Ottumwa man pleads guilty to tax charges in connection with Ponzi scheme. Known to TV viewers of a certain age as the home of Radar O’Reilly, Ottumwa, Iowa now also has its own Ponzi scam. CBSNews.com reports:
An Ottumwa, Iowa investment manager is likely heading to prison after pleading guilty to charges of wire fraud and tax evasion stemming from a $1.1 million Ponzi scheme.
John Francis Holtsinger pleaded guilty Friday during a hearing in federal court in Des Moines as part of a plea agreement with prosecutors.
The plea deal says that Mr. Holtsinger told people that he would invest their money, and he instead spent most of it. On what? Things that might be sold to recover funds for the investors? The indictment doesn’t offer much hope for recovery (my emphasis):
Of the $493,000 in funds received from investors, only $155,000 was transferred to an investment account at Interactive Brokers. The remainder was deposited into accounts controlled by Holtsinger and used by him to further his scheme and for his personal use including, but not limited to, legal expenses, cas withdrawals, payment of living expenses, trips, accessing web-based “dating” sites, and other purposes different than he represented to investors.
Interesting scare quotes around “dating.” In any case, it’s not an investment likely to produce anything that his victims would want.
The indictment and plea deal together show that there were warnings to his investors. He wasn’t a registered investment advisor, for starters. And this from the indictment should have triggered BS detectors:
After conducting trades on behalf of investors for a short period of time, Holtsinger offered and sold investments to the investors in the form of promissory notes. He represented that the notes would yield high returns with no risk including, but not limited to, what he called an “inheritance investment” that would be invested through his mother and pay out upon her death. The “inheritance investment” required a $20,000 deposit and was to pay annual returns of 9% with automatic liquidation and payout if the investment dropped below 3% of its initial value.
The “high returns with no risk” fairy is the Tax Fairy’s evil twin sister. When she shows up, it’s time to back away quickly from whoever brings her into the room. Other red flags:
- When he couldn’t come up with cash, he came up with excuses, like “informing investors… that their funds had been frozen as a result of actions taken by state or federal authorities.”
- After learning he was being investigated, “…he attempted to convince investors to lie to law enforcement and under oath regarding the purpose of the funds they had given to him. The defendant instructed these individuals to describe their payments to him as ‘interest-free loans,’ when in reality they were investments. The defendant also threatened that anyone who cooperated with law enforcement would not be repaid.”
Unfortunately, the not getting repaid part was already true. The plea deal says that Mr. Holtsinger faces a four-to-seven year sentence.
Service: It’s in our name. Victims of Identity Theft Get Little Help From IRS
Service: It’s in our name (II): Report Fraud to the IRS? Watchdog Says IRS Flubs Over 100,000 Tips Annually (Robert W. Wood,Forbes).
They can take it, but they can’t dish it out. Indiana Public Officials Indicted for Tax Fraud and Other Offenses (FBI press release)
Andrew Mitchel, Form 1099 for Payments to Foreign Contractors for Services?
One question that often comes up is how a domestic U.S. business should treat payments to a foreign contractor for services performed outside the U.S. Is a Form 1099 required? Is withholding required?
As long as the foreign contractor is not a U.S. person and the services are wholly performed outside the U.S., then no Form 1099 is required and no withholding is required.
Jason Dinesen, Connecting Strange Baseball Rules to Taxes The infield fly rule is involved.
Martin Sullivan, Ways and Means Chairman To Cut Corporate Interest?
Russ Fox, Gillette Decision Upheld, But Beware. Important news for taxpayers with California activity.
Anthony Nitti, Crunching Numbers on a Hypothetical Cap on Deductions
William McBride, More on How to pay for Romney’s Tax Cuts
Trish McIntire, EFTPS Changes
Daniel Shaviro, Follow-up on the financial transactions tax
Jim Maule, Say One Tax-and-Spending Thing, Do Another
Robert D. Flach has a new Buzz tax roundup.
The Tax Update is so awesome, our comment trolls have Pulitzers.
Tags: Andrew Mitchel, Anthony Nitti, Daniel Shaviro, David Cay Johnston, Jason Dinesen, Kay Bell, Martin Sullivan, maule, Robert D Flach, Robert W. Wood, Russ Fox, tax administration, tax crime, TaxGrrrl, Trish McIntire, trolls, William McBride