Grand Rapids, Mich. - A federal grand jury has indicted three tax shelter promoters, charging them with conspiring to promote, market and sell fraudulent tax shelters.

The five-count indictment accused Peter J. Peggs of Prides Crossing, Mass., Robert D. Larsen of Winter Park, Colo., and Craig M. Stone of Fort Pierce, Fla., of selling a fraudulent tax shelter called a loss-of-income insurance policy. They issued the policies through a company in the U.S. Virgin Islands called Caduceus Life Insurance Co., which changed its name in 1999 to Security Trust Insurance Co., and has since gone out of business.

According to the indictment, Peggs and Larsen began selling the policies to wealthy clients in 1995. Stone, who was associated with Nasco Corporate Finance, joined the scheme in 1999. They sold the policies for more than $12 million in premiums. The indictment also charges Peggs and Larsen with playing a role in the attempted income tax evasion by a client who improperly deducted approximately $3.9 million in insurance premiums.

The three men are also accused of improperly disguising a $3 million repayment of funds to the client. The indictment alleges that, as part of the scheme, Peggs, Larsen and others lied to the IRS during an audit of the client and misrepresented the scheme to the client's tax attorney. Peggs and Larsen allegedly engaged in similar schemes with clients in Massachusetts and Kentucky.

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