A federal court in Pensacola, Fla., has sentenced three of nine promoters of a fraudulent tax-and-debt-elimination scheme to prison terms for their roles in tax fraud, wire fraud and money laundering.
On March 31, 2010, a federal jury returned guilty verdicts against eight people, following a month-long trial in Pensacola involving the promotion of fraudulent schemes through Pinnacle Quest International, also known as PQI and Quest International. The court sentenced Eugene Casternovia to seven years in prison and Arthur Merino to three years and four months in prison, the Justice Department announced Monday. Mark Lyon, who cooperated with the government and testified at trial, was sentenced to 18 months in prison.
Four others were sentenced in July to prison terms ranging from 5 to 12 years. The remaining two will be sentenced in October. The ninth, Lyon, entered a guilty plea and testified against the other eight at trial.
According to the evidence presented during trial, PQI was an umbrella organization for numerous vendors of schemes to eliminate tax and credit card debt. Some of the PQI vendors, such as the Southern Oregon Resource Center for Education, sold bogus theories and strategies for tax evasion. For fees starting at $10,000, SORCE helped its customers create a series of sham business entities in the United States and Panama.
Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a reliance defense that consisted of a paper trail of frivolous correspondence that a client could allegedly use as evidence of good faith if the client were prosecuted.
At trial, the government established that other PQI vendors sold fraudulent schemes for eliminating credit card debt, the most successful of which was called Financial Solutions. Financial Solutions charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt. The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy.
According to the evidence, another PQI vendor, MYICIS, operated as a sophisticated, computerized warehouse bank. MYICIS was a single bank account in which customers pooled their money. MYICIS was promoted to PQIs clients as a method of hiding their assets from the IRS as a result of the pooled nature of the account. MYICIS had 3,000 clients and approximately $100 million in deposits over a three-year period.
Evidence introduced at trial showed that PQI purported to sell only CDs and tickets to offshore conferences. However, PQI acted as a gateway to its fraudulent vendors. PQI clients seeking the tax evasion and debt elimination vendors could only access the product if they joined PQI first. The cost of membership ranged from $1,350 to $18,750, depending on the level of access.
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