Jury Convicts Tax Shelter Promoters of Conspiracy, Tax Crimes
WASHINGTON - Three tax shelter promoters, Peter J. Peggs of Prides Crossing, Mass., Robert D. Larsen of Winter Park, Colo., and Craig M. Stone, formerly of Fort Pierce, Fla., were convicted of conspiracy to defraud the United States by a federal jury in Grand Rapids, Mich., today following a four-week trial, the Justice Department and Internal Revenue Service (IRS) announced. In addition, the jury found Peggs and Larsen guilty of tax evasion.
In October 2007, Peggs, Larsen and Stone were indicted for a scheme to promote, market, sell and administer a fraudulent tax shelter. In March 2008, a superseding indictment was returned charging Anthony Merlo of New Hampshire, a business consultant and partner of Peggs and Larsen; John A. Campbell, a former partner in the Kalamazoo, Mich., office of the law firm of Miller, Canfield, Paddock & Stone P.L.C.; and Campbell’s client, Oskar René Poch of Hickory Corners, Mich., for their roles in the scheme. In April 2008, Campbell, who marketed the fraudulent insurance product; and Poch, who was the owner and operator of Trillium Staffing, an employee-leasing company in Kalamazoo, Mich., pleaded guilty to tax crimes. In May 2009, Merlo pleaded guilty for his role in the scheme.
According to evidence presented during trial, Peggs, Larsen and Stone conspired with Campbell, Merlo and others to defraud the United States by concealing facts and documents from the IRS in their promotion, marketing, sale and administration of sham "Loss of Income" insurance policies through an insurance company in the U.S. Virgin Islands known as Security Trust Insurance Company. The defendants sold these purported insurance policies to wealthy U.S. taxpayers as tax deductible products, with the understanding that the purchasers would have most of their premiums returned to them in a purportedly non-taxable manner. The clients then improperly took tax deductions for the purchase of this sham product and fraudulently reduced their taxable income. During the duration of the conspiracy, more than $12 million in premiums were collected by the promoters of the loss of income policies.
According to evidence presented during trial, Peggs, Larsen and Stone improperly disguised the return of over $3 million of Poch’s companies’ insurance premiums as funds available to Poch in the form of loans that he never repaid from a Michigan bank account in the name of an offshore foreign corporation which Poch paid the defendants to set up in the Bahamas. Moreover, Peggs, Larsen and Stone agreed in e-mails and other documents to conceal facts and documents from the IRS regarding this insurance tax shelter.
According to evidence presented during trial, Peggs and Larsen committed tax evasion by misleading the IRS during its audit of Poch’s tax returns for the years 1999 and 2000. Additionally, Peggs and Larsen lied to the IRS during its audit of Poch’s tax returns in 2002 and 2003. Peggs and Larsen also allegedly made material misrepresentations about the facts
underlying this scheme to Poch’s attorney who was preparing to contest the IRS audit determination in U.S. Tax Court against the IRS.
According to evidence presented during trial, Peggs and Larsen engaged in similar conduct with other clients and individuals in Massachusetts, Ohio and Kentucky. Another individual, Bruce M. Cohen of Louisville, Ky., was convicted in federal courts in both Ohio and Kentucky in connection with his participation in this conspiracy. Cohen, who testified during the trial, is currently serving a 37 month prison sentence for his conduct.
No sentencing date has yet been scheduled. Both the conspiracy and tax evasion convictions carry a maximum punishment of five years in prison and a fine of up to $250,000.
"The government will continue to unravel schemes promoted and used by taxpayers to evade their federal tax obligations," said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. "As this conviction demonstrates, those who attempt to hide behind fraudulent transactions and foreign corporations as part of their illegal tax schemes will be held accountable."
"Promoting the use of fraudulent loss of income documents for the purpose of taking false tax deductions isn't tax planning; it’s criminal activity," said Eileen Mayer, Chief, IRS Criminal Investigations. "We will continue to shut down fraudulent tax schemes and hold the promoters of these schemes accountable for their actions."
