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Sunday, March 15, 2015

THREE "TAX BREAK 2000" DEFENDANTS SENTENCED TO PRISON FOR TAX FRAUD

FROM:  U.S. JUSTICE DEPARTMENT
Wednesday, March 11, 2015
Ex-Casino Owner, Nevada Businessman and Former NFL Player Sentenced to Prison in Massive Tax Fraud Scheme
Court Orders More than $35 Million in Restitution

A former casino owner from Henderson, Nevada, a former businessman from Las Vegas and a former NFL punter from Upland, California, were sentenced yesterday in U.S. District Court in Las Vegas to serve prison time and ordered to pay more than $35 million in restitution for conspiracy and fraud related to their promotion of a fraudulent tax product through the now-defunct National Audit Defense Network (NADN), announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Alan Rodrigues, NADN’s former general manager and executive vice president, was sentenced to serve 72 months in prison to be followed by three years of supervised release and to pay a $2,000 special assessment by U.S. District Court Judge Miranda Du of the District of Nevada.  Rodrigues was ordered to pay restitution of more than $35 million to customers of NADN who purchased the fraudulent tax product.  Weston Coolidge, a businessman who previously served as NADN’s president, was sentenced by Judge Du to serve 70 months in prison followed by three years of supervised release, and to pay a $2,000 special assessment for his part in the fraud.  Coolidge was also ordered to pay restitution of more than $35 million to victims of the fraud.  Joseph Prokop, who previously served as the National Marketing Director for Oryan Management and Financial Services, a company affiliated with NADN, was sentenced to serve 18 months in prison to be followed by 30 months home confinement and three years of supervised release.  Prokop was also ordered to pay a $1,800 special assessment and restitution to victims of more than $35 million.  At sentencing, Judge Du found that the defendants were responsible for fraud losses of more than $36 million and an intended tax loss of more than $60 million.

On May 27, 2014, after a six-week jury trial, the three defendants were convicted of one count of conspiracy to defraud the United States, 13 counts of aiding and assisting in the preparation of false income tax returns and four counts of mail fraud.  Rodrigues and Coolidge were each convicted of an additional two counts of aiding and assisting in the preparation of false income tax returns.

“Business professionals who design, market and sell fraudulent tax products by criminally exploiting select provisions of the tax code will be prosecuted to the full extent of the law,” said Acting Assistant Attorney General Ciraolo.  “The prison sentences handed down yesterday against the defendants demonstrate that the Department of Justice is committed to holding individuals responsible for their criminal conduct.”

The evidence at trial established that through NADN, the defendants promoted and sold a product called Tax Break 2000 to customers throughout the United States.  NADN began to promote and sell Tax Break 2000 in early 2001.  Tax Break 2000 purported to be an online shopping website.  The defendants falsely and fraudulently told customers that buying the product would allow them to claim legitimate income tax credits and deductions under the Americans with Disabilities Act (ADA) by modifying the website each customer was provided to make it accessible to the disabled.  NADN charged $10,475 for the product to maximize the fraudulent income tax credits and deductions that individuals would claim on their tax returns.  Although the price of the product that was claimed on the tax returns was $10,475, the customers only paid between $2,000 and $2,695 out-of-pocket.  The remainder of the cost was covered by a promissory note that customers were not expected to repay.

The defendants knew that the websites provided to customers made little, if any, money from sales commissions and that they did not entitle the purchaser to either a tax credit or any deductions.  The defendants nonetheless taught and directed the tax return preparers working for NADN to prepare thousands of tax returns for customers that claimed the fraudulent tax credit and deductions.  When special agents of the Internal Revenue Service (IRS) began to investigate Tax Break 2000 and NADN, the evidence showed that the defendants sought to cover up the fraud by creating false IRS Forms 1099 that reported fictitious income to make it appear that the websites were in fact earning money.

From 2001 through approximately May 2004, NADN sold the Tax Break 2000 product more than 18,000 times to thousands of customers located throughout the United States.  As a result of the defendants’ fraud, thousands of NADN customers were audited by the IRS.  On April 13, 2004, the Tax Division filed a civil complaint seeking to enjoin, among others, NADN, Rodrigues, Coolidge and Prokop from selling fraudulent tax schemes, including Tax Break 2000.  NADN ceased operations in May 2004.

“We view schemes like Tax Break 2000 as organized tax evasion” said Special Agent in Charge John Collins of IRS Criminal-Investigation (IRS-CI).  “It is a top priority for the IRS to stop promoters of these harmful schemes.  The public should remember the old saying ‘if it sounds too good to be true, it probably is.’  Instead of being a tax break this fraudulent product cost the victims much more in the end with interest and penalties.”

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-CI who investigated the case.  She also commended the substantial efforts of former Trial Attorneys Timothy J. Stockwell and Katherine L. Wong, and Paralegal Larry Garland of the Tax Division, who prosecuted the case, and Trial Attorney Mark L. Williams of the Tax Division, who assisted with sentencing.  Acting Assistant Attorney General Ciraolo thanked the U.S. Attorney’s Office of the District of Nevada in Las Vegas for their substantial assistance.