LAS VEGAS -- A former lawyer and author pleaded guilty to felony conspiracy, tax and identity theft charges in a scheme to help individuals hide their income and assets from the Internal Revenue Service and other creditors, Nevada's U.S. Attorney Daniel Bogden said Tuesday.
William S. Reed, 61, of Santa Barbara, Calif., pleaded guilty Monday to conspiracy to defraud the United States, aggravated identity theft and attempt to evade or defeat taxes. He is scheduled to be sentenced May 14 by Senior U.S. District Judge Philip Pro. Reed faces up to 12 years in prison and $750,000 in fines.
Reed, Wendell L.Waite and Richard C. Neiswonger were indicted in July for a scheme in which it is alleged they may have made more than $60 million. Waite and Neiswonger are awaiting trial.
The indictment alleges that from 1998 to 2006, the defendants enriched themselves through the sale of services and products designed to assist individuals in concealing their assets from the IRS and creditors.
Reed is a former Colorado attorney whose license to practice was suspended by the Colorado Supreme Court in 1997 for engaging in misrepresentations and dishonesty. Reed owned at least one residence in Las Vegas, and wrote the book, "Bulletproof Asset Protection." Neiswonger was engaged in sales and marketing ventures and resided in Las Vegas. Waite resided in Las Vegas and was a licensed certified public accountant in Nevada, California and Utah.
According to Reed's plea agreement, in October 1998 he and Neiswonger formed Asset Protection Group in Nevada. From 1999 to mid-2006, the company operated in Las Vegas, where it sold a business opportunity program to consumers nationwide. Consumers purchased the "asset protection" program for $9,800 and became the company's "consultants." The consultants then sold the asset protection service to clients who wished to conceal assets from potential litigants and creditors, as well as government agencies. The consultants received a portion of the fees paid by the clients.
The service allowed clients to place funds in bank accounts that were held in the names of nominees, and created and maintained domestic corporations and offshore international business companies with obscured ownership. The service sold "friendly liens," which created the false impression that a client had little or no equity in a real property. The service also marketed, with the assistance of Waite's accounting company, tax-saving Nevada corporations designed to "shift income" from a business outside Nevada to a Nevada corporation for the purpose of evading state and federal taxes.
The company allegedly sold the business opportunity training program to at least 1,000 people for about $10,000 each, created roughly 2,500 disguised ownership corporations in Nevada for $795 each, opened more than 900 disguised ownership corporate bank accounts, and prepared more than 400 fraudulent liens. Waite allegedly received more than 180 corporate tax referrals from the company and prepared more than 400 tax returns. From 2003 to 2006, the company allegedly received more than $63 million in deposits, made more than $62 million in withdrawals through one of its bank accounts, and sent more than $11 million offshore.
The Federal Trade Commission intervened in the company's operations in July 2006. In 2007, the U.S. District Court in the Eastern District of Missouri entered a permanent injunction against the company, prohibiting it from marketing the business opportunity training program.
In September 2010, Reed stipulated in U.S. Tax Court that he owed more than $13 million to the IRS. Between then and late 2011, IRS Criminal Investigation agents determined that Reed made numerous false statements about his assets, income, and place of residence. In December 2010, Reed transferred money from a secret offshore account to an account controlled by Reed but held in the name of his father. Between December 2010 and May 2011, Reed made deposits into his son's bank account.
In July 2011, following Reed's arrest in southern California, agents discovered that he had hidden more than $70,000 in cash in his vehicle. In September 2011, Reed told the IRS he had offshore accounts containing more than $1 million in Lichtenstein, Luxembourg and the Turks & Caicos Islands. IRS agents that month also found $427,900 in a Las Vegas storage unit that Reed held under a false name.
The case is being prosecuted by Assistant U.S. Attorney J. Gregory Damm.