The United States has filed civil injunction complaints in three federal courts on the east and west coasts, seeking to bar promotions of alleged tax-fraud schemes, the Justice Department announced on Tuesday.
The government complaints and other court papers allege that a multi-level marketing organization called Pinnacle Quest International (PQI) and a number of individuals and organizations currently or formerly affiliated with it are promoting a variety of fraudulent "tax defier" schemes.
The complaint filed against PQI alleges that the organization has 830 salespeople, thousands of customers, and gross sales from 2002 through 2006 of approximately USD54mn. During the same period, PQI’s leaders allegedly received commissions from sales of PQI products of approximately USD8.8mn.
Court papers allege that the defendants have sold tax-fraud and other schemes through vendors at trade-show-like conferences at resorts around the world, and — in one instance — at a 400-person conference on the Celebrity Cruise Line ship Galaxy in the Mediterranean Sea, in May of 2007. The complaint describes PQI vendors as “a Who’s Who of notorious tax defiers”.
The complaint further alleges that one PQI promoter on the Galaxy cruise was Sherry Peel Jackson, a former IRS revenue agent turned promoter of frivolous tax theories. Jackson allegedly earned some USD138,000 in commissions on sales of PQI products from 2002 to 2006.
She was indicted by a federal court in Atlanta shortly before the cruise and was convicted of tax crimes last year by a federal jury. In February of this year, Jackson was sentenced to four years in prison for those crimes.
The suits allege that PQI, based in Ft. Walton Beach, Florida., is a successor to Institute of Global Prosperity, a business that sold tax-fraud schemes until law-enforcement actions caused it to shut down. Daniel Andersen, a co-founder of Global Prosperity, pleaded guilty in 2004 to a federal felony tax charge.
Last November another Global Prosperity co-founder, David Alan Struckman, was found guilty of tax evasion and conspiracy in a federal court in Seattle.
According to the PQI injunction complaint, PQI took up where Global Prosperity left off, and has been promoting tax-fraud schemes similar to those that Global Prosperity formerly promoted.
The suit against PQI was filed on Monday in US District Court for the Northern District of Florida.
The other two suits were filed in Portland, Oregon, and Tacoma, Washington, in the US District Courts for the District of Oregon and the Western District of Washington.
The Washington suit names Sharon Kukhahn, who allegedly sells a scheme that falsely purports to “decode” Internal Revenue Service (IRS) computer transcripts of customers’ taxpayer accounts to show that the customers are not liable for federal income tax.
Kukhahn allegedly falsely advises customers that the IRS, in order to subject people to federal taxes, fraudulently misidentifies citizens as residents of a US territory such as the US Virgin Islands, or misidentifies them as operating an enterprise subject to federal excise tax, such as firearms manufacturing.
According to the complaint, Kukhahn charges single taxpayers between USD1,750 and USD1,900 and charges married taxpayers between USD2,450 and USD3,195 for her bogus “decoding” service.
The Oregon suit names Eugene “Gino” Casternovia, and three other individuals. According to the Oregon complaint, the defendants operate two businesses that work with PQI to promote tax scams involving the use of sham entities to help customers conceal their assets.
The defendants also allegedly promote a “disenfranchisement” scam, falsely telling customers that the federal income tax system is voluntary, and that customers can opt out of their federal income tax obligations by revoking their Social Security numbers.
“The size and sheer brazenness of the tax defier activities alleged in these complaints are staggering,” observed Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division.
He continued: “Tax defiers sometimes claim to be ‘patriots,’ but those who push bogus tax schemes are nothing more than con artists, and those who pay for these schemes are buying nothing but trouble.”
“Tax scheme promoters should be aware that we will continue to work closely with the Justice Department to shut them down,” added IRS Commissioner Doug Shulman. “Taxpayers should carefully review any questionable advice because they are responsible for what goes on their tax returns.”
Since 2001, the Justice Department’s Tax Division has obtained injunctions against more than 320 tax-fraud promoters and unscrupulous tax preparers.
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