Former Upstate New York Financial Advisor Pleads Guilty to Using and Selling Abusive Trust Schemes to Obstruct the IRS
WASHINGTON - Richard A. Muto of Buffalo, N.Y., has pleaded guilty to corruptly endeavoring to obstruct and impede the administration of the internal revenue laws, the Justice Department announced today. A federal grand jury in Buffalo returned an indictment against Muto in December 2005.
According to the indictment and documents filed in the district court, Muto, a former resident of Lewiston, N.Y., was a financial advisor who owned and operated a business called Tax and Investment Strategies, located in Niagara Falls, N.Y. Between February 1996 and March 2000, Muto promoted abusive tax shelters that involved a multi-layered abusive trust scheme. The fraudulent scheme allowed clients to illegally reduce their federal income taxes by diverting business income through a series of sham corporations and trusts. Through these trusts, Muto helped his clients conceal their true income from the Internal Revenue Service (IRS). This fraudulent scheme resulted in an unlawful reduction in reported taxes by his clients.
Muto also counseled his clients to submit frivolous documents and correspondence to the IRS to obstruct audits and thwart the IRS revenue agents. In addition to promoting the fraudulent trusts, Muto also utilized them. The use of these fraudulent trusts resulted in Muto also filing false income tax returns for the tax years 1996, 1997 and 1998. According to the plea documents, the scheme promoted by Muto caused a tax loss to the United States of more than $1.7 million.
The charge against Muto carries a maximum sentence of up to three years in prison and up to one year of supervised release. He is scheduled to be sentenced on May 9, 2011.
"The IRS and the Justice Department will continue to investigate and prosecute people who use schemes and scams to obstruct our nation’s tax system," said John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division. He thanked the IRS
Criminal Investigation agents who investigated the case as well as Tax Division trial attorneys John N. Kane and Jeffrey Shih who prosecuted the case.
This prosecution is one of several prosecutions against the fraudulent trust schemes promoted nationwide by The Aegis Company based in Palos Hills, Ill. In May 2008, a federal jury in Chicago convicted the six Aegis principals who ran the nationwide scheme out of Illinois and with whom Muto had a business relationship to promote the trusts.