April 3, 2010
April 3, 2010
Eight promoters of a fraudulent tax and debt elimination scheme were convicted of tax, wire fraud and money laundering charges by a federal jury following a month long trial in Pensacola, Fla., the Justice Department and Internal Revenue Service ( IRS ) announced today. The defendants, who were indicted in September 2008, promoted fraudulent schemes through Pinnacle Quest International, also known as PQI and Quest International.
The charges and convictions were as follows:Claudia Constance Hirmer and Mark Steven Hirmer of Niceville, Fla., were each convicted of conspiracy to defraud the United States and to commit wire fraud, conspiracy to commit money laundering, and tax evasion. Eugene “Gino” Joseph Casternovia of Ashland, Ore., Arnold Ray Manansala of Renton, Wash., Dover Eugene Perry of Renton, Wash., and Michael Guy Leonard of Troy, N.Y., were each convicted of conspiracy to defraud the United States and to commit wire fraud, and conspiracy to commit money laundering.
Mark Daniel Leitner of Fairport, N.Y., and Arthur Ramirez Merino of Renton, Wash., were each convicted of conspiracy to defraud the United States and to commit wire fraud.
According to the evidence presented during trial, PQI was an umbrella organization for numerous vendors of tax and credit card debt elimination scams. Some of the PQI vendors, such as Southern Oregon Resource Center for Education ( SORCE ), sold bogus theories and strategies for tax evasion. For fees starting at $10,000, SORCE assisted its customers in the creation of a series of sham business entities in the United States and Panama. Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a purported “reliance defense” that consisted of a paper trail of frivolous correspondence which a client could allegedly use as evidence of good faith if the client were prosecuted.
At trial, the government established that other PQI vendors sold fraudulent schemes for eliminating credit card debt, the most successful of which was Financial Solutions, owned and operated by defendant Arthur Merino. Financial Solutions charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt. The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy.
According to the evidence, another PQI vendor, MYICIS, operated as a sophisticated, computerized “warehouse bank.” MYICIS was a single bank account in which customers pooled their money. MYICIS was promoted to PQI’s clients as a method to hide their assets from the IRS as a result of the pooled nature of the account. MYICIS had 3,000 clients and approximately $100 million in deposits over a three year period.
According to the evidence presented during trial, PQI purported to sell only CDs and tickets to offshore conferences. However, PQI acted as a gateway to its fraudulent vendors. PQI clients seeking the tax evasion and debt elimination vendors could only access the product if they joined PQI first. The cost of membership ranged from $1,350 to $18,750, depending on the level of access. In May 2008, a federal district court issued a preliminary injunction against the promoters of Pinnacle Quest International.
As established at trial by the government, defendants Claudia Hirmer, Dover Perry, Arnold Manansala, Michael Leonard and Arthur Merino were members of the executive council of PQI. The executive council selected vendors, guided the day-to-day operations of the company, planned offshore conferences, and fielded customers complaints, which were voluminous. Defendant Mark Hirmer managed PQI’s finances on a day-to-day basis. Between 2002 and 2008, PQI had over 11,000 members throughout the United States. Executive council member Joseph McPhillips pleaded guilty prior to trial.
According to the evidence presented, none of the defendants filed tax returns while they were involved in the PQI conspiracy. Claudia Hirmer and Mark Hirmer were convicted for evading the payment of over $2 million in income taxes, penalties, and interest for years 1996 through 2001. The Hirmers sought to evade the payment of their tax liability in numerous ways, including extensive use of cashier’s checks and cash and extensive use of nominee companies and offshore accounts. Additionally, the Hirmers attempted to strip the equity out of one of their homes by granting a bogus mortgage to a Panamanian nominee entity they controlled.
Judge Rodgers scheduled sentencing for July 6, 2010. Claudia Hirmer and Mark Hirmer each face a maximum sentence of 30 years in prison and a maximum fine of $1 million. Casternovia, Manansala, Perry, and Leonard each face a maximum sentence of 25 years in prison and a maximum fine of $750,000. Leitner and Merino each face a maximum sentence of five years in prison and a maximum fine of $250,000.
“Today’s convictions send a powerful and unequivocal message to those who seek to evade and help others evade their taxes,” said Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division. “Those who promote tax fraud schemes will be investigated, prosecuted and convicted, and they also face substantial prison sentences.”
“The use of abusive trust schemes and fraudulent debt elimination tactics intended to conceal income from the IRS isn’t tax planning; it’s criminal activity. There is no secret formula that can eliminate a person’s tax obligations,” said Victor S. O. Song, Chief, IRS Criminal Investigation. “Today’s verdict reinforces our commitment to every American taxpayer that we will identify and prosecute those who promote illegal financial transactions designed to evade the payment of taxes.”
Judge Rodgers set aside the jury verdict as to a ninth defendant, Robert Pendell, and acquitted him of all counts.
Acting Assistant Attorney General DiCicco commended the IRS – Criminal Investigation Division special agents who investigated the case, as well as Tax Division trial attorneys Michael J. Watling, Adam F. Hulbig, and Jonathan R. Marx, who prosecuted the case.