Taxable Talk

Sometimes when you deal with the government you get the runaround. Agency "A" will tell you need to talk with Agency "B" while Agency "B" says only Agency "A" can handle the problem. It's enough to give you gray hair.

One enterprising (albeit Bozo) attorney had an interesting idea of how to apply this in reverse. He had just filed his mother's estate into probate in King County (Seattle), Washington. He decided to file a Tax Court case on the estate, and tell the Probate Court there was a problem resolving the Tax Court case while telling the Tax Court there was a problem resolving the Probate Court case.

He did this quite successfully for twelve years. Unfortunately, he wasn't so successful in the thirteenth year. The Tax Court caught on to his scheme and has sanctioned the attorney:

Mr. Allison’s education and legal experience, not to mention his admission to the Tax Court bar, underscore the egregiousness of his conduct. The issues in both cases before us are fairly simple and should have been resolved long ago. Instead, the cases before us have dragged on for over eight years, and the probate case has lingered for more than a decade. We therefore find that he used procedures of our Court primarily for delay, and in doing so was repeatedly dishonest. Mr. Allison’s persistence in the face of warnings from both courts thus warrants a penalty under section 6673(a)(2). That section requires a determination of the costs imposed on the Commissioner, and we will order the Commissioner to file evidence of what those costs were.

Because Mr. Allison is an attorney currently admitted to practice before the Tax Court, other sanctions may be appropriate. We will also send this opinion (and the order to show cause dated March 7, 2008) to the King County Superior Court for their consideration in In re Estate of Allison, No. 95-4-03740-0.

I guess the old saying, fool me once, shame on you, fool me twice, shame on me, needs to be lengthened.

Other Coverage: Roth Tax Updates, TaxProf Blog

By far the worst tax schemes in the view of the IRS are offshore (foreign) trusts. In fact, trusts of all sorts—domestic and foreign—are regularly abused.

First, not all trusts are bad. Many trusts serve a legitimate purpose, such as family trusts. (Family trusts are a device to avoid probate, and are used in many states. For tax purposes, these revocable trusts are ignored.) Survivors' trusts are another useful vehicle.

But trusts set up to avoid income tax are abusive, and very much Bozo-like. Individuals and businesses have spent thousands of dollars trying to avoid taxes (in some cases, mid five-figure amounts)...and many times these tax structures have been challenged successfully by the IRS.

And those are the domestic trusts.

The foreign trusts are worse. These are usually organized just to avoid taxes and hide money. If you look at Schedule B on your tax return you'll see that you are supposed to report your foreign trusts. They work great until the IRS finds out about them.

Remember: If it sounds too good to be true it probably is.

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That concludes the 2007 series of Bozo Tax Tips. Don't be a Bozo: Use legitimate tax savings vehicles rather than Bozo methods.

I really am an Enrolled Agent. In fact, hanging on the wall behind me is my Certificate of Enrollment (and my license is in my wallet).

Do you believe that anyone would impersonate a Certified Public Accountant? And would then choose to specialize in serving law enforcement?

Given that I'm writing about it, you should know the answer. From Arvada, Colorado (suburban Denver) comes the story of Denise Smith. Ms. Smith was indicted by a Jefferson County grand jury of 50 counts for allegedly impersonating an accountant. She's also alleged to have incorrectly increased the deductions for her clients, cheating the IRS and Colorado out of tax revenue.

Her scheme unraveled when a client received an audit notice which apparently led to the investigation. Besides the obvious moral of the story (choose a reputable tax preparer) the Bozo moral is that if you're going to impersonate an accountant, choose clients who don't have the power to arrest you.

A good friend of mine called me late this afternoon and asked me for a referral. I asked him what he needed, and he told me, "Your side business." I'm a writer (and I'm certain he knew that), so this made no sense. After I expressed my bewilderment he said, "Can't you provide me with the same kind of service you did for Eliot Spitzer?"

Ah yes, the Governor of New York. Mr. Spitzer, a Democrat who decided to partake of the world's oldest profession, chose a rather expensive prostitution ring. He apparently paid somewhere between $1000 to $4300 an hour, and may have spent $80,000 of his own money.

