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CNN Live Today

Congress Holding Hearings on Tax Fraud

Aired April 11, 2002 - 10:26   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: All right, check the calendar. It's tax time and the filing deadline is just a few days away. As always, there will be more than just a few people out there who are going to try to cheat the government, but be warned. The government is watching, or at least it's trying to now.

The Senate Finance Committee this hour is having some hearings with the intriguing title, "Schemes, Scams and Cons." You are seeing some live pictures right coming from that hearing. This hearing is all about tax fraud, which is a growing problem for the IRS. And our Brooks Jackson joins us now from Washington. He has been taking a look at that issue for us -- good morning, Brooks.

BROOKS JACKSON, CNN CORRESPONDENT: Good morning, Leon. Well, the star witness at that Senate hearing, the man you just saw pictured, is a California surgeon, who is now in federal prison for tax fraud. His name is Daniel Bullock (ph). I spoke to him several weeks ago before he began serving his time. And the story he told is becoming more and more common.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: I have two more weeks here at home, and then I have 18 months in prison.

JACKSON (voice-over): It sounded so convincing, a system of trust, supposedly legitimate, but in the eyes of the law, an elaborate scam, all arranged by this man.

UNIDENTIFIED MALE: Now, I create a trust.

JACKSON: Lonnie Crocket (ph), a promoter from bountiful Utah, who had already been convicted of falsifying tax returns.

In a typical transaction, Bullock sent $12,500 from his medical practice in California to a trust in Utah controlled by Crocket (ph). Crocket deducted a fee and sent the rest to a numbered account in Austria, then brought it back it Utah, subtracted another fee and sent the rest to Bullock's (ph) family trust back in California, tax-free and criminal.

The scheme went on for years. Bullock paid several thousand dollars in fee to Crocket, but skipped paying at least $156,000 in federal income taxes, until his bookkeeper turned him in and the IRS came knocking.

UNIDENTIFIED MALE: My 17-year-old daughter answered the door to some armed federal agents from the criminal investigation division, who forced the door open and came in and began going through all of my private books and papers and told her she couldn't call her dad. And another group went to my office and seized papers, and that was a bad day.

JACKSON: Bullock has packed up his medical office. His license to practice is suspended. The IRS wants back taxes plus interest. He and his wife may lose their house. He is telling his story now to warn others not to make the same mistake he did.

(END VIDEOTAPE)

JACKSON: And, Leon, if you think that is an isolated story, we need to think again, because the news that's emerging from these hearings today is frankly shocking. There is testimony that the IRS is now estimating that 740,000 taxpayers a year have used abusive schemes. That was the number in year 2000, the last one that they really have a count on. The IRS was estimating $20 to 40 billion a year was lost to offshore schemes alone, like the one that we just saw.

But that was before the IRS found that many Americans, more than they thought, have credit cards on offshore banks in tax haven countries, and they are now estimating that 1 to 2 million Americans are using bank accounts in tax haven countries. Some say that's inflated, but clearly there is more than the IRS thought before.

There is going to be testimony later this morning from an IRS consultant, who is estimating that the loss just to offshore schemes is $70 billion a year. And, Leon, that's money that honest taxpayers have to make up.

HARRIS: Boy, bit time, yes. Offshore schemes are not just for Enron anymore, huh? Brooks Jackson, thanks a lot. We'll talk with you about this and maybe some more pleasant things down the road, buddy -- take care.

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