Ex-IRS Director Pleads Guilty to Fraud

A former IRS district director pleaded guilty Thursday to defrauding the agency in connection with a tax scam orchestrated by Renaissance, The Tax People Inc. of Topeka.

Jesse Ayala Cota, a former Internal Revenue Service district director, admitted in federal court in Kansas City, Kan., that he conspired to prepare, or have others prepare, false federal income tax returns resulting in a tax loss to the government of about $1.3 million.

Cota, who worked for the IRS for more than 30 years before joining Renaissance, The Tax People Inc. of Topeka in 1999, also admitted that he made more than $300,000 from the scheme.

Cota is the seventh person to plead guilty to felony charges stemming from the activities of Renaissance, which recruited people to peddle tax packages claiming to lawfully reduce income taxes by deducting personal expenses as business expenses.

Federal prosecutors say thousands of customers paid more than $75 million for the packages, costing the Treasury more than $20 million in lost taxes.

Renaissance, which was founded in 1995, went out of business in 2001 after a Shawnee County district judge ruled that the enterprise was an illegal pyramid scheme.

Cota faces up to five years in prison and a $250,000 fine. U.S. District Judge Carlos Murguia set sentencing for January.

"Mr. Cota was the director of Renaissance's so-called Tax Dream Team," Eric Melgren, U.S. attorney for the District of Kansas, said. "Renaissance used Cota's credentials as a former district director for the Internal Revenue Service to lend the tax fraud scheme legitimacy and to induce people to join and to remain members."

Cota managed Renaissance's Tax Dream Team from July 1, 1999, through May 10, 2001, according to a 148-count indictment unsealed in October 2004.

He was employed by the IRS from 1963 to 1996 in various capacities, rising to become district director for the Southern District of California.

Cota admitted that he and his co-conspirators falsely assured clients that Renaissance's tax system was legal, according to a statement by the Justice Department.

Among other things, Cota and his co-conspirators falsely told customers that Renaissance had endorsements from over 2,000 attorneys, CPAs and IRS agents.

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