Fraud investigation linked to earlier tax scam


An FBI investigation into three telemarketing companies suspected of defrauding small businesses has uncovered links to a past nationwide tax scheme that cost the government hundreds of millions of dollars in lost revenue.

FBI agents raided Silver State Holding Co., SBA Consulting Services and Foundation Research Inc. on Oct. 13 looking for evidence the companies defrauded struggling businesses across the country by falsely promising help to obtain federal grants, including economic stimulus money.

The brains behind the companies, Mark Bausch, a fledgling rapper who legally changed his name last November to Mark Eting (a play on the word marketing) and telemarketing expert Alan Rodrigues, were tied to a Las Vegas company the Justice Department accused in 2004 of unlawfully persuading tens of thousands of Americans to avoid paying more than $324 million in taxes.

That firm, the National Audit Defense Network, which had filed for bankruptcy, shut its doors after Justice filed a lawsuit to stop its sale of fraudulent tax schemes. Its co-founder, Robert Bennington, later committed suicide.

The government alleged the NADN ran a "tax-scam boiler" that sold bogus websites, home-based businesses and incorporation packages designed to help clients claim improper tax deductions and credits. Thousands of clients said they paid for services they never received, and a top IRS official called the scheme "truly staggering."

In its lawsuit, the Justice Department identified Rodrigues as the NADN's general manager of daily operations. Rodrigues, 51, and two other NADN executives were indicted on 21 counts of tax fraud in January 2009. That case is pending. Bausch, 36, was not named in the suit or the indictment, but in 2004, The New York Times said he was described in court papers as an NADN employee.

In June 2005, William Leonard, Jr., the NADN bankruptcy trustee, alleged that the company fraudulently funneled $290,000 to Bausch. The trustee obtained a default judgment but it was dropped after Bausch himself filed bankruptcy.

In his Chapter 7 bankruptcy petition, Bausch gave his 2003 income from NADN as $155,000. He listed $1.2 million in debts, including $60,000 to the IRS, and $40,810 in assets.

The IRS remains interested in Bausch and Rodrigues. Paul Camacho, special agent in charge of the IRS Las Vegas criminal investigation field office, confirmed his agency participated in the FBI raid but declined further comment.

Bausch seems to have made a financial comeback since his bankruptcy. State records show he has started a variety of businesses under his old and new names, including a record studio and several grant writing firms that use telemarketing techniques to help businesses find federal funding.

Bausch's self-produced rap CD, "Operation Medication," was released under the name Mark Eting in February. He appears in an Internet ad pitching his talents to "East Coast" rap executives, including Sean "P Diddy" Combs. In the ad, Bausch bills himself as a "major independent artist" who grew up in Los Angeles and is "straight West Coast."

The three grant writing companies raided by the FBI were spin-offs of Company Funds, Inc., which Bausch incorporated on Aug. 5, 2008.

Neither Bausch nor Rodrigues are officers of Silver State Holding, Foundation Research or SBA Consulting Services. But attorney Dan Anderson, who provided legal advice to Company Funds, said that he believed the companies inherited their business from that firm, and that Bausch and Rodrigues were involved in the new companies.

"As far as I was aware, the three companies were conducting business in the ordinary course and were servicing their clients consistent with their contracts," Anderson said.

Bausch declined comment on the FBI raid, Anderson said. Defense lawyer Karen Winckler, representing Rodrigues, also declined to comment.

The exact roles of Bausch and Rodrigues in the companies under investigation is unclear, according to those familiar with them.

Bausch is described mainly as a "concept guy" who received a handsome share of profits while not always involved in daily operations. Rodrigues is described as a marketing consultant or sales manager who perfected the client pitch.

The two men aren't alone in attracting FBI attention in recent months. Authorities say Southern Nevada is a hotbed of those who prey on small businesses seeking financial help to stay afloat, and that dozens of area firms are suspected of stealing millions of dollars.

Typically, the companies ask for money up front and then solicit more fees while promising to help the businesses get through the federal funding process, former employees have told the Las Vegas Review-Journal. The firms often change names, incorporate as new companies and move offices to stay ahead of authorities.

A state court lawsuit earlier this year also sheds light on Bausch's dealings at Company Funds.

Stephen Gilmore, owner of a commercial development and consulting firm, filed a breach of contract suit in April against Bausch and Kenneth Tobin II, who is listed in state records as the president of Company Funds.

Tobin, who is also named in records of other companies associated with Bausch, filed for bankruptcy in 2005. On his Chapter 7 petition, he said he earned roughly $1,400 a month working in security for a small casino company. He could not be reached for comment.

Gilmore alleged that Bausch reneged on a 2008 agreement to allow him to buy into the company and any future businesses Bausch and Tobin created. The agreement was part of a $100,000 loan Gilmore made to Company Funds, which was later repaid. Gilmore also bought Bausch a $60,000 Cadillac Escalade.

The deal soured after Gilmore noticed Bausch was allegedly lending thousands of dollars to himself and taking high weekly pay from company profits. In the lawsuit, he said the defendants refused to properly account for more than $500,000 in "undocumented draws and salary."

In a Dec. 4, 2009 letter to Bausch and Tobin, Gilmore said a bookkeeper hired to examine company books found Bausch's gross annual income was roughly $667,000.

"When I first began looking into the accounting of the company, I was shocked at the lack of professional standards and practices that were being conducted," Gilmore wrote. "The company has been mismanaged and I have to look to the two of you as the responsible parties."

Gilmore said he believed that Company Funds, Bausch and Tobin likely would have "serious income tax obligations and liabilities" for 2008 and 2009.

Anderson dismissed that, saying, "We didn't think there was any merit to the lawsuit.''

Gilmore's lawyer, Stan Johnson, said that in light of the investigation Gilmore no longer wants to associate with Bausch and likely will drop the lawsuit. He said his client met Bausch when he rented offices to Company Funds, but did little checking before becoming a partner.

Gilmore became suspicious when he started getting rent checks from Silver State Holding, SBA Consulting and Foundation Research, Johnson explained, and filed suit after his partners would not allow him to see Company Funds' financial records or answer questions about the other companies.

Contact Jeff German at jgerman@reviewjournal. com or 702-380-8135 or read more courts coverage at lvlegalnews.com.

 

Rules for posting comments

Comments posted below are from readers. In no way do they represent the view of Stephens Media LLC or this newspaper. This is a public forum. Read our guidelines for posting. If you believe that a commenter has not followed these guidelines, please click the FLAG icon next to the comment.