Justice Department Sues to Shut Down Alleged "Warehouse Banking" Scam

warehouse banking scam

Complaint Alleges Los Angeles-Area Man Helps Customers Hide Income and Assets from IRS

WASHINGTON , D.C. - The Justice Department today sued Anthony L. Hargis, of Fountain Valley , California , seeking to shut down an alleged fraudulent “warehouse banking” scheme that Hargis allegedly uses to help customers hide their income, assets, and identities from the IRS. The civil injunction suit, filed in the U.S. District Court for the Central District of California in Santa Ana , alleges that Hargis accepts funds from some 253 customers and then places the commingled funds in nine commercial bank accounts, held in his name or the names of his associates, in California and Texas . Hargis then allegedly uses the commercial bank accounts to write checks to pay customers' bills. The commercial bank accounts are allegedly held in Hargis' and his associates' names making it difficult for the authorities to trace the income, assets, expenditures, and identities of customers. The complaint alleges that Hargis' customers, located throughout the United States , but primarily in California , owe an estimated $24 million in federal taxes.

“The promoters and operators of so-called ‘warehouse banks' claim to offer financial privacy. What they are actually offering is a ticket to trouble for themselves and their customers when that privacy leads to tax fraud,” said Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division. “The Department of Justice can and will ask courts to shut down these illegal operations and order promoters to turn over their customer records.”

In a related case pending in federal court in Santa Ana , California , the Justice Department asked the court to hold Hargis in civil contempt and incarcerate him until he complies with a court order requiring him to turn over his customer list. A hearing on the government's motion will be held in Santa Ana on March 15.

In 2002, a federal jury in Portland , Oregon , convicted three individuals for operating a warehouse bank known as the Christian Patriot Association and convicted four other individuals of tax crimes relating to using the warehouse bank. Their appeals of those convictions are pending. In 1993, Judge Richard Matsch of the U.S. District Court for the District of Colorado ruled that a similar warehouse banking scheme, operated nationwide in the 1980s by a group known as the National Commodity and Barter Association, “was clearly established to thwart enforcement of the tax laws.”

The Justice Department has sought and obtained injunctions against a number of tax-scam promoters.

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TaxLawFirm.net is not related to the above mentioned case in any manner. We only provide this real life case to demonstrate how serious the IRS is treating offshore trust abuse issues; including the types of promotions made to help taxpayers such as in the aforementioned example.

For both promoter and victim, if caught, the price can be high. Those caught using trusts to illegally avoid paying taxes, the government must be paid the original taxes with interest plus fines plus an additional penalty of 75% of the original tax. It is very realistic that, when it's all said and done, the person charged with offshore trust abuse could wind up paying more than twice the original tax.

If you have utilized offshore companies, set up bank accounts in an offshore tax haven, or were convinced that an abusive tax shelter was a good idea, we can take action on your behalf. We will work diligently to get you in compliance and try to avoid criminal prosecution. If you have already been contacted by an IRS Special Agent and the IRS is pursuing you criminally, we will try to minimize the damage and aggressively defend your rights. Our law firm performs every type of civil tax audit, including foreign tax audits, and has been successfully defending our clients in the audits, appeals and tax litigation a rena, for over twenty years.

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warehouse banking scam