|
JUSTICE DEPARTMENT SEEKS TO BAR ALLEGED TAX SCAMS Sham “Websites” and Home Businesses Allegedly Sold to 100,000 Customers for Obtaining Improper Tax Benefits-Bilking Treasury of an Estimated $324 Million
Help Available for NADN/Oryan Victims In voluminous papers filed in the case, the Justice Department alleges that NADN-a telemarketer that also advertises on the radio and Internet-runs a “tax-scam boiler room” that sells bogus “websites,” home-based businesses and “incorporation” packages designed to help customers claim improper tax deductions and credits. The “websites” are allegedly designed to help customers claim to have a business with a website, and then improperly claim tax deductions and credits for supposedly “modifying” the website-purportedly to comply with the Americans with Disabilities Act (ADA). According to court papers, NADN charges customers $2,495 to make sham website modifications, but also adds a sham $7,980 promissory note as part of the ostensible purchase price to artificially raise the total cost to $10,475. NADN allegedly tells prospective purchasers that they can use that inflated cost to claim a $5,000 ADA income-tax credit and a $5,475 business tax deduction, thereby reducing their taxes by more than double the $2,495 they paid for the “modifications.” In reality, according to court papers, purchasers never received their own website or their own ADA modifications. Instead, in what court papers say is “one of the oldest swindles in the book,” NADN allegedly sold one website 17,000 times, and modified it only once while charging each purchaser for supposed separate modifications. Moreover, the Justice Department alleges, the supposed ADA modifications were largely useless to disabled computer users, making the scheme “a cruel hoax.” The IRS recently included ADA tax-credit schemes on its list of “dirty dozen” tax schemes, found at: http://www.irs.gov/newsroom/article/o,,id=120803,00.html. “People ought to use their common sense: the fact that a scheme is advertised on the radio or Internet, or sold by a large company, doesn’t make it legitimate,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “The Justice Department is striving to bring people who sell fraudulent tax schemes the response they deserve: injunctions, penalties, and-where warranted-criminal prosecutions.” “The scale of this scheme is truly staggering,” said IRS Commissioner Mark W. Everson. “As we've said time and time again, people shouldn't fall prey to schemes and scams. No matter how slick the sales pitch, taxpayers should be wary of anyone promising to eliminate their taxes. There is no secret way to escape paying taxes, either through a home-based business or any other scam.” The suit also alleges that NADN sells a sham home-business tax scam, telling purchasers that, by starting purported home-based businesses they can deduct the cost of such non-deductible personal expenses as meals, travel, and housing. Home-based business scams are also on the IRS Dirty Dozen list. More information on these scams is available at: http://www.irs.gov/pub/irs-news/ir-02-13.pdf. Court papers also allege that NADN misleads prospective customers about the tax savings that can be obtained by having NADN help the customers set up Nevada corporations. According to the Justice Department complaint, California-based Free Trade Enterprises, d/b/a Oryan Management, originated the website-based ADA tax scam in 2000. Oryan and four of the individual defendants have agreed, in a stipulated proposed order filed with the complaint, to be enjoined. The agreed permanent injunction would bar Oryan and the four individuals from selling the website scheme or any other arrangement that misrepresents the tax benefits from using the arrangement. The thirteen individuals named in the suit are Las Vegas-area residents Robert Bennington, Weston J. Coolidge, Alan L. Rodrigues, Adam Mangabang, Lee Panelli, Christine Reid, Jeffrey Klingenberg, Rich Klingenberg, and Marie Orie, as well as California residents Daniel W. Porter of Chino, Robert Goetsch of Hayward, Michelle M. Hernandez of Upland, and Joseph Prokop of Mt. Baldy. |
Las Vegas Review-Journal
Tuesday, June 22, 2004
Founder of tax service investigated by government commits suicide
By JOHN G. EDWARDS
REVIEW-JOURNAL
A founder of a tax service company that the Justice Department accused of
promoting schemes that cheated the government out of $324 million in taxes died
from a self-inflicted gunshot wound Sunday. The Clark County coroner's office on
Monday ruled that Robert Bennington, 40, a co-founder of the National Audit
Defense Network, committed suicide. The shooting happened at 12:30 p.m. Sunday
in a vehicle at University Avenue and Hualapai Way. National Audit Defense
Network sold fraudulent tax schemes, including phony Web site businesses, to an
estimated 100,000 taxpayers around the country, according to the Justice
Department. That resulted in the loss of $324 million in federal taxes,
according to the agency.
The Justice Department said individual defendants formerly associated with the
company are using its customer lists and selling fraudulent tax schemes. While
the company is in bankruptcy, "its former principals have taken NADN's customer
list without authorization and without payment and are continuing to scam
customers" through other companies, according to a motion filed by tax division
trial attorney Evan Davis.
Bennington started several years ago with three or four salespeople and two
accountants who helped people with tax issues, according to his brother, Michael
Berman "He started that business to help people, and it turned into something
else," Berman said. "His philosophy was to let the people run the business."
Larry Weinsteen, an attorney and friend, agreed. "Robert certainly would have
never done anything intentionally to cheat or hurt anybody." Weinsteen said.
Berman said: "Somewhere along the line, it was turned around. He was
overwhelmed, and he was embarrassed" about the Justice Department lawsuit.
Earlier, "he was fun to be around, always optimistic. He was never depressed,"
Berman said.
A divorced single father, Bennington was devoted to his two sons, age 9 and 12,
and had a "heart of gold," said a friend who asked not to be identified. "The
kids were his life."
The Justice Department is focusing its attention on businesses connected to
former National Audit Defense Network executives, who are now marketing tax
services to former company customers. A bankruptcy judge entered an injunction
against further activities by the company, but the injunction didn't stop
individual defendants from pursuing similar businesses.
The injunction against National Audit Defense Network "has removed only one head
of this hydralike operation," the Justice Department said. "Swift action against
individual defendants is needed to protect the public." In several cases,
representatives of the new firms told company customers that buying their
services would prevent income tax audits.
Cort Christie, former company co-owner who runs Nevada Corporate Headquarters,
is registered agent for four Nevada corporations with Global Management. They
are among the companies that are using National Audit Defense Network customer
lists to sell fraudulent tax services, according to the government. Christie
didn't return a call seeking comment Monday.
In one instance, Tim Franks called Lydia Montelongo, a National Audit Defense
Network customer, and said he was going to work for Global, the government
motion said. He offered to sell her a Web site, eliminate a loan and prepare her
tax returns. Franks told her the company would get her a $5,000 tax credit for
being disabled and a $5,475 tax deduction, which the government called "bogus."
A representative of Allied Grant Writers of America called Allan Kerr, another
former National Audit Defense Network customer, on his mobile telephone,
offering to create a Web page for $4,000, according to the motion. The
representative falsely claimed the Web page would show an intention to make a
profit and would prevent an audit by the Internal Revenue Service, the motion
said. Allied made a similar sales pitch to Joan Klanchnik, according to the
motion. When she didn't immediately agree, Allied tried to contact Klanchnik for
12 consecutive days, the motion said. Panos Papagiannopoulos and Adam Mangabang,
two former National Audit Defense Network co-workers, are officers with Allied.