Four More Co-Conspirators Charged in Alleged Nationwide Abusive-Trust Tax Shelter Scheme

A superseding indictment was returned yesterday by a federal grand jury in Denver charging four people with conspiring with Larry Conner and Timothy McPhee to defraud the IRS. Connor and McPhee had previously been indicted for conspiring to defraud the IRS related to the same scheme in September 2023.

According to the superseding indictment, from February 2018 until September 2023, Marcia Predmore, Roderick Prescott, Suzanne Thompson and Weldon Wulstein allegedly conspired with Conner, McPhee and others to promote, sell and implement an abusive-trust tax shelter scheme. The superseding indictment further charges Thompson and Wulstein with assisting in the preparation of false income tax returns on behalf of clients who used the shelter. Predmore and McPhee had previously been charged with tax evasion related to their use of the tax shelter to conceal their own income from the IRS. Conner and McPhee had also previously been charged with assisting in the preparation of false income tax returns on behalf of clients who used the shelter.

According to the superseding indictment, the shelter was marketed as a way for business owners to avoid paying federal income taxes on nearly all of their business income. Conner and McPhee allegedly instructed clients to use the fraudulent tax shelter by assigning nearly all of their business income to a series of sham trusts and a purported "private family foundation" to create the illusion that the income did not belong to the client. Conner and McPhee then allegedly referred the clients to handpicked tax-return preparers for the preparation of false individual income tax returns that did not report the income assigned to the trusts or that was donated to the foundation. In reality, however, the clients allegedly retained full control and use of that income. Although the income assigned to the sham trusts was reported on tax returns for the trusts, those tax returns allegedly offset the income with improper deductions, including donations, to report $0 in taxes owed.

As to Prescott, the superseding indictment charges that through his business, The Stewardship Institute, Prescott promoted the "private family foundation" that was advertised as the final step of the tax shelter. Prescott allegedly taught about the foundation at workshops he hosted with Conner, McPhee, Predmore and others. Prescott allegedly advised clients how to spend the funds "donated" to their private family foundations for their own personal use and to disguise the transactions to make them appear charitable. Prescott also allegedly oversaw the preparation of the instruments used to create the so-called private family foundations.

The superseding indictment alleges that Conner, McPhee and Predmore referred clients to Thompson for bookkeeping services and Wulstein for return preparation services. Thompson allegedly operated a bookkeeping firm called The CFO Agency; Wulstein allegedly operated a return preparation firm called Wulstein Financial Services. Thompson and her employees allegedly prepared financial statements for clients who used the abusive-trust tax shelter and sent those financial statements to Wulstein for the preparation of false tax returns.

If convicted, each defendant faces a maximum penalty of five years in prison for conspiring to defraud the United States. Conner, McPhee, Thompson and Wulstein also face a maximum penalty of three years in prison for each count of assisting in the preparation of a false tax return. McPhee and Predmore face a maximum sentence of five years in prison for each count of tax evasion. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department's Tax Division made the announcement.

IRS Criminal Investigation is investigating the case.

Trial Attorneys Amanda R. Scott and Lauren K. Pope and Senior Litigation Counsel Corey J. Smith of the Tax Division are prosecuting the case.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.