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Urbana, IL - Jan Paul Miller, United States Attorney for the Central District
of Illinois, was joined by Eileen J. O'Connor, Assistant Attorney General
for the U.S. Department of Justice, Tax Division, and James W. Martin,
Special Agent in Charge of the Criminal Investigation Division of the
Internal Revenue Service, Chicago Field Office, to announce that Paul
E. Palmer, also known as Gene Palmer, age 39, formerly of Effingham, Illinois
was sentenced to serve a term of 108 months imprisonment for conspiring
to defraud the IRS and aiding the filing of false tax returns. The sentencing,
before U.S. District Judge Michael P. McCuskey, concluded yesterday, May
29, 2003.
Judge McCuskey also ordered that Palmer pay a fine of $150,000 and restitution
to the IRS in the amount of $1,369,662 and ordered Palmer to cooperate
with the IRS to pay all of his own outstanding taxes, interest and penalties
following release from incarceration. Judge McCuskey found that during
the conspiracy, from 1993 to 1998, the system Palmer promoted and sold
was responsible for defrauding the IRS of $2,141,522 in federal income
taxes.
Palmer was convicted in May 2002, following an eight-day trial, of conspiring
with Dwight D. Larson, a/k/a Dennis Larson, formerly of Charleston, Illinois,
during the period from 1993 to 1998, to defraud the IRS by obstructing
the computation, assessment and collection of individual income taxes.
Larson was the president of Larson Accounting, Inc. in Charleston, Illinois.
In that capacity, Larson provided tax advice to persons who purchased
"trusts" from Palmer. Larson pled guilty on January 8, 2002,
and was sentenced on July 9, 2002, to serve 55 months in the Bureau of
Prisons.
Palmer was convicted of selling entities he called "trusts,"
which were used to shelter income from the IRS. Clients paid Palmer $4,200
to $46,000 to participate in the trust system. At the sentencing hearing,
Special Agent Bernard Coleman, of the IRS, testified that Palmer obtained
at least $258,389 directly from the sale of trusts.
According to evidence presented at trial and sentencing, these "trusts"
were an elaborate scheme to make it appear that taxable income was transferred
to entities other than Palmer's clients. In the two types of schemes offered
by Palmer, clients took deductions on their business and individual income
tax returns for false services which were purportedly performed by the
"trusts," or the clients reported false distributions to entities
purportedly existing outside the United States.
Evidence at trial demonstrated that Palmer set up bank accounts in towns
outside the county where the client normally did business, used false
tax identification numbers on the bank account records, and supplied only
a post office box as an address on the bank signature card. Palmer also
arranged for bank accounts to be opened in Antigua.
Palmer was also convicted of six counts of aiding and abetting the filing
of false income tax returns. Witnesses testified at trial that the income
reported on their tax returns would have been higher for each of the years
charged but for the deductions and distributions claimed when money was
transferred to "trust" bank accounts. An IRS revenue agent testified
that he saw no economic substance in any of the transfers which purportedly
occurred among the clients and the "trusts."
"Promoting foreign trusts and bank accounts to commit tax evasion
isn't tax planning; it's criminal activity," said Assistant Attorney
General O'Connor. "We will continue to shut down fraudulent tax schemes
and hold their promoters accountable."
U.S. Attorney Miller said, "Taxes are a responsibility shared by
all citizens who enjoy the rights, privileges and services tax dollars
provide. Those who promote and engage in illegal tax evasion schemes shirk
that responsibility in order to benefit themselves at the expense of others."
T. David Ring, a businessman from Effingham, Illinois, who pled guilty
July 30, 2002, to filing a false and fraudulent income tax return for
the 1993 tax year on behalf of his company, J.M. Personnel, testified
at the sentencing hearing that Palmer recommended that he use Palmer's
"trust" system to evade taxes. Ring testified that Palmer suggested
the money Ring wished to hide from the IRS be run through two of Palmer's
"trust" bank accounts to make it more difficult for the IRS
to trace the funds. Ring used "trusts" he obtained from Palmer
for the 1993 tax year and then, at Palmer's suggestion, used a different
"trust" system supplied by Palmer for the 1995 and 1996 tax
years.
Judge McCuskey found that Palmer also steered Ring to another trust promotion
company known as Aegis, in Palos Hills, Illinois, in order to purchase
backdated "trusts" which were supposed to shelter the income
that Ring had diverted through the "trusts" obtained by Palmer.
Ring also testified that when he was contacted by an IRS criminal agent
investigating his taxes, Palmer advised Ring to destroy records so the
IRS would not find them. At sentencing, Judge McCuskey found that Palmer's
direction to Ring to destroy records was an obstruction of justice.
"The sentence imposed on Paul E. Palmer underscores the IRS initiative
to deter unscrupulous foreign and domestic trust promoters from defrauding
the United States as well as their clients," said Special Agent in
Charge James W. Martin of the IRS. "Taxpayers should be very careful
when selecting a tax planner or preparer. You should be as careful as
you would in choosing a doctor or lawyer. The trust schemes promoted by
Palmer support the axiom that ‘if it sounds too good to be true it
probably is.'"
The case was investigated by the Criminal Investigation Division of the
Internal Revenue Service. The case was tried by Assistant United States
Attorney Hilary W. Frooman and John J. Kaleba, Trial Attorney, of the
U.S. Department of Justice, Tax Division.
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