by Brian Mahany
Welfare benefit plans have generated their fair share of bad press. The IRS hates them and considers most of them abusive tax shelters. Even owning a legitimate plan can still earn you a $200,000 penalty from the IRS just for having one and not properly reporting it.
Many of these so-called benefit plans simply fail to pass IRS muster – they don’t do what they claim to do. Others, however, are outright scams. Just ask Michael Millman of Rhode Island. A federal judge in Connecticut today sentenced Millman to 63 months in a federal prison. His crime? Operating a sham welfare benefit plan – Nutmeg Welfare Benefit Plan and Trust – and stealing more than $1 million from the plan and its trustee.
According to court documents and press statements from the U.S. Attorney’s Office, Millman collected hundreds of thousands of dollars of premiums and promised participants in the plan valuable life and disability benefits. Instead he simply stole the money and created phony statements to cover his tracks.
Millman was convicted of 1 count of bank fraud, 2 counts of wire fraud and 1 count of embezzlement.
Depending on how plans are structured and the violation committed, cases involving welfare benefit plans may be investigated by the IRS or the Employee Benefits Security Administration.
Most plans do not involve pure theft, although we have represented victims of two such cases to date. In many instances, fly-by-night promoters create plans promising the ability to shelter income from taxation by placing pretax income in the plan. They claim that benefits can then be paid back to the participant as a tax-free disability payment. Don’t believe them.
Although there are legitimate plans, the industry is rife with fraud. There is hope, however, even if the promoter is bankrupt or in jail. Relief can often be obtained if the plan was purchased through an insurance agent, financial planner or stockbroker. These financial professionals have an obligation to perform due diligence before recommending investments or complex tax strategies.
If you are the victim of a phony welfare benefit plan, call us. Our asset recovery and welfare benefit plan fraud may be able to get your money back. For a no obligation, no nonsense consultation, contact Brian Mahany at (414) 704-6731 or
Mahany & Ertl, LLC – Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services available nationwide.