FOR IMMEDIATE RELEASE TAX

TUESDAY, APRIL 3, 2007 (202) 514-2007

WWW.USDOJ.GOV TDD (202) 514-1888

Justice Department and Internal

Revenue Service
Highlight Tax Enforcement Results
WASHINGTON – The Department of Justice and the Internal Revenue Service
(IRS) today announced highlights of their work during the past year to defend and
enforce federal tax laws.

Since 2001, the Justice Department’s Tax Division has brought to justice hundreds
of people who evaded their federal taxes or otherwise violated the internal revenue
laws. The division has obtained hundreds of civil injunctions to stop the promotion
of tax scams and the preparation of false and fraudulent tax returns, and has
criminally prosecuted numerous tax fraud scheme promoters.

To curb the marketing of tax shelters to corporations and individuals, the Justice
Department’s Tax Division has helped the IRS to identify and pursue nearly every
customer who engaged in certain abusive tax shelter transactions, while at the same
time pursuing the professionals who designed, facilitated or accommodated the
underlying tax shelter transactions.

“Taxes are how we pay for what we ask our government to do for us. People who
pay what the law requires deserve the assurance that those who don’t, and those
who promote or facilitate tax evasion, will not get away with it,” said Eileen J.
O’Connor, Assistant Attorney General for the Tax Division. “The Tax Division is
using all available law enforcement tools to identify and punish tax offenders and to
recover tax revenues.”

“The vast majority of Americans pay their taxes honestly and accurately,” said IRS
Commissioner Mark W. Everson. “We enforce the law because people deserve to
know their neighbors and competitors are doing the same.”

Bringing Fraudulent Tax Return Preparation to a Halt

The Tax Division continues to bring civil injunction suits to stop tax preparers who
habitually prepare bogus tax returns. In response to the government’s efforts, courts
across the country have barred tax preparers from preparing inaccurate returns.
Since January 2001, the Justice Department has sought and obtained injunctions
against more than three dozen tax return preparers, including 18 since January 2006.
It expects to obtain many more injunctions throughout the year. The United States
recently has obtained injunctions that barred the following schemes by tax
preparers:

*Filing tax returns that falsely report “zero income”;

*Claiming that only income from a foreign source is taxable, using a spurious
interpretation of Section 861 of the Internal Revenue Code; *Claiming personal
living expenses as business expenses;

*Preparing amended tax returns to claim tax refunds without customers’ knowledge
or consent; and

*Asserting that casino gaming proceeds paid to Native Americans are exempt from
federal income tax.

The Department of Justice also has obtained injunctions against employers who fail
to withhold, account for, and pay over employment and withholding taxes and
against return preparers who prepare related false returns.

Stopping Tax Evasion

During fiscal year 2006, the Justice Department’s Tax Division authorized
prosecutions of nearly 1,200 defendants for tax crimes, an increase of more than 34
percent over the number authorized for prosecution in 2001. The Tax Division’s
criminal enforcement priorities include investigating schemes that involve:

*Using trusts or other entities to conceal control over income and assets;

*Shifting assets and income to hidden offshore accounts;

*Making false statements to the IRS in order to claim tax refunds;

*Selling and promoting fraudulent tax avoidance schemes;

*Using frivolous justifications for not filing truthful tax returns;

*Failing to withhold, report and pay payroll and income taxes;

*Failing to report income on individual and corporate returns; and

*Failing to file tax returns.

*Stopping the Promotion of Tax Fraud Schemes

Since April 2006, the Justice Department and the IRS have vigorously pursued the
promoters of tax fraud schemes to stop their activity and to warn would-be
promoters that promoting tax fraud schemes leads nowhere but to a federal court
injunction or to a long stay in jail.

Since January 2001, the Justice Department has sought and obtained injunctions
against nearly 200 promoters of tax fraud schemes, including 66 since January 2006.
These injunctions have stopped promoters from selling tax evasion schemes on the
Internet, at seminars, or though other means. The tax-scam promoters the
government has sought to enjoin have cost the U.S. Treasury an estimated $2.5
billion, and have had an estimated 500,000 customers. Among the government’s
results in this area are:

In May 2006, David Carroll Stephenson was sentenced to eight years in prison in
connection with his promotion of a tax evasion scheme using “pure equity trust”
organizations.

