Saturday, November 9, 2013

Gary J. Permanently Barred from Promoting Tax-Fraud Schemes


Source- http://www.justice.gov/tax/2013/txdv131199.htm

WASHINGTON – A federal court has permanently barred Gary J. Stern from promoting tax fraud schemes and from preparing related tax returns, the Justice Department announced today. The civil injunction order, to which Stern consented without admitting the allegations against him, was entered by Judge Robert Gettleman of the U.S. District Court for the Northern District of Illinois. The order permanently bars Stern from preparing various types of tax returns for individuals, estates and trusts, partnerships or corporations (IRS Forms 1040, 1041, 1065, and 1120), among others. The United States alleged that Stern used those returns to facilitate the unlawful schemes identified in the complaint.

According to the complaint, Stern designed at least three tax-fraud schemes that helped hundreds of customers falsely claim over $16 million in improper tax credits and avoid paying income tax on at least $3.4 million. Stern allegedly promoted the schemes to customers, colleagues, and business associates. The complaint alleges that his customers included lawyers, entrepreneurs and professional football players, and some of the latter, including NFL quarterback Kyle Orton, have sued Stern in connection with the tax scheme, alleging fraud, breach of fiduciary duty and professional malpractice.

Federal law allows an income tax credit with respect to certain sales of fuel from non-conventional sources (FNS), including methane produced from landfills. According to the complaint, beginning in the early 2000's Stern created a web of partnerships, companies and other entities to serve as a conduit for sham transactions designed to funnel false FNS credits to his customers. Stern allegedly funneled over $11.4 million of these bogus FNS credits to customers and used a bogus trust arrangement to fraudulently distribute an additional $5.34 million in FNS credits to his customers.

Finally, according to the complaint, Stern promoted an abusive income-shifting technique to help his wealthiest customers illegally avoid taxes. Stern and his business associates allegedly kept most of the money that customers contributed to this scheme. The court has barred Stern from using any entity to assist others in illegally shifting income for the purpose of avoiding tax.


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