Federal Court Shuts Down Multi-State 'Warehouse Banking' Tax Scheme
The court found that ALH customers who owed substantial tax debts, were under IRS audit, or had been criminally convicted for failing to file federal tax returns used ALH to hide their income and assets from the IRS. Evidence submitted by the Justice Department showed that ALH customers sent money to ALH, which commingled the funds and deposited them in accounts at six commercial banks-four in California, one in Nevada, and one in Minnesota. ALH then wrote checks for the customers, enabling them to pay their bills without leaving a paper trail with their names on it. Last August, the court preliminarily enjoined Hargis and ALH and appointed Robert Mosier of Santa Ana as a receiver to take possession of ALH’s records and assets, including the commercial bank accounts.
“The Justice Department is committed to taking appropriate action to stop tax fraud schemes,” said Eileen J. O’Connor, Assistant Attorney General in charge of the Justice Department's Tax Division.
Earlier this year, Judge Carter found Hargis in contempt of court for failing to turn over his customer list and other records. Hargis was held at the Santa Ana City Jail for over five months for violating the court’s order.
The court’s order requires Hargis to send copies of the injunction to customers. The court also directed the receiver to post the injunction order on the ALH website.
Justice Department trial attorney Michael R. Pahl handled the case which was investigated by IRS revenue agent Shereen Hawkins.