The IRS doesn’t like people who commit tax evasion. They are even less charitable to phony “asset protection” scheme promoters who help others evade taxes. Two weeks ago U.S. District Court Judge Philip Pro sentenced Nevada resident William Reed to 9 years in prison. When Reed gets out he must still pay $4.2 million in restitution.
How Reed came to list his new address as the “Gray Bar Hotel” (federal prison) is a story worth repeating.
Until 1997, Reed was an attorney. Among his many claims to “fame”, he is the author of a book, Bulletproof Asset Protection. The feds say that shortly after he stopped practicing law, Reed hooked up with Wendell Waite, a CPA, and businessman Richard Neiswonger. At first the trio seems to have an impressive wealth of knowledge on the subject of taxes and asset protection… a published author and attorney, a CPA and a businessman. If the men possessed any useful knowledge on these subjects, it certainly isn’t evident.
The feds charged Neiswonger with deceptive trade practices in 1997 and permanently ordered him to stop lying in sales promotions. The court order was not very effective, however.
It did not take look before the 3 men created an entity called Asset Protection Group. The feds say that the trio was marketing a thinly veiled scheme to conceal income from the IRS. The products they offered included a disguised corporate ownership service complete with nominee bank accounts and phony liens to make it appear that one’s property had no value. Other products included a “Tax Savings Nevada Corporation” designed to shift income to Nevada (which has no income tax) and an International Business Corporation which they claim could move “liquid assets” (cash) anonymously offshore. The IRS properly determined that all of their products were nothing more than schemes to commit tax evasion.
According to the indictment, the trio’s marketing materials were quite blatant. Promotional materials made claims such as “ Better to have your assets where the IRS can never seize them or know about them” and “ Once an asset is out of reach of my friend the federal judge and the IRS, it’s safe.”
Obviously Reed’s “friend, the federal judge” wasn’t amused.
It’s not just the indictment and restitution that Reed needs to worry about. Prior to the indictment, Reed admitted in U.S. Tax Court that he underreported his income tax liability by $13,000,000.
The Asset Protection Group apparently created 2000 corporations for Reed’s clients. Now those clients will likely soon be hearing from the IRS. As part of his plea agreement, Reed agreed to cooperate with the IRS and testify as necessary.
Although the IRS was the victim of the conspiracy, many of Reed’s customers are also the victims. We suspect that many believed his ridiculous claims; after all the program was being marketed by an attorney and accountant.
The old adage “If it sounds to good to be true, it probably is,” bears repeating. Asset protection schemes are heavily marketed on the Internet. Most of the promoters are con artists. While there is a legitimate need for asset protection, promoters who suggest that it’s legal to hide money from the IRS are just plain wrong. Ditto for promoters who claim that any asset protection program is “bulletproof.”
Given the number of clients buying Reed’s program, we think it won’t be long before more indictments and audits surface.
If you purchased a plan from William Reed, Wendell Waite or the Asset Protection Group or if you are under investigation for tax evasion, give us a call. Let an experienced criminal tax lawyer help you come into compliance, unwind any phony tax shelters and avoid prosecution.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney-client privilege and kept in strict confidence. IRS criminal tax services available anywhere in the United States.
Post by Brian Mahany, Esq.