The Internal Revenue Service wants to intervene in a lawsuit so that it can enforce $30 million in tax liens on money held in customer bank accounts for Las Vegas-based Asset Protection Group, which was shut down by a federal judge.
The IRS wants to participate in a civil case that the Federal Trade Commission brought against Asset Protection, alleging partners Richard Neiswonger and William Reed, a suspended attorney from Colorado, violated a permanent injunction. A St. Louis federal judge issued the injunction against Neiswonger 10 years ago for an allegedly deceptive business opportunity scheme.
After that business opportunity venture was shut down, Asset Protection was established in Las Vegas and operated as a resident agent. The company helped customers form corporations, enabling the customers to use “straw men” as their officers and directors and to keep the customers’ ownership of the company secret as permitted under Nevada law.
The Justice Department filed a motion this month, saying the government has identified 69 customers of Asset Protection who have $30 million in bank accounts that is subject to tax liens.
Judge Stephen Limbaugh of St. Louis has not acted on the request from the Justice Department to intervene.
The case raises issues about Nevada’s permissive state laws on incorporation, partnerships and limited liability companies. The Nevada Legislature is considering bills that would tighten some of those laws, apparently in reaction to a hearing by the U.S. Senate Permanent Investigations Subcommittee in November. The subcommittee questioned why laws in Nevada, Delaware and Wyoming do not require companies to disclose more information about ownership, officers and directors.
Subcommittee members expressed concern that Nevada laws enable criminals to hide drug money, launder money and evade income taxes, as well as potentially finance terrorism.
Sen. Carl Levin, D-Mich, cited Nevada First Holdings of Las Vegas as an example of reasons for concern. Nevada First helps businesses incorporate, using “straw men” rather than the actual name of company officers and directors, and helps these companies open bank accounts, which is legal under Nevada laws.
Levin did not mention that Wayne Andre McMiniment, who operated Nevada First Holdings, pleaded guilty in 2000 to two counts of wire fraud and embezzling $2 million from clients. McMiniment was sentenced to 52 months in prison for those crimes, and U.S. District Judge Philip Pro put McMiniment on three years of probation for willful failure to pay child support.
During his probation, the U.S. Probations and Parole office complained that McMiniment was continuing to be involved in the operation of Nevada First Holdings, the resident agent business, but Pro ruled against the probations office.
Neiswonger, a partner in Asset Protection, also served time in federal prison. In 1998, Neiswonger pleaded guilty to wire fraud and money laundering. Neiswonger served 12 months of an 18-month prison term. He was ordered to pay $2.75 million in restitution.
His conviction followed a lawsuit that the FTC filed, alleging deceptive marketing programs that said individuals could earn six-figure incomes based on training Neiswonger sold for $10,000. Neiswonger agreed to a permanent injunction.
However, in July, the FTC filed papers in a St. Louis federal court alleging that Neiswonger violated the permanent injunction. Neiswonger attorney Richard McAllister of Denver denied that the FTC was accusing his client of violating the permanent injunction and said Neiswonger did not violate the injunction.
“We believe they should be held responsible for their contemptuous actions,” Millard said.
An attorney for Reed did not return calls for comment.
The FTC accused Asset Protection of selling a $9,800 training program for Asset Protection consultants and of making false statements to 2,000 consumers who paid for the training.
In promoting the business opportunity, Asset Protection said consumers to make hundreds of thousands of dollars yearly selling asset protection services to customers. About 94 percent of the trained consultants failed to earn enough to cover the cost of the training, the FTC reported.
Yet Asset Protection prospered. Over 5 1/2 years, Asset Protection received $19.8 million from selling the training program alone, according to a court document filed by FTC attorney Joshua Millard.
The consultants were told they would be selling “complete protection against asset seizure by the IRS or other government agencies.”
While many sales consultants were unsuccessful, Asset Protection did set up companies owned by customers and filed a so-called “friendly trust deed” or loan secured by real estate owned by the customer, according to court documents.
A lender company then put a lien on the real estate. The lender was a company controlled by the customer, but the liens discouraged legitimate creditors from trying to seize the property because it appeared there was no equity in the property, according to court papers.
The receiver also found that customers transferred funds to an Asset Protection escrow account and transferred money to the customer’s separate account. The receiver decided the activities had the “potential to facilitate money laundering.”
Court papers say the receiver for Asset Protection discovered 1,000 accounts totaling $10 million were opened by Asset Protection at Bank of Nevada.
Asset Protection also is accused of advising customers to misrepresent ownership of Nevada corporations. Customers were told to issue a so-called bearer stock certificate that indicated that whoever held the stock certificate owned the company.
“Through this device, Reed advised customers that they could hid and legally deny any ownership of the corporation,” the Justice Department said in a court papers.
The judge allowed receiver Robb Evans of Las Vegas to close the operations of Asset Protection.
The federal agency urged the judge to find Neiswonger and Reed in contempt of court and to require the defendants to disgorge money received from sales of the training program.