WASHINGTON, Oct. 26 /PRNewswire-USNewswire/ -- David Plummer, Spencer Plummer
and Terry Green, operators of a fraudulent tax shelter that offered tax
benefits in connection with the leasing of thoroughbred mares, pleaded guilty
today to a criminal information charging them with one count of conspiracy to
defraud the United States, the Justice Department and the Internal Revenue
Service (IRS) announced.
According to the criminal information and statements made in court, the
defendants called their fraudulent tax product the Mare Lease Program and
marketed it through a company called ClassicStar LLC. David Plummer created
the Mare Lease Program and oversaw the program at ClassicStar. Spencer
Plummer assisted David Plummer in the operation of the Mare Lease Program.
Terry Green was a Certified Public Accountant and assisted investors in the
Mare Lease Program in preparing and filing income tax returns on which they
reported fraudulent deductions. Green also assisted customers in their IRS
audits by creating false and back-dated documents and presenting them to IRS
auditors. The investors in the Mare Lease Program filed tax returns with the
IRS claiming false tax deductions of over $500 million, which resulted in a
tax loss to the Government of over $200 million.
According to the criminal information and statements made in court,
ClassicStar's Mare Lease Program purported to offer wealthy individuals the
opportunity to invest in thoroughbred horse breeding. According to Mare Lease
Program promotional materials, investors leased the reproductive capacity of
specific thoroughbred mares. If the mare had a foal during the time that the
investor held the lease, the investor would own the foal. Mare Lease Program
promoters told investors that they could take deductions on their federal
income tax returns for the losses generated by the thoroughbred horse breeding
operation. These deductions reduced or eliminated the investors' taxes, and
many investors received tax refunds, including refunds for years prior to
their investments. These deductions were fraudulent because, among other
reasons, the Mare Lease Program used fraudulent loans to finance investors'
participation, and the program induced investors to lease thoroughbred mares
that the operators of the program knew ClassicStar could not provide.
According to the criminal information and statements made in court, most
investors financed at least 50 percent of their investments in the Mare Lease
Program through loans from the National Equine Lending Company (NELC), a
purportedly independent financial institution. In fact, NELC was controlled
by ClassicStar. ClassicStar's operators claimed that NELC would transfer
funds to ClassicStar on behalf of an investor to finance his or her investment
in the Mare Lease Program. In reality, NELC had no funds of its own and would
instead accept money from ClassicStar. Typically, ClassicStar transferred
insufficient funds to NELC to finance an investor's entire loan. To conceal
the lack of funds, NELC and ClassicStar repeatedly transferred the same funds
between their bank accounts to create a paper trail that gave the appearance
that the investor's loan was fully funded by NELC. At the conclusion of the
investor's participation in the Mare Lease Program, the investor, often having
made no payments on the supposed loan, had the loan extinguished through
fictitious trades involving an entity that purportedly owned interests in coal
bed methane gas wells.
According to the criminal information and statements made in court, in
addition to the fraudulent lending arrangements of the Mare Lease Program,
ClassicStar sold Mare Lease Program investments knowing that it lacked
sufficient thoroughbred mares to fulfill its contractual obligations to the
investors. To justify the deductions that the investors claimed on their
income tax returns, ClassicStar substituted less-valuable quarter horse mares
for the thoroughbred mares that they had promised.
"U.S. taxpayers who honestly report their income and pay their taxes can rest
assured that those who promote fraudulent schemes that illegally conceal
assets and income will be investigated and prosecuted by the IRS and
Department of Justice," said John A. DiCicco, Acting Assistant Attorney
General of the Justice Department's Tax Division.
"Tax crimes hurt everyone, by depriving the Treasury of funds needed for
important government programs. This nationwide fraudulent scheme is by far
the largest criminal tax case in the history of Oregon, and we are grateful
for the assistance of the Internal Revenue Service in the investigation of
this case," said Acting U.S. Attorney Robinson.
The case was investigated by special agents of the Internal Revenue Service -
Criminal Investigation and is being prosecuted by Assistant U.S. Attorney and
Senior Litigation Counsel Allan M. Garten and Department of Justice Tax
Division Trial Attorney Jay Nanavati.
"The IRS uses all its investigative tools to uncover abusive tax schemes
designed to create fraudulent deductions for investors," said Eileen Mayer,
Chief, IRS Criminal Investigation. "Investment schemes that seem too good to
be true should be a signal to investors to stay clear. The IRS is actively
pursuing promoters as well as investors who knowingly participate in these
types of tax avoidance schemes."
Additional information about the Justice Department's Tax Division and its
enforcement efforts may be found at http://www.usdoj.gov/tax.
SOURCE U.S. Department of Justice
U.S. Department of Justice Office of Public Affairs, +1-202-514-2007, TDD
+1-202-514-1888
