Contact:
Paul D. Lochner
Assistant United States Attorney
(906) 226-2500

FOR IMMEDIATE RELEASE

Grand Rapids, Michigan – February 24, 2005 – Grand Rapids, Michigan – United States Attorney Margaret M. Chiara and Maurice M. Aouate, Special Agent in Charge, Internal Revenue Service (IRS), Criminal Investigation, announced that on February 22, 2005, Dr. Daniel Smalley, 56, of Ludington, Michigan, was sentenced to one year and one day in prison based upon his conviction for tax evasion. The sentence was imposed by United States District Judge David W. McKeague, and included a two year period of supervised release following Smalley’s release from prison. Smalley pleaded guilty on November 24, 2004, to an information charging him with four counts of tax evasion with a total tax liability of $139,794.00. Although Smalley has since filed corrected amended tax returns with the IRS, he must still cooperate in making any payments, including any interest and penalties. In sentencing Smalley, Judge McKeague noted that he was the first tax protestor who appeared before him that expressed remorse and was repentant. The judge stated that he took that into account in passing sentence.

According to court records, during the years 1997 through 2002, Smalley was employed at the Baraga Correctional Facility, Baraga, Michigan, and at the Oaks Correctional Facility, Eastlake, Michigan, working for several different companies, including Genesys Integrated Group, Wexford Health Services, the State of Michigan, and Correctional Medical Services. During this period, and in concert with his wife Rhonda Smalley, Smalley actively evaded his federal tax liability by arranging for his income to be hidden in a series of bank accounts, and by taking steps to ensure that no federal taxes were withheld by his employers. In 1998, Smalley sent a package of frivolous correspondence to the IRS, disclaiming the legal authority of the United States and the IRS, while renouncing any legal relationship with the government.

In 2002, the IRS submitted a Notice of Levy to Smalley’s employer to collect taxes due and owing from Smalley’s wages. After being notified of this action, Smalley attempted to avoid the levy through the use of shell companies and bank accounts. On June 28, 2004, Smalley was arrested at the Baltimore Washington International Airport, in Baltimore, Maryland, after returning from Ghana, West Africa.

As part of Dr. Smalley's plea agreement, the United States Attorneys Office will move to dismiss a criminal complaint filed against Rhonda Kay Smalley.

Mr. Aouate stated, "Dropping out of the tax system in this day and age is just senseless. With this type of intentional act, you risk jail time, along with still being responsible for paying your fair share of taxes, which may also include interest and penalties."

Ms. Chiara commended the special agents of IRS Criminal Investigation for their work in this investigation. Assistant United States Attorney Donald A. Davis prosecuted the case on behalf of the United States.