An American Indian admits to promoting the charitable contribution tax scheme
NEW YORK, July 12 (IANS) An American Indian financial planner from Cleveland has pleaded guilty to conspiracy to defraud the US government as well as aiding and abetting the filing of a false tax return.
Federal prosecutors charged Rao Garuda, president and CEO of the Associated Concepts Agency (ACA), last month of providing tax shelter to wealthy clients by making it look like they contributed to a charity.
According to court documents and statements filed in court, Garuda engaged in a scheme—the Advanced Inheritance Plan or Final Tax Plan—to help high-income individuals illegally lower their taxes by using a scheme orchestrated, marketed, and sold by the conspirators.
ACA’s former Chief Operating Officer previously pleaded guilty to conspiracy to defraud the United States on September 26, 2022.
To accomplish the scheme, Garuda, his co-conspirators, and other accomplices instructed clients to transfer assets to the LLC in exchange for a 100 percent ownership interest in the LLC; The assignment of the proprietary interest to a charity controlled by the conspirators, and the claim of a charitable contribution tax deduction for the alleged donation.
Garuda and others marketed the scheme as a way for customers to receive a tax rebate without giving up control of the LLC or its assets, a statement from the Department of Justice said.
After the scheme is implemented, clients can access the assets within the LLCs through tax-exempt loans.
Garuda marketed the scheme despite being warned by several lawyers over the years that the scheme was illegal, such as one lawyer calling the scheme “clearly fraudulent”.
Garuda and co-conspirator also helped clients claim charitable contribution tax cuts after the end of the tax year by filing documents retroactively to make it appear as if the clients carried out the scheme a year earlier.
To do this, Garuda and others directed the clients to use pre-existing limited liability companies (sometimes referred to as “Shelf LLCs”) that the co-conspirator had set up and formed at the end of the previous year and documents dated to show as if the clients owned and acquired equity interests in the Shelf LLCs in the year the previous.
For his part in the scheme, Garuda caused or intended to cause a tax loss of more than $2.7 million, which he agreed to pay as compensation to the United States.
The Department of Justice filed a civil suit against his co-conspirator in 2018 to prevent him from organizing, marketing and selling the scheme.
Subsequently, Garuda, his co-conspirator, and other associates sought to derail the case by providing agents with forged documents dated retroactively to be turned over to the government in response to the civil subpoenas.
Garuda is scheduled to be sentenced on November 14, 2023, and faces a maximum sentence of five years in prison for conspiracy to defraud the United States and three years in prison for false return.
He also faces a period of supervised release, compensation and financial penalties.
A Federal District Court judge will determine any sentencing after considering US sentencing guidelines and other legal factors.
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