Washington (Dec. 27, 2002) -- Two individuals were indicted on counts of conspiracy to defraud the IRS, wire fraud and mail fraud as the result of an investigation by Internal Revenue Service Criminal Investigation special agents.According to the indictment, Jerome Schneider and Eric Witmeyer offered for sale the stock of Nauru trading corporations licensed as international banks and other offshore corporations in an attempt to defraud the Internal Revenue Service. Nauru is an island nation located in the Pacific north of the Solomon Islands.
No business was conducted by any offshore entity sold by the defendants on Nauru nor was any bank account established on Nauru. Instead, the defendants would cause accounts in the name of the Nauru bank to be established in financial institutions located outside the U.S.
The indictment alleges that the defendants used a scheme called "decontrol" to conceal the U.S. taxpayer's ownership in the offshore entity. IRS undercover agents posing as prospective clients met with the defendants and were told how the offshore entities being sold and how the "decontrol" process could be used to evade taxes on income earned by the U.S. taxpayer or the offshore entity.
In the "decontrol" process, the U.S. taxpayer investor paid $15,000 to $60,000 for the offshore entity, which defendants then sold to a so-called "Independent Foreign Owner" (IFO) in exchange for a promissory note in an amount large enough to make it appear as if there was a bona fide and negotiated sale of the offshore entity to the IFO. The U.S. taxpayers were advised that they could receive back the funds they had transferred to the offshore entity through tax-free loans.
-- Electronic Accountant Newswire staff
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