INDICTMENT OF PROMOTERS OF ALLEGED ILLEGAL OFFSHORE
TAX VASION SCHEME

WASHINGTON, D.C. - Eileen J. O'Connor, Assistant Attorney General for the Justice Department Tax Division, and John W. Suthers, United States Attorney for the District of Colorado, along with David B. Palmer, IRS Chief, Criminal Investigation, today announced that three operators of Tower Executive Resources, an alleged promoter of illegal tax evasion schemes, were indicted by a federal grand jury in Denver on various tax fraud charges.

Paul D. Harris and Lester R. Retherford, residents of Colorado, together with Robert N. Bedford, a resident of Florida, were charged with conspiring to defraud the United States. Additionally, Harris and Retherford were charged with 26 counts of aiding and assisting the filing of false income tax returns for the years 1996 through 1999. In addition, Harris was charged with filing false Reports of Foreign Bank and Financial Account for 1997 and 1998; and Retherford was charged with filing a false Foreign Bank and Financial Report for 1997 and failing to file the report for 1998.

"The Department of Justice is working with the IRS to identify and prosecute criminals who use offshore bank accounts and credit cards to commit tax evasion. One of our highest priorities is to shut down tax evasion schemes and prosecute their promoters to the full extent of the law," said Assistant Attorney General Eileen J. O'Connor.

According to the indictment, Harris, Retherford, and Bedford set up shell corporations for small business owners that were used to conceal nearly $9 million in taxable income in secret accounts in the Turks and Caicos Islands and other foreign countries from 1992 through 1999. The indictment further alleges that although the defendants made it appear as though these offshore transfers were payments for consulting services, most of the Tower members used debit cards and loans to spend the money they had secreted offshore. To make use of this service, many members allegedly paid an initiation fee of $50,000, according to the indictment.

On June 28, 2002, in Massachusetts, John Mikutowicz was convicted on charges of conspiracy, tax evasion and filing false corporate tax returns, in conjunction with his membership in Tower.

"Foreign bank accounts, and the subsequent use of credit and debit cards, established for the purpose of evading taxes pose a serious threat to tax administration. Such actions undermine public confidence in the Service's ability to administer the tax laws fairly and effectively," said David B. Palmer, IRS Chief, Criminal Investigation.

The ongoing investigation is being conducted by Internal Revenue Service, Criminal Investigation. The prosecution is being handled jointly by attorneys from the Tax Division's Criminal Enforcement Section and the United States Attorney's Office.

Conspiracy to defraud the United States government, in violation of Title 18 United States Code, Section 371, carries with it a maximum penalty of five years in prison, a $250,000 fine and/or three years of supervised release. Aiding and assisting the preparation or filing of a false income tax return, in violation of Title 26 United States Code, Section 7206(2), carries a maximum penalty of three years in prison, a $250,000 fine and/or one year supervised release. Failure to file, or filing a false Report of Foreign Bank and Financial Account, in violation of Title 31 United States Code, Sections 5314 and 5322, carries a maximum penalty of ten years in prison, a $500,000 fine and/or three years supervised release.

These charges are only allegations. In the American justice system, a person is presumed innocent unless and until he or she is proven guilty in a court of law.

Additional information about tax fraud schemes to avoid can found on the IRS Criminal Investigation website at www.ustreas.gov/irs/ci/.

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