May 13, 11

NEWS / Justice Department Sues to Halt Sham Cemetery Tax Scams

Washington, D.C.-Area Father and Son and Poughkeepsie, N.Y., Man Allegedly Promoted Fraudulent Schemes with Huge Purported Tax Benefits

WASHINGTON – The United States is seeking to bar three men from promoting alleged tax shelter schemes involving sham cemetery investments, the Justice Department announced today. The government has filed a civil injunction lawsuit in federal court in Washington, D.C., against Michael A. Strauss of Herndon, Va.; his son, Patrick B. Strauss, of Washington, D.C.; and Joseph C. Barreiro of Poughkeepsie, N.Y.



According to the government complaint, the Strausses and Barreiro promoted illegal tax schemes to customers located in Northern Virginia, Maryland and Washington, D.C. Through these scams, they allegedly received millions of dollars from their customers and concocted approximately $35 million in fake partnership losses and phony charitable contribution deductions, which they falsely told their customers could be used to offset their federal income taxes. The complaint alleges that the three men falsely promised their customers $5 of tax benefits for every $1 that they “invested.” The defendants allegedly sold the schemes through shell entities, which they controlled, called Burial Specialists LLC, Memorial Specialists LLC and Dignified Charitable Burials.



The complaint states that the men falsely told their customers that Burial Specialists had bought a “license” worth more than $90 million from a company called Southern Dorchester LLC using a $90 million “promissory note.” The license purportedly gave Burial Specialists the right to future profits from performing funeral services at a purported cemetery in Spotsylvania County, Va. According to the complaint, the defendants also falsely claimed that Burial Specialists could annually deduct a portion of the license’s supposed value and then pass on millions of dollars in losses to the customers. The government contends that there was no arm’s-length sale by Southern Dorchester and that Michael Strauss and Barreiro fabricated the $90 million “license” value, along with the accompanying $90 million “promissory note,” to generate fake tax benefits. The defendants also allegedly used the fictitious promissory note to siphon off, for their personal benefit, funds that they told their customers were being “invested.”



According to the complaint, the defendants undertook a virtually identical scheme using Memorial Specialists and a supposed cemetery in Lloyd, N.Y., as well as a third scheme using Dignified Charitable Burials that generated bogus charitable contribution deductions.



In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions to stop the promotion of abusive or fraudulent tax schemes and the preparation of fraudulent tax returns. Information about these cases is available on the Justice Department website.

http://www.justice.gov/opa/pr/2011/May/11-tax-606.html