So why did my friend call me? He had heard that the ringleader of the prostitution ring (called the Emperors Club VIP) was an Enrolled Agent. Of course, ABC gets some details of what an Enrolled Agent is wrong:

"He is also a licensed "enrolled agent" of the IRS, spokesman Rob Marvin confirmed. That means Brener was allowed to prepare and submit other people's taxes, represent others in tax court and in negotiations with the IRS, and receive information directly from the IRS on behalf of others."

For the record, an Enrolled Agent represents taxpayers before the IRS; we are not employees of the IRS. We do prepare tax returns and represent individuals and businesses in negotiations with the IRS and other tax agencies.

I had to disappoint my friend; I didn't have a Kristen to send his way. My side business doesn't earn me $4000 an hour in illegal income. Unless your name is Tom Clancy or John Grisham writers just don't make that kind of money.

On the positive side, at least Enrolled Agents are making the news....

Two reports this weekend about athletes having tax troubles. First, former baseball player Lenny Dykstra refused to pay his accountant's bill. Well, he was billed $111,097. I guess I don't charge enough. Anyway, Dykstra told the New York Daily News, "Did they actually think I would pay that much for a tax return? That's insane." The accounting firm claims that such charges are "fair and reasonable" given their retainer agreement and that the charges have now grown to nearly $140,000 (including interest). (Hat tip: TaxProf Blog)

Meanwhile, seven current or former NFL players have been ensnared in a phony gold mining scheme sold as a tax shelter. Joe Kristan reported on this and a phony chicken farm scandal. I think it's easy to see how a phony mining scheme can be done. But how do you invent a phony farm? Even better, the chickens on this farm laid liquid eggs. Sounds like a book about cows that give chocolate milk.

We the People, the tax protester organization headed by Robert Schulz, has been on the wrong ends of various court rulings. We the People believed that you could voluntarily stop withholding. The IRS and the Department of Justice didn't like the idea of a $39.95 kit that allowed one to not pay taxes. So last year the IRS got a permanent injunction to stop the distribution of the packets. The IRS also asked PayPal for a list of who bought the packets (We the People accepted PayPal for payments) and last year won an appeal in the 8th Circuit: "[W]e conclude that Schulz’s constitutional arguments challenging the IRS’s authority to enforce the tax laws are without merit."

The IRS also asked We the People for a list of who bought their packets. We the People refused, an the injunction was stayed pending an appeal to the 2nd Circuit. Today that Court said basically the same thing as the 8th Circuit: "We have considered all of defendants’ arguments and find them to be without merit. We affirm the judgment for substantially the reasons set forth in the district court’s decision. See United States v. Schulz, __ F. Supp. 2d __, 2007 U.S. Dist. LEXIS 58271 (N.D.N.Y. Aug. 9, 2007)."

As for the stay, that's gone.

"The district court found that defendants’ illegal activities were harming individuals, who were exposing themselves to criminal liability by following the defendants’ ill-conceived instructions. Requiring defendants to provide the identity and contact information of the recipients of the tax materials enables the government to monitor the defendants’ obligation under the injunction to provide a copy of the district court’s order to recipients of the tax materials. Moreover, the district court found that the defendants’ illegal actions were harming the government, which was not receiving required tax payments and was forced to expend resources to collect the unpaid taxes. Requiring defendants to provide the identity and contact information of the recipients of the tax materials enables the government to monitor whether the recipients of defendants’ materials are violating the tax laws. Thus, we find no abuse of discretion with respect to the district court’s imposition of the reporting requirements in Paragraph C of the injunction." [citations omitted]

So if you were one of those gullible enough to purchase a $39.95 package that would terminate your taxes you may soon receive a "Dear Valued Taxpayer" letter. In the end, we all have to pay our taxes.

Hat Tip: How Appealing

There are all sorts of awards given, but the award I give is special. To be considered for the Tax Offender of the Year award, you must do more than cheat on your taxes. It has to be special; it really needs to be a Bozo-like action or actions.

In 2005 Sharon Lee Caulder won the inaugural award. Quoting from my post, "Sharon Lee Caulder, formerly of Oakland and now from New Orleans, our voodoo priestess who wrote a book and was convicted of tax evasion. She did not include the $1.7 million she earned between 1998 and 2002 (mainly from sales of her book, Mark of Voodoo, on her tax returns". As I wrote when she was convicted, "Voodoo is more profitable than I realized, especially if your net income after taxes is the same as your net income before taxes (until Uncle Sam catches you)."

