Tax Shelter Promoters Sentenced In Michigan For Conspiracy & Tax Fraud
WASHINGTON – Three promoters of fraudulent tax shelters were sentenced to prison for conspiring to defraud the United States, the Justice Department and the IRS announced today. Peter Peggs of Prides Crossing, Mass., was sentenced to nine years in prison. Robert Larsen of Winter Park, Colo., was sentenced to six years in prison, and Craig Stone of Fort Pierce, Fla., was sentenced to five years in prison.
On October 20, 2009, a Grand Rapids, Mich., jury found Peggs, Larsen and Stone guilty of a conspiracy to defraud the United States. In addition, the jury found Peggs and Larsen guilty of tax evasion.
Evidence presented during the four-week trial showed that the three men conspired with John A. Campbell and Anthony Merlo to defraud the United States by promoting, marketing, selling and administering sham "Loss of Income" insurance policies through an insurance company in the U.S. Virgin Islands known as Security Trust Insurance Company. The coconspirators sold these purported insurance policies to wealthy U.S. taxpayers as a tax deductible product, with the understanding that the purchasers would have most of their premiums returned to them in a non-taxable manner. The clients then improperly took tax deductions for the purchase of this sham product and improperly reduced their income taxes. The co-conspirators collected more than $20 million in premiums.
The co-conspirators also agreed to conceal facts from the Internal Revenue Service (IRS) regarding this insurance tax shelter. During the trial, the evidence revealed that Peggs and Larsen lied to the IRS during an audit in 2002 and 2003 of their Michigan client Oscar Rene Poch, who also pleaded guilty to a tax offense.
Campbell and Merlo were previously sentenced. Campbell, a resident of Portage, Mich., and a former partner in the Kalamazoo, Mich., law office of Miller, Canfield, Paddock & Stone, P.L.C., was sentenced to 60 months' in prison after pleading guilty to conspiring to defraud the United States. Merlo, a business consultant and resident of Boston was sentenced to 51 months' in prison after pleading guilty to conspiring to defraud the United States.
Acting Assistant Attorney General John A. DiCicco, U.S. Attorney for the Western District of Michigan Donald A. Davis and IRS Special Agent in Charge Maurice Aouate, commended the investigative efforts of the IRS agents involved in this case, as well as Tax Division trial attorneys Richard M. Rolwing, Patrick J. Murray, and Jessica Nuzzelillo, who prosecuted the case.
More information about the Justice Department's Tax Division and its enforcement efforts is available at www.usdoj.gov/tax/.