beach, Florida returned a 56 count indictment charging Ratfield with preparing for clients and himself fraudulent federal individual and trust income tax returns, corruptly impeding the enforcement of the tax laws and criminal contempt. The indictment was sealed pending today’s arrest. His initial court appearance is scheduled for Wednesday, April 19, 2006 at 10:00 am before Magistrate Judge Vitunac.
The indictment alleges that Ratfield operated LWR Accounting and Tax Service, a tax preparation business, which was later called LWR Financial Services Trust. The businesses were located in Lake Worth where Ratfield also resided. In or before 1997, Ratfield allegedly began collaborating on a book that was eventually published and widely marketed under the title, The Constitutional Common-Law Trust. The indictment alleges the book fraudulently advised readers that taxpayers could claim deductions on their returns to which they were not lawfully entitled for ordinary living expenses, such as the cost of utilities, food, clothing, vehicles, and education, through use of the so-called “common-law trust.” It is also alleged that Ratfield helped write a “how-to” manual, which sold for approximately $495, and provided advice on setting up and using “common law trusts,” keeping a second set of business records, and counseled readers not to trust advice from government, banks and other businesses.
Ratfield allegedly marketed “common law trust” packages to clients throughout the U.S. via group seminars and individual client meetings, and sold over 100 trust packages at prices ranging from $2,995 to $5,995 each. The indictment further alleges that Ratfield positioned himself to secure all tax return preparation business from his clients and prepared at least 252 federal tax returns in connection with the scheme. Once the IRS began auditing his clients, Ratfield allegedly took numerous unlawful steps to obstruct and impede the audits. According to the indictment, Ratfield’s conduct caused a tax loss to the U.S. Treasury of more than $6.4 million.
On September 7, 2001, the Department of Justice filed a civil law suit against the defendant in the U.S. District Court for the Southern District of Florida, in connection with his marketing of the “common law trust” scheme. On September 29, 2002, the court issued a preliminary injunction barring Ratfield from acting as a federal income tax return preparer until he provided a complete client list to the IRS, and further barred him from organizing or selling abusive tax shelters, making false statements about purported tax benefits associated with participation in an abusive tax shelter, and assisting in the preparation of or preparing any tax returns that he knew would result in the understatement of a tax liability. On November 30, 2004, the court entered a permanent injunction against Ratfield and also ordered him, among other things, to contact all of his trust clients and inform them of the court’s order.
The indictment also alleges that Ratfield committed criminal contempt, in part, by continuing to promote and defend his “common law trust” scheme and by representing clients before the IRS after the court ordered him to stop these activities.
If convicted, Ratfield faces a maximum potential sentence for each violation of preparing false returns and corruptly impeding the tax laws of three years in prison followed by up to one year of supervised release, a $250,000 fine and liability for the costs of prosecution. Per the discretion of the court, Ratfield could face a term of imprisonment, a fine, or both, for the criminal contempt charges.
The case was investigated by prosecutors from the United States Attorney’s Office for the Southern District of Florida and the Department of Justice’s Tax Division, with the assistance of special agents from the IRS, Criminal Investigation Division. Assistant U.S. Attorney Ellen Cohen and Stephanie Evans of the Tax Division are prosecuting the case. Additional information about tax fraud schemes can be found on the IRS Criminal Investigation website at http://www.ustreas.gov/irs/ci. Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.
The charges contained in the indictment are only allegations. A person is presumed innocent unless and until he or she is proven guilty in a court of law.