Adviser who sold tax avoidance schemes sent to prison for tax evasion

California man sentenced to two years for filing false tax returns 2002-05

Nov 25, 2014 @ 12:39 pm

By Liz Skinner

A California man who acted as a financial adviser and allegedly sold clients tax avoidance schemes was sentenced to prison Monday for failing to report millions of dollars of his own income in filings with the Internal Revenue Service.

William James Kennedy of Livermore, Calif., was sentenced to two years in prison by U.S. District Judge Anthony W. Ishii in Fresno, Calif., according to Benjamin Wagner, U.S. attorney for the Eastern District of California.

As part of a plea agreement in the case, Mr. Kennedy, 68, agreed to pay $627,000, the sum the U.S. Treasury lost from his under-reported income filed in tax returns in 2002, 2003, 2004 and 2005, according to court documents.

For several years, Mr. Kennedy acted as a financial adviser and sold clients fraudulent debt reduction and tax avoidance schemes, including the use of corporation “soles,” a legal entity created for religious institutions and church leaders, the documents said.

Mr. Kennedy charged clients $20,000 to $25,000 to establish the corporation soles, and allegedly told clients they could put all or a substantial portion of their income into the entity and reduce their income tax burden, according to the court documents.

In 2002, he also claimed an improper charitable deduction of $42,557 to an entity he had created as his own corporate sole, Mr. Wagner said.

“Judge Ishii stated that the sentence he imposed was warranted because Kennedy committed a serious scheme that continued for at least four years,” a news release from Mr. Wagner's office said.

Mr. Kennedy's attorney, Eric K. Fogderude, did not return a call Tuesday seeking comment.

Mr. Kennedy had been licensed as a Farmers Insurance agent in California until September 2010, said Tom Dresslar, spokesman for the California Department of Business Oversight. Previously, from August 1996 to December 1998, Mr. Kennedy was a registered representative with WMA Securities Inc., Mr. Dresslar said. He had no disciplinary history or enforcement actions against him in either role, Mr. Dresslar said.

The IRS warned consumers in March 2004 to beware of people promoting the use of corporation sole laws as a way to evade federal income taxes, child support and other personal debts.

The corporation sole laws, when used as intended, allow religious leaders to be incorporated to protect the continued ownership of property that benefits legitimate religious groups, the IRS said in the investor alert.

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