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Denver federal grand jury indicts four more conspirators in elaborate tax fraud scheme

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(The Center Square) – A federal grand jury in Denver charged four people with conspiring to defraud the Internal Revenue Service, the U.S. Department of Justice announced on Thursday.

A superseding indictment was returned alleging Marcia Predmore, Roderick Prescott, Suzanne Thompson and Weldon Wulstein conspired with Larry Conner and Timothy McPhee, who were indicted in September 2023 on federal fraud charges for allegedly assisting in the preparation of false income tax returns. McPhee, from Estes Park, was also charged with his spouse for evading personal federal income taxes. Conner is from Texas.

Between February 2018 and September 2023, the four allegedly conspired with McPhee and Conner to promote, sell and implement an abusive-trust tax shelter scheme, according to information from the DOJ. Thompson and Wulstein were also charged with assisting in the preparation of false income tax returns on behalf of clients who used the shelter. McPhee and Predmore were previously charged with tax evasion for allegedly using the tax shelter to hide their income from the IRS.

The indictment stated the shelter was marketed to business owners as a method to avoid paying federal income taxes on almost all business income. Clients were allegedly instructed by Conner and McPhee to use the fraudulent tax shelter by stating almost all their business income was assigned to a series of sham trusts and a purported “private family foundation.” The allegations state it created the appearance the income didn’t belong to the client.

The clients were then referred to tax preparers selected by Conner and McPhee, according to court documents. Those tax preparers created false individual income tax returns with income assigned to the trusts or donated to the foundation. The clients allegedly had full control and use of the income. Even though the income assigned to the sham trusts was reported on tax returns for those trusts, the tax returns allegedly offset the income with improper deductions and donations to allow the filing to show no federal tax was owed.

Prescott’s business, The Stewardship Institute, was promoted as the private family foundation in the tax shelter scheme, according to the superseding indictment. Prescott allegedly instructed clients to spend funds on their own personal use, but allocate them to their private family foundations to make them appear as charitable contributions.

Court documents state Prescott allegedly taught the foundation strategy at workshops held with Conner, McPhee, Predmore and others.

Conner, McPhee and Predmore referred clients to Thompson for accounting services and Wulstein for tax preparation, according to allegations in the superseding indictment. Thompson and her employees allegedly prepared financial information for clients who used the abusive-trust tax shelter and then sent those statements to Wulstein, who prepared false tax returns, according to court documents.

Each defendant, if convicted, faces a maximum penalty of five years in prison for conspiring to defraud the federal government. Conner, McPhee, Thompson and Wulstein each face a maximum penalty of three years in prison for each count of assisting in preparing a false tax return. McPhee and Predmore could be sentenced to a maximum of five years in prison for each count of tax evasion.