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FOR IMMEDIATE RELEASE TAX

MONDAY, APRIL 30, 2007 (202) 514-2007


WWW.USDOJ.GOV TDD (202) 514-1888

Lake Worth Tax Return Preparer


Convicted
on Tax Fraud, Contempt Charges
Promoted Scheme to Hide Income, Assets from IRS
in Bogus Trusts,
Evading Millions in Taxes
WASHINGTON—Following a five-week trial, a federal jury in West Palm Beach
has found defendant Louis Wayne Ratfield, a Lake Worth, Fla., tax return preparer,
guilty on 50 charges against him in connection with his participation in a tax fraud
scheme to hide income and assets in bogus trusts, Eileen J. O’Connor, Assistant
Attorney General for the Justice Department’s Tax Division, R. Alexander Acosta,
U.S. Attorney for the Southern District of Florida, and Michael Yasofsky, Jr.,
Special Agent in Charge, Internal Revenue Service (IRS), Criminal Investigation
Division announced today.

On April 13, 2006, a 56-count indictment was returned charging Ratfield with
preparing for clients and himself fraudulent federal individual and trust income tax
returns, corruptly impeding the enforcement of the tax laws and criminal contempt.
Prior to trial, the government dismissed five of those counts. The indictment alleged,
and evidence offered at trial established, that Ratfield operated a tax preparation
business, LWR Accounting and Tax Service, which was later called LWR Financial
Services Trust. The businesses were located in Lake Worth where Ratfield also
resided.

In or before 1997, Ratfield allegedly began collaborating on a book that was


eventually published and widely marketed under the title, The Constitutional
Common-Law Trust, which fraudulently advised readers that taxpayers could claim
deductions for ordinary living expenses on their returns to which they were not
lawfully entitled, such as the costs of utilities, food, clothing, vehicles and education
through use of the so-called “common-law trust.” The evidence established that
Ratfield provided advice on setting up and using “common law trusts,” keeping a
second set of business records, and counseled readers not to trust advice from
government, banks and other businesses.

Ratfield marketed “common law trust” packages to clients throughout the United
States via group seminars and individual client meetings; sold over 100 trust
packages at prices ranging from $2,995 to $5,995 each; and prepared at least 252
federal tax returns in connection with the scheme. The evidence at trial established
that once the IRS began auditing his clients, Ratfield took numerous unlawful steps
to obstruct and impede the audits. According to the indictment, Ratfield’s conduct
caused a tax loss to the U.S. Treasury of more than $6.4 million.

On Sept. 7, 2001, the Department of Justice filed a civil lawsuit against the
defendant in the U.S. District Court for the Southern District of Florida in
connection with his marketing of the “common law trust” scheme. On Sept. 29,
2002, the court issued a preliminary injunction barring Ratfield from acting as a
federal income tax return preparer until he provided a complete client list to the
IRS. The injunction also barred him from organizing or selling abusive tax shelters,
making false statements about purported tax benefits associated with participation in
an abusive tax shelter, and assisting in the preparation of or preparing any tax
returns that he knew would result in the understatement of a tax liability.

On Nov. 30, 2004, the court entered a permanent injunction against Ratfield and
ordered him, among other things, to contact all of his trust clients and inform them
of the court’s order. The indictment alleges and the evidence at trial established that
Ratfield committed criminal contempt, in part, by continuing to promote and defend
his “common law trust” scheme, representing clients before the IRS after the court
ordered him to stop these activities, and continuing to make false statements about
the taxability of income and deductibility of expenses.

“Promoting tax fraud and preparing fraudulent federal tax returns are serious crimes,
and those who commit them face serious consequences” said Eileen J. O’Connor,
Assistant Attorney General for the Justice Department’s Tax Division. “Working
together with the Internal Revenue Service and United States Attorney’s Offices, the
Tax Division has made investigating and prosecuting such crimes a high priority.”

U.S. Attorney Alex Acosta stated, “By fraudulently advising taxpayers that they
could claim deductions for ordinary living expenses, including food, clothing, and
the cost of education, Ratfield caused a tax loss to the U.S. Treasury of more than
$6.4 million. The U.S. Attorney’s Office will continue to help the Internal Revenue
Service to enforce our nation’s tax laws and stop fraud and abuse.”

Special Agent in Charge Michael Yasofsky, Jr. stated, “Those who participate in or
encourage taxpayers to use sham entities for the purpose of evading taxes are
engaging in criminal activity. We will vigorously investigate those individuals who
use abusive trust arrangements to evade their tax obligation.”

Ratfield faces a maximum potential sentence for each violation of preparing false
returns and corruptly impeding the tax laws of three years in prison followed by up
to one year of supervised release, a $250,000 fine, and liability for the costs of
prosecution. Ratfield could also face a term of imprisonment, a fine, or both, for the
criminal contempt charges, the length and amounts of which will be determined in
the discretion of the court. Judge Hurley remanded the defendant to the custody of
the U.S. Marshal following his conviction.

The case was prosecuted by Assistant U.S. Attorney Ellen Cohen and Trial
Attorneys Tracy Gostyla and Stephanie Evans of the Tax Division and was
investigated by special agents of the Internal Revenue Service whose assistance was
essential.

Further details about these and other tax enforcement cases are available on the Tax
Division’s Web site http://www.usdoj.gov/tax/, on the IRS’s Web site
http://www.irs.gov/, and on the IRS Criminal Division’s Web site
http://www.ustreas.gov/irs/ci/.

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