LAS VEGAS (CN) - Just over $1.6 million must be returned to the trust of champion tax dodger Jon Edelman, so the federal government can apply it to his $335 million tax bill, a federal judge ruled.
U.S. District Judge Andrew Gordon ruled on multiple requests for summary judgment on March 4, ordering, in essence, that $1,601,000 must be returned to the Edelman Trust after the money and an income stream were fraudulently transferred to another trust in another attempt at ducking taxes.
Among beneficiaries of the Edelman Trust is Jon Edelman, whom Judge Gordon describes as "a tax-dodger who owes the United States government $334.8 million."
Lead defendant in the complicated case is Peter B. Lazare, trustee of the Jon J. Edelman Trust, whom the government sued to set aside transfer of money to the Aurora Borealis Trust. It claims Lazare is personally liable "because he transferred the income stream before paying a debt owed to the United States."
Edelman's history is, to say the least, colorful. In the 1980s he "was on top of the world. He made a lot of money in the tax shelter business and lived an extravagant lifestyle," Judge Gordon wrote in his summary, citing a Jan. 29, 2014 New Mexico Federal Court ruling in Acheff v. Lazare, a property dispute from which this case springs.
Edelman's 55-foot yacht, the Elusive, won the Astor Cup in 1984. In 1989, he bought 30 acres in Taos, N.M., with an 8,500-square-foot house, a 2,200-square-foot guesthouse, an indoor swimming pool and a five-car garage.
But it all crashed in 1989 when federal prosecutors charged Edelman and his business partner Bernhard Manko with 32 counts of defrauding the IRS and helping others to make hundreds of millions of dollars in a $38 billion bogus trading scheme.
Edelman was convicted in 1991, sentenced to five years in federal prison and fined $334.8 million. He escaped after serving two months in a federal prison in Colorado and evaded capture for two years while sailing the South Pacific with his wife and three children. The family survived on $5 million in the Delos Trust, which Edelman set up before he went to prison.
He was caught in Vanuatu in 1995 and sent back to the United States, where he cooled his heels in a Texas prison until he was released in 1999. Meantime, the mortgage on the Taos property went into default, and it was bought at foreclosure from William Acheff, who had sold it to Edelman.
Edelman, out of prison, bought the Taos property from Acheff again, through the Edelman Trust, and lived there for the next 12 years, paying off the debt, for some years, with money from the Delos Trust, through the Edelman Trust - all according to Gordon's case summary.
In 2004, Edelman's friend of 30 years, Peter Lazare, became trustee of the Edelman Trust.
When a $1 million balloon payment for the Taos property approached, the Edelman Trust was insolvent. When it became apparent the government would seize the Edelman Trust's assets, Edelman and Lazare settled the Aurora Borealis Trust in Nevada and on Oct. 30, 2012, transferred $1.6 million and a monthly revenue stream to it.
The government says that transfer violates Nevada's Uniform Fraudulent Transfer Act, and that Lazare broke federal law by transferring the assets before paying a debt owed to the federal government.
Gordon noted that the Edelman Trust received nothing in exchange for the $1.6 million transfer to the Aurora Borealis Trust, and that the Edelman Trust was insolvent at the time of the transfer, as demonstrated by a foreclosure action against it at the time.
With the Edelman Trust and Lazare defendants, a New Mexico magistrate found the government was likely to prevail in its claim in a separate action and recommended Lazare be enjoined from transferring the trust's assets, Gordon wrote. But he transferred the money anyway.
Lazare argued the government's claim against the trust was not made until trial, not in its pleadings, and the Edelman Trust is solvent, because it has other assets.
However, Lazare acknowledged that the value of the remaining assets was so low that the Edelman Trust could not afford to pay a $1,000 filing fee for a tax return, Gordon found.
The judge said that Lazare et al. did not show that the transfer occurred before the government's claim existed, or that the Edelman Trust is solvent, and entered summary judgment in the government's favor on that claim.
Gordon denied the government's claim of personal liability against Lazare for transferring the money, saying the Edelman Trust did not yet owe a debt to the government as defined by federal law, because the matter still was in litigation and no judgment had been made.
Gordon ruled that the $1.6 million transfer from the Edelman Trust is a fraudulent conveyance, ordered the money and a revenue stream from a trust created years ago by Edelman's deceased mother to be returned to the Edelman Trust.
Gordon also enjoined Lazare, Ian Williams, Premier Trust and the Aurora Borealis Trust from making any other transfers from the Edelman Trust or the Aurora Borealis Trust, other than to the federal government.