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April 28, 2010     Feather River Bulletin
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April 28, 2010
 

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il llllltlll llll[ 6B Wednesday, April 28, 2010 Bulletin, Progressive, Record, Reporter As it sho ', a clever tax fraud scheme unravels LEGAL MUSINGS STEVE BRENNEMAN steve.brenneman@jud.ca.gov Tax fraud schemes come and tax fraud schemes go. Some are as simple as ne- glecting to report income re- ceived under the table, while others involve offshore bank accounts, dummy corpora- tions and very high priced lawyers and accountants. Tax fraud schemes never seem to go out of style, and tax cheats always appear to be several steps ahead of the Internal Revenue Service. There are many who believe cheating on their taxes is somehow patriotic, like our forebears who refused to pay taxes to the kingand started a revolution. There are also those who think cheating on their taxes is all right because, well, everyone does it. It's not, and they don't. As I'm sure I've said be- fore, when you cheat on your taxes, you fail to pay your fair share of the expenses of running the country, thereby requiring everyone else to pick up the slack through ever-higher taxes on them. If nobody cheated, presumably the government would be so flush with cash it would re- duce taxes across the board. Did I really say that? Recently, a religious leader in New York was sentenced to two years in prison for his par- ticipation in a tax fraud scheme that was described by the sentencing judge as "breathtaking in its scope and duration." I might add it was also amazing in its simplicity. The scheme worked like this: The religious leader ac- cepted charitable donations on behalf of several legiti- mate charities he adminis- tered and the donors took corresponding tax deduc- tions. No problem there. However, the donations were in fact shams. Through the use of secret foreign ac- counts and a money transfer network, the religious leader secretly refunded up to 95 percent of the donations to the donors. For example, let's say a wealthy taxpayer donates $100,000 to one of the chari- ties. However, after the covert return of 95 percent of the donation, the charity re- ally receives only $5,000. But because the donor takes state and federal tax de- ductions for the full $100,000, thereby saving more than $40,000 in taxes, he ends up pocketing $35,000 on the deal. Not a bad day's work. While the charity doesn't get the full $100,000 donation, it still gets $5,000 it might not otherwise have received. A win-win situation for both the nearly 100 donors in- volved in the scheme and the charitable organizations. The only ones who lose are all the rest of us. This scheme had been go- ing on for decades and was estimated to have cost the government hundreds of mil- lions of dollars in lost tax rev- enue. It came to light only af- ter one of the participants, who had gotten caught up in an unrelated SEC matter, re- vealed the tax fraud scheme to buy some goodwill. So far, seven others have been sen- tenced to prison for their par- ticipation in the tax fraud scheme. What troubles me about this case besides the huge loss of tax revenue is the rela- tively lenient sentence im- posed on the religious leader. Two years for what must have been thousands of sepa- rate acts of tax fraud. If this had been a young, in- ner city kid committing a se- ries of seven to 11 robberies that netted a few hundred dollars in loot, rather thar a wen-respected, 61-year-old re- ligious leader, you can bet he would have been sentenced to some serious time. With good behavior, the re- ligious leader will probably do no more than a year at some country club prison, af- ter which he will return to his life of providing moral guidance to others. Perhaps it was the 270 let- ters of support sent to the sentencing judge. In arguing for a lenient sentence, the let- ters pointed out the religious leader received no personal gain from the tax fraud scheme. All the money re- ceived in donations went to charities and was used for re- ligious schools, food for the hungry and other assistance to the poor. This may well explain the 270 letters of support. If I stole a million bucks and spread it all around town, I'd probably make a lot of friends too. But the government also provides assistance to the poor and needy: Every tax dollar lost is a tax dollar un- available for food stamps or the Head Start program. Is society better off when a charity has $5,000 to use for the benefit of the public at the expense of $40,000 that would have been available to the government for public purposes? Furthermore, even