08/10/2010

News / Justice Department Sues Two California Residents to Bar Them from Promoting Alleged Tax Sham Trusts

Individuals Allegedly Encourage Taxpayers to Form Common-Law Trusts as a Means of Tax Evasion

WASHINGTON – The United States has sued Gwenn Wycoff and Frank Ozak of Los Angeles seeking to bar them from promoting the formation and operation of "common-law" trusts for the purpose of tax avoidance, the Justice Department announced today.

According to the government’s complaint, filed in the U.S. District Court for the Central District of California, Wycoff and Ozak promote - through personal appearances, a website and a self-published two-volume work they co-wrote entitled The Art of Passing the Buck - the creation of common-law trusts. Wycoff and Ozak urge taxpayers to place all personal assets, as well as their businesses, into a variety of related trusts in order to create the impression that the taxpayer no longer owns the assets at issue. Thereafter, the complaint alleges, the trusts are ostensibly run by independent trustees (often Ozak and Wycoff themselves), when in fact the customers who created the trusts continue to exercise control over the assets placed into the trusts in many ways (although Ozak and Wycoff also made investment decisions with respect to some of their customers’ trusts without their knowledge).

A major goal in creation of such trusts, the complaint asserts, is to make it appear as if the taxpayers themselves have little to no income, and thereby evade the payment of federal income taxes. Indeed, as the complaint alleges, Wycoff and Ozak have their customers sign an "Oath of Privacy" (in which they agree to not disclose trust business or face penalties of up to $100,000) as a means of preventing customers from disclosing to the government facts revealing the illegality of the trusts.

The government’s lawsuit contends that the trusts created with the assistance of Wycoff and Ozak (including one they created for themselves) either to be sham entities or to have made false and fraudulent claims in the trust income tax returns. Wycoff and Ozak’s misconduct, the complaint alleges, has caused great harm; the total amount of tax deficiencies assessed by the government to date in just four cases involving Wycoff and Ozak-created trusts is over $1.1 million.

http://www.justice.gov/opa/pr/2010/August/10-tax-912.html

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