A Colorado man has admitted to orchestrating a massive tax evasion scheme that cost the government $45 million while also running a separate $8 million investment fraud.
Timothy McPhee of Estes Park pleaded guilty Thursday to conspiracy, tax evasion, and wire fraud charges that could land him in federal prison for up to 30 years.
From 2018 to 2023, McPhee promoted a fraudulent tax shelter using private foundations and trusts. He taught clients nationwide to funnel business income through these entities while claiming personal expenses as deductions.
The scheme allowed clients to pay taxes on just 2% of their actual income. McPhee himself used it to hide over $5 million and dodge $1.8 million in taxes from 2016 to 2021.
Court documents reveal McPhee ignored warnings from accountants and attorneys about the shelter’s illegality. He knowingly instructed clients to file false returns that contradicted IRS guidance.
Starting in January 2023, McPhee launched another scam called the “ROI Cash Flow Fund.” He promised investors 3% monthly returns through foreign currency trading.
Instead of investing as promised, McPhee used new investor money to pay earlier investors. He also spent over $2 million on personal expenses through his trust accounts.
The FBI and IRS Criminal Investigation uncovered both schemes. Trial attorneys from the Justice Department’s Tax Division are prosecuting the case.
McPhee faces sentencing on October 23. The conspiracy and tax evasion charges each carry five-year maximum sentences, while wire fraud could bring 20 years.
Acting Deputy Assistant Attorney General Karen Kelly announced the guilty plea on Friday. A federal judge will determine the final sentence based on federal guidelines and other factors.