Wednesday, March 27, 2019

11th Circuit Affirms Convictions of Promoters of Insurance Premium Scam Bullshit Tax Shelter (3/27/19)

In United States v. Donaldson, 2019 U.S. App. LEXIS 8684 (11th Cir. 2019) (unpublished), here and here, the Tenth Circuit affirmed the district court's convictions of Dionaldson and Crithfield for conspiring to defraud the United States, 18 U.S.C. § 371, and willfully aiding the submission of false and fraudulent income tax returns, 26 U.S.C § 7206(2).  Basically, they sold their clients bullshit tax shelters in the guise of a Business Protection Plan (BPP). Essentially, the customers would pay purported business insurance premiums, purportedly deductible for tax purposes, for a plan that was not insurance but returned most of the "premiums" to the clients, less the promoter's rake off.  I have previously written on the prosecutions and convictions.  Bench Trial Convictions on Offshore Business Insurance Scams (Federal Tax Crimes Blog 7/13/17), here.  That prior blog entry contains much of the detail for better understanding the scam.

The Court of Appeals held:

1. The evidence was sufficient to support the convictions, going through the facts and the elements of the crimes of conviction. The essential holding on appeal was that the BPP was a substantive sham and the defendants were willful in promoting the sham, thus supporting the conviction for the defraud conspiracy (18 USC § 371)  and aiding and assisting (§ 7206(2)).

2.  The District Court did not improperly deny the motion for acquittal or new trial.  The claim asserted on this basis related to Donaldson.  Donaldson claimed that the district court had improperly "persuaded" him not to call a witness, a lawyer who gave an opinion supporting the BPP, who might have supported his reliance on counsel defense.  The actual opinion was in evidence.  The judge simply stated, after admitting the opinion, what the lawyer's testimony would add.  Donaldson's lawyer then made a strategy decision not to call the lawyer as a witness.  No error there.  The Court of Appeals discussion includes this:
Moreover, the district court did not find, as Donaldson suggests, that the coverages offered within the BPP were superfluous for all purposes. Rather, the district court found that the coverages were superfluous for the specific customers who bought them, including one doctor's office that purchased wholly unnecessary insurance for protection against international kidnapping.
3.  The District Court properly rejected the appellants' motion to suppress evidence seized by search warrant.

JAT Comment: All in all, a fairly routine case which is why, I suppose, the opinion is nonprecedential.  However, for those wanting more about the case, please go to the prior blog linked above discussing the bench opinion convicting the defendants/appellants.

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