Buddy's Carpet & Flooring is a Cincinnati-based chain of carpet stores. Its owners in the late 1990s devised a method of saving on their taxes—they purchased eight "loss of income" life insurance policies for $3.6 million. Those policies led to tax savings of around $700,000 in 1998 and 1999.
There's only one problem: the policies were shams according to the IRS. The then owners were refunded 81% of the premiums. The IRS prosecuted the two owners (Leif Rozen and Burton "Buddy" Kallick) and the company's in-house counsel (Alan Koehler). Mr. Kallick died in January 2007 before the case came to trial.
Last week a jury agreed with the government's view that the policies were a sham. Mr. Rozen was found guilty of conspiracy and tax evasion while Mr. Koehler was found guilty of filing a false tax return. Earlier, Milton Liss and Bruce Cohen, who were insurance salesmen, were found guilty of conspiracy to defraud the United States. All are now awaiting sentencing and will likely be spending some time at ClubFed.
News Stories:
Cincinnati Enquirer,
Business Courier of Cincinnati
