Department of Justice Seal Department of Justice
FRIDAY, JUNE 14, 2002
(202) 514-2007
TDD (202) 514-1888


Court's Order Backs IRS-Justice Department Crackdown

WASHINGTON, D.C.– The Justice Department announced that a federal court in Chicago today barred Rex E. Black of Beecher, Ill. from selling fraudulent trust plans used to evade federal income taxes, and told him to post the court's order on the Internet. It also ordered him to turn over his lists of customers, and banned him from preparing federal income tax returns.

In addition, the order applies to affiliated organizations that Black has used to promote the trust schemes—The Liberty Network, Liberty Estate Planning, The Liberty Institute, Fiduciary Management Group, The National Council of Certified Estate Planners, Association for Certified Estate Planning Attorneys and Eagle Publications Trust.

"We are pleased that the court shut down this major scam, and that Mr. Black was ordered to post the injunction on his Internet sites. The Internet makes selling these kinds of tax scams remarkably easy, but the Department's Tax Division is going to use the Net to find and shut them down," said Eileen J. O'Connor, Assistant Attorney General for the Department's Tax Division. "People who are thinking of cheating on their taxes should be on guard – substantial civil and criminal sanctions may be imposed on those who participate in abusive schemes, and we will continue to pursue promoters who sell them."

Last year, 45 people were convicted for tax evasion for selling or using phony trusts. Defendants who were sentenced to prison faced sentences averaging more than five years. As of December 31, 2001, the IRS had 160 open criminal investigations involving trust schemes. The IRS estimates that fraudulent trust schemes cost the public about $3 billion in lost revenue each year.

According to papers the Justice Department filed in the case, Black and his organizations help customers violate federal tax laws by purporting to transfer their income and assets to bogus trusts. They also advise customers to claim tax deductions for such non-deductible items as depreciation on their homes.

The government's court papers further claimed that Black's "Liberty Institute" has trained over 2,500 people nationwide through "certification" courses resulting in a "Certified Estate Planner" designation. Upon "certification," Liberty agents then sell trust packages to customers for fees as high as $3,750, plus additional annual charges for tax return preparation, "trustee services," and secretarial services. Court papers showed that Black's National Association of Certified Estate Planners claims to have 730 Certified Estate Planners in 39 states. The IRS estimates that Black's activities cost taxpayers more than $9 million per year.

Today's court order requires Black to:
  • give the IRS his complete customer list,

  • mail a copy of the injunction and government complaint to all his customers and all people who, since 1995, attended Liberty Institute courses, which had titles such as "The Certified Estate Planner," "The Master Certified Estate Planner," "Charitable Planning Specialist," and "Elder Planning Specialist"; and

  • prominently display the injunction order on the first page of his organizations' Web sites.

The Justice Department has moved in the same case for a preliminary injunction against one of Black's associates, Michael D. Richmond. The court has allowed Richmond, who, according to court papers is currently in prison, additional time to respond to the lawsuit. A similar injunction case is pending in federal court in Boston against Kevin Mahoney, allegedly one of Black and Richmond's associates.

Related Documents:

  United States v.
  Michael D. Richmond
  and Rex E. Black, et al.