The U.S. Department of Justice has brought a superseding indictment against six individuals for their involvement in promoting or participating in an abusive tax shelter transaction involving sham trusts and family foundations. They were charged with conspiracy to sell an abusive tax shelter, in which U.S. taxpayers would divert their income through a series of sham trusts and ultimately a charitable foundation to evade taxes. The defendants, including Larry E. Conner, Timothy A. McPhee, Marcia G. Predmore, Roderick A. Prescott, Suzanne B. Thompson, and Weldon W. Wulstein, were accused of advising clients to assign ownership of their businesses to trusts to avoid paying taxes.
Conner operated The Business Solutions Group, McPhee and Predmore owned Private Banking Concepts, Prescott ran The Stewardship Institute, Thompson operated The CFO Agency LLC, and Wulstein operated Wulstein Financial Services & Company, Inc. Together, Thompson and Wulstein ran Concierge Acctncy Corporation, offering bookkeeping and accounting services nationwide. The defendants held seminars and workshops pitching the abusive tax shelter scheme to business owners, charging clients between $25,000 and $50,000 for the structure. Other unindicted co-conspirators were hired to draft trusts and transaction documents for the scheme.
The defendants advised clients to pay personal expenses from the bank accounts of the sham trusts to avoid paying taxes on the income. Prescott encouraged clients to spend funds donated to family foundations on personal expenses while disguising transactions as charitable in nature. Thompson prepared false financial statements for clients to use with their tax preparers, while Wulstein filed false tax returns for clients in the scheme. Referral fees were paid for generating new clients for the scheme, and some of the defendants used the structure to evade their own income taxes.
Abusive trust schemes have been used for years to evade income taxes, with the premise that a trust doesn’t pay taxes. However, the income must either pass through to a live person or be taxed at trust tax rates. Scam artists selling these trusts target unsophisticated victims, such as successful business owners unfamiliar with taxes or accounting. To keep victims unaware, they refer them to co-conspirators for accounting services, preventing legitimate professionals from detecting the scam. Seeking an independent second opinion is crucial when considering questionable tax arrangements with advice possibly being provided by those involved in the transaction.
The clients who participated in this tax evasion scheme may face deduction denials and penalties, emphasizing the importance of seeking independent advice. Those who were recommended into the deal by their existing accounting service providers highlight the need for caution when presented with seemingly too good to be true opportunities. It’s essential to be wary of tax and financial professionals who may go rogue, necessitating diligence in seeking independent advice and ensuring compliance with tax laws to avoid legal ramifications.
