Illinois Federal Court Shuts Down "Employee Benefit Plan" Tax Scheme
On March 6, the Justice Department announced that a federal court permanently barred Tracy L. Sunderlage, Linda Sunderlage, and four companies from operating an alleged scheme to help high-income individuals attempt to avoid income taxes by funneling money through purported employee benefit plans.
Judge John W. Darrah of the US District Court for the Northern District of Illinois entered the permanent injunction orders, to which the defendants consented, against the Sunderlages; SRG International Ltd., of Nevis, West Indies; and three Illinois companies ‒ SRG International US LLC, Maven U.S. LLC, and Randall Administration LLC.
According to the government complaint, the defendants claimed to promote and operate plans that provide insurance benefits to participating companies' employees, when in fact, the scheme was simply a mechanism for the companies' owners to receive purportedly tax-free or tax-deferred income for their personal use.
Tracy Sunderlage and the two SRG International companies allegedly marketed the scheme to high-income professionals who own small closely held companies. In the most recent version of the alleged scheme, each participant's company made supposedly tax deductible payments to a purported benefit plan operated by Maven US and Randall Administration. The companys' contributions were then allegedly transferred to an account within a company based in the Caribbean island of Anguilla, in which they were allegedly invested until the owner terminated from the program and received the assets for his or her personal use.
The complaint alleged that many participants owned these accounts through offshore trusts, which Tracy Sunderlage and SRG International Ltd. often helped to establish. The complaint alleged that participants from across the country have transferred at least $239 million as part of the scheme, and that total contributions may exceed $300 million.
The injunction orders bar the defendants from operating or promoting any purported "welfare benefit plans." The court also ordered the defendants to provide the government with a list of their customers and to send copies of the injunction orders to their customers.
In the past decade, the Justice Department's Tax Division has obtained hundreds of injunctions against promoters of tax schemes and preparers of fraudulent tax returns. Information about these cases is available on the Justice Department website.