Lies, Deceit, and Nefarious Schemes

As a poker player, I know there’s a time to lie. As a tax professional, I know that time is not while preparing your tax return or advising others on taxes. These individuals learned that the hard way.

First, we head to my old stomping grounds. From Orange County, California, comes the case of Kenneth Elliott. Mr. Elliot sold welfare benefit plans (also known as 419(e) plans). When these are legitimate, they provide benefits to employees for things such as health, disability, and long-term care. Legitimate plans allow contributions to be deductible business expenses.

Mr. Elliott’s plans were different. His plans allowed you to both get the tax deduction and, “then later access the full cash value of their plan contributions by taking out loans against the life insurance policies purchased with plan contributions.” That’s not allowed. Mr. Elliott has been barred by a federal court from ever selling and/or operating any purported welfare benefit plans; he must also send a copy of the injunction to his customers.

Next, Randall Due and Donna Kozak were already in trouble. The two had been convicted of tax evasion. (They believe they’re “sovereign citizens” so not subject to income tax. That didn’t work.) Well, there are various things you might do after being convicted. You might find grounds for an appeal; that’s a good idea. You might file liens against the judge, the US Attorney for the District of Nebraska, the Assistant US Attorneys, and an IRS Special Agent (in Criminal Investigations); that will get them! This is a really, really bad idea.

But that didnt’ stop Mr. Due and Ms. Kozak. Both were convicted of filing false liens. They’re looking at lots more time at ClubFed. The best summary of this is simple: Don’t do it!

Finally, from Philadelphia comes the case of Yaser Masso. Mr. Masso did a great job of billing the customers that used his security guards. He didn’t do so well in providing the records of those bills to his accountants. He only understated his income by $2.1 million for 2006 to 2009. Oops.

This was an especially bad problem when the IRS discovered the error. Given that the understatement resulted in a need for $429,000 of restitution, this was a big deal. Mr. Masso was sentenced to 21 months at ClubFed and must make that restitution.

All-in-all, these are three examples to avoid.

One Response to “Lies, Deceit, and Nefarious Schemes”

  1. […] Fox, Lies, Deceit, and Nefarious Schemes.  He addresses a VEBA scam: His plans allowed you to both get the tax deduction and, “then […]