If it wasn’t so serious, it has all the makings of a joke with a hilarious punch line: “So this ex-Casino owner and former NFL player are sitting at a bar sipping their gin and reminiscing about old times when …” Only it is.
A former casino owner, a former businessman from Las Vegas, and a former NFL punter were recently sentenced in U.S. District Court in Las Vegas for conspiring to promote a fraudulent tax product through the now-defunct National Audit Defense Network (NADN).
Alan Rodrigues, NADN’s former general manager and executive vice president, was sentenced to serve 72 months in prison followed by three years of supervised release and ordered to pay a $2,000 special assessment by the judge. Rodrigues must also pay restitution in excess of $35 million to NADN customers who purchased the fraudulent tax product.
Weston Coolidge, a businessman who previously served as NADN’s president, was sentenced to 70 months in prison followed by three years of supervised release, in addition to a $2,000 special assessment for his role in the fraud. Coolidge must also pay restitution in excess of $35 million to victims of the fraud.
Joseph Prokop, who previously served as the National Marketing Director for Oryan Management and Financial Services – a company affiliated with NADN – was sentenced to 18 months in prison followed by 30 months home confinement and three years of supervised release. Prokop was also ordered to pay a $1,800 special assessment and restitution to victims in excess of $35 million.
At sentencing, Judge Du found that the defendants were responsible for fraud losses exceeding $36 million and an intended tax loss greater than $60 million.
Rodrigues, Coolidge, and Prokop each pleaded “not guilty” and went to trial. Unfortunately, they didn’t fair too well. After a six-week long jury trial, all three were convicted of a litany of crimes, including the following: (1) one count of conspiracy to defraud the United States; (2) thirteen counts of aiding and assisting in the preparation of false income tax returns; and (3) four counts of mail fraud. Rodrigues and Coolidge were each convicted of an additional two counts of aiding and assisting in the preparation of false income tax returns.
Acting Assistant Attorney General Ciraolo said:
“Business professionals who design, market and sell fraudulent tax products by criminally exploiting select provisions of the tax code will be prosecuted to the full extent of the law. The prison sentences handed down yesterday against the defendants demonstrate that the Department of Justice is committed to holding individuals responsible for their criminal conduct.”
At trial, the government introduced evidence showing that through NADN, the defendants promoted and sold a product called, “Tax Break 2000” to customers. NADN began aggressively promoting and selling Tax Break 2000 in early 2001. Tax Break 2000 masqueraded as an online shopping website.
The defendants fraudulently told customers that buying the product would allow them to claim legitimate income tax credits and deductions under the Americans with Disabilities Act (ADA). In order to accomplish this, customers were directed to websites that had been manipulated in order to make them accessible to the disabled.
NADN charged $10,475 to maximize the fraudulent income tax credits and deductions that individuals would claim on their tax returns. Although the tax returns properly reported the price of the product as $10,475, customers only had to go out-of-pocket in an amount between $2,000 and $2,695. The remainder of the cost was covered by a promissory note that customers were not obligated to repay.
Further evidence established that the defendants knew that the websites provided to customers generated little, if any, money from sales commissions and that they did not entitle the purchaser to either a tax credit or deductions.
Notwithstanding, the defendants directed the tax return preparers working for NADN to prepare thousands of tax returns for customers, all of which claimed the fraudulent tax credit and deductions.
As is so very often the case, when special agents from the Internal Revenue Service (IRS) began to investigate Tax Break 2000 and NADN, the defendants attempted to cover up the fraud. How so? By creating false IRS Forms 1099 that reported fictitious income to make it appear that the websites were in fact earning money. Unfortunately, that turned into an exercise in futility, as special agents caught on immediately.
Incredibly, NADN sold Tax Break 2000 more than 18,000 times to thousands of customers between 2001 and May 2004, most of whom were audited. These customers have the defendants to thank for bringing an “uninvited guest” into their homes for a period that eclipsed one year in certain causes.
Things started to go south for the defendants on April 13, 2004, the day that the Tax Division filed a civil complaint seeking to enjoin NADN, Rodrigues, Coolidge, and Prokop from selling fraudulent tax schemes, including Tax Break 2000. One month later, NADN ceased operations.