KC man accused of masterminding tax fraud scheme
Monday, September 26, 2011
KANSAS CITY, Mo. (AP) — Five months after a Kansas City man was permanently barred from filing tax returns, a grand jury this past week charged him and more than a dozen of his associates with taking part in the biggest tax fraud scheme ever tried in Missouri.
In a 72-count federal indictment, federal prosecutors said Gerald A. Poynter, 46, also known as "Brother Jerry Love," used a fraudulent tax scheme to help clients receive hundreds of thousands of dollars in tax refunds to which they weren't entitled.
Thirteen other "associates" or "branch managers" from eight states also are facing federal conspiracy charges related to Poynter's alleged operations. Five, including Poynter, live in the Kansas City area, while the rest are spread out across the country.
In all, Poynter and the alleged co-conspirators attempted to receive $96 million in fraudulent returns from the Internal Revenue Service, although 89 percent of the claims were rejected and the rest resulted in refunds to clients of about $3.5 million, prosecutors said.
"Kansas City was the hub of a nationwide conspiracy that attempted to receive nearly $100 million in fraudulent tax refunds," U.S. Attorney Beth Phillips said. "Federal agents worked diligently to expose the largest false claims scheme ever prosecuted in Missouri. These indictments serve as a warning to anyone who might consider engaging in a similar fraud that such schemes won't be tolerated and their perpetrators will be prosecuted."
Prosecutors said the scheme involved the use of 1099-Original Issue Discount forms, which typically are used by tax filers who must pay taxes on income they receive from bond investments. They say Poynter, his branch managers and office staff prepared and filed at least 284 tax returns, then got a portion of whatever money was refunded, prosecutors said.
Fees paid to Poynter were recorded as a "love donation," they said.
The indictment accuses Poynter and other associates of promoting the tax fraud scheme at meetings in hotels and gatherings in living rooms by telling prospective clients they could "recoup" any debt taken out in their names.
According to the indictment, participants had clients provide financial documents, such as mortgage and loan statements, car payments, bank statements, credit card statements and other records of debt and spending. They then listed those debts on tax returns as investment earnings.
The tax preparers are accused of inflating the amount of taxes on individual returns they claim the government withheld, then filing for refunds — some in excess of $1 million — when none of the clients had earned, or paid taxes on any bond income.
Two other Kansas City area residents were charged in a separate but similar case involving fraudulent tax returns using the 1099-OID forms.
"Tax violations have been erroneously referred to as victimless crimes, but it's the honest, law-abiding U.S. citizen who is harmed when someone attempts to cheat our nation's tax system," said Stephen Boyd, special agent in charge of IRS criminal investigations.
In April, a federal judge granted a permanent injunction against Poynter banning him from preparing or filing federal tax returns for others.
"Poynter's abusive scheme is a version of the repeatedly rejected 'redemption' scheme," U.S. District Judge Howard F. Sachs wrote in his order resolving the government's civil lawsuit against Poynter. "Proponents of commercial redemption claim that the United States government is in possession of money rightfully owned by the taxpayer. ... The scheme employed by Poynter exemplifies a growing trend among tax defiers to rely on the frivolous redemption theory in order to evade tax obligations or obtain other wrongful financial benefits, often using fraudulent IRS Forms 1099."
Poynter represented himself in the civil lawsuit and is expected to do so again in the criminal case, a U.S. attorney's spokesman said.
A message left Friday afternoon at a phone number listed for Poynter was not immediately returned, nor was an email request for comment sent earlier in the day.