Smarts and awareness of the law does not guarantee adherence to it. In Willows, California, the elderly Orion Memmott, who is a Stanford Law School graduate and tax attorney, was convicted of attempted tax evasion and for subscribing a false tax document. The case citation is: U.S. v. Memmott (E.D. Cal., Aug. 21, 2013, CR-S-08-402 KJM), 2013 WL 4496615.
Mr. Memmott stole several hundred thousand dollars from investors and clients—funds which he spent on personal items, including “day trading, travel, and personal trainers,” according to the Department of Justice’s (DOJ) website: http://www.justice.gov/usao/cae/news/docs/2013/08-2013/08-21-13Memmott.html
The DOJ’s site elaborates that one of Mr. Memmott’s even stole from one of his client’s medical trust, leaving his client “destitute and homeless.” Mr. Memmott also concealed the embezzled money through the use of “nominee account”—which is an account in one person’s name, although the real ownership is by another.
It is instructive to know the elements of these charges.
The court explained the elements for Subscribing to a False Tax Document: (1) signing a tax collection document (here, Form 433–A), knowing to contain false and incorrect information as to a material matter; (2) the document contains a written declaration that it is being signed under the penalties of perjury; and (3) the defendant acted willfully.
The court also explained the elements for attempted tax evasion: (1) owing more income tax than one declares is due on a return; (2) the defendant knows that more federal income tax was owed than was declared due; (3) the defendant makes an affirmative attempt to evade or defeat such additional tax; and (4) the defendant acts willfully in attempting to evade/defat the additional tax.
One of Mr. Memmott’s defenses was that the accounts were not really his. However, the government successfully argued that the accounts and property were only “nominee” accounts, and that the real ownership resided with Mr. Memmott.
The court iterated the 9th Circuit’s test for when an account is a “nominee.” This test comprises six factors: “(1) whether inadequate or no consideration was paid by the nominees; (2) whether the properties were placed in the nominees’ names in anticipation of a lawsuit or other liability while the transferor remains in control of the property; (3) whether there is a close relationship between the nominees and the transferor; (4) failure to record the conveyances; (5) whether the transferor retained possession; and (6) whether the transferor continues to enjoy the benefits of the transferred property.” Id. at *8–9. “ ‘Virtually without exception, courts focus on the totality of the circumstances,’ and no single factor is dispositive.” Id. at *9 (quoting Dalton v. Comm’r of Internal Revenue, 682 F.3d 149, 158 (1st Cir.2012)). “[T]he overarching consideration is ‘whether the taxpayer exercised active or substantial control over the property.’ ” Id. (quoting In re Richards, 231 B.R. 571, 579 (E.D.Pa.1999)). See also BLACK’S LAW DICTIONARY (9th ed.2009) (“nominee” defined, in relevant part, as “[a] party who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others”).”
The court found that all the elements of both charges were satisfied. Accordingly, the court found Mr. Memmott guilty on both counts. His sentencing will be in November.