Feds Shut Down Tax Scheme in Rancho Santa Margarita

A federal court has permanently barred a Rancho Santa Margarita, California, man from promoting and selling an alleged nationwide tax scheme that involved using welfare benefit plans to unlawfully increase and accelerate tax deductions and avoid income taxes, the Justice Department announced today.

Kenneth Elliott, the man behind the alleged tax scheme, consented to a permanent injunction order entered by District Judge Josephine L. Staton of the U.S. District Court for the Central District of California.

According to the complaint, welfare benefit plans permit companies to pool together and make monetary contributions toward the purchase of life insurance for the benefit of each participating company’s employees or principals. Participants in legitimate welfare benefit plans may be able to deduct their plan contributions as a business expense. The complaint alleged that Elliott falsely informed his customers that the welfare benefit plans he promoted and operated were legal.

However, according to the complaint, Elliott has been promoting and operating plans that illegally permitted his customers to both claim substantial tax deductions for their plan contributions, then later access the full cash value of their plan contributions by taking out loans against the life insurance policies purchased with plan contributions.

The complaint alleged that Elliott’s promotion and operation of these unlawful welfare benefit plans deprived the U.S. Treasury of significant amounts of tax and subjected his customers to audits and Internal Revenue Service (IRS) scrutiny.

The injunction order bars Elliott from selling and operating any purported welfare benefit plans. The court also ordered Elliott to send a copy of the injunction order to his customers.

With this latest move, the Tax Division has obtained more than 500 injunctions to stop tax fraud promoters and tax return preparers in the past decade. Information about these cases is available on the Tax Division’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

RELATED: New Rochelle Valet Grifter Gets 37 Months in Federal Prison

RELATED: Springs Dealer Gets 25 Years

MORE FEDERAL CRIME NEWS

White Collar Crime

Perkins Jr., Wire Fraud, Florida 2021

Jan 15, 2021

White Collar Crime

Edmond P. LaFrance, Wire Fraud and Money Laundering, Massachusetts 2012

Mar 2, 2017

White Collar Crime

Thomas F. Wiswall, Wire Fraud, Pennsylvania 1988

Jan 15, 1988

White Collar Crime

Luis Renaldo Santiago, Wire Fraud, Delaware 2005

Jan 15, 2005