Taxable Talk

No, I’m not going to have anything in this post about Richard Hatch. Instead, we’ll head to the Great White North (Canada) where an entrepreneur with a checkered past decided to try his hand at developing a Survivor show.

“David Martin” came up with the idea in 2004 of a back-country hike/race, with contestants going from Buttle Lake to Mount Washington (via Mount Albert Edward) in British Columbia. His race did get at least 29 contestants…and 29 individuals who had to be rescued by search and rescue teams. The report of the incident is rather terse:

10 Comox Valley and 18 Campbell River SAR members responded to rescue the participants of a Survivor Canada Hike on Mount Albert Edward. The hikers were apparently dropped off and were to complete a hike to Buttle Lake. The participants sustained numerous minor injuries and were not equipped to be out overnight. A total of 27 individuals were escorted out of the trail system by ground and another 2 were flown by helicopter to Raven Lodge where they received medical attention.

Needless to say, the show didn’t get picked up. But Mr. “Martin” did; it turns out he was really Ronald Morrison, wanted for skipping parole (on a fraud charge). He has served the remainder of that sentence.

Anyway, Mr. Morrison was accused this year by Canada Revenue Agency of filing false tax returns. According to Canada’s version of the IRS, Mr. Morrison used the names of individuals he had been in touch with and created returns for each of them. Amazingly enough, all of those returns had refunds. Not so amazingly, all of the money refunded made its way to Mr. Morrison’s bank accounts. And even less amazingly, the CRA discovered the tax fraud (sooner or later, the CRA would wonder why there were two returns for some individuals). Mr. Morrison was charged with 15 counts of claiming a false refund and two counts of forgery. He was being tried; this past week he pleaded guilty. It appears he’ll have another chance to visit a Canadian penitentiary.

Jesse Cota was a District Director for the IRS. After he left the IRS he went to work for Renaissance, the Tax People. That wasn’t a good choice of employer. It may have been lucrative financially for Mr. Cota for a while (he did earn $300,000) but the methods that he espoused weren’t the best.

Renaissance was a multi-level marketing firm. There’s nothing wrong with that. Renaissance sold a product called “The Tax Advantage System.” Well, if they were teaching Americans how to better prepare returns, that would be a good thing. However, as Cota admitted when he pleaded guilty to defrauding the government out of $1.3 Million, the program was, “…designed to sell illegal tax deductions through false and misleading representations.” Oops.

He was sentenced today to two years at ClubFed.

No, I’m not implying by the title of this post that we won’t return to good economic times. Rather, I’m commenting on the death of an outrageous tax fraud scheme.

Back in November 2007 I wrote about the conviction of Global Prosperity co-founder David Struckman. The Global Prosperity scheme was simple. Just return your social security cards to the government, and you won’t have to pay taxes; the 16th Amendment was never ratified; and the IRS can’t collect taxes in any of the fifty states (only in U.S. territories and possessions). Amazingly, 44,000 individuals fell for this bunch of hogwash.

All of the above is, of course, as phony as a $3 bill. If you are ever told any of these “truths” turn the other way—fast. Dan Evans’ Tax Protester FAQ is an excellent source on these bogus arguments.

In any case, another co-founder of Global Prosperity, Daniel Andersen, is nearing the completion of his two-year term at ClubFed. The Justice Department asked and received an injunction against Mr. Andersen from promoting any fraudulent tax schemes.

As usual, if it sounds too good to be true it probably is. Global Prosperity’s schemes were just that.

I try to save my clients money on their tax returns by finding legitimate deductions that they’re entitled to. Unfortunately, not everyone in my profession cares about legitimate.

I wrote about Anthony Pendleton last February. Mr. Pendleton’s clients did get refunds. However, Mr. Pendleton’s methods were out of the Bozo tax professional’s guide: imaginary employers, phony W-2s, and fake educational expenses. Mr. Pendleton, who was a former IRS employee, should have realized his scheme was doomed from the start.

Mr. Pendleton was tried in Los Angeles and he was found guilty of conspiracy to defraud the United States through the filing of the false tax returns. He’ll almost certainly find his way to a real ClubFed facility when he’s sentenced in November.

Jeffery Tuggle, of Lynchburg, Virginia, promised investors returns of between 30 and 40 percent. That in itself should have been a warning to investors. But it apparently wasn’t. Supposedly the money came from paying attorney’s clients their settlement monies early; the interest would be paid by the attorneys when they received their actual settlements.

Mr. Tuggle pleaded guilty last week to two counts of tax fraud, and an additional count each of wire fraud and failing to file a tax return. He’ll be spending some time in ClubFed and will probably owe a fine (which it’s unlikely he can pay).

United States Attorney Julia Dudley noted, “Mr. Tuggle used trust and the promise of high returns to steal money from hard-working, innocent people. He did all this so he could gamble. He gambled away the savings of his victims. He gambled away their futures and the futures of their children.”

One of my favorite sayings is that if it sounds too good to be true it probably is. Mr. Tuggle’s “Advanced Fee Investment Opportunity” was really a Ponzi scheme. Somehow 19 very gullible individuals lost over $400,000. If you are offered such a wonderful investment opportunity, run, don’t walk, in the other direction.