A federal judge in San Francisco has signed a permanent injunction order barring the developer of a complex tax scheme involving numerous entities located around the globe and sales of over $1.25 billion in securities from promoting the scheme.
Judge Phyllis J. Hamilton of the U.S. District Court for the Northern District of California entered the injunction against Charles Cathcart of Tuxedo Park, N.Y., after he advised the court on the first day of trial that he would not refute the governments evidence. The record indicated that Cathcart, a Ph.D. economist, developed a scheme called the 90% Loan Program and promoted it throughout the United States through companies he controlled, including Derivium Capital LLC and Derivium USA.
The 90% Loan Program falsely claimed that customers could exchange their appreciated stock for loan payments equal to 90 percent of the stocks value without paying income tax on their capital gains. It also purported to allow the tax-free return of those customers stocks at maturity if the customers repaid the loans.
However, prosecutors contended that customers stocks were sold immediately, with 90 percent of the sale proceeds going to make the purported loans to the customers, and the other 10 percent being retained by the promoters. Customers were told the loans were made by independent third-party lenders, but in fact the supposed loans were made through sham companies that Cathcart created and controlled. The sham companies never functioned as genuine lenders, never held or maintained any assets or reserves, and were located throughout the world in such far-flung places as the Isle of Man, Ireland and Hong Kong, according to prosecutors.
Cathcart, through the 90% Loan Program, allegedly sold more than $1.25 billion worth of customers stock in some 3,100 transactions, leaving more than $100 million for himself and the other promoters after payment of 90 percent of the sale proceeds to customers as purported loans. The government complaint in the case alleged that the scheme cost the U.S. Treasury an estimated $230 million or more.
The same court earlier barred Scott Cathcart,Yurij Debevc, Robert Nagy, Charles Hsin and Franklin Thomason from promoting the same program.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access