News and Press Releases

Former Reno Resident Sentenced to 57 Months in Prison for Tax Evasion, Obstructing the Irs, and Conspiracy to Defraud the United States

March 12, 2002

Reno, Nev. - Daniel G. Bogden, United States Attorney for the District of Nevada, Eileen J. O'Connor, Assistant Attorney General in the Department of Justice Tax Division, and Byram Tichenor, Special Agent-in-Charge of the IRS Criminal Investigation Division for Nevada and Utah, announced that Jose John Gastanaga, age 61, was sentenced to 57 months in prison today for his participation in a scheme to defraud the IRS. The sentence was handed down in Reno by U.S. District Court Judge David W. Hagen.

Gastanaga will begin serving his sentence immediately because he is in federal custody after being arrested on February 21, 2002, in Fernley, Nevada. Gastanaga was staying in a motel under an assumed name when the U.S. Marshal Service executed a warrant for his arrest for his failure to appear at his sentencing on January 28, 2002.

Following a two-week jury trial, Gastanaga was convicted last August of conspiracy to defraud the United States, evading over $2 million in federal taxes, and obstructing and impeding the IRS. The evidence at trial demonstrated that Jose John Gastanaga, with the assistance of co-defendant Palle "Pono" Bognaes, used a variety of tactics to defraud and obstruct the IRS. Gastanaga used trust-like entities called Unincorporated Business Organizations "UBO's," which were set up for him by Bognaes. Among other things, Gastanaga and Bognaes claimed that if an individual transferred all of their assets to the UBO, they could withdraw from the tax system entirely. These trusts were referred to by various names including Massachusetts Trusts, Common Law Trusts, and Pure Trust Organizations.

Jose Gastanaga has not filed a tax return since 1987. In his efforts to evade taxes, Gastanaga also attempted to rescind his social security number and renounce his citizenship, and with the assistance of Bognaes and others, prevented the IRS from seizing two of his homes for nonpayment of taxes. Bognaes also obstructed an attempted IRS sale of Gastanaga's interest in a ranch located in Paradise Valley, Nevada.

Judge Hagen also ordered Gastanaga to pay restitution to the IRS in the amount of $1,718,670.42, and placed Gastanaga on a two-year period of supervised release following his term of imprisonment. Judge Hagen further ordered Gastanaga to pay $4,861 for costs of prosecution.

Bognaes, a former resident of Zephyr Cove, Nevada, was recently sentenced to serve 80 months in prison for his conviction on nine tax-related charges in the same trial. Bognaes was ordered to report to prison on March 11, 2002, but failed to appear and is now a fugitive from justice. Bognaes is 60 years old, approximately 5'11'', 270 lbs, blue-eyed, and has balding whitish-blonde hair and a moustache. He was last seen in the Las Vegas area, although he has contacts in Maui, Hawaii. If you have any information about the whereabouts of Palle "Pono" Bognaes, please contact the U.S. Marshal Service at 775-686-5780.

The prosecution and convictions of Gastanaga and Bognaes are the result of an extensive investigation by the Department of Justice Tax Division and Special Agents with the Internal Revenue Service Criminal Investigation Division. The IRS maintains a web site which contains a warning notice to the public concerning abusive trust programs. The web site address is The case was prosecuted by Department of Justice Trial Attorneys Anastasia Enos and Lori Hendrickson.

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