Acting Assistant Attorney General DiCicco commended the investigative efforts of the IRS agents involved in this case, as well as Justice Department Tax Division attorneys, Richard Rolwing, Patrick J. Murray, Jessica Nuzzelillo, who prosecuted the case. Acting Assistant Attorney General DiCicco also thanked the U.S. Attorney’s Office in Grand Rapids, Mich. for their assistance.
In October 2007, Peggs, Larsen and Stone were indicted for a scheme to promote, market, sell and administer a fraudulent tax shelter. In March 2008, a superseding indictment was returned charging Anthony Merlo of New Hampshire, a business consultant and partner of Peggs and Larsen; John A. Campbell, a former partner in the Kalamazoo, Mich., office of the law firm of Miller, Canfield, Paddock & Stone P.L.C.; and Campbell’s client, Oskar René Poch of Hickory Corners, Mich., for their roles in the scheme. In April 2008, Campbell, who marketed the fraudulent insurance product; and Poch, who was the owner and operator of Trillium Staffing, an employee-leasing company in Kalamazoo, Mich., pleaded guilty to tax crimes. In May 2009, Merlo pleaded guilty for his role in the scheme.
According to evidence presented during trial, Peggs, Larsen and Stone conspired with Campbell, Merlo and others to defraud the United States by concealing facts and documents from the IRS in their promotion, marketing, sale and administration of sham "Loss of Income" insurance policies through an insurance company in the U.S. Virgin Islands known as Security Trust Insurance Company. The defendants sold these purported insurance policies to wealthy U.S. taxpayers as tax deductible products, with the understanding that the purchasers would have most of their premiums returned to them in a purportedly non-taxable manner. The clients then improperly took tax deductions for the purchase of this sham product and fraudulently reduced their taxable income. During the duration of the conspiracy, more than $12 million in premiums were collected by the promoters of the loss of income policies.
According to evidence presented during trial, Peggs, Larsen and Stone improperly disguised the return of over $3 million of Poch’s companies’ insurance premiums as funds available to Poch in the form of loans that he never repaid from a Michigan bank account in the name of an offshore foreign corporation which Poch paid the defendants to set up in the Bahamas. Moreover, Peggs, Larsen and Stone agreed in e-mails and other documents to conceal facts and documents from the IRS regarding this insurance tax shelter.
According to evidence presented during trial, Peggs and Larsen committed tax evasion by misleading the IRS during its audit of Poch’s tax returns for the years 1999 and 2000. Additionally, Peggs and Larsen lied to the IRS during its audit of Poch’s tax returns in 2002 and 2003. Peggs and Larsen also allegedly made material misrepresentations about the facts
underlying this scheme to Poch’s attorney who was preparing to contest the IRS audit determination in U.S. Tax Court against the IRS.
According to evidence presented during trial, Peggs and Larsen engaged in similar conduct with other clients and individuals in Massachusetts, Ohio and Kentucky. Another individual, Bruce M. Cohen of Louisville, Ky., was convicted in federal courts in both Ohio and Kentucky in connection with his participation in this conspiracy. Cohen, who testified during the trial, is currently serving a 37 month prison sentence for his conduct.
No sentencing date has yet been scheduled. Both the conspiracy and tax evasion convictions carry a maximum punishment of five years in prison and a fine of up to $250,000.
"The government will continue to unravel schemes promoted and used by taxpayers to evade their federal tax obligations," said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. "As this conviction demonstrates, those who attempt to hide behind fraudulent transactions and foreign corporations as part of their illegal tax schemes will be held accountable."
"Promoting the use of fraudulent loss of income documents for the purpose of taking false tax deductions isn't tax planning; it’s criminal activity," said Eileen Mayer, Chief, IRS Criminal Investigations. "We will continue to shut down fraudulent tax schemes and hold the promoters of these schemes accountable for their actions."
Acting Assistant Attorney General DiCicco commended the investigative efforts of the IRS agents involved in this case, as well as Justice Department Tax Division attorneys, Richard Rolwing, Patrick J. Murray, Jessica Nuzzelillo, who prosecuted the case. Acting Assistant Attorney General DiCicco also thanked the U.S. Attorney’s Office in Grand Rapids, Mich. for their assistance.
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