Tuesday, May 21, 2013

Investment officer goes to prison for creative, fraudulent tax shelter

A Virginia investment firm officer who thought he found a creative way to defraud the IRS was sentenced to 54 months in prison yesterday for implementing a fraudulent tax shelter for KPMG clients.
Michael Parker, chief operating officer of TransCapital Corp., promoted and implemented from 1998 through 2006 a tax shelter called the Sale Leaseback of Tenants Improvements Strategy (SLOTS), ultimately helping client corporationss to deduct more than $240 million from their corporate income tax returns.

Parker, working with others, formed single purpose entities to buy leasehold improvements from the SLOTS clients. These leasehold improvements were appraised in such a way to reflect a higher value on the clients’ books than the sale price.

Parker admitted that he conspired to defraud the IRS and withheld information about the transactions from his clients. At least eight SLOTS shelters were transacted for corporate clients. The Kroger Co. was identified as having done the largest transaction, claiming over $178 million in deductions.
Parker said the SLOTS transactions were simply devices to conceal financing deals.  Schemes to manufacture deductions continue to be a high-risk-shelter strategy.