the reli- gious leader's attorney ac- knowledged the steady stream of fake donations en- hanced the leader's name and reputation as a fundraiser and improved his standing in the community. Another argument for le- niency concerned the reli- gious leader's remorse, which is a common factor considered by sentencing judges. The religious leader explained to the court at sen- tencing that he is "embar- rassed beyond words" and his "remorse is deep and heartfelt." If you have an argument with your spouse and say some unkind things, your re- morse may cause you to apol- ogize later. If you steal money or goods from another, your remorse may cause you to return the item or find ways to funnel the money back to the victim. In Dostoevsky's "Crime and Punishment," Raskot: nikoffs remorse over having killed two people tormented him for the next nine days, until he finally confessed to the crime. When one pursues a fraud- ulent scheme for decades and expresses shame and regret only after being caught, that is not remorse. That is an at- tempt to cut your losses. This religious leader con- spired with otherg over decades to cheat the public out of hun- dreds of millions of dollars. If one of the participants had not been caught up in an unrelated SEC matter, it would probably still be going on. The religious leader should have been treated ac- cordingly. Go Onli00Te for answers to ),our DMV questions ASK GEORGE ....... ; ............ G e6iiGEi/iii:i/fii8 ..................... Director, CA Dept of Motor Vehicles Do you have questions about general driving related requirements like registration and insurance? Are you un- clear about laws and restric- tions related to driving? The California Department of Mo- tor Vehicles has answers. "Save Time by Going Online;" dmv.ca.gov, Q: Why are some areas in my city regarded as "double-fine' zones? A: Due to increased acci- dents, injuries and fatalities, certain roads are designated as "Safety Enhanced-Double Fine Zones." Fines are dou- bled in these areas and in highway construction or maintenance zones when workers are present. Pay extra attention where roadwork is performed. Signs and message boards warn you of workers, slow-moving equipment and closed lanes ahead. Cones or drums will di- rect you to open lanes. Merge as soon as possible without crossing the cones or drums. Reduce your speed and be pre- pared to merge early, slow down or stop for highway equipment. Do not use your phone in a cone zone and keep your eyes ontheroad and vehicles ahead. Q: I am a first time car buyer and I'm looking to purchase a used car in the next month. In my search, I've noticed some amazing cars have "salvaged" titles. What does this mean? A: A "salvaged" vehicle is defined as having been wrecked or damaged in some way, and the owner, insur- ance company, financial insti- tution or leasing company considers it too expensive to repair. Commonly, these cars are also referred to as "to- taled." DMV issues a salvage cer- tificate when it receives a re- port of the damage. A sal- vaged title is issued after the vehicle is repaired and re-reg- istered. This is probably what you are seeing in the car ads. Regardless of what type of car you buy, always protect yourself by researching the vehicle's history online by us- ing the vehicle identification number, making sure the car has complete existing DMV paperwork, or ask the seller to provide receipts of the repairs made to the car. If you still have doubts, get the car in- spected before you buy it. For more information go to dmv.ca.gov/vr/buyinfo.htm. Q: My husband and I are., interesfetl inbuying a houseboat for our annual vacation next summer. Do we register it with the DMV like any other boat? A: Yes, you must register your new houseboat with the DMV like any other boat. A houseboat is considered a "vessel" and every sail-pow- ered vessel over eight feet in length and every_motor-dri- ven vessel (regardless of length) that is not document- ed by the U.S. Coast Guard used on the waters of this state are subject to registra- tion by DMV. Make sure to get this out of the way because without pay- ing the applicable fees, your houseboat cannot be placed m California waters. You can ob- tain more information about Vessel registration on the DMV website at: dmv.ca.gov/boatsinfo/boatreg .htm. Q: I really want to become an organ donor the next time I renew my driver license but I heard that it might be costly to my family. Is this true? A: Absolutely not! Costs related to organ and/or tissue donations will be covered by the organ and tissue donor program, so you will not be responsible for any aspect of the donation process. 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