Three men sentenced in investment/Tax fraud scheme
FOR IMMEDIATE RELEASE |
December 21, 2011 |
NEWARK, N.J. – A principal of Mid-Atlantic Trustees and Administrators (MATA) and two of the company’s employees were sentenced to prison terms or home detention today for conspiracy to defraud the United States through the marketing of two fraudulent products designed to conceal assets from the IRS and fraudulently discharge debt, U.S. Attorney Paul J. Fishman announced.
Michael Balice, 61, of Metuchen, N.J., was sentenced to 48 months in prison by U.S. District Judge William J. Martini in Newark federal court. Angel Done, 53, of Queens, N.Y., was sentenced to 12 months of home detention and Wilson Calle, 54, of Queens, was sentenced to three months home detention. Balice and Done were convicted by a jury June 20, 2011, of one count each of conspiracy to defraud the United States, mail fraud and wire fraud. Balice was also convicted of one count of tax evasion. Calle had pleaded guilty to one count of mail fraud during the trial.
According to documents filed in this case and the evidence at trial:
Balice and Ronald Ottaviano, 65, of Lewes, Del., were the principals of MATA, a company formed in 2005 and based in Bayville, N.J. At various times, Ottaviano’s wife, Harriet Foster, 67, of Tuckerton, N.J., Done and Calle were employees of MATA who, in exchange for referral fees and commissions, recruited customers for the companies.
At no time did MATA conduct legitimate business. Instead, MATA marketed two products to its customers: Pure Trust Organizations (“PTOs”) and Beneficiaries in Common (“BIC”).
PTOs
On the Internet, in promotional materials, and elsewhere, MATA, its principals, and employees held themselves out to be trust experts who employed a team of attorneys, certified public accountants, certified financial planners, and other tax professionals who were equipped to establish legal trusts for their clients. MATA also claimed to have established thousands of trusts and to be one of the leading authorities in the creation of “pure trusts.” Ottaviano frequently identified himself as a non-practicing attorney and the leading authority on trusts in the United States. The company also touted that its trusts had been assigned Trust Identification Numbers by the IRS, and were therefore legal. According to the evidence at trial, none of those statements was true.
From the formation of MATA through July 2010, the defendants established several hundred PTOs for their customers, the express design of which was to conceal their customers’ income and other assets from the IRS, thereby impeding the IRS in its tax collection efforts. In creating, marketing, and selling PTOs, the defendants made concerted efforts to make it appear that PTO customers had no control over the assets in the account and the trustees had complete control. The customers, however, always maintained unfettered access to their assets. Each PTO customer was provided with a debit card and checkbook in the name of the PTO and signature stamps bearing the signatures of Ottaviano and Balice – which enabled the customer to use the assets in the PTO as he or she chose.
BIC
In May 2007, MATA began to market and sell a second product, BIC, as a debt elimination program. For thousands of dollars per customer, MATA, its principals, and its employees manufactured false and fictitious bonds, often with face amounts of tens of millions of dollars, which were sent directly to the United States Treasury Department. According to MATA, once a customer’s bonds were sent to the Treasury Department and accepted, the customer was “bonded,” and, with MATA’s help, could draw down that bond to pay “public” debt, including mortgage debt, credit card debt, and tax obligations.
As part of the BIC process, customers paid MATA to send hundreds of bonds to the U.S. Treasury, the IRS, and other government agencies in an attempt to discharge their tax and other debts. In total, MATA flooded the U.S. Treasury, IRS, and other government agencies with hundreds of billions of dollars in worthless paper.
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Through the marketing and sale of PTOs and BIC, the defendants collectively made over $3.5 million in illicit gross receipts, most of which was hidden in PTOs controlled by the defendants. None of the defendants paid income taxes on the proceeds, and, in many cases, filed no federal income tax returns at all. In the case of Ottaviano and Foster, they spent a portion of their illicit proceeds, over $500,000 in total, to purchase the Lewes home – in cash.
In addition to the prison sentences, Judge Martini sentenced Balice to three years supervised release. Restitution will be determined at a future date.
In addition to the other charges Ottaviano was convicted of two counts of tax evasion and one count of money laundering; he was sentenced Dec. 15, 2011, to 62 months in prison. Foster was additionally convicted of two counts of failing to file a tax return and one count of money laundering and was sentenced Dec. 15, 2011, to 13 months in prison.
Three other defendants originally charged in the scheme pleaded guilty in November 2010. Richard MacFarlane, 63, of Doylestown, Pa.; and Paula Mariani, 51, and Patrick Potopowicz, 62, both of Bensalem, Pa., pleaded guilty to conspiring with each other and others named in the Indictment to obstruct the IRS in its tax collection efforts, admitting they marketed two fraudulent products designed to conceal assets from the government and fraudulently discharge debt. They are all awaiting sentencing.
The investigation was led by the Treasury Inspector General for Tax Administration, under the direction of Special Agent in Charge Robert Geary, and IRS - Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, as well as the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge Philip R. Bartlett.
The government is represented by Assistant U.S. Attorneys Gurbir S. Grewal and Christopher J. Kelly of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
11-519
Defense counsel:
Balice: Joseph R. Donahue Esq., River Edge, N.J.
Done: Alexander Booth Esq., Union City, N.J.
Calle: Richard Verde Esq., West Caldwell, N.J.
