A Rolls-Royce Ghost, a luxury yacht and more than $200 million in alleged federal tax losses are at the center of a sprawling fraud case involving four Texas residents.
Federal prosecutors say Duncan John MacDonald, Sarah Duren, Richard Ronald Cayce and Thomas Weickgenant promoted a fraudulent trust scheme that sheltered more than $1.5 billion in income from taxation. Clients allegedly paid fees often exceeding $100,000 for arrangements that allowed them to avoid taxes while retaining control of their money and assets.
In a separate alleged fraud connected to the tax shelter business, prosecutors say MacDonald diverted $2 million in investor funds to purchase a Rolls-Royce Ghost and make a down payment on a yacht.
A federal grand jury in Dallas indicted the four defendants on September 22, according to an October 16 Justice Department announcement.
How the alleged tax shelter worked
Prosecutors say the defendants sold high-income clients complex trust arrangements that purportedly shielded approximately 90% of their income from taxation while allowing them to retain the benefits and control of their assets. Fees often exceeded $100,000 per client, according to a release.
The defendants allegedly told clients they could transfer income into the trusts and defer taxes indefinitely. They also allegedly encouraged some clients to backdate trust documents and seek refunds through amended tax returns.
Weickgenant allegedly prepared false returns and obstructed IRS audits, including by instructing clients not to speak with investigators. Prosecutors say he encouraged at least one client not to comply with a federal court order enforcing an IRS summons.
Rolls-Royce and yacht allegations
MacDonald and Duren, whom federal officials identify as common-law spouses, allegedly concealed millions of dollars in tax shelter fees through trusts and accounts held in other people’s names. Cayce allegedly failed to report millions of dollars in fees from a distributorship that licensed the trust arrangements.
Prosecutors say MacDonald solicited the money for a business supposedly developing digital trusts, but allegedly spent it on personal luxury purchases instead.
The Justice Department says MacDonald was subject to a court injunction barring him from selling securities not registered with the Securities and Exchange Commission when he solicited the investments.
Federal charges and potential penalties
All four defendants face one count of conspiracy to defraud the United States, punishable by up to five years in prison if convicted. MacDonald, Cayce and Weickgenant face charges of aiding in the preparation of false tax returns, carrying up to three years per count. Weickgenant also faces a charge of corrupt interference with the IRS, punishable by up to three years.
MacDonald and Duren face tax evasion charges carrying up to five years per count. Cayce faces four counts of filing false returns, each carrying a maximum three-year sentence. MacDonald also faces two wire fraud counts, punishable by up to 20 years each, and three counts of transactions involving criminally derived property, punishable by up to 10 years each, according to the Justice Department.
IRS Criminal Investigation is handling the case. The charges are allegations, and all four defendants are presumed innocent unless proven guilty beyond a reasonable doubt.
