William Cover of Naperville IL, one of six people convicted of tax fraud, conspiracy, and other charges in May in a nationwide tax avoidance scheme, and the second to be sentenced in the case, was ordered to serve 160 months or 13 years in prison by U.S. District Court Judge Charles Norgle earlier this month. Cover had been found guilty on 25 charges in connection with his participation in a tax scheme promoted by the Aegis Management Company that allowed 650 wealthy taxpayers to avoid $60 million in taxes. Federal prosecutors and the Internal Revenue Service (IRS) say that the case is one of the largest of its kind.
Cover was a promoter and manager of Aegis trusts, which diverted income into sham domestic and foreign trusts, and president of Sigma Resource Management, a company that provided management services to purchasers of Aegis trusts.
Cover and the other defendants were indicted in 2004, following a lengthy undercover investigation (code-named "Operation Trust Me") by IRS agents, and the seizure of approximately 1.5 million documents, computer files, and related materials. The IRS investigation has resulted in convictions of more than 30 defendants and charges against approximately 30 other defendants around the country, including in Florida, Illinois, New York, Ohio, and West Virginia.
"There are numerous variations on abusive trust schemes, but in general, promoters say the trusts are designed to shift income and assets into vehicles that are either not subject to U.S. taxes or will make it impossible for authorities to trace," said IRS-CI Chief Mayer according to a government press release. "However, the financial investigative efforts of IRS special agents continue to unmask these abusive financial transactions for what they really are - methods of tax evasion."
Charges against Cover included tax conspiracy against the U.S., mail fraud, wire fraud, aiding and assisting the preparation of false tax documents, and filing false personal tax returns, according to Maria Suarez, a special agent and public information officer of the Chicago field office of the IRS Criminal Investigation unit, the Naperville Sun reports.
Cover argued in his sentencing memorandum that he merited a shorter sentence because of his personal history and because, aside from Michael Dowd, a defendant from Florida, he received the least financial benefit of all of the defendants. He also argued that his conviction was based on the fact that he only supervised one person who set up these trusts and the preparation of tax returns and may not have been personally involved.
The lead defendant in the case, Michael A. Vallone of Orland Park, IL, executive director of The Aegis Management Co., received a sentence of 18 1/2 years.
Cover will surrender to the Bureau of Prisons on January 7, 2009.
Judge Charles R. Norgle ordered the forfeiture of Cover's home and $4,125,000. Additionally, Cover was ordered to pay the cost of prosecution in the amount of at least $245,101.