Friday, June 11, 2004
Copyright © Las Vegas Review-Journal

U.S. gets names of tax customers

A federal bankruptcy judge in Las Vegas on Thursday gave the U.S. Justice Department access to the identity of 640,000 former customers of the National Audit Defense Network, a tax advisory service accused of causing $324 million in underpayment of income taxes.

These customers, who are located across the country, will be sent letters, advising them how to amend their tax returns to correct allegedly improper past income tax deductions and credit.

The action is the result of a permanent injunction ordered Thursday by bankruptcy Judge Lloyd King, a visiting judge from Hawaii, against NADN, a Las Vegas-based telemarketing firm. As part of the injunction, the Justice Department was given access to the names of NADN customers.

In the past, the government has audited taxpayers on lists like NADN's and, in some cases, pursued criminal charges against people discovered through the lists, a government source said.

"Shutting down a tax scam promotion prevents further harm to the tax system. But it is only step one," Eileen O'Connor, assistant attorney general for the Justice Department's Tax Division, said in a statement.

"In the next steps, the Department of Justice and the Internal Revenue Service will seek to repair the harm by following the scam to its users and seeking to recover the losses it caused to the federal treasury," she said.

The government accused NADN of selling abusive tax shelters, such as encouraging taxpayers to take business tax deductions without regard to whether they had a business. The injunction prohibits NADN from selling questionable tax schemes and from preparing federal income tax returns.

NADN closed on May 27. It earlier filed for Chapter 11 bankruptcy, which allows companies to reorganize their operations, but the company converted the case to Chapter 7 for liquidation of assets on that date.

The Justice Department continues to seek permanent injunctions against 10 other defendants in the suit: Weston Coolidge, NADN's former president; Al Rodrigues, NADN's former general manager; Robert Bennington, NADN's former owner; Adam Mangabang, a former NADN sales manager; Christine Reid, a former NADN employee; Mary Orie, NADN's former return-preparation department manager.

Also, the government is pursuing a permanent injunction against ALR Inc., operating as Success Matrix Group; Lee Panelli; Ric Klingenberg; and Jeff Klingenberg.

The other six defendants named in the lawsuit, Oryan Management and Financial Services, Robert Goetsch, Daniel Porter, Joseph Prokop, Michelle Herandez, and ADA Adventure Inc., agreed to a permanent injunction, which was entered by a Nevada federal court in May.