U.S. Indicts Two for Nauru Tax Scams

IMPORTANT: The full content of this page is available to premium users only.

Saturday, February 1, 2003
Author: 
Bruce Zagaris
Volume: 
19
Issue: 
2
61
Abstract: 
On December 18, 2002, a federal grand jury in the Northern District of California (San Francisco) returned an indictment against Jerome Schneider, a U.S. citizen residing in Vancouver, B.C., and Eric J. Witmeryer, a Los Angeles attorney for conspiracy to defraud the U.S. Government. The fraud was arranging offshore tax fraud in connection with their alleged sale of Nauru-based business entities to U.S. taxpayers. According to the indictment, Schneider and Witmeyer are alleged to have operated a scheme between January 1994 and December 2001, in which they offered for sale the stock of Nauru trading corporations licensed as international banks and other offshore corporations in an effort to defraud the IRS. The indictment alleges that no business was conducted by any offshore entity sold by the defendants on Nauru nor was any bank account established on Nauru. Instead, the defendants caused accounts in the name of the Nauru bank to be established in financial institutions situated outside the U.S. The defendants structured the “decontrol” process so that the U.S. taxpayer investor paid defendant Scheider approximately $15,000 to $60,000 for his offshore entity. Thereafter, defendants sold the U.S. taxpayers investor’s interest in the offshore entity to a so-called “Independent Foreign Owner” (IFO) in exchange for a promissory note in an amount large enough to make it appear as if the IFO had made a bona fide and negotiated sale of the offshore entity. The prosecutions the result of a long investigation by the IRS Criminal Investigation Division special agents and the U.S. Attorney’s Office. In connection with this investigation, the U.S. Government made a request under the U.S.-Canada Mutual Assistance in Criminal Matters Treaty for Documents relating to the investigation. Although the U.S. obtained some documents, ultimately a Canadian court denied the request because of abuse by the U.S. Government agents in section with the request.