THREE CPAs PLEAD GUILTY IN ANDERSON’S ARK AND ASSOCIATES INTERNATIONAL TAX SHELTER CASE

WASHINGTON, D.C. - Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division; John L. McKay, U.S. Attorney for the Western District of Washington; and Mark W. Everson, Internal Revenue Service Commissioner, announced today that Tara Lagrand of Naples, Florida, Gary Kuzel of Downers Grove, Illinois, and Lynden Bridges of Wheat Ridge, Colorado, pleaded guilty to aiding and assisting the filing of false income tax returns. The government and the defendants stipulated that the tax loss caused by the filing of the false income tax returns prepared by each of these three accountants was between $2.5 million and $5 million each. Each defendant faces a maximum penalty of three years in prison and a $250,000 fine.

“People who prepare or assist in the preparation of fraudulent tax returns are cheating all law-abiding taxpayers,” said Assistant Attorney General O'Connor. “Those who engage in such criminal conduct should expect to be prosecuted by the Department of Justice and spend time in jail.”

These three accountants were part of Anderson’s Ark (AAA), an organization through which fraudulent tax shelters and investment scams were promoted and sold. In late November–December 2004, in Seattle, Washington, the Justice Department prosecuted a number of AAA promoters and accountants. On December 27, 2004, after seven weeks of trial, a jury convicted six defendants—Keith Anderson, Wayne Anderson, Richard Marks, Karolyn Grosnickle, James Moran, and Pamela Moran—on charges of conspiracy to defraud the government, mail fraud, wire fraud, money laundering, and aiding and assisting the filing of false tax returns in connection with their promotion and sale of these fraudulent AAA schemes. From 1996 through 2001, AAA had approximately 1,500 clients, nearly 300 of whom reported over $120,000,000 in fraudulent income tax deductions. The Andersons, Mr. Marks, Ms. Grosnickle, and the Morans also defrauded their clients out of an additional $35,000,000 in fees and invested funds.

On April 22, 2005, Keith Anderson was sentenced to 20 years in prison, Wayne Anderson and Richard Marks were each sentenced to 15 years in prison, and Karolyn Grosnickle was sentenced to eight years in prison. On April 26, 2005, James and Pamela Moran were each sentenced to seven years in prison. More information about the conviction and sentencing of these defendants can be found on the Tax Division website at: http://www.usdoj.gov/tax/txdv05210.htm.

At the 2004 trial, the jury was unable to reach a verdict on these accountants who have now pleaded guilty to aiding and assisting the filing of false income tax returns. In their plea agreements, Ms. Lagrand, Mr. Bridges, and Mr. Kuzel, each a Certified Public Accountant in their respective states, admitted that they each assisted AAA clients by preparing and filing the partnership agreements, promissory notes, and income tax returns required to implement the “Look Back” program – one of two fraudulent schemes promoted by the AAA organization. As part of the Look Back plan, AAA clients were told that, for a substantial fee, they could take out a “loan” from “La Maquina Blanca,” a Costa Rican lender. La Maquina Blanca was merely a Costa Rican bank account used by AAA. The clients were advised that the funds borrowed would be invested with another AAA entity, Mason Advertising, for advertising expenses associated with AAA’s “Tax Magic” project. The clients also were told that this investment would entitle them to obtain a refund of all federal income taxes paid in the current year, plus those paid in the previous two years. In reality, the purported loan was illusory. AAA simply transferred a few million dollars between accounts at Costa Rican banks to create the appearance that the loans were actually being funded. The Tax Magic venture was not based on any economic reality and the resulting tax deductions claimed on the clients’ returns were false.

Sentencing is scheduled before Judge Coughenour on September 16, 2005.

Assistant Attorney General O’Connor and U.S. Attorney McKay thanked Tax Division Trial Attorneys Corey J. Smith, Krista Tongring, and M. Kendall Day, who prosecuted the case. They also thanked the special agents of the IRS whose assistance was essential to the successful investigation and prosecution of the case.

Additional information about tax fraud schemes to beware of may be found on the IRS Criminal Investigation website at http://www.treas.gov/irs/ci/index.htm.

Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.

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