Justice Department Convicts Five For Selling Abusive Trust Scheme

by Leroy Baker, Tax-News.com, New York

14 September 2005

Five persons associated with Innovative Financial Consultants (IFC) have been convicted of tax crimes in connection with the promotion of a tax evasion scheme utilizing abusive trusts called “pure trust organizations,” the Justice Department and Internal Revenue Service (IRS) announced last week.

IFC, a consulting company based in Tempe, Arizona, advanced its scheme through several avenues, including domestic and offshore seminars; a promotional website; and an interactive telephone conference line.

“People in the business of encouraging others to evade their tax obligations and to hide income and assets from the IRS can expect to be prosecuted and convicted,” said Assistant Attorney General Eileen J. O’Connor of the Justice Department’s Tax Division.

“Attorneys with the Justice Department’s Tax Division are working tirelessly to investigate and prosecute the promotion and use of tax evasion schemes," she added.

According to evidence the government presented at trial, from 1996 through early 2003 the defendants received $4.7 million dollars in fees from their sale of 2,000 “pure trusts,” falsely claiming that their customers could lawfully avoid income taxes by placing their income and assets into either an “onshore” or “offshore” trust package.

Evidence introduced at trial showed that IFC’s trusts enabled customers to retain the use, control, and dominion of any income and assets they placed into their respective trusts, while making it difficult for the IRS to track the true ownership of assets or income assigned to the “trusts” or deposited into trust bank accounts.

The evidence revealed that the defendants charged IFC customers approximately $10,500 for the offshore trust package and approximately $4,154 for the onshore trust package. Trial evidence showed that IFC was a prominent vendor with the Institute of Global Prosperity (IGP). At offshore seminars hosted by IGP, defendant Dennis Poseley promoted IFC’s trust schemes to thousands of people.

“The IRS has ramped up its enforcement efforts, particularly in the area of offshore and domestic trusts established for the purpose of escaping tax obligations,” said Nancy Jardini, IRS Chief, Criminal Investigation.

“We will continue to pursue promoters of this unlawful activity to assure the taxpaying public that when they pay their taxes, they can be confident that neighbors and business competitors are doing the same," she added.

The defendants were also convicted of willful failure to file tax returns reporting the substantial amount of gross income they received from the sale of their trust schemes.

“I applaud the efforts of these Department of Justice attorneys. By working diligently on prosecuting these types of complicated tax cases, they allow us to dedicate our resources here in Arizona to prosecute more violent crimes,” said Paul K. Charlton, U.S. Attorney for the District of Arizona.

“This type of relationship allows more cases to be brought to justice in our district," he added.

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