Now, on to 2007. There have been lots of tax fraudsters this year. But one stands out. No, it's not Wesley Snipes. Mr. Snipes hasn't been convicted yet, so technically he's not an offender. (He certainly has a good shot at the 2008 award, though.)

The story begins back in 2000. A Camarillo, California company is sued for patent infringement and settles the case for "tens of millions of dollars." Now, if you owned that business what would you do? Would you look for new income producing lines of business? Would you develop workarounds so that you wouldn't be infinging on the patents? Or would you decide to commit tax fraud just to get back at the federal judge who allowed the miscarriage of justice (in your view) to happen?

If you're thinking that no one could have such a bad motive to commit tax fraud you'd be wrong. This actually happened.

As I detailed earlier this year, Gene Haas did exactly that. The former CEO and owner of Haas Automation, Inc. created a phony Nevada company and enlisted the help of his then CFO to commit tax fraud. Here's what I wrote:

So, enlisting the help of his then CFO, John Phillips, the business created a phony company in Nevada called "Supermill," and then paid the phony company from phony invoices. Then Mr. Haas and Mr. Phillips got in a business dispute, Mr. Haas sued Mr. Phillips for $27 million (apparently related to the phony transactions), and Mr. Phillips went to the FBI and told them of the scheme. (Mr. Phillips was not indicted.) It's not a good idea when you commit tax fraud to get a co-conspirator angry enough to go to the FBI.

The DOJ, in a press release announcing Haas' indictment, claimed that the tax fraud was upwards of $20 million. Now, with a $5 million fine added in, penalties, and interest, the total judgment is somewhere around $70 million. And Mr. Haas will be receiving two years at ClubFed.

If you find yourself losing a court case, I strongly recommend that you do not follow Mr. Haas' path, and decide that committing tax fraud is a way of getting back at the judge. Kenneth Barish, an attorney for Mr. Haas, in describing the plea deal, noted, "[u]nder the circumstances, it was a good result." When paying $70 million and getting two years at ClubFed is a good result, you wonder what a bad result would be.

As for Gene Haas, he was formally sentenced in November to two years at ClubFed, payment of the taxes, penalties, and interest (totaling about $70 million), and a fine of $5 million. Added to the $30 million or so he paid for the patent infringement case, that's a whopping $105 million plus two years at ClubFed. Yes, Mr. Haas threw away two years of his life and $75 million.

That's a wrap for 2007. While I'd love to not have anyone commit such a bozo tax crime as Mr. Haas did, I fully expect to see at least one similar story in the coming year. I have complete confidence in Americans to commit bozo tax crimes.

I just finished re-reading Murder by the Book. Written in the 1950's by Rex Stout, the Nero Wolfe novel deals with four deaths and what a certain book ("Put Not Your Trust") has to do with them. If you've never read Stout, do so—he's a wonderful author, and the books written many years ago are still eminently readable.

Coincidentally, two sham trusts crossed my email in-basket this evening. From Kenai, Alaska comes yet another dentist who allegedly decided that a sham trust was a good way to cut his taxes. Here's the alleged scheme according to the Department of Justice.

The accused, Glenn Lockwood, formed a professional corporation. No problem so far. Then he allegedly contracted his services to an Irish company. That company allegedly leased his services to a Nevada company which, in turn, allegedly leased his services back to his own corporation. Of course, the money took a much more convoluted path, with offshore accounts, Nevada real estate development, and sham trusts supposedly thrown into the mix. The DOJ alleges that the loss to the Treasury is $575,000 for tax years 2000-2003. Mr. Lockwood will face four counts of tax evasion, and is looking at ClubFed if found guilty.

Meanwhile, in North Carolina, the DOJ has filed a civil lawsuit accusing two men of creating sham trusts to help customers evade taxes. The accused, Alexander Klosek and Bryan Noel, allegedly targeted wealthy and elderly individuals and attempted to get them to sell their homes and other major assets into sham trusts. It appears to be a pretty big alleged crime; the DOJ estimates the loss to the Treasury at $55 million. The DOJ has asked for an injunction to stop the individuals from selling any more trusts. And you can be fairly certain that a request for their customer list will soon follow so that the IRS can send a heartwarming "Dear Valued Taxpayer" letter to Klosek's and Noel's customers.

In the end, the best kinds of sham trusts are the ones you read about in novels. They cost you $5.95 or so for a paperback. The crimes described above, if proved, could lead to much larger penalties.

