JUSTICE DEPARTMENT CONTINUES ASSAULT ON
NATIONWIDE TAX SCAMS INVOLVING BOGUS CHURCH STATUS

Suits To Enjoin "Corporation Sole" Scams Filed In Washington, Oregon, And Texas

WASHINGTON, D.C. - The Department of Justice announced today that it has filed civil suits in federal courts in Washington, Oregon and Texas, to stop a nationwide tax scheme in which customers are allegedly advised to create - and claim bogus church status for - a company known as a “corporation sole.” The Justice Department filed similar suits in five other states last week related to the same promotion, which is headed by Joseph Saladino of Palmdale, California.

“Be wary of any scheme designed to hide income or assets from the Internal Revenue Service,” said Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division. “If someone tries to sell you a ‘corporation sole’ to reduce or eliminate your taxes, you should report the fraud scheme to the IRS.”

Named in today’s suits were:

• Donald and Patricia Kahl of Spokane, Washington;
• Marcel R. Bendshadler of Portland, Oregon;
• Elizabeth Detwiler of Portland, Oregon;
• Dennis C. Styles of Fort Worth, Texas; and
• Edwin C. Jordan of Spring, Texas.

According to papers filed in the cases, the defendants advise and assist customers to establish ‘corporations sole,’ to which the customers transfer assets and income that they continue to control. The Justice Department alleges the ‘corporations sole’ are used merely to pay customers’ personal living expenses, not for any church purposes. The defendants and their sales organization allegedly falsely tell customers who use corporations sole that they need not file tax returns or pay taxes.

In another part of the scheme, the suit alleges, the defendants help customers file false returns seeking tax refunds based on the bogus argument that compensation for personal labor is not taxable. Defendants allegedly call this the “claim of right” doctrine.

The suits ask the courts to order the defendants - and anyone working with them - to stop promoting these schemes and to give their customer lists to the Justice Department. More than 700 customers, located in nearly every state and several foreign countries, are alleged to be in the program.

According to court papers filed by the Justice Department, the defendants market their scheme on the internet, in conference calls, and at seminars. The lawsuits allege that customers are charged from $200 to $2,295 to participate in the bogus schemes.

“Corporation sole” and claim-of-right promotions are named in the IRS’s annual consumer alert of the "Dirty Dozen" tax scams. A complete list of the "Dirty Dozen" can be found at: http://www.irs.gov/newsroom/article/0,,id=120803,00.html. Additional information on the corporate sole tax scheme is located at: http://www.irs.gov/newsroom/article/0,,id=121566,00.html. Information on the lawsuits filed last week by the Justice Department involving the same promotion can be found at: http://www.usdoj.gov/tax/txdv04192.htm. Information on the Justice Department’s Tax Division is available at http://www.usdoj.gov/tax/.