Operation Incarcerate Me

Chalk one up for the government. Ugh. Six attorneys and financial planners were, following an 11 week trial,  convicted of engaging in a 10 year conspiracy that channeled individual’s income into sham trusts. The scheme, described as one of the worst in U.S history, permitted individuals who were clients of Aegis Co., the entity for whom the now convicted attorneys and financial planners worked, to shelter hundreds of millions of dollars of income from tax. Prosecutors estimate the loss to the United States to exceed $60 million dollars.

The defendants were originally indicted in 2004 as a result of an undercover investigation that the government entitled Operation Trust Me. The government therein seized 1.5 million documents and related computer files.

Here is how it worked. From July 1994 through December 2003, the defendants at Aegis Co. allegedly promoted and sold domestic and offshore trusts that targeted wealthy self-employed professionals. Aegis Co. clients were charged between $10,000.00 and $75,000.00 for the trusts and those clients were recruited from seminars directed at individuals earning $100,000.00 or more per year.

The government alleges that once the trusts and trust management services were sold, Aegis Co. defendants diverted the profits from their clients’ businesses to sham trusts, either bogus charitable trusts or bank accounts in tax havens such as Belize and Antigua. Allegedly, Aegis Co. defendants then prepared false tax returns for those clients.  

It gets better. When it all started to go bad, meaning the IRS began investigating or auditing, Aegis Co. defendants then allegedly set up a D.C. based company named Parker & Associates to represent Aegis Co. clients during an audit. The government naturally was not amused and charged those Aegis Co. employees with obstruction.

The IRS was rightfully annoyed by this entire scheme. The Chief of the IRS Criminal Investigation Division in the Chicago area where this case was brought and prosecuted said: “Today’s verdict sends a message: taxpayers should be wary of anyone claiming to be an expert on how to hide income from the IRS.” He is right.