Federal Court Bars Ohio Accountant and Former Business Partner from Promoting Oil-and-Gas Tax Fraud Scheme
Government Estimates Alleged Tax Loss of $5.7 Million to $6.9 Million
WASHINGTON – A federal court has permanently barred two men from promoting an alleged tax fraud scheme involving interests in purported oil and gas wells, the Justice Department announced today. Judge James L. Graham of the U.S. District Court for the Southern District of Ohio entered the permanent injunction orders against Daniel D. Weddington of Newark, Ohio, and James R. Earl of Heath, Ohio. Both men were preliminarily enjoined in 2008. A third defendant, Jeffrey L. Gaumer of Newark, N.J., was permanently enjoined in 2008. All three men agreed to the permanent injunctions without admitting to the government’s allegations against them in the amended complaint.
Weddington recently pleaded guilty in federal court to two counts of aiding and assisting the filing of false income tax returns and one count of obstructing the administration of the internal revenue laws in connection with his role in the oil-and-gas well scheme.
The amended complaint in the civil injunction case alleged that Weddington, Earl and Gaumer marketed a scheme to claim tax deductions for fictitious well-drilling costs to more than 200 customers across the country. Customers allegedly paid for their purported investments using sham notes that were supposedly paid off by fictitious gas royalty payments from fictitious wells. The amended complaint also alleged that the defendants used a shell corporation, Aurora Capital Group Inc., to issue sham letters of credit to customers in an attempt to make the customers’ sham notes appear legitimate, so as to deceive the Internal Revenue Service (IRS).
The amended complaint also asserted that Weddington is a public accountant, that Gaumer is a certified public accountant in the same accounting firm, and that they prepared tax returns for the majority of the scheme’s participants. According to the amended complaint, the IRS estimated that the scam caused tax revenue losses of $5.7 million to $6.9 million from 2001 to 2004.
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax return preparers and tax fraud promoters. Information about these cases is available on the Justice Department website .