In June 2006, a federal judge sentenced five defendants, Dennis Poseley (seven
years), David Trepas (five years), Patricia Ensign (18 months), Rachel McElhinney
(16 months), and Keith Priest (18 months), to prison terms for their respective roles
in promoting a tax evasion scheme that used offshore trusts and bank accounts.

On June 22, 2006, District Judge Elizabeth Kovachevich issued an injunction

permanently barring Douglas Rosile, a former certified public accountant whose
clients included Wesley Snipes, from preparing federal income tax returns for others
and from promoting a frivolous tax argument based on Section 861 of the Internal
Revenue Code. Among the documents the government filed in court was a return
submitted to the IRS on behalf of Snipes claiming a bogus $7.3 million tax refund.

In November 2006, a federal judge sentenced Milton H. Baxley II to 18 months in

prison and fined him $10,000 for contempt of court. On August 9, a jury convicted
Baxley on two counts of violating an injunction order barring him from promoting a
tax fraud scheme. In December 2006, a federal judge sentenced Thomas Miller to
nearly four years in prison for conspiring to defraud the United States in connection
with a “pure trust” tax fraud scheme. Miller operated Freedom Education Center, a
business in California that sold anti-tax literature and helped people create bogus
trusts.

Curbing High-End Tax Shelters

During the past year, the Justice Department and the IRS have continued their
vigorous enforcement efforts against the promoters and facilitators of abusive tax
shelters. Abusive shelters for large corporations and high-income individuals have
cost the U.S. Treasury billions annually, according to Treasury Department
estimates. The Tax Division also has had great success in federal court defending
the U.S. Treasury against tax shelter-related claims of large companies and
individual investors. The Tax Division is currently litigating approximately 86 tax
shelter cases or groups of cases, including 47 separate cases involving the Son of
BOSS tax shelter. Among the successes during the past year in this area are the
following:

In December 2006, Utah businessman Chandler S. Moisen pleaded guilty to

conspiracy and wire fraud in connection with a criminal probe of tax shelters
promoted by a group of KPMG, LLP executives. In January 2007, Steven Michael
Acosta, a former KPMG manager, pleaded guilty to four felony tax charges in
connection with his involvement in KPMG’s promotion of tax shelter transactions.

The Supreme Court let stand the decision of the U.S. Court of Appeals for the 6th
Circuit that the COLI (corporate-owned life insurance) program The Dow Chemical
Company used to claim more than $33 million of tax deductions was an economic
sham.

The Supreme Court also let stand the decision of the U.S. Court of Appeals for the
Federal Circuit that the IRS was right to disallow the $375 million loss Coltec
Industries claimed from its “contingent liability” tax shelter.

The U.S. Court of Appeals for the 2nd Circuit held that the IRS properly disallowed
the losses General Electric Capital Corporation claimed from its participation in an
equipment leasing tax shelter, resulting in $62 million in additional income taxes.
The U.S. District Court for the Middle District of North Carolina granted summary
judgment for the United States in the first Lease In - Lease Out (LILO) tax shelter
to go to court, BB&T Corporation v. United States.

The U.S. Court of Appeals for the Federal Circuit ruled for the United States on an
issue raised by tax shelter participants in several tax shelter refund suits in A D
Global Fund, LLC v. United States. The court ruled that the statute of limitations on
the return of a person who participates in a tax shelter partnership does not expire at
least before the statute of limitations on the partnership’s return does.

Coordinated Civil and Criminal Proceedings

The government brings both its civil and its criminal tools to bear in the fight
against tax fraud. An ongoing tax scam causes continuing harm to the federal
Treasury and it leaves participants owing taxes, interest, and often, penalties. The
government does not wait until a criminal case has been developed to take action to
stop the scam. Rather, the Justice Department brings civil injunction suits to stop
both the promotion of tax scams and the preparation of false or fraudulent returns.
Additionally, in appropriate cases, the Justice Department brings criminal charges
against the promoters, preparers, and scam participants to punish them for their
unlawful conduct.

Further details about these and other tax enforcement cases are available on the Tax
Division’s Web site http://www.usdoj.gov/tax/, on the IRS’s Web site
http://www.irs.gov/, and on the IRS Criminal Division’s Web site
http://www.ustreas.gov/irs/ci/.

The Justice Department encourages anyone who has information about suspected
tax fraud to report it to the IRS Web site at http://www.irs.gov and click on the links
“Contact IRS” and “How Do You Report Suspected Tax Fraud Activity.”

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