A tax shelter sold for fees that often topped $100,000 claimed to protect more than $1.5 billion in income from tax, federal prosecutors say, and the trusts behind it were a sham. Four people have been indicted in the Northern District of Texas over what the Justice Department puts at more than $200 million in estimated tax loss. It is the largest case in a six-week crackdown announced on October 14.
The crackdown, which the department calls its first National Tax Enforcement Surge, covers 76 defendants and more than $490 million in estimated intended loss to the government. The figures describe charges and court actions, and the people charged are presumed innocent.
How the trust shelter allegedly worked
The Justice Department’s announcement names Duncan John MacDonald, Sarah Duren, Richard Ronald Cayce and Thomas Weickgenant. Prosecutors allege the four sold clients a trust arrangement meant to make taxable income vanish on paper. Clients allegedly kept control of their assets while claiming the income had been assigned to the trusts. Some were allegedly encouraged to backdate the trusts and file amended returns asking for refunds.
The fees, the release says, were often more than $100,000 per client. The income that the arrangement was said to shelter added up to more than $1.5 billion.
The case turns on whether the trusts were real. The IRS rule that bears on it is simple: income earned by one person cannot be assigned to another for federal income tax purposes, and a person who keeps control of a trust’s assets is taxed on its income.
The $490 million total is the Justice Department’s estimate of intended loss, and the figure for each charged case can change when the case reaches a plea or sentencing.
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Six weeks, 35 offices, 76 defendants
The surge ran from early September to October 14 and drew on 35 U.S. Attorneys’ Offices. The department counts 23 new actions against 31 defendants with an estimated intended loss above $350 million. A further 39 actions, covering 45 defendants, were trials, guilty pleas and sentencings, with an estimated intended loss of nearly $140 million.
Attorney General Todd Blanche said every dollar stolen through tax fraud is a dollar taken from the American people, and called the cases “only the tip of the iceberg.” Jarod Koopman, chief of IRS Criminal Investigation, said that when taxpayers evade their obligations, “the burden does not disappear, it is shifted to law-abiding Americans.”
Preparers, payroll and trusts
Most of the cases fall into three groups. The first is return preparers. Sherita Booker, a Cleveland preparer, was charged by information with aiding false returns worth $11,806,165 that claimed COVID-era sick leave credits for businesses that did not exist, fuel tax refunds and refunds for supposed prior-year overpayments. In Maryland, Marquis Al Bey pleaded guilty on September 17 to a refund conspiracy involving seven false returns for 2017 through 2021 that sought more than $35 million. Prosecutors say he charged clients a percentage of the refunds. A father and son in Minnesota, LaMar Dazjar Burgess and LaMar Javis Burgess, pleaded guilty to filing at least 300 false returns that claimed at least $9.2 million.
The second group is employers who kept the tax they took from workers’ paychecks. Marty Allen Linville, who ran a trucking company in Arkansas, was sentenced to 20 months and ordered to pay $3.8 million in restitution. Ephantus Mwangi, a Missouri businessman, got 51 months for failing to pay employment taxes for his credit-card processing companies.
The third is trusts. Ronald and Gordon Chrichlow pleaded guilty in New Jersey to filing false 2022 trust returns that claimed tax payments never made. In Florida, McDonald Preval was sentenced to 36 months for false returns for himself and trusts he controlled. Prosecutors say he got more than $580,000, some of it used to pay off his mortgage.
What the figures count
The $490 million is the department’s estimate of intended loss, not money the government has recovered or proven lost. For the 31 newly charged defendants, the amounts are allegations in indictments, informations and complaints. Only the 45 defendants in pleas, trials and sentencings have reached a court outcome.
The Fraud Division that led the surge was created on April 7 and supports a federal fraud task force chaired by Vice President J.D. Vance, according to the release.
When a trust is the sales pitch
The IRS addresses the central claim in its questions and answers on trusts: “Income that is earned by one person cannot be assigned to another for federal income tax purposes.” It adds that when the person who set up a trust keeps control of its income or assets, that income is taxed to that person. The page says trusts cannot deduct personal living expenses.
A taxpayer who is offered a trust to cut a tax bill can compare the pitch with those two rules before paying a fee. The IRS runs a Tax Shelter Hotline at 866-775-7474 and takes reports at irs.tax.shelter.hotline@irs.gov.
The fee and backdating allegations in the Texas case come from the Justice Department’s announcement. The defendants have not been convicted, and the next steps will appear on the court docket in the Northern District of Texas.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
