FOR IMMEDIATE RELEASE|
MONDAY, MARCH 4, 2002
TDD (202) 514-1888
JUSTICE DEPARTMENT SUES TO HALT PROMOTERS
OF ILLEGAL TRUST TAX SCHEME
Potential Revenue Loss Estimated At More Than $9 Million Annually
WASHINGTON, D.C. – The Department of Justice today filed a civil suit in Chicago to stop an alleged abusive tax scheme promoted by two Chicago-area men, Michael D. Richmond and Rex E. Black. The government complaint alleges that Richmond, Black and their businesses—The Liberty Network, Liberty Estate Planning, The Liberty Institute, Fiduciary Management Group, National Council of Certified Estate Planners, Association for Certified Estate Planning Attorneys, and Eagle Publications Trust—sell sham trust packages that improperly reduce or eliminate customers' reported federal income taxes. The suit also seeks to bar the defendants from preparing federal income tax returns and to require them to turn over their customer lists to the government.
"The IRS and the Justice Department are working closely together to halt the spread of fraudulent trust schemes," said Eileen J. O'Connor, Assistant Attorney General in charge of the Justice Department's Tax Division. "The Internet makes selling tax scams remarkably easy, but the public should be on guard—using the word ‘trust' doesn't make a scheme legitimate. Substantial civil and criminal sanctions may be imposed on those who participate in abusive trust schemes."
According to the complaint filed in the United States District Court in Chicago, Richmond and Black advise and encourage customers to violate federal tax laws by transferring their houses and other assets to sham trusts, which defendants describe as "Pass-Through Technology." The government alleges that the defendants falsely advise customers that these trusts allow customers to claim deductions for house payments, utilities, and other non-deductible personal expenses.
The defendants allegedly recruit agents and customers through the Internet and through ostensible "educational" programs conducted by their "Liberty Institute." The complaint alleges that the Liberty Institute teaches nationwide "certification" courses offering a "Certified Estate Planner" designation. According to the complaint, Richmond and Black charge customers trust set-up fees of $3,750 and other annual fees for tax return preparation, "trustee services," and secretarial services. The complaint alleges that Richmond is currently incarcerated. The IRS estimates the revenue loss from the scheme at more than $9 million annually.
Taxpayers should look for the following warning signs that may indicate an abusive trust promotion:
Taxpayers can find more information about abusive trusts on the IRS website at www.irs.gov. People hearing about tax benefits that sound "too good to be true" should check them out with a trusted tax professional or the IRS. Anyone with information about suspected tax fraud should report it to the IRS tip line at 1-800-829-0433.