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Friday, September 5, 2008
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Three Accountants Sentenced to Prison in $20 Million Offshore Tax Fraud Conspiracy

SALT LAKE CITY – Certified Public Accountant (CPA) Stephen F. Petersen of Coalville, Utah; accountant Brent Metcalf of Cottonwood, Utah; and CPA Reed H. Barker of Littleton, Colo., have been sentenced to prison for their roles in a tax fraud conspiracy, the Justice Department and Internal Revenue Service (IRS) announced.

On Sept. 3, 2008, U.S. District Judge Tena Campbell sentenced Petersen to 35 months in prison and 36 months of supervised release, and Metcalf to 24 months in prison and 36 months of supervised release. The court also ordered that Petersen forfeit $1,166,884.46 and entered a money judgment in that amount. On Sept. 4, 2008, Chief Judge Campbell sentenced Barker to 18 months in prison and 36 months of supervised release. Chief Judge Campbell also ordered Barker to pay restitution in the amount of $167,608.

In November 2005, Barker, Metcalf and Petersen, along with attorney Dennis B. Evanson, of Sandy, Utah, were indicted by a federal grand jury in Salt Lake City for promoting a tax fraud scheme that cost the federal treasury more than $20 million. The fraud scheme took multiple forms, including the use of false documentation for fictitious currency transaction losses, false insurance expense deductions and bogus capital losses, all for the purpose of fraudulently offsetting taxable income for clients. The scheme utilized, among other things, offshore companies, offshore bank accounts in the Cayman Islands and Nevis, the services of offshore nominees and opinion letters that purported to give legal authority to the fraudulent transactions.

Barker, Metcalf and Petersen pleaded guilty for their roles in the scheme in January 2008. Each admitted that, from 1996 until April 2005, he conspired with Evanson and others to conceal portions of customers’ income from the IRS and to create false deductions for the purpose of reducing the income tax paid by customers. The defendants admitted that they knew that the deductions on the tax returns were false and fraudulent.

Petersen also admitted that as part of the scheme, he and Evanson were paid a fee that was typically equal to 30 percent of the tax evaded by their customers as a result of false deductions created by Evanson and Petersen. Petersen admitted that he was individually paid $1,166,885.46 of the total fees collected by Evanson from customers he referred to participate in the scheme. Also as part of his plea, Petersen admitted to causing a false tax return to be filed with the IRS on behalf of one of his customers.

"Unscrupulous tax advisors face long prison sentences and large monetary penalties for promoting and engaging in fraudulent tax schemes," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "The government will continue to identify and prosecute those who continue to peddle these fraudulent schemes."

"Most tax advisors are honest and knowledgeable, but these individuals took creative tax planning to another level - a criminal level. This sentencing shows two things: no one is above the law; and the authorities and the courts will find the promoters, expose their illegal schemes and hold them accountable for their actions," said IRS Criminal Investigation Chief Eileen C. Mayer.

"These sentences send a firm message to tax professionals, especially accountants and CPAs, that if you assist your clients in defrauding the Internal Revenue Service, you will be punished to the fullest extent of the law, including extended jail time," said U.S. Attorney Brett L. Tolman.

Evanson was convicted for his role in the scheme following a jury trial in February 2008. In August 2008, Evanson was sentenced to 120 months in prison and 36 months supervised release. The court also ordered that Evanson forfeit four pieces of real property, a Hummer and a Toyota Tundra, and entered a money judgment in the amount of $2,774,133.04. Attorney Graham R. Taylor of Tiburon, Calif., pleaded guilty for his role in the scheme and is scheduled to be sentenced in January 2009.

Assistant Attorney General Hochman thanked Tax Division trial attorneys Caryn Mark and Leigh Kessler, as well as Assistant U.S. Attorney Loren Washburn, who prosecuted the case. He also thanked the special agents of the IRS, whose assistance was essential to the successful investigation and prosecution of this case.