At least three times I've written about Renaissance, the Tax People. The company, now out of business, was a multi-level marketing firm that promoted deducting personal expenses as business expenses. The latter is why they're out of business, with the principals finding their way to ClubFed.

Thell G. Prueitt of Kingsland, Texas used to be at Renaissance. After that company dissolved, he set up shop at several other companies. The US Government alleges that Mr. Prueitt is promoting the same schemes as used at Renaissance, and the government is suing to bar him from preparing tax returns. The DOJ alleges that Mr. Prueitt's materials, "...have falsely claimed that customers could convert non-deductible personal expenses into deductible business expenses and be 'audit proof.'"

My old advice stands about any tax scheme that you come across: If it sounds too good to be true, it probably is.

Back in 2005 I wrote about Derivium Capital. They were under investigation by the IRS & FTB for making loans that converted capital gains to nothing! for tax purposes. A great scheme, if you can get away with it.

Well, the Department of Justice filed suit to stop the scheme. The defendants are Derivium Capital, LLC, Derivium Capital (USA) Inc., and Veridia Solutions LLC. Four individuals were named in the suit. The DOJ is asking for a permanent injunction to stop the loans; the lawsuit claims that the scheme has cost the US Treasury over $230 million.

Though Derivium is in bankruptcy, the lawsuit alleges that the individuals involved are still trying to peddle the loans. My advice from back in September 2005 was if it sounds too good to be true, it probably is. In this case, not only are the defendants in trouble, but if you happen to have "bought" a Derivium loan, or are considering buying one today, you will have problems with the IRS.

Wouldn't it be nice if we could buy a $39.95 package that would terminate our taxes? Tax protester Robert Schulz offered just such a package...until the US government got an injunction against him.

But the IRS had this idea. Wouldn't it be nice to know who bought these packages, and we might want to check and see if they actually filed (and paid) their taxes? So they issued a subpoena to PayPal for the records. And they won at the District Court.

Mr. Schulz appealed to the 8th District Court of Appeals. As Joe Kristan reported today, the Appeals Court upheld the subpoena. Read his entire post; it's excellent. I'll just note one sentence from the Appeals Court ruling: "[W]e conclude that Schulz’s constitutional arguments challenging the IRS’s authority to enforce the tax laws are without merit."

This sounds ludicrous (and it is, of course), but some tax protesters came up with this argument. And a very famous actor apparently bought it.

Wesley Snipes, star of Blade and Passenger 57, went to an accountant who believes this. Mr. Snipes allegedly amended his tax return and claimed that he should get a $12 million refund. The government says that the IRS sent letters to Snipes advising him of the error of his ways...but he continued to claim the refund. Snipes now stands charged with filing false tax returns and claiming false refunds. He's out on $1 million in bond.

The Internal Revenue Code (which is a law, Title 26 U.S.C.) says that all income is taxable. If the charges against Snipes are true, Snipes better hope that the judge he draws has a very good sense of humor.

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The U.S. Tax Code is a mess. I've basically completed my returns for the year, and I'm amazed at how ugly our tax system has become.

I hope you've enjoyed this series. One thing I do hope you realize is that almost all income is taxable. If you follow down the path of Snipes (allegedly, of course) and Hatch, you're asking for trouble. If you're famous, you'll get it, because the IRS likes to make examples of bozo celebrities.

For a tax blogger, people like Richard Hatch are wonderful. Hatch, for those who don't remember, was the winner of the first Survivor and won $1 million. About 300 million individuals worldwide saw Hatch take down the $1 million.

Hatch received a Form 1099-MISC for his winnings. In the United States, winnings from contests are taxable. Hatch claims that CBS and/or the producers of Survivor promised him that they would pay his taxes. (Both CBS and the producers of Survivor deny this charge.)

Here's what I wrote back in January 2006 when Hatch was convicted:

Mr. Hatch has cemented a place in the Bozo Tax Criminals Hall of Fame (a website I'll create one day). Let's look at his stupid not so good actions.

1. Hatch goes to accountant #1, find out that he owes over $300,000 in taxes. He goes to accountant #2, and the tax bill is around $240,000. (At his level of income, some differences in taxes owed is normal.) He then asks accountant #2 what his return would be if he didn't declare the $1 million in Survivor winnings. Accountant #2 makes Hatch sign a statement that he won't file that return (it showed Hatch getting a $4300 refund). He filed that return.

