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Monday, March 23, 2015

United States Sues to Block San Diego Man Posing as Attorney and CPA from Promoting Bogus Tax Schemes and Preparing Fraudulent Returns

The United States has sued a former attorney and certified public accountant to bar him from promoting and implementing tax fraud schemes and preparing tax returns for others, the Justice Department announced today. 

The lawsuit, filed in the U.S. District Court for the Southern District of California, alleges that Lawrence Preston Siegel, aka Larry Lave, Yehuda Lave and Larry Easy, falsely represented that he is a licensed attorney and CPA in order to solicit business for his tax practice. 

According to the civil injunction suit, Siegel pleaded guilty to one count of tax evasion and two counts of subscribing false tax returns in 1994.  He subsequently resigned from the California bar in 1994, lost his CPA license in 1997, and never regained either accreditation, according to the suit.  The complaint alleges that following his release from federal prison in 2001 for additional convictions, Siegel established a tax practice and stated online that he is an “[i]interesting combination of a Tax Lawyer and CPA who is also a Rabbi trained in Spirituality.”  Siegel, the complaint alleges, claimed to others that his “goal as a spiritual Rabbi, Tax Attorney and CPA is to save people money without going to jail … Everybody wants to pay very little tax, I do it legally and morally under the Torah.” 

According to the complaint, among his tax fraud schemes, Siegel falsely advised his customers, typically high earners who own profitable businesses, that they can establish companies in Nevada and treat their California home as an out-of-state corporate office.  Siegel falsely claimed that doing so would transform a vast array of non-deductible personal expenses into tax deductible business expenses, according to the suit.  According to the complaint, Siegel boasted about this tax fraud scheme in e-mails, including one where he falsely claimed that his customers are entitled to free housing as tax-free compensation from their out-of-state companies and that “[t]he housing can [b]e luxurious and cost thousands a [] month” because “[t]here is an assumption that corporations don’t waste money.”

In another scheme, Siegel falsely advises his customers to enter into sham license agreements to purportedly lease their professional skills and expertise to the out-of-state companies Siegel established for them, according to the suit.  Under these license agreements, the companies paid royalties to the customers in exchange for use of the customers’ professional skills and expertise, according to the complaint.  Siegel allegedly promoted and implemented this scheme to mischaracterize income customers received from their out-of-state companies, which is subject to employment taxes, as royalty payments, which Siegel falsely claimed as exempt from employment taxes.

The complaint alleges that, in conjunction with his tax fraud schemes, Siegel prepared customer tax returns, and in some instances, filed tax returns without obtaining his customers’ permission to file.  In preparing returns, Siegel falsely claimed customers’ personal purchases as deductible business expenses, including purchases at Tiffany & Company and Louis Vuitton, and with Royal Caribbean Cruise Lines and Princess Cruise Lines, according to the suit.  Siegel attempted to conceal these false deductions from the Internal Revenue Service (IRS) by reporting them as large expenses for “supplies” or “medical records and supplies,” according to the government’s complaint.

According to the complaint, Siegel also attempted to delay and obstruct IRS examinations of his customers.  Siegel allegedly provided false corporate documents to the IRS in order to deceive auditors, produced bogus contracts to IRS auditors, and lied to IRS officials during U.S. Tax Court litigation when asked to confirm information on behalf of his customers, according to the suit.

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

Topic(s): 
Tax
Component(s): 
Press Release Number: 
15-359
Updated May 18, 2016