JUSTICE DEPARTMENT SUES TO ENJOIN RETURN PREPARERS
IMPLICATED IN SLAVERY-REPARATIONS TAX SCAM

Irs Says $2.7 Billion In False Reparations Claims Filed In 2001

WASHINGTON, D.C. – The Department of Justice today filed civil suits in Mississippi and Virginia to enjoin tax return preparers from preparing income tax returns claiming bogus refunds based on a supposed tax credit for slavery reparations. The lawsuits also seek to require the defendants to give the government their complete client lists. The complaints, filed today in federal courts in Richmond, Virginia and Jackson, Mississippi, note that the IRS has recently seen a surge in these frivolous claims. In January the IRS announced that it received nearly 80,000 returns in 2001 claiming more than $2.7 billion in false reparation refunds. The complaints filed today allege that the two defendants are responsible for some of these false claims.

"We hope the courts act promptly to stop the promotion of this fraudulent tax scheme," said Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division. "People who prepare fraudulent returns are risking penalties and possible prosecution not only for themselves, but also for the people whose returns they prepare. Filing a return claiming slavery reparations is illegal."

According to the complaints filed today, the two defendants prepared and filed returns and amended returns claiming bogus refunds ranging from $8,000 to $500,000 per client, based on tax credits for reparations for slavery or segregation. No provision in the federal tax code allows such credits or refunds. The complaint filed in Mississippi alleges that Andrew L. Wiley of Durant, Mississippi may be responsible for helping to prepare as many as 3,910 returns claiming a total of approximately $168 million in improper reparation refunds. The complaint filed in Richmond alleges that Robert L. Foster prepared bogus reparation claims exceeding $2 million.

The IRS has issued public warnings about the reparations tax scam. In January, IRS Commissioner Charles O. Rossotti said: "Promoters are shamelessly preying upon people. These snake-oil salesmen build false hopes and charge people good money for bad advice on reparation refunds. In the end, the victims discover their refund claims are rejected, and their money and the promoters are long gone."

Some promoters of the reparations scam have been charged criminally. In October 2001, Vernon T. James of Carrollton, Texas was convicted of preparing false, fictitious and fraudulent personal federal income tax returns for preparing tax returns claiming the reparations credit. In January, a federal judge sentenced James to six and one-half years in prison and ordered him to pay $1.2 million in restitution.

People hearing about tax benefits that sound "too good to be true" should check them out with a trusted tax professional or the IRS. Anyone with information about suspected tax fraud should report it to the IRS tip line at 1-800-829-0433.

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