May 16, 2005
For Immediate Release
P R E S S R E L E A S E
Edward H. Kubo, Jr., United States Attorney for the District of Hawaii, and Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division, announced today that on May 13, 2005, a federal jury in Honolulu, Hawaii, convicted Royal LaMarr Hardy (aka Royal LaMarr Sounet), Ursula A. Supnet (aka Ursula Ann Sounet), Michael L. Kailing, Fred M. Ortiz, and Terry Leroy Cassidy (aka Shawn Michaels) of a variety of federal tax offenses relating to the promotion and sale of tax evasion schemes over an approximate 20-year period that resulted in a tax loss of greater than $8.7 million to the United States Department of Treasury. The jury deliberated less than a day after eight days of trial.
Hardy and Supnet were also convicted of a separate conspiracy to hide income earned from a scheme related to The Research Foundation, and Hardy was further convicted of willfully failing to file individual income tax returns for tax years 1995, 1996, and 2001. According to evidence introduced at the trial, in 1995 and 1996, Hardy earned $491,000 and $397,000, respectively, from the sale of the illegal schemes, and in 2001, he earned $257,000 from an offshore investment.
Evidence introduced at the trial detailed schemes including abusive trusts, fraudulent IRA rollovers, and the so-called "Reliance Defense," marketed as a legal way to avoid paying taxes. The scheme included reliance letters and other materials to support a claim that the purchasers honestly thought the filing of income tax returns was voluntary and that the Internal Revenue Code made no one "liable" for individual income taxes.
During the trial, the prosecution contended that Hardy and Supnet managed the conspiracy as Executive Director and Administrator, respectively, of The Cornerstones of Freedom Research Foundation; Kailing and Ortiz provided opinion letters for the scheme; and Cassidy marketed the schemes in Washington state.
United States District Judge Edward Rafeedie set sentencing of the defendants for August 29, 2005. Hardy faces maximum penalties of 13 years imprisonment (five years for each of the two conspiracies and one year for each of the willful failure to file counts) and fines up to $800,000. Supnet faces maximum penalties of ten years in prison and fines up to $500,000. Kailing, Ortiz, and Cassidy face maximum sentences of five years imprisonment and up to $250,000 in fines.
The investigation resulting in the prosecution was conducted by the Internal Revenue Service Criminal Investigation Division. The prosecution was handled by Assistant United States Attorney Clare Connors and Tax Division Trial Attorney Brian D. Bailey.
Additional information about the Justice Department's Tax Division and its enforcement efforts may be found at www.usdoj.gov/tax.
# # #