Rao Garuda, Tax Scheme, Ohio 2023

Ohio Financial Planner Pleads Guilty to Tax Scheme

A financial planner from the Cleveland-area pleaded guilty today to conspiracy to defraud the United States and assisting in the filing of a false tax return.

Rao Garuda, the President and Chief Executive Officer of Associated Concepts Agency, Inc. (“ACA”), engaged in a scheme — known as the Advanced Legacy Plan or the Ultimate Tax Plan — to assist high-income individuals in unlawfully reducing their taxes using a plan organized, marketed and sold by a coconspirator, Individual A.

According to court documents and statements made in court, Garuda and others instructed clients to transfer assets to an LLC in exchange for 100% ownership interest in the LLC, assign the 100% ownership interest to a charity controlled by co-conspirators, and claim a charitable contribution tax deduction for the purported donation.

Garuda and others marketed the scheme as a way for clients to receive the tax deduction without relinquishing control over the LLC or its assets. After executing the scheme, clients could access the assets inside the LLCs through tax-free loans.

To accomplish the scheme, Garuda and others directed clients to use preexisting LLCs (sometimes referred to as “Shelf LLCs”) that Individual A had created and formed at the end of the prior year and backdate documents to make it appear as if the clients owned and assigned ownership interests in the Shelf LLCs in the prior year.

For his role in the scheme, Garuda caused or intended to cause a tax loss of more than $2.7 million, which he agreed to pay back as restitution to the United States. He is scheduled to be sentenced on Nov. 14, 2023, and faces a maximum penalty of five years in prison for conspiracy to defraud the United States and three years in prison for the false return count.

Garuda also faces a period of supervised release, restitution, and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The IRS-Criminal Investigation is investigating the case. Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Michelle M. Baeppler of the Northern District of Ohio made the announcement.

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