Washington (April 16, 2004) -- The Justice Department asked a federal court in Las Vegas to issue a temporary restraining order against a Las Vegas-based telemarketing firm that it alleges sold fraudulent tax schemes that have bilked the Treasury out of an estimated $324 million.
In a civil lawsuit filed this week in U.S. District Court, the DOJ alleges that National Audit Defense Network, known as NADN, sold fraudulent tax schemes -- including phony Web site businesses -- to an estimated 100,000 customers. The suit also names 13 individuals and three other companies: ALR Inc. (operating under the name Success Matrix Group), Free Trade Enterprises (operating under the name Oryan Management), and ADA Adventure.
The suit asks the court to permanently bar NADN and four of the individual defendants from preparing federal income tax returns for others, and to order the defendants to turn over their customer lists.
The Justice Department alleges that NADN runs a “tax-scam boiler room” that sells bogus Web sites, home-based businesses and “incorporation” packages designed to help customers claim improper tax deductions and credits. The “Web sites” are allegedly designed to help customers claim to have a business with a Web site, and then improperly claim tax deductions and credits for supposedly “modifying” the site to comply with the Americans with Disabilities Act. According to court papers, NADN charges customers $2,495 to make sham Web site modifications and adds a sham $7,980 promissory note to artificially raise the cost to $10,475. NADN allegedly tells buyers that they can use that inflated cost to claim a $5,000 ADA income tax credit and a $5,475 business tax deduction. The DOJ says that purchasers never actually received their own Web site or their own ADA modifications. Instead, NADN allegedly sold one Web site 17,000 times and modified it once while charging each purchaser for supposed separate modifications -- which the DOJ said were largely useless to disabled computer users.
The suit also alleges that NADN sells a sham home-business tax scam, and tells purchasers that they can deduct the cost of non-deductible personal expenses such as meals, travel and housing. Both ADA tax-credit schemes and home-based business scams were included in the Internal Revenue Service's list of “dirty dozen” tax schemes.
The company did not return calls for comment by press time. On its Web site, www.awayirs.com, NADN claims to offer "guaranteed tax savings strategies designed by former IRS agents;" "high quality, low cost audit defense for existing tax problems," and "free audit defense for problems arising after you become a client (no matter what year)." The site also says that the company has a 100 percent success rate with IRS offers-in-compromise and a nationwide network of former IRS agents, auditors, CPAs and enrolled agents.
The DOJ complaint also alleges that NADN misleads prospective customers about the tax savings they can get by having NADN help them set up Nevada corporations. According to the complaint, Free Trade Enterprises, doing business as Oryan Management, originated the Web site-based ADA tax scam in 2000. The DOJ said that Oryan and four of the individual defendants agreed to an injunction barring them from selling the Web site scheme or any other arrangement that "misrepresents the tax benefits from using the arrangement."
The lawsuit named Las Vegas-area residents Robert Bennington, Weston J. Coolidge, Alan L. Rodrigues, Adam Mangabang, Lee Panelli, Christine Reid, Jeffrey Klingenberg, Rich Klingenberg and Marie Orie, and California residents Daniel W. Porter of Chino, Robert Goetsch of Hayward, Michelle M. Hernandez of Upland, and Joseph Prokop of Mt. Baldy.
The Federal Trade Commission filed a complaint against the company in January 2002 that charged that the firm failed to live up to its refund guarantees and failed to give refunds in a timely manner. The FTC's case against the company is ongoing, according to staff attorney Janice Charter. The FTC has a preliminary injunction against the company that it hopes will be made permanent. Charter added that the FTC's case has been "complicated" by the fact that the company filed for bankruptcy last June. "That affects our ability to get any monetary relief," she said.
-- Melissa Klein Aguilar

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

Don't have an account? Register for Free Unlimited Access