A press release from the U.S. Attorney’s Office:
FEDERAL COURT IN ILLINOIS SHUTS DOWN NATIONWIDE “EMPLOYEE BENEFIT PLAN” TAX SCHEME
Tracy Sunderlage's Facebook page says he graduated from Woodstock High School in 1964.
WASHINGTON – A federal court has permanently barred Tracy L. Sunderlage, Linda Sunderlage and four companies from operating an alleged scheme to help high-income individuals attempt to avoid income taxes by funneling money through purported employee benefit plans, the Justice Department announced today.
Judge John W. Darrah of the U.S. District Court for the Northern District of Illinois entered the permanent injunction orders, to which the defendants consented, against
- the Sunderlages,
- SRG International Ltd., of Nevis, West Indies, and three Illinois companies –
- SRG International U.S. LLC,
- Maven U.S. LLC and
- Randall Administration LLC.
According to the government complaint, the defendants claimed to promote and operate plans that provide insurance benefits to participating companies’ employees, when in fact the scheme is simply a mechanism for the companies’ owners to receive purportedly tax-free or tax-deferred income for their personal use.
Tracy Sunderlage and the two SRG International companies allegedly marketed the scheme to high-income professionals who own small, closely held companies.
In the most recent version of the alleged scheme, each participant’s company made supposedly tax deductible payments to a purported benefit plan operated by Maven U.S. and Randall Administration.
The company’s contributions were then allegedly transferred to an account within a company based in the Caribbean island of Anguilla, in which they were allegedly invested until the owner terminated from the program and received the assets for his or her personal use.
The complaint alleged that many participants owned these accounts through offshore trusts, which Tracy Sunderlage and SRG International Ltd. often helped to establish.
Sunderlage Resources operates from 2380 Esplanade Drive # 203 near Randall Road in Algonquin.
The complaint alleged that participants from across the country have transferred at least9 $23 million as part of the scheme and that total contributions may exceed $300 million.
The injunction orders bar the defendants from operating or promoting any purported “welfare benefit plans.”
The court also ordered the defendants to provide the government with a list of their customers and to send copies of the injunction orders to their customers.
In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against promoters of tax schemes and preparers of fraudulent tax returns. Information about these cases is available on the Justice Department website.
Why don’t they invest this money in jobs right here at home?!
They’re part of the problem, not part of the solution.
Sheesh…
The resulting DoJ penalty is barring the defendants from operating the scheme. No criminal penalty?
Let’s recap this illegal scheme to avoid paying taxes on income that should be taxable.
Company 1 (Participant) makes tax deductible payments to Company 2 (Benefit Plan).
That part is legal, assuming you will use the money for stated benefit purposes.
Company 2 transfers the money to Company 3 (Offshore trust in Anguilla – a British territory in the Caribbean – established by Company 2). Now that raises concern.
Company 1 terminates from the plan and receives the money from Company 3 for personal use. That seems definitely illegal.
Tax & Fraud Law Firm Mahany & Ertl further describe the scheme.
http://www.mahanyertl.com/mahanyertl/uncle-sam-goes-after-another-welfare-benefit-plan-scam/831
No “criminal penalty” because there were no allegations of criminal conduct.
All the DoJ sought was a cease and desist from selling 419 plans.
They had already quit selling 3 years earlier and it was easier to accept the consent decree rather than pay $100,000 + in attorneys’ fees.
Actual recap is as follows: Company A adopts plan and makes contribution to provide welfare benefits. Company A claims a tax deduction.
IRS doesn’t agree with tax deduction and publishes Notice 2007-84. PBT quits selling plan. IRS audits clients and asks DoJ to stop PBT from selling.
The fact that a non-US insurance company was used to provide the welfare benefits elected was not a problem and was not addressed in the consent decree.