An Orange County tax shelter promoter who admitted creating thousands of bogus trusts for his 500 clients is scheduled to be sentenced Monday on conspiracy and tax evasion charges that could land him in federal prison for three or more years.
In documents filed with U.S. District Judge Dickran M. Tevrizian Jr. in Los Angeles, Edward J. "Jay" Lashlee admitted that he misled many clients by promoting his schemes as legitimate ways to make large profits without paying taxes, Internal Revenue Service officials and a prosecutor said Friday.
Other Lashlee clients, however, knowingly cheated the government, according to the IRS. Two of those, San Diego business owner Anthony Arnold Mitchell, 78, and his wife, Dorothy May Mitchell, 74, were sentenced in January to eight months and six months of house arrest, respectively, on tax evasion charges. The Mitchells admitted that they diverted funds, including $3.7 million from the sale of a paint company, to offshore bank accounts.
The case is part of an IRS crackdown on abusive tax shelters and their promoters.
"It's always the same sales pitch, whether they use telemarketing, the Internet or snail mail," said Phillip Mullins, acting head of IRS criminal investigations in Los Angeles. "They're trying to convince people they're going to make 20% per quarter without paying taxes."
A prosecution memorandum said Lashlee, 54, could be sentenced to as many as 78 months in prison for his March 5 guilty pleas to conspiracy and tax evasion. But because of his "substantial assistance" to investigations of other tax evaders, the prosecutors requested a sentence of 33 months to 41 months.
"With Jay Lashlee's help, we are vigorously pursuing others who have used abusive trusts, offshore bank accounts and debit cards to cheat on taxes," Assistant U.S. Atty. Richard E. Robinson said Friday.
Lashlee operated his business, Professional Trust Services, in San Juan Capistrano but now lives in Mission Viejo.
He provided foreign bank accounts and debit cards issued by Swiss American National Bank of Antigua that allowed clients to secretly retrieve funds he had transferred offshore to evade U.S. taxes, IRS spokesman Gary Tang said. He also set up trusts enabling business owners to deduct personal expenses such as rent as expenses of the trusts.
According to the sentencing memorandum, Lashlee helped the Mitchells engineer their complex tax evasion scheme, failed to report about $3 million of his own income to the government and admitted using client funds to pay personal expenses.
Many of the clients invested in the Genesis Fund, which Lashlee promoted as an unregulated investment fund that engaged in foreign currency trading through brokerage accounts in Hong Kong and elsewhere.
Genesis transferred $24 million in and out of domestic and offshore bank accounts without reporting investors' accounts and distributions to the IRS.
Lashlee and his attorneys could not be reached for comment Friday.