Three more North Texans charged in $1 billion tax shelter scheme
DALLAS (CBSDFW.COM) — Another attorney and two tax professionals were indicted for their roles in a $1 billion tax shelter scheme organized by a Dallas lawyer, federal officials announced Wednesday.
Attorney and CPA Kevin McDonnell and CPA James Richardson, co-owners of the Waxahachie-based tax preparation and accounting firm McDonnell Richardson, PC, and Craig Fenton, a tax manager at the firm, were added to the federal case against Joseph Garza, a Dallas attorney who was charged in Oct. 2022 with defrauding the government out of over $1 billion in owed taxes.
All three men were charged with a count of conspiracy to defraud the United States, one count of conspiracy to commit wire fraud, and five counts of assisting with the preparations of fraudulent tax returns.
The superseding indictment also added a charge of conspiracy to defraud the United States against Garza.
Federal law enforcement officials allege that McDonnell, Richardson, and Fenton all worked with Garza to help illegally shelter his clients' taxable income. Garza allegedly took a cut of the money his clients wanted sheltered as payment. McDonnell, Richardson, and Fenton were allegedly compensated with the illicit funds as well.
According to the indictment, Garza created shell companies that would purport to provide services to clients' businesses or serve as investment vehicles. In reality, they had no legitimate purpose and served only to move money around.
Garza and his coconspirators even went as far as creating fake operating agreements, service agreements, invoices, and private annuity agreements in order to give the shell companies a veneer of legitimacy in order to hide the scheme from the IRS.
The scheme also involved preparing and filing fraudulent tax returns. McDonnell, Richardson, Fenton, and others involved in the scheme would falsely deduct expenses for services that were never performed, create receipts for payments not earned, deduct payments from the investment company for annuities that did not exist, and underreport their clients' individual incomes.
The scheme allegedly resulted in over $1 billion in unreported income and over $200 million in unpaid taxes.
Special Agent in Charge Christopher Altemus, Jr. of the IRS Criminal Investigation's Dallas field office said, "Today's indictments reinforce our commitment to every American taxpayer that the dedicated women and men of IRS Criminal Investigation will continue to work tirelessly to identify and prosecute tax professionals who devise illegal tax shelters to evade the tax obligations of their wealthy clients."
