A federal grand jury in Denver has returned an indictment, which was unsealed today, charging two individuals from Colorado and Texas with conspiring to defraud the United States and assisting in the preparation of false income tax returns. The indictment also alleges that the Colorado man and his spouse evaded their federal income taxes.
The indictment identifies the accused as Timothy McPhee of Estes Park, Colorado, and Larry Conner of Frisco, Texas. According to the indictment, since 2017, McPhee and Conner, along with others, promoted and sold an abusive-trust tax shelter to clients across the country, charging fees ranging from approximately $25,000 to $50,000.
The indictment further alleges that McPhee and Conner advised their clients to assign their income to a series of sham trusts, making it appear as though the income was no longer under their control. However, it is claimed that this trail was false, as clients continued to benefit from and control the income assigned to the sham trusts. The indictment suggests that this scheme resulted in tens of millions of dollars in federal income taxes not being paid to the IRS.
McPhee and Conner allegedly assured clients that they could maintain full control over the assets even after transferring income or personal property to the sham trusts. To facilitate this, they purportedly directed clients to open bank accounts and obtain credit cards in the names of their sham trusts, using these accounts to pay personal expenses. Additionally, McPhee and Conner are said to have advised their clients to transfer real estate and other assets to the sham trusts to avoid paying taxes on any capital gains.
In a separate aspect of the indictment, McPhee and his wife, Marcia Predmore, are charged with using the abusive-trust tax shelter to hide a significant portion of their income from the IRS. McPhee and Predmore are alleged to have created four trusts, opened bank accounts in their names, and paid personal living expenses from those accounts. It is further alleged that they assigned almost all of their income to these sham trusts and transferred multiple real estate properties to one of them before selling the properties. Subsequently, McPhee and Predmore are said to have filed false individual income tax returns with the IRS that did not report the income assigned to the sham trusts.
If convicted, McPhee and Conner face a maximum penalty of five years in prison for conspiring to defraud the United States and three years in prison for each count of aiding and assisting in the preparation of false tax returns. McPhee and Predmore also face a maximum penalty of five years in prison for each count of tax evasion. Sentencing will be determined by a federal district court judge, considering the U.S. Sentencing Guidelines and other statutory factors.
