The 64-year-old owner of a Maryland tax preparation business has been sentenced to 210 months in prison for a tax shelter scheme in which he colluded with an IRS revenue officer.
Irvin Hannis Catlett Jr. of Crownsville, Md., received the 17 ½-year prison sentence, followed by three years of supervised release. He and his tax preparation business were accused of reporting over $22 million in bogus tax losses from a fake car leasing company. U.S. District Judge Roger W. Titus handed down the sentence on Thursday and entered an order of restitution against Catlett for $3,810,244. A federal jury convicted Catlett on Nov. 4, 2010.
According to testimony at the nine-day trial, Catlett operated Tax Resolutions Inc., located in Laurel, Md. He told his clients about “investing” in several car leasing and sale businesses, with names like Motors Holding Company and Rentown. Catlett knew, however, that the entities were not engaged in automobile leasing and sales, nor in any other legitimate, profit-making business. From 1999 to 2009, Catlett worked with others to sell clients purported “investments” in the tax shelter entities. These investments were actually payments to Catlett for the purchase of bogus tax losses, purportedly generated by the tax shelter entities’ automobile leasing operations.
Catlett, Walter Cullum and James Unterreiner prepared fraudulent tax returns for their clients that included the fictitious business losses, thereby reducing the amount of taxable income and total tax reported by the clients, resulting false claims for refunds from the IRS.
Testimony at the trial showed that Catlett paid Mark Hunt, an IRS revenue officer, to providing him with IRS taxpayer information on Tax Resolutions’ clients and to allow him to introduce Hunt to clients and potential clients as Catlett’s connection at the IRS, in order to assure them that the tax returns prepared by Tax Resolutions would not be the subject of adverse IRS actions.
As part of the scheme, Catlett and Cullum supplied clients with copies of stock certificates to assure them of the legitimacy of their investment in the tax shelter. Catlett and Cullum also provided clients with fraudulent IRS forms on which were reported the clients’ portions of fictitious business losses incurred by the tax shelter entities.
Catlett instructed Cullum and Unterreiner to prepare client tax returns by first determining each client’s tax without the tax shelter loss and then adding to the return a fictitious loss from a tax shelter entity that was large enough to reduce to zero the client’s tax due. Catlett instructed Cullum and Unterreiner on how to prepare false tax returns so they could maintain the scheme while Catlett was in prison on other charges from November 2002 to September 2004.
As a result of the scheme, approximately 275 tax returns were filed with the IRS reporting $22,009,021 in bogus Schedule E losses, which resulted in a tax loss to the U.S. Treasury of $3,810,244.
Maryland residents Walter Cullum, Jr., age 37, of Columbia; Mark E. Hunt, age 45, of Baltimore; and James Unterreiner II, age 34, of Bowie pleaded guilty to their participation in the tax evasion scheme. They were each sentenced to three years’ probation. Tressa Nivens, age 45, of Frederick, Md., also pleaded guilty to her role in the scheme and was sentenced to two years’ probation.
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