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A Chesterton man was one of six convicted on Monday by a federal jury in connection with a $60 million tax fraud conspiracy, the U.S. Attorney’s Office for the Northern District of Illinois said. According to the U.S. Attorney’s Office, all six were associated with The Aegis Company, which for a decade sold sham domestic and foreign trusts for the purpose of diverting and hiding client’s taxable income, resulting in a $60 million tax loss to the U.S., in one of the largest cases of its kind. Convicted of one count of tax fraud conspiracy was Timothy Shawn Dunn, 48, of Chesterton, a certified financial planner who promoted and managed Aegis trusts; Michael A. Vallone, 48, of Orland Park, Ill., one of the founders of Aegis; Edward B. Bartoli, 78, of Clearwater, Fla., also a founder of Aegis; Robert W. Harper, 62, of Gadsden, Ala., similarly a founder of Aegis; William S. Clover, 72, of Naperville, Ill., a promoter and manager of Aegis trusts; and Michael T. Dowd, 34, of Glenview, Ill., also a promoter and manager of the trusts. All six defendants were also found guilty of additional charges, while two of the six were acquitted on some count, the U.S. Attorney’s Office said. Dunn and Vallone were taken into custody following Monday’s verdict, which followed an 11-week trial, while the other four remain free on bond. Jury deliberations began on May 14. The six were indicted in 2004 after a lengthy undercover investigation by the Internal Revenue Service, codenamed Operation Trust Me, in which some 1.5 million documents, computer files, and related materials were seized, the U.S. Attorney’s Office said. Two other defendants in this case and two others in separate cases in Chicago involving abusive trusts previously pleaded guilty. Nationwide the Chicago-based investigation has resulted in convictions of more than 30 defendants, with charges still pending against another 30 across the country, in Florida, Illinois, New York, Ohio, and West Virginia. Evidence presented at trial showed that between July 1994 and December 2003 the six organized, promoted, and sold domestic and foreign/offshore trusts, chiefly to self-employed persons, for fees ranging from $10,000 to $70,000 for a package of one or more Aegis trusts. Those “abusive trusts” were intended to fraudulently conceal trust purchasers’ true assets and income from the IRS and to illegally reduce or eliminate tax liability, the U.S. Attorney’s Office said. The IRS first cautioned taxpayers in April 1997 that such trust arrangements were illegal and in fact provide no shelter and have no effect on transferring assets or reducing or eliminating tax liabilities. Evidence further showed that the scheme diverted profits from businesses to a sham trust system and transferred funds either to a bogus charitable trust or to bank accounts in tax haven countries like Belize and Antigua, the U.S. Attorney’s Office said. The defendants then caused the filing of clients’ false tax returns, which claimed false deductions and omitted substantial income, the U.S. Attorney’s Office said. Dunn and his co-defendants were also convicted of tax fraud regarding their own individual tax returns for the years 1997 through 2000, resulting in a tax loss of more than $1 million, the U.S. Attorney’s Office said. “All Americans have an obligation to pay taxes when they earn income,” U.S. Attorney Patrick Fitzgerald said. “The defendants in this case engaged in a massive effort to help high-income earners evade their fair share of taxes. They have now been brought to justice. The IRS is to be commended for its excellent work in bringing this case to a successful conclusion.” “Today’s verdict sends a message: taxpayers should be wary of anyone claiming to be an expert on how to hide income from the IRS,” said Alvin Patton, special agent-in-charge of the IRS Criminal Investigation Division in Chicago. “The Criminal Investigation Division has made the investigation of promoters and clients using abusive trust schemes one of its highest tax compliance priorities.” Each count of tax fraud conspiracy, tax evasion, mail fraud, and wire fraud carries a maximum penalty of five years in prison and a $250,000 fine, the U.S. Attorney’s Office said, while each count of filing a false tax return, or aiding and assisting the preparation and filing of a false tax return, carries a maximum penalty of three years in prison and a $250,000 fine. The defendants must also pay the costs of prosecution and they remain liable for any taxes, penalties, and interest owed. As an alternative maximum fine on the fraud counts, the court may order a fine totaling twice the gross loss to any victim or twice the gain to the defendant, whichever is greater. Restitution is mandatory.
Posted 5/21/2008
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