11/19/2008

News / Ohio and Michigan Tax Defiers Who Promoted Bogus Trust Scheme Convicted of Tax Charges

WASHINGTON – Following a one-week trial in Toledo, Ohio, a federal jury convicted Winfield Thomas, a resident of Carey, Ohio, and Jeanne Herrington, a resident of Parma, Mich., of conspiracy to impede the Internal Revenue Service (IRS), the Justice Department and IRS announced today. Herrington also was convicted of corruptly interfering with the administration of the internal revenue laws.

According to the indictment and evidence introduced during trial, beginning in approximately 1993, Thomas marketed and promoted abusive trusts in northern Ohio. Thomas, according to court documents, instructed trust participants to prepare false tax returns, which unlawfully assigned personal income to the trusts and illegally deducted personal expenses as fiduciary fees. Thomas also instructed trust participants to ignore IRS correspondence. Thomas and trust participants sent false and threatening documents to the IRS.

According to court documents and trial testimony, Thomas and Herrington then promoted a scheme that involved preparing and submitting fictitious financial instruments to the IRS as purported payment of trust participants’ tax liabilities. These fictitious financial instruments, called "Bills of Exchange" and "drafts," claimed to be worth more than $10 million. Herrington instructed trust participants to open and then quickly close checking accounts and to use the account and routing numbers for those accounts on the bogus "drafts."

In addition, Herrington submitted false Forms 1099 to the IRS in October 2006, shortly after she was initially indicted for tax crimes, according to evidence introduced during the trial. These Forms 1099 falsely reported that various individuals associated with the prosecution, including a Tax Division trial attorney and an assistant U.S. attorney in Toledo, Ohio, had received substantial amounts of income from Herrington.

"This is precisely the type of conduct the Tax Division is committed to stopping under the National Tax Defier Initiative," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "Those who do engage in or promote this illegal tax defier conduct face being branded a felon for life, prison time, fines and still having to pay back all of the taxes and interest."

Thomas faces a maximum sentence of five years in prison and a $250,000 fine. Herrington faces a maximum sentence of eight years in prison and a $500,000 fine.

"There is no secret formula that can eliminate a person’s tax obligations. People should be wary of anyone peddling the fraudulent use of trusts or worthless ‘bills of exchange’ to evade their tax liability," said Eileen Mayer, Chief, IRS Criminal Investigation. "Today's verdict signals the jury’s confirmation that these schemes are fraudulent."

Assistant Attorney General Hochman and U.S. Attorney William J. Edwards commended the IRS Criminal Investigation special agents who investigated the case, as well as Tax Division trial attorneys Jorge Almonte and Sean O’Connell who prosecuted the case.

###http://www.usdoj.gov/opa/pr/2008/November/08-tax-1015.html

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