2. The IRS amazingly discovers his tax evasion. (With perhaps 300 million witnesses, even the most inept attorney could prove he won $1 million.) He's offered a plea bargain: pay your taxes, and we'll let you off fairly easily on the jail time. He accepts the plea initially, then changes his mind.

3. The case goes to trial. Hatch claims that CBS should have withheld taxes. His attorney might want to ask any seasoned accountant about what you should do if taxes aren't withheld but should have been. (Answer: you pay the taxes.)

4. Hatch's attorney can't find the OJ Simpson jury. (Hat tip: Roth Tax Updates)

5. Hatch is found guilty. Roth Tax Updates speculates that his sentence will be around 3 years in jail. Oh, he'll also have to pay those taxes, and interest and penalties. The maximum possible sentence is 13 years in prison and a fine of $600,000.

Hatch is now serving his prison sentence of 51 months. He recently appealed his conviction, though chances of it being overturned seem slim.

Tomorrow, you will see our number one bozo tax tip of the year. It's a real "winner," and one that I can guarantee will cause you nothing but problems (if you follow it).

California is not a low-tax state. The corporate tax rate is 8.84% for C Corporations (1.5% for S Corporations); both must pay a minimum $800 tax each year. If I'm in my car for any appreciable length of time, I'll hear a commercial advising you to establish a Nevada Corporation. And, of course, my clients who hear that call me.

There's a fundamental problem with having a Nevada corporation and doing business in California and hoping you will avoid California tax on the corporation: nexus. If a corporation is doing business in California (have a "nexus" in the state), the corporation is liable for California income tax. Yes, foreign (out-of-state) corporations must pay California income tax.

So if a California business reincorporates in Nevada, you will still have to pay California tax. Now, a Nevada corporation can make sense...if you're going to operate in both California and Nevada, for example, or if you plan on moving to Nevada. Just realize that if you have a Nevada corporation, and you operate in California, you are liable for California tax, and if you don't pay, you're committing a crime. ClubCal is no more fund than ClubFed....

When I was in college, I was taught that there is a right way journal entries should be written and many wrong ways. There's an appropriate structure to a journal entry, and you want to make sure you keep the appropriate backup.

That has nothing to do with this post.

Indeed, since we're dealing with bozos here, an incorrect structure is where we need to start. The United States has various financial and currency reporting requirements. If you deliberately structure transactions to avoid these laws, you're guilty of the crime of structuring.

So don't deposit $10,000 in cash; make sure your deposits are $9,000. I've written on several occasions about individuals who have structured transactions. One bozo did just this, and made sure he never used the same bank branch on the same day (he used $5,000 transactions). Unfortunately for him, the bank manager of the second branch he used happened to be visiting at the first branch he used earlier on the same day. When she wrote up the currency transaction report, she glanced at the account history and noticed the pattern...a pattern that the IRS learned about. That bozo is now spending time at ClubFed.

Today, transactions of as little as $3,000 can be reported if a bank employee is suspicious, and you probably won't be told of the report. What's the solution for the crooks of the world? Well, the simple solution is to report your income on your tax return, whether it's in cash, checks, or credit cards. For the bozos, unfortunately cash is very difficult to deal with, and money laundering is quite illegal.

The truth is that structuring continues, because many get away with. Just be aware you are committing a felony if you structure your transactions (in an attempt to avoid tax or reporting), and if you get caught ClubFed might be in your future.

A few weeks ago, I had lunch with a friend who is a fellow tax preparer. He told me a story of "Abe."

This Abe definitely wasn't like Honest Abe. He had gone fifteen years without filing a tax return. He had a cashed-based business, had owned his home for years, didn't have a bank account, and knew enough about currency rules (he never spent more than $7,000 in cash on anything) so he wouldn't get caught.

And then one day the IRS knocked on his door. And presented him with a very large bill.

Abe has no idea how the IRS found out about him, but my friend was going to prepare 15 years of tax returns for Abe, until he started saying that the tax system is voluntary, and no one has to pay taxes. My friend told Abe that he's about to find out otherwise.

The moral of the story is fairly obvious. In these days of currency records and suspicious bank activity reports on transactions of as little as $3,000, it's pretty difficult to escape the IRS and the FTB.

