Tuesday, August 1, 2023

Three DOJ & IRS Charity Tax Fraud Cases

DownloadThere are three recent instances of charity fraud that attracted federal criminal prosecution interest, including a jury conviction of an individual for making a false statement in an exemption application, the sentencing of an individual for stealing of over $1 million from two purported charities he created, and the indictment of an individual for allegedly helping rich clients save $35 million in taxes using phony donations to charities.

The U.S. Attorney's Office for the Northern District of Ohio reported that a federal jury convicted an individual of conspiracy, healthcare fraud, and most notably for purposes of this blog, making a false statement on an application for charitable tax-exempt status. The purported charity that was the subject of the application was supposedly created to receive donations from the public but instead was used to receive proceeds from the multi-million dollar prescription fraud engaged in by the convicted individual. The purported charity also apparently engaged in in little to no charitable activity but instead purchased gold and silver in the name of the individual.

The U.S. Attorney's Office for the Middle District of Alabama reported that a court sentenced an individual to 30 months in federal prison for tax evasion, mail fraud, and drug conspiracy charges, plus three years supervised release and a restitution payment to the IRS of $376,720. The individual founded two purported charities, solicited over $1.3 million in donations to them over multiple years, and then withdrew those funds for his own personal benefit without reporting those funds as taxable income on his own returns. He also provided false information to the tax preparer who prepared the returns for the purported charities, causing the preparer to vastly understate their income. 

Finally, the Miami Herald reports that the Department of Justice has indicted an individual who allegedly marketed the "Ultimate Tax Plan" to high-income clients. The plan involved those clients taking deductions for purported charitable contributions to several charities with ties to the individual that allowed the clients to maintain control over the donated assets. This included the clients receiving tax-free loans and, after three years, buying back the donated property at significantly discounted prices. The Department of Justice press release notes the indictment has 34 counts, and further notes that the individual had previously been enjoined from promoting the Ultimate Tax Plan.

Lloyd Mayer




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