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.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print