Eileen J. O'Connor, Assistant Attorney General for the Tax Division of the Department of Justice, and Carol C. Lam, United States Attorney for the Southern District of California, announced this week that a federal court in
San Diego, CA, has issued a temporary restraining order to California-based xÃ©lan, Inc., and a number of related entities and persons affiliated with the xÃ©lan family of companies.
According to court papers unsealed today, persons and entities affiliated with xÃ©lan have advised thousands of medical professionals primarily doctors to place income in various fraudulent tax avoidance schemes employing purported supplemental insurance products or improper charitable deductions.
The individual defendants named in the suit are L. Donald Guess and Monte T. Mellon of California, Leslie S. Buck of Maryland, David Jacquot now living in Idaho, G. Thomas Roberts of Pennsylvania, and Chris G. Evans and Nigel Bailey of Barbados.
The order freezes over $500 million in bank and investment accounts. The court also appointed a temporary receiver to preserve assets for the payment of taxes or other claims by defrauded parties. The court also ordered Guess, Mellon, Buck, Jacquot and Roberts to surrender their passports to the United States Marshal and not to leave the United States.
According to the government's complaint, more than $500 million is held in investment accounts controlled by xÃ©lan-related and Barbados-based Doctors Benefit Insurance Co.
Court filings also state that millions of dollars in doctor-provided funds have been diverted, with some funds used to pay legal fees and other liabilities of defendants Guess, Buck, Jacquot, xÃ©lan and affiliated entities.
According to the complaint, the IRS estimates that the defendants have sold their fraudulent tax reduction schemes to approximately 4,000 doctors, with the result that those doctors could now owe as much as $420 million in taxes plus interest and penalties. Agents of the IRS's Small Business/Self-Employed Division are investigating those liabilities.
"This action protects the government's interest while we complete the investigation," said Kevin M. Brown, Commissioner of the IRS's Small Business/Self-Employed Division.
The court set a hearing in San Diego for November 18, 2004 to determine whether to extend the relief granted by the temporary restraining order and to consider whether to order the defendants to repatriate any assets held offshore.