A few years ago, a prospective client came to me. He had used Western Tax Service, and the IRS was about to audit him. Western, for those unfamiliar with them, had a great way of attracting clients: they invented phony deductions, or padded the amounts of deductions. This went on for years, and once the IRS discovered it, they looked at another Western client, and discovered it was systemic fraud (see this press release).

So why not use the Western Tax Service method? What can go wrong if you change your charitable deductions from $100 to $10,000? And add a uniform deduction of $2500 (those business suits are expensive, you know). And $2500 for miscellaneous unreimbursed business expenses. And....

Because we know that the odds are that the IRS won't catch me, right? And what's the worst that can happen to me? I'll just pay the tax that I would have, right?

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Wrong.

What I've written above is fraud. When you sign your tax return, you're signing under "penalty of perjury." The IRS takes that seriously. That's why whether you prepare your return yourself, or use a professional, you should review your return carefully. And that's why every return sent from our office asks the client to review the return. We want you to understand what's on your tax return.

You should take all the deductions and credits you're entitled to. But try hard not to take the ones you're not entitled to, because if the IRS finds you deliberately falsely took those, you're looking at penalties...which can include fines and even jail time. That's what the founders of Western Tax Service faced.

Have you heard about Kyle McDonald, the guy who bartered his way from one red paperclip to a house in Saskatchewan? Yes, barter can do that for you.

Say you have a box of binders you don't need. Meanwhile, your neighbor has a box of pens he doesn't need. So you swap. Everyone's happy.

So Mr. McDonald bartered his way from one paperclip (worth less than $0.01) to a house (we'll estimate that it's worth $100,000). And he didn't have to pay a penny in taxes.

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Now to the real world. Mr. McDonald is Canadian, I believe, and exempt from US tax laws. For Americans, barter transactions must be reported to the IRS. If you swap a box of binders worth $10 for a box of pens worth $10, no one has gained any income. But suppose you swap $100 worth of pens for $10 worth of binders. The person who received the pens "earned" $90. And, yes, he must report that as income.

Barter exchanges have sprung up, and if you participate in one, they function as intermediaries and issue BarterDollars. You don't have to spend cash at Joe's pen shop, you just spend BarterDollars. And Joe buys his binders with BarterDollars. At year-end, you each will receive a 1099-B from the intermediary showing your sales.

Bartering can be a good idea. It's the first form of commerce for man. But the taxman expects his cut, and if you don't give it to him, and he finds out, you won't be very happy.

Let's thank Michael Graham of Queens, New York for coming up with this gem. Mr. Graham decided to file phony tax returns with the IRS. He used consecutive social security numbers on his tax returns.

He did get one tax refund through the system and collected $900. However, the other 1,799 returns were caught by the IRS and he didn't get the $1.6 million he attempted to collect. He did find his way to court, though....

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I strongly suggest that you do not try anything like this. The IRS and state tax agencies do have systems in place to catch bozos who attempt crimes like this. Instead of trying to bilk the system, ask your tax preparer about legitimate deductions that are available for you to take. The regular IRA allows you to deduct $4000 ($5000 if you're 50 or older) from your income (if you're eligible). You have until April 17th to make your contributions.

And if you're self-employed, you may be able to contribute to a SEP IRA. You have until your return is timely filed, including extensions, to contribute to a SEP IRA. You can contribute 25% of your net income up to a maximum of $44,000 to a SEP.

Phony tax returns will likely lead you to a stint at ClubFed (where Mr. Graham went). We recommend the IRA or SEP IRA over ClubFed....

"Renaissance, the Tax People", was, as I previously reported, a multi-level marketing firm specializing in tax. That was the legal part of the business. The illegal part, according to the Department of Justice (and the six individuals who have pleaded guilty to various charges to date) was how it lowered taxes for its clients.

If you used the Renaissance system, you could deduct personal expenses as business expenses! And you could have gotten this system for just $300 to $1200, plus another $100 per month! What a deal!

Just one major problem with that...you can never deduct personal expenses as business expenses. That's fraud, and that's what the Renaissance founders promoted.

The latest to plead guilty is Renaissance's former National Marketing Director, Todd Eugene Strand of nearby Murrieta, California. Mr. Strand admitted that he falsely assured customers that the program was legal. He also agreed that Renaissance defrauded customers of $75 million, and caused a tax loss to the United States of $20 million.

Mr. Strand is looking at a few years at ClubFed, and a possible fine of $500,000. He'll be sentenced in January 2008.