A federal judge in Kansas City, Mo., has permanently barred Allen R. Davison from promoting a variety of tax fraud schemes, including some that used sham companies, sham chicken-flock contracts, and sham pension plans.
The civil injunction order found that Davison engaged in widespread misconduct, and directs the Justice Department to provide a copy of the order to the licensing boards of the states where Davison maintains a CPA license.
The court found that since "at least the mid-1990's, Davison has advised on tax-related matters and promoted tax-fraud schemes," including orchestrating "arrangements that involve sham companies and bogus deductions" that Davison knew were "for the purpose of illegal tax avoidance."
Davison, a licensed CPA and member of the Nebraska bar, has been employed at two large accounting firms and, most recently, as a contractor for entities owned by a Kansas City-area businesswoman. The court found that Davison also works through several small accounting firms set up by his former colleagues at a larger firm.
He started his career at Coopers and Lybrands Omaha office, moved to its Kansas City office, and then ultimately moved to Grant Thorntons Kansas City office, where he became a partner in the tax practice group. He left Grant Thornton in October of 2001, but continued to provide tax advice to clients.
The court order describes improper schemes that Davison set up for clients that included medical practitioners, an insurance broker and car dealership owners. According to the court, Davison made his tax fraud schemes "deliberately complex" in order to "evade IRS detection."
Davison's attempts to evade detection included fabricating records, preparing documents after the fact to address IRS concerns, and intentionally providing false information to the IRS during audits of his clients. Davison himself "deliberately disguised the nature of his work" and also "expressed a willingness to change to new and different tax fraud schemes when faced with the heightened IRS scrutiny of older schemes."
The court found that Davison "deliberately advised his clients to break the law, and helped them go about doing so." Davison's tax-fraud schemes included sham management companies whose shares were owned by employee stock option plans and Roth IRAs, and bogus chicken-flock deductions claimed for clients who were not eligible to claim them because they did not qualify as farmers under federal tax law.
In one scheme, sham corporations were set up for the sole purpose of sponsoring pension plans for the benefit of Davison clients who owned businesses. The sham companies were used to evade the federal tax law requirement that pension plans include rank-and-file employees.
The court ordered Davison to give the Justice Department a list of all clients for whom he has provided any tax-related advice in the last five years. He must continue to provide such a list once a year in the future for as long as he continues to provide tax advice.
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