Contact:
Donald A. Davis
Assistant United States Attorney
(616) 456-2404

FOR IMMEDIATE RELEASE

Grand Rapids, Michigan - May 27, 2004 - United States Attorney Margaret M. Chiara and Mark Kroczynski, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division, announce that Andrew and Karen Ouwenga, of Howard City, Michigan, were convicted of tax-related felony offenses after a six day trial before the United States District Court Judge David W. McKeague, in Lansing, Michigan. The Ouwenga’s were convicted of tax evasion, conspiracy to defraud the United States, and criminal contempt of court on May 26, 2004.

Evidence at trial demonstrated that Andrew and Karen Ouwenga owned and operated Labakk Studio, a photography business, in Grand Rapids, Michigan from 1994 through 2003. Andrew Ouwenga was the photographer and Karen Ouwenga managed the accounts payable. The Ouwengas also owned and operated Tamarack Pines Estates, a mobile park, located in Montcalm County, Michigan. The Ouwengas’ accountant prepared their 1994 federal income tax return which claimed more than $75,000 in income. The defendants filed a frivolous tax return claiming they had no income and requested a tax refund of their 1994 withholdings of more than $10,000. Andrew Ouwenga informed his accountant that he would not file tax returns or pay income taxes because "the Sixteenth Amendment was never ratified".

Despite gross deposits of over $6.3 million and gross business receipts of $1.7 million into their bank accounts, the Ouwenga’s failed to file their tax returns. From 1993 through 1999, the Ouwengas created at least nine sham trusts, which enabled them to conduct their personal and business affairs while evading their income tax obligation.

The Defendants were first arrested on March 7, 2003 and jailed for civil contempt of court for their failure to comply with grand jury subpoenas and court orders. Their continued failure to comply with subpoenas and court orders resulted in charges of criminal contempt. Following their convictions, the Court ordered that they remain in federal custody until sentencing. A sentencing date of August 30, 2004, has been set by the court.

Tax evasion is in violation of Title 26, United States Code, Section 7201; a conviction carries a maximum penalty of not more than five years’ imprisonment and a $250,000 fine. Conspiring to defraud the United States by impeding and obstructing the lawful functions of the Internal Revenue Service is a violation of Title 18, United States Code, Section 371; a conviction carries a maximum penalty of not more than five years’ imprisonment and a $250,000 fine. Willfully and unlawfully disobeying a grand jury subpoena (the basis for the criminal contempt charges) is in violation of Title 18, United States Code, Section 401 (3) and can be punished by any term of years.

Ms. Chiara commends the efforts of the IRS agents who investigated the case. Assistant United States Attorney Donald A. Davis prosecuted this case on behalf of the United States.