Wesley Snipes and the Pure Trust scam
June 15, 2009
In my Michigan probate litigation practice, I see many instances of scams and exploitation of seniors. I've been working on a new case involving a "pure trust". Normally, I'm all in favor of trusts. That is, legitimate trusts, such as the revocable living trusts that most reputable estate planning attorneys use.
Any trusts offered by a company rather than a lawyer should questioned right off the bat. For example, I previously posted an article about "trust kits" and why they are dangerous. Pure trusts, sometimes known as "common law trusts" or "constitutional trusts", are even worse.
Since the early 1990's, unscrupulous companies have been peddling these documents to help people place assets into what they describe as separate legal entities that are outside of the jurisdiction of the United States. Why would that interest people? Taxes. You transfer your assets into these pure trusts, the sales pitch goes, and boom -- no more taxes!
Sound too good to be true? It is. The IRS has been cracking down on pure trust companies, such as Commonwealth Trust Company, prosecuting everyone involved for tax evasion and fraud. Many of those involved (at least the ones who could be found) have received lengthy jail sentences.
Companies like this prey on the seniors and other vulnerable, trusting adults with seminars and other sales efforts that sound legitimate. They promise that there is legal precedence that pure trusts work. Many unsuspecting elderly adults, and others, plop down thousands, transfer their investments, and then stop paying taxes. And yes, customers have been prosecuted, convicted and sentenced, along with principals.
And if the risk of jail time wasn't enough, there's more. Those who invest money into these products lose control. That means their money can be placed into shady offshore investments -- or even worse, outright stolen. And seniors are a prime target because they considered easier to dupe.
So how exactly does Wesley Snipes fit into all this? It seems he was a big proponent of pure trusts. The IRS alleged he intentionally failed to file tax returns and committed fraud. While Snipes proclaimed his innocence, the federal government had evidence he hosted a seminars for companies that sold these and tried to convince others to become their clients and stop paying taxes.
Snipes was tried by a jury in 2008. He was found guilty of three counts of failing to file tax returns and pay taxes. He was sentenced to 36 months in jail (the maximum sentence) and ordered to pay restitution in the amount of $17 million, plus interest and penalties.
However, Snipes was found innocent of the felony charges of tax fraud and conspiracy. His two co-defendants were found guilty of those charges and received longer jail sentences.
You can read the sentencing report filed about Wesley Snipes' case, which details some of the evidence against him. It claims that he evaded paying taxes of more than 15 million dollars and cost the United States Treasury more than $41 million. He also was part of a scheme, the government contends, of submitting false tax refunds claims and other fraudulent documents seeking tens of millions of dollars.
So far, Snipes has avoided jail time by appealing the case to the Eleventh Circuit Court of Appeals. He claims he was an innocent bystander in the pure trust scams, not a participant. His attorneys argue the trial was improper and the sentence too long.
A very comprehensive discussion of the history of pure trust companies and their methods is available on the anti-defamation league website.
How do you know the difference between a legitimate trust and a scam? First, work with a reputable and experienced estate planning attorney. Don't try to save money working without one.
Second, if it sounds to good to be true, it probably is. You can't avoid taxes by placing your money into a trust.
Third, never, ever sign anything that names someone as a trustee who you don't know. Only those you trust can fill that important role.
You wouldn't hand your money to a stranger and trust him or her to take care of you. But that's exactly what you're doing if you fall prey to a pure trust. Protect yourself -- and your elderly loved ones.
Even with the IRS crackdown, these scams are still prevalent on the internet and elsewhere. Warn your elderly family members. And when in doubt about any legal document you consider signing, talk to an attorney first.
Posted by: Author and probate attorney Andrew W. Mayoras, co-author of Trial & Heirs: Famous Fortune Fights! and co-founder and shareholder of The Center for Probate Litigation and The Center for Elder Law in metro-Detroit, Michigan, which concentrate in probate litigation, estate planning, and elder law. You can email him at awmayoras @ brmmlaw.com.
Follow us on Google+