The three-count Indictment resulted from an investigation concerning AFG by the IRS and FBI. The three count Indictment alleges that Chism and his wife used his unreported income to make at least $1,400,000 in payments on a variety of personal expenses. Specifically, Count 1 of the Indictment charges that Chism prepared and caused to be prepared a false and fraudulent 1999 tax return that was filed with the IRS, which stated that defendant and his wife’s joint taxable income for 1999 was $23,880.00, and that the tax due and owing thereon was $3,581.00, when, in fact, Chism knew that his joint taxable income for 1999, and the federal income tax due thereon, was substantially in excess of these amounts. Count 2 of the Indictment charges that Chism prepared and caused to be prepared a false and fraudulent 2000 tax return that was filed with the IRS, which stated that defendant and his wife’s joint taxable income for 2000 was $183,935.00, and that the tax due and owing thereon was $49,265.00, when, in fact, Chism knew that his joint taxable income for 2000, and the federal income tax due thereon, was substantially in excess of these amounts. Finally, Count 3 of the Indictment charges that Chism prepared and caused to be prepared a false and fraudulent 2001 tax return that was filed with the IRS, which stated that defendant and his wife’s joint taxable income for 2001 was $328,424.00, and that the tax due and owing thereon was $100,457.00, when, in fact, Chism knew that his joint taxable income for 2001, and the federal income tax due thereon, was substantially in excess of these amounts.

The maximum penalty is five (5) years incarceration on each count and a fine of $100,000 on each of the tax evasion counts.

According to the Indictment, AFG’s principal activity was to invest its clients’ money in transactions involving restricted securities. Restricted securities are, in general, securities that are not freely tradeable in the public market and are subject to certain resale limitations under the federal securities laws. AFG bought restricted securities issued by public companies pursuant to “Regulation D” and “Regulation S” of the federal securities laws, which provide exemptions from registration with the United States Securities and Exchange Commission for certain types of securities transactions. In addition, AFG offered a restricted stock loan program in which it made loans to borrowers that owned restricted stock and who were willing to pledge restricted stock worth four to five times the amount of the loan as collateral for the loan.

AFG solicited investor funds and managed those funds through a number of affiliated corporate entities including American Equity Management, Inc. (AEMG). AEMG, which was owned and controlled by Chism maintained bank accounts into which investor funds solicited by AFG, as well as money that was claimed to be profits generated from AFG’s restricted securities transactions, were deposited. AEMG’s bank accounts also were used to engage in restricted securities transactions using investor funds and to distribute to Chism, among others, the money that was claimed to be profits generated from AFG’s investments. AEMG paid a management fee to AFG for AFG’s services. Edward Myles Chism, Sr., also owned and controlled H2H, Inc. (H2H or Have to Have), which he formed in November 2000 to receive his portion of the money that was claimed to be profits generated from AFG’s restricted securities transactions.

The Indictment alleges that, as part of the tax evasion scheme, Chism deposited, and caused to be deposited, checks from AEMG’s bank accounts reflecting a substantial part of his share of the claimed profits from AFG’s securities transactions to a bank account at City National Bank of Florida that was opened in the name of his mother-in-law, a non-citizen who resides outside the United States and, as such, was not required to pay United States federal income tax. The Indictment further alleges that Chism later established a bank account at City National Bank, in the name of H2H, to receive his share of the claimed profits from AFG’s securities transactions, but nonetheless he continued to deposit, and caused to be deposited, checks from AEMG’s bank account reflecting his share of the claimed profits from AFG’s investments into his mother-in-law’s bank account at City National Bank.

According to the Indictment, Chism caused checks to be drawn on defendant’s mother-in-law’s bank account at City National Bank to pay for personal expenses. These payments for personal expenses included, among others, the following:

May 26, 1999 - purchase of a Mercedes Benz S430 luxury automobile using a check in the amount of $79,428.97;

December 11, 1999 - payment to Neiman Marcus for the credit card account of defendant’s wife using a check in the amount of $20,000.00;

January 27, 2000 - purchase of a 2000 Mercedes Benz S500 luxury automobile using a check in the amount of $94,372.23;

March 2, 2000 - mortgage payment on his residence in Aventura, Florida, using a check in the amount of $485,192.41;

August 11, 2000 - purchase of an equity membership in the Fisher Island Club using a check in the amount of $90,000.00;

• December 14, 2000 - purchase of a 2001 Porsche 911 Turbo sports car using a check in the amount of $83,855.00;

April 4, 2001 - partial payment on the purchase of a 2001 Venture 34 boat using a check in the amount of $50,000.00;

May 1, 2001 - additional partial payment on the purchase of a 2001 Venture 34 boat using a check in the amount of $50,236.60;

June 4, 2001 - purchase of a 2001 Ferrari 550 Maranello sports car using a check in the amount of $238,500.00;

July 17, 2001 - purchase of a 2001 Ferrari 360 Modena Spider sports car using a check in the amount of $219,570.00;

December 15, 2001 - payment for home improvements on his and his wife’s Fisher Island condominium using a check in the amount of $11,675.83; and

December 20, 2001 - payment for home improvements on his and his wife’s Fisher Island condominium using a check in the amount of $40,000.00.

As part of the tax evasion scheme, Chism failed to declare as income and failed to pay federal income tax on his share of the claimed profits from AFG’s securities transactions that he deposited, or caused to be deposited, into his mother-in-law’s bank account at City National Bank.