A man from Carey, Ohio, and a Michigan woman have been indicted on federal conspiracy and mail fraud charges for selling and marketing a trust system that purportedly allowed clients to avoid paying $15 million in federal income taxes.
Winfield Thomas and Jeanne Herrington, whose last known address was Parma, Mich., were named in a 20-count indictment filed last week in U.S. District Court in Toledo.
Mr. Thomas was arrested and arraigned Friday in federal court. He was released by Magistrate Vernelis Armstrong on a $50,000 signature bond. Authorities are still looking for Ms. Herrington.
According to the indictment, the trust packages marketed and promoted by Mr. Thomas and others at group seminars were purchased by about 400 people in northwest Ohio who under his advice reported little or no income on their tax returns.
"The trusts promoted at these seminars purported to provide asset protection, but actually served as tax evasion vehicles for clients who purchased the trusts," the indictment states.
Court records said Mr. Thomas charged clients $2,000 for trust formation services, which instructed them to report little or no income on tax returns and use the their trust accounts to pay all their expenses.
Clients were told that if they established a trust account by following the instructions, payments made out of it would be tax deductible, records said.
The investigation into the scheme also has resulted in charges being filed in federal court against others who prepared tax returns for clients who bought the trust formation services, including Chad Rickle of Findlay, who pleaded guilty to conspiracy to defraud the IRS.
Rickle, who sometimes used the name FTG for his tax preparation services, admitted to preparing over 900 fraudulent tax returns that amounted to more than $1 million in tax losses.
The charges against Rickle and Findlay residents Duane and Jennifer Fry, who each pleaded guilty to a misdemeanor conspiracy charge related to the scheme, were unsealed last week in federal court.
Also unsealed was the case against Daniel Fry, also of Findlay and whose relationship to the couple was unknown. He pleaded guilty to aiding and assisting in the preparation of a false income tax return. He admitted to causing a tax loss of more than $63,000.
A seventh defendant, Thomas A. Fruth, also of Findlay, was indicted in April by a federal grand jury and pleaded not guilty to three counts of filing false tax returns. He is scheduled to change his plea during a hearing scheduled for Oct. 12.
The charges against Mr. Thomas and Ms. Herrington include 17 counts of mail fraud.
David Bauer, assistant U.S. attorney, said civil litigation was filed against clients who avoided paying taxes by using the scheme, and they are being assessed for back taxes as well as fines and interest for delinquent payments.
Mr. Bauer said that if Mr. Thomas and Ms. Herrington are convicted, their sentences will be determined by the judge after reviewing factors unique to the case, including prior criminal records, if any, their roles in the offense, and the characteristics of the violation.
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