The List April 2004

Ten Tax Scofflaws

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According to the General Accounting Office, 400,000 Americans have attempted tax evasion in the past two years, two thirds of them using illegal offshore credit-card accounts—a rampant trend. Many people fear the agency is outgunned. But IRS investigators are still securing convictions. Here, from the IRS archives, are ten of the biggest tax scofflaws so far this century.

1. ANDERSON'S ARK & ASSOCIATES. Nine members of this tax scam, based in California and Costa Rica, have been convicted. The entity's founder awaits trial. From 1998 to 2001 Anderson's Ark stashed money from 1,500 taxpayers in offshore trusts, where the clients could access the money through debit cards. Anderson's then prepared fraudulent tax returns, claiming the money was spent for legitimate deductions. Estimated loss to the U.S. government: $28 million.

2. VERNON JAMES, king of the slavery-reparations tax scammers, persuaded 300 African-American taxpayers that they were eligible for a "black investment tax credit," and sought more than $8.4 million in bogus refunds on their behalf. In January of 2002 James was sentenced in Texas to six and a half years in prison.

3. RICHARD G. FLOWERS and five Oregon associates founded the Christian Patriot Association, a "warehouse bank" that served 900 tax evaders, who used aliases and false Social Security numbers to shield themselves from IRS scrutiny. The government lost $5 million. Flowers received five years in prison in January of 2003.

4. BARRIE L. KONICOV. In October of 2001 a federal judge in Michigan sentenced this hypnotist and self-help guru to seven-plus years for distributing tips for tax evasion in "De-Taxing America" seminars. He himself failed to pay taxes in 1994-1996. The IRS found that 138 of his customers cost the government $3.3 million.

5. BRADFORD G. BROWN. Brown, a doctor, diverted some of his earnings to secret accounts in 1994 and 1995, and failed to pay most of his taxes in later years. Last May he was sentenced in Georgia to forty-one months and ordered to repay $3.04 million.

6. JOHN MODENA. In November of 2000 he was sentenced in Michigan to sixty months for creating false trusts to help five brothers avoid $3 million in income taxes. The brothers did not use bank accounts and relied on cash to remain anonymous.

7. ALFRED B. REECE. A tax preparer, Reece submitted 633 tax returns in the 1990s that were padded with bogus charitable contributions, theft and gambling losses, and medical and dental expenses. The IRS pinpointed $2.9 million in false refund claims. In July of 2000 Reece was sentenced in Kansas to five years in prison.

8. ANTHONY A. AND DOROTHY M. MITCHELL. This California couple, both in their seventies, prove that age is no defense in tax-fraud cases. They admitted in 2002 to storing $3.7 million, most of it earned from the sale of a painting business, in offshore accounts. Anthony also sent more than $1 million to a Cayman Islands bank account. Total loss to the government: $3 million. Anthony received eight months in prison, Dorothy six months of home confinement.

9. TERENCE M. CLARKE. A former CEO of Katun Corporation, a copier-parts distributor, Clark from 1997 to 2001 underreported his income by more than $3.4 million, for a tax loss of $1.4 million. Last June he was sentenced in Minnesota to two years.

10. THEODORE M. McANLIS. Last July this golf-course architect was sentenced in Florida to ten years. He had not filed with the IRS since 1977, evading $1.3 million in taxes through the use of trusts, a "sham church," and false Social Security numbers. Unlike golfers, the tax code does not allow mulligans.

Christopher Shea writes a column about academia for The Boston Globe's "Ideas" section.
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