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No, it's Iowa

March 06, 2009

A Cedar Rapids-area real estate magnate learned the hard way the lesson Kevin Costner taught years ago: This ain't heaven, it's Iowa.

Richard Lee Mellor was convicted yesterday of four counts of tax evasion, one false claim count, and one obstruction count. From the U.S. Attorney's press release:

The obstruction of tax laws conviction involved evidence that Mellor filed a frivolous and fictitious lawsuit against an IRS revenue officer for more than $84,000,000, sent and filed threatening letters to bankers concerning implications if they cooperated with IRS collection efforts, and filed an $84,000,000-plus lien against the same revenue officer.

And that didn't make the IRS exam stop? That's a big surprise.

Mr. Mellor had allegedly claimed to be a citizen of heaven. Either he failed to establish that to the jury or they (correctly) decided that U.S. taxes are due on U.S. source income, even when earned by non-residents. But it appears that there was more than a residency issue involved. From the U.S. Attorney's press release:

The evidence at trial showed that Mellor attempted to conceal his income from the IRS through abusive trust schemes using, in part, tax-avoidance methods such as those promoted by Dr. Joe Sweet and the Joy Foundation, Milton H. Baxley II, and other individuals. The evidence showed that Mellor deposited the receipts of his business into bank accounts in varying names, mainly trusts and LLC entities, from year to year. By 2005, Mellor was moving funds around the country using accounts that did not bear his name, but were in the names of companies or accounts other people opened for him. For example, in 2005 he transferred more than $289,000 to a warehouse banking company in Maryland, then transferred $180,000 to a company in Colorado, moved $248,000 from Colorado to a money order company in Arkansas, and then transferred $226,500 back to his accomplice in Colorado, who sent blank, pre-signed checks back to Mellor in Iowa. Mellor used accounts in the names of invalid trusts to hold business deposits and he transferred real estate to the trusts.

The JoY Foundation is an old and tired tax scam, but I'm sure it appeared to work fine until it blew up. There appears to be a connection with Wesley Snipes' erstwhile tax advisor, Eddie Kahn, through Milton Baxley II. (Does that make Mr. Snipes Wesley I?). It's a small world.

Links:

Press Release on injunction against Joseph Sweet

Press Release on Baxley sentencing.

Tags: Mellor.tax crime.