Stephen T. Mellinger III, Promoting Illegal Tax Shelter, Stealing Clients’ Funds and Money Laundering, Mississippi 2023

A Florida financial advisor has been charged with running a years-long scheme to promote and operate an illegal tax shelter, stealing some of his clients' funds, and money laundering.

According to the indictment, Stephen T. Mellinger III, of Florida, was a securities broker, financial advisor, and insurance salesman. Beginning in late 2013, Mellinger allegedly conspired with several others to defraud the IRS by promoting an illegal tax shelter.

Mellinger allegedly instructed clients participating in the shelter, including clients in Mississippi, to transfer money to a company controlled by Mellinger or his co-conspirators in the amount they wished to claim as a deduction on their tax returns. The conspirators then allegedly returned the money to a bank account that clients controlled less a percentage fee that they charged for their services. Even though tax shelter clients received their money back, Mellinger allegedly directed them to claim the transfer to the company as a deduction on their tax returns, and to label the deduction as a 'royalty' payment. Mellinger allegedly earned more than $3 million in fees from the shelter.

Also, in January 2016, the federal government allegedly seized funds from some of Mellinger's clients, who were engaged in a scheme to defraud health care benefit programs, including TRICARE, the U.S. Department of Defense's health care benefit program. Mellinger conspired with a close relative to take advantage of the seizure to steal some of the money that those clients had transferred through the tax shelter. Mellinger then allegedly laundered the stolen funds, which he knew were proceeds of healthcare fraud. Ultimately, he allegedly used some of the funds he stole from his clients to buy a home in Delray Beach, Florida.

Mellinger was charged with conspiracy to defraud the United States, aiding in the preparation of false tax returns, conspiracy to commit wire fraud, conspiracy to commit money laundering, and money laundering. If convicted, Mellinger faces a maximum penalty of five years in prison for conspiring to defraud the IRS, a maximum penalty of three years in prison for each substantive count of aiding in the preparation of false tax returns, a maximum penalty of 20 years in prison for conspiring to commit wire fraud, a maximum penalty of 20 years in prison for conspiring to commit money laundering, and a maximum penalty of 20 years in prison for each substantive count of money laundering.

Acting Deputy Assistant Attorney General Stuart M. Goldberg and U.S. Attorney Todd W. Gee made the announcement. IRS Criminal Investigation and Defense Criminal Investigative Service are investigating the case. Trial Attorneys William Montague, Richard J. Hagerman, and Matthew Hicks of the Tax Division, Assistant U.S. Attorney Charles W. Kirkham for the Southern District of Mississippi, and Trial Attorneys Emily Cohen and Jasmin Salehi Fashami of the Criminal Division's Money Laundering and Asset Recovery Section are prosecuting the case.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Source: https://www.justice.gov/archives/opa/pr/florida-financial-advisor-charged-promoting-illegal-tax-shelter-stealing-clients-funds-and