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Press Release

Two Chattanooga Residents Sentenced to Prison for Participating in a Conspiracy to Commit Wire Fraud And For Tax Evasion

For Immediate Release
U.S. Attorney's Office, Eastern District of Tennessee

CHATTANOOGA, Tenn. – On September 29, 2017, James H. Brennan, 68, and Douglas A. Dyer, 58, both of Chattanooga, Tennessee, were sentenced by the Honorable Travis R. McDonough, U.S. District Court Judge, to respectively serve 48 months and 60 months in federal prison for their roles in a wire fraud and tax evasion conspiracy. Upon their release, U.S. Probation will supervise them for three years.  Brennan and Dyer were also ordered to pay over $4.9 million in restitution to over 200 victims in this case.  Additionally, Brennan was ordered to pay restitution to the IRS in the amount of $184,022.84.  Dyer was ordered to pay restitution to the IRS in the amount of $354,251.58.


 In May 2017, both Dyer and Brennan pleaded guilty to conspiring to steal approximately $4.9 million from investors and evading the assessment and payment of their true taxes due and owing by mischaracterizing the stolen money as capital gains instead of income, thus paying at a fraudulently derived lower tax rate.   Dyer also pleaded guilty to criminal contempt for dispersing funds contrary to an order in a civil case filed by the Securities and Exchange Commission for securities fraud.


According to documents on file with the U.S. District Court, between 2008 and 2016, Brennan and Dyer sought and received funds from numerous investors by promising them that their money would be used to capitalize limited liability corporations which would merge with companies seeking to transition to public ownership on a public stock exchange. Instead, they diverted the funds to their personal use. Although the general practice is to report stolen funds as income, Brennan and Dyer mischaracterized the funds they stole as capital gains and paid taxes at the lower capital gains rate, effectively evading paying taxes at the correct rate.     


The case was investigated by the Federal Bureau of Investigation (FBI) and Internal Revenue Service (IRS) Criminal Investigation. Assistant U.S. Attorneys James T. Brooks and Anne-Marie Svolto represented the United States.


U.S. Attorney Nancy Stallard Harr said, “The U.S. Attorney’s Office will continue to pursue prosecution of fraudulent offenders, such as Brennan and Dyer, who effectively steal money from both innocent individuals and the United States by failing to pay taxes.” 


“Fraudulent investment schemes continue to bring financial ruin to many Americans,” stated Tracey D. Montaño, Special Agent in Charge, IRS-Criminal Investigation. “We are proud of the work of our special agents who utilize their specialized forensic accounting skills to unravel complex financial schemes.  The prosecution of individuals who intentionally conceal their income and evade taxes is a key priority for IRS Criminal Investigation.  Mr. Dyer and Mr. Brennan stole investors’ hard-earned money, used it for their own personal benefit, and evaded the federal tax owed on the stolen funds.  This case should serve as a reminder, no matter the source of income, all income is taxable.” 


“The public's faith in the integrity of investment markets, particularly those involving capital for new companies, is essential for the continued success of our country's economic stability and growth,” stated Renae McDermott Special Agent in Charge of the Knoxville FBI. “The sentencing today demonstrates the commitment of the FBI and our investigative partners to bring to justice those who prey upon unsuspecting investors.”




Sharry Dedman-Beard
Public Information Officer

Updated September 29, 2017