Warehouse Banking and Shelf Corporations
see also Wyoming 1-5 | Global B.S.

Citation: http://www.usdoj.gov/tax/04_tax_236.htm

FOR IMMEDIATE RELEASE WEDNESDAY, APRIL 14, 2004 WWW.USDOJ.GOV TAX (202) 514-2007 TDD (202) 514-1888

THIRD PROMOTER OF OFFSHORE TAX FRAUD SCHEME PLEADS GUILTY IN OREGON Prosecutions Also Snared Clients Who Used Scheme To Cheat

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice; Karin J. Immergut, U.S. Attorney for the District of Oregon; and Nancy Jardini, Chief, Internal Revenue Service

Criminal Investigations announced today that at the federal courthouse in Portland, Oregon, Lee E. Morgan pled guilty to a felony tax charge of filing a fraudulent income tax return (26 U.S.C. §7206(1)). Sentencing is scheduled for July 12, 2004.

The offense of filing a fraudulent tax return carries a maximum penalty of three years imprisonment, a $250,000 fine, or both, and three years of supervised release following imprisonment. As a condition of his plea agreement, Mr. Morgan agreed to the imposition of the maximum sentence of imprisonment.

“Honest taxpayers deserve to know that people who commit tax fraud face serious consequences,” said Assistant Attorney General Eileen J. O’Connor.

“The investigation of abusive tax schemes is a national priority for the IRS,” said Nancy Jardini, Chief, IRS Criminal Investigation.

“Individuals who market or who intentionally buy into abusive trust schemes for the purpose of willfully concealing income and evading taxes will be held accountable, as evidenced by the legal actions taken by the Department of Justice over the past few days.”

On April 23, 2003, a thirteen-count indictment was returned against Messrs. Morgan, along with Terry Neal, Aaron Young and James Fontano. It alleged that, since at least 1995, they conspired to hide assets, income and expenditures from the IRS, for themselves and their clients. The defendants allegedly established foreign and domestic "shelf" corporations for themselves and their clients.

FL Foreign Profit PRIME NATIONAL HOLDING CORPORATION 2533 N. CARSON STREET STE 4896 CARSON CITY NV 89706 Date Filed 10/02/2001 State NV WITHDRAWAL 04/12/2002 Agent Name FONTANO, JIM 2533 N. CARSON STREET STE 4896 CARSON CITY NV

A "shelf" corporation has no employees or business premises and conducts no business. The defendants allegedly established domestic and foreign bank and securities accounts for the corporations, and devised a variety of ways they and their co-conspirators could use the funds in the United States without making the funds easily traceable to the true owner or paying taxes on them. These methods allegedly included "income stripping," use of "warehouse banks," offshore credit or debit cards, false mortgage loans, false insurance policies, and offshore brokerage accounts.

According to the indictment, "income stripping" involved setting up a Nevada corporation, which then billed the client’s legitimate business for fictitious consulting or other services. Allegedly, the legitimate business would fraudulently deduct the payments as a business expense on its tax return.

A "warehouse bank" account is a bank account at a regular commercial bank in which all clients’ funds are commingled or pooled, for the purpose of concealing the client’s ownership of the funds.

Clients would allegedly send instructions to Neal or his coconspirators, who would conduct the transactions at their direction. Similarly, offshore bank accounts allegedly were used to conceal a client’s funds, with credit or debit cards issued by an offshore bank used as one means for repatriating monies as needed.

According to the indictment, the defendants also advised clients to purchase an "insurance policy" from a fictitious foreign insurance company. The client’s legitimate business would allegedly deduct the insurance premium as a business expense on its tax return. The money would allegedly be sent offshore to defendants, who kept six to nine percent as their fee. After a year, the balance of the funds would allegedly be deposited to one of the client’s foreign bank accounts and would again be available to the client.

According to the indictment, in order to further conceal the scheme, the defendants allegedly prepared false, fictitious, and fraudulent documents to create a veneer of legitimacy to their clients’ tax evasion. These documents allegedly included false invoices for "consulting" or "services," promissory notes, consulting agreements, and insurance policies. They also allegedly prepared and filed false tax returns for the clients’ Nevada corporations, which returns usually showed little or no tax due.

