Two Executives Sentenced For Promoting A Fraudulent Offshore Tax Shelter Scheme
Tampa, Florida – U.S. District Judge Steven D. Merryday has sentenced Duane Crithfield (70, Lecanto) to four years and six months in federal prison and Stephen P. Donaldson, Sr. (72, Tampa) to six years’ imprisonment for their roles in a conspiracy to defraud the United States using an offshore tax shelter scheme. A separate hearing will be held at a later date to determine the amount of restitution owed by the two defendants.
Crithfield and Donaldson were indicted on May 2, 2013, for conspiracy to defraud the United States. A superseding indictment was returned on July 25, 2013, that added two substantive charges.
As alleged in the superseding indictment, from 2001 to at least March 2008, Crithfield and Donaldson, and others, through Foster & Dunhill, Offshore Trust Service, Fidelity Insurance Company ("FIC"), and Citadel Insurance Company ("CIC") promoted, marketed, and implemented a fraudulent offshore tax strategy known as the Business Protection Plan ("BPP"). The fraudulent BPP strategy enabled the defendants' affluent clients to claim business expense deductions based on sham “BPP insurance premium” payments made to offshore entities FIC and CIC in amounts intended primarily to substantially reduce the clients' taxable income for a particular year.
According to court records and evidence admitted during the bench trial, Crithfield and Donaldson conspired together, and with others, to create and promote the offshore BPP tax shelter strategy. The strategy, however, was nothing more than self-insurance and was devoid of any economic substance and the so‑called “BPP insurance premiums” were not based on any business risks. After obtaining the benefit of a tax deduction on a client's corporate income tax return, the client would later receive approximately 83‑85% of the premium back. Thus, the premium amounts were not ordinary and necessary business expenses that were entitled to deductions under Section 162(a) of the Internal Revenue Code. Rather, they were merely sham expenditures and not properly deductible for U.S. income tax purposes on the respective businesses’ tax returns.
This case was investigated by the Internal Revenue Service. It was being prosecuted by Assistant United States Attorneys Jay G. Trezevant and Megan K. Kistler.