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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,

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From: StockDung4/9/2008 2:36:55 PM
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Feds Crack Down on Alleged Tax Fraud Schemes
Justice Dept. Claims Promoters Ran a 'Smorgasbord of Tax Fraud at Sea'
By JASON RYAN and PIERRE THOMAS
April 8, 2008—

The Justice Department today announced a crackdown against a growing number of companies that are telling tens of thousands of customers they don't have to pay federal income tax, and took legal action against a company for allegedly promoting one such scheme.

In seeking a civil injunction, the government hopes to shut down Pinnacle Quest International, which allegedly made $54 million between 2002 and 2006 by sponsoring various tax avoidance schemes at trade shows and resorts in Mexico, France and several locations in the Mediterranean to customers who sought to avoid U.S. taxes.

According to the Justice Department, PQI, which employed 830 salespeople, organized a conference aboard a cruise ship in the Mediterranean to allegedly educate clients on how to avoid paying federal income tax.

The cruise, dubbed a "smorgasbord of tax fraud at sea" in the Justice Department's civil injunction papers, was allegedly held aboard the Celebrity Cruise Line ship Galaxy in May 2007 and included lectures by Sherry Peel Jackson, a former IRS agent who was at the time under indictment for tax crimes.

The government says Jackson earned an estimated $138,000 from working for PQI. A federal jury in Atlanta convicted her last year on charges that she failed to submit tax returns, and a judge sentenced her to four years in prison in February. Jackson is appealing her conviction.

The lawsuits, filed against PQI and several of its alleged promoters in three federal courts in Florida, Oregon and Washington State, allege that the company sold its products to more than 10,000 customers who paid a fee to learn how to convince the federal government that they were not required to pay taxes.

In the Oregon case, the government claims PQI promoted the use of false entities to hide taxable income, and promoted seminars that wrongly told customers they could avoid paying taxes by revoking their Social Security numbers.

The federal lawsuit filed in Florida alleged that PQI engaged in a marketing scheme with financial incentives to keep customers buying the companies products and lectures. Customers initially bought into the PQI tax shows for $7,500 and were invited to attend the next level seminar for $18,750 before being invited to attend the cruise.

Attempts to contact PQI by phone and fax were not successful, and e-mail messages from ABC News were not immediately answered.

Nathan Hochman, assistant attorney general of the Justice Department's Tax Division said, "The size and sheer brazenness of the tax defier activities alleged in these complaints are staggering."

Justice announced the legal action, as well as the larger initiative to combat alleged tax fraud schemes, as millions of Americans finalize their tax returns before next week's April 15 deadline.

U.S. Attorney offices across the country are being told to target so-called "tax defier" companies, which often rely on the Internet to lure the gullible.

In recent years, the tax avoidance schemes have grown, especially on the Internet, with tax defiers asserting that they are not required to file federal tax returns for various reasons.

Some individuals claim they have renounced their U.S. citizenship, but "If they meet the minimum income requirement they absolutely have to pay their taxes," Hochman said at a press conference.

Other individuals claim they can avoid filing tax returns because they claim it is in violation of the 16th amendment, which limits Congress' authority to levy taxes. "The tax defier rejects the entire legal basis of our tax system," Hochman added.

As for the customers of the alleged sham organizations like PQI, the government says it's going to force them to pay their taxes, and in some cases, will prosecute them.

Copyright © 2008 ABC News Internet Ventures
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