When clients were contacted by the IRS, the defendants allegedly advised the clients to lie about their connection to the Nevada and Nevis corporations and to destroy documents. The defendants allegedly charged substantial fees for their services. Assistant Attorney General O’Connor, U.S. Attorney Immergut and IRS Criminal Investigation Chief Jardini also announced that, recently, two promoters, Terry Neal and Aaron Young, and four clients who used these tax fraud schemes had pled guilty to tax charges in Oregon. Terry Neal pled guilty to a charge of conspiracy and, under his plea agreement, agreed to a sentence of five years imprisonment. Aaron Young pled guilty to a charge of aiding and assisting in the preparation of a false tax return, and under his plea agreement, agreed to a sentence of three years imprisonment. As part of their respective plea agreements, Neal and Young will cooperate with the government in its further investigations of their clients and of other offshore tax evasion promoters.

They also agreed to cease operations of their offshore businesses and banks, and assist the government in obtaining access to all business and financial records connected with the scheme located in foreign countries.

Assistant Attorney General O’Connor and United States Attorney Immergut thanked Assistant U.S. Attorney Robert B. Ross and Tax Division Trial Attorneys Mark S. Determan and Amanda B. Cruser, who assisted in the prosecution of this case. They also thanked the special agents of the Internal Revenue Service, whose assistance was essential to the successful investigation and prosecution of this complex case.

Mr. Fontano is awaiting trial on the indictment. The charges contained in an indictment are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law. ###

TWO BUSINESSMEN PLEAD GUILTY TO TAX FRAUD IN OFFSHORE CREDIT CARD SCHEME Credit Cards Were Used To Spend Untaxed Income Stashed In Foreign Accounts

WASHINGTON D.C. - Eileen J. O’Connor, Assistant Attorney General for the Tax Division, United States Department of Justice, Jeffrey G. Collins, United States Attorney for the Eastern District of Michigan, and Nancy Jardini, Chief, Internal Revenue Service

Criminal Investigations, announced that at the federal courthouse in Detroit, Michigan, Kurt P. Greaves and Herbert J. Greaves each pled guilty to a felony charge of filing a fraudulent tax return (26 U.S.C. §7206(1). The sentencings were scheduled for July 15, 2004. A violation of 26 U.S.C. § 7206(1) carries a maximum penalty of three years imprisonment, a $250,000 fine, or both, and three years of supervised release following imprisonment.

“As these convictions demonstrate, moving money offshore doesn’t hide it from the IRS,” said Assistant Attorney General Eileen J. O’Connor. “The government can and will find those who try to hide unreported income offshore, and hold them accountable.”

“Today's plea shows that not only are the promoters being prosecuted, but increasingly the clients who participate in these schemes for the purpose of willfully evading taxes are being prosecuted, too,” said Nancy Jardini, Chief, IRS Criminal Investigation. “The prosecution of individuals who intentionally conceal income and evade taxes is a vital element in maintaining public confidence in our tax system. We should not expect the honest taxpayer to foot the bill for those who hide income from the government.”

Herbert Greaves and Kurt Greaves own Greaves, Inc. (the “company”), which operates roofing and other businesses. They admitted that, from 1999 through 2001, they used offshore entities run by tax scam promoters to hide much of their income. They admitted filing fraudulent individual income tax returns that falsely reported no interest in a financial account in a foreign country. In fact, they each had interests in numerous foreign bank accounts. In one scheme, the Greaves admitted they caused their company to make payments to Nevada shell corporations, and fraudulently deducted them as “professional fees” and/or “outside fees.” In fact, the payments were deposited in bank accounts controlled by the scheme’s promoters, who then wire-transferred the funds offshore to bank accounts maintained in Nevis, West Indies.

The Greaves admitted they controlled those accounts. The promoters arranged for issuance of a credit card by Bahamas-based Leadenhall Trust Company Ltd., and for untaxed income held in the foreign accounts to be used to pay the credit card bills. The Greaves used the credit card to pay their personal expenses.

In a second scheme, the Greaves caused their company to wire transfer $230,000 to an offshore Nevis-based bank account controlled by the promoters. The company deducted the entire payment on its tax returns as an “insurance” expense. To substantiate the fraudulent deduction, the promoters provided the Greaves with a bogus insurance policy purportedly issued by Grenada-based Sovereign Life & Casualty Ltd.

The Greaves had executed a secret indemnification agreement whereby, through a Nevis-based corporation, they agreed to indemnify the insurance company from any claims which might be made under the policy. The promoters received six percent of the total funds as a fee for holding the funds for one year, after which the Greaves were entitled to receive the balance.

Assistant Attorney General O’Connor and U.S. Attorney Collins thanked Tax Division Trial Attorneys John E. Sullivan and D. Loren Washburn, who prosecuted this case. They also thanked the special agents of the Internal Revenue Service, whose assistance was essential to the successful investigation and prosecution of these complex cases. ###