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CNN Sunday Morning
IRS Cracks Down on Illegal Tax Havens
Aired March 03, 2002 - 07:52 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.
MILES O'BRIEN, CNN ANCHOR: Got your taxes done?
KYRA PHILLIPS, CNN ANCHOR: Ha ha. A friend of mine said she finished hers yesterday and it stressed me out even more.
O'BRIEN: I just got done with last year's.
PHILLIPS: Exactly.
O'BRIEN: I'm not kidding.
PHILLIPS: We just filed the deadline for last year.
O'BRIEN: I just keep going on the deadline. I milk it for all its worth. So I promise my accountant the other day that I wouldn't be the last one this year. He started laughing at me.
PHILLIPS: Well, Brooks Jackson has a lesson for all of us to learn in this story.
(BEGIN VIDEOTAPE)
BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Think you've got tax problems? Come to Mount Shasta, California. Talk to Daniel Bullock. This doctor's headed for federal prison because he listened when a crooked promoter told him he could beat the IRS.
DANIEL BULLOCK: I have two more weeks here at home. And then I have 18 months in prison.
JACKSON: 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, Lonnie Crockett, a promoter from bountiful Utah, who had already been convicted of falsifying tax returns, though Bullock didn't know that. It sounded legal.
BULLOCK: He was very careful to underline the proper IRS codes and the rules that this followed.
JACKSON: But now Crockett has been convicted again, because in practice, his scheme was money laundry, hiding taxable income. In a typical transaction, Bullock sent $12,500 from his medical practice in California to a trust in Utah controlled by Crockett. Crockett deducted a fee and sent the rest to a numbered account in Austria, then brought it back to Utah, subtracted another fee, and sent the rest to Bullock's family trust back in California, tax free and criminal.
The scheme went on for years. Bullock paid several thousand dollars in fees to Crockett, but skipped paying at least $156,000 in federal income taxes until his bookkeeper turned him in and the IRS came knocking.
BULLOCK: 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 isn't alone. Promoters of phony tax trusts are proliferating. Bullock's own attorney works full-time defending cases just like his.
JENNIFER SODARO, TAX ATTY.: There's just always hundreds of people out there, thousands of people, that have these trusts right now, as we speak.
JACKSON: With crooked schemes on the rise, IRS criminal investigators and federal prosecutors are cracking down.
BEN WAGNER, ASST. U.S. ATTORNEY: There really has been a focus on trying prosecute, not only the promoters of these things, but those taxpayers, those clients of the promoters who knowingly, willingly evade taxes through utilizing the services of those promoters.
JACKSON: And judges are running out of patience.
(on camera): Two other Mount Shasta doctors also evaded taxes using the same phony trust as Bullock. But they said they were not aware they were breaking the law when they did it. The judge didn't buy that, gave them even longer prison sentences than Bullock.
"You cheated your country," he said. Said it was a scheme any 10-year old would know was obviously illegal.
(voice-over): 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. But he says facing prison has made him grow spiritually.
BULLOCK: The good news is I've learned a lot about myself. And so, I can go there knowing that God has a purpose for me there. And there's someone there who's going to need some help.
JACKSON: He's telling his story now to warn others not to make the same mistake he did.
BULLOCK: I know there's other people out there that are thinking about things like this. It wasn't two days ago that a doctor was asking me how a tax haven country could be used to protect his assets from a lawsuit. And I have allowed a clear answer now. JACKSON: And that is?
BULLOCK: Don't get involved in tax haven countries.
JACKSON: And get independent legal advice.
SODARO: Any group that sets forth these principles that you can avoid tax entirely, that you can send money to foreign jurisdictions and avoid tax, that's just the biggest red flag that there can be. They should run for the hills.
JACKSON: Brooks Jackson, CNN, Mount Shasta, California.
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