CHICAGO (CN) – An Illinois man who helped orchestrate a $6 million tax-sheltering scheme cannot overturn his conviction and 15-year sentence, the 7th Circuit ruled.
Brian Wasson co-founded Midwest Alternative Planning in 1997, marketing and selling sham trusts through the now-defunct Aegis Co. Founded in Palos Hills, Ill., Aegis provided “asset protection” and helped clients reduce their tax liability by diverting their income into overseas accounts.
Clients paid between $20,000 and $40,000, plus annual fees of up to $7,000, to set up trusts under the Aegis system.
Midwest Alternative Planning was one of several companies promoting Aegis “trusts,” collecting more than $350,000 in fees and costing the U.S. government $6 million. Over a 10-year period, the Aegis system helped 650 clients eliminate more than $60 million in tax liability nationwide.
But the scheme unraveled in 2000 amid a criminal investigation by the Internal Revenue Service.
Wasson was indicted in September 2006 with aiding in the filing of a false tax return. The indictment was twice superseded to add Wasson’s business partners, Joseph Starns and John Wolgamot, and charge all three with conspiracy to defraud the IRS. The final indictment was released on May 2007.
Extensive delays plagued the trial, according to the 7th Circuit.
Noting the “complex” nature of the case, which required both sides to review of over one million documents, U.S. District Judge Michael McCuskey excluded several periods in computing time for trial. Both the government and Wasson’s attorney sought continuances after co-defendant Starn died of cancer and co-defendant Wolgamot pleaded guilty.
Throughout the March 2009 trial, Wasson insisted that he believed the Aegis system was legal. But McCuskey rejected Wasson’s good-faith defense and found him guilty on all charges in December 2009, over three years after he was first charged.
Wasson was sentenced under the 2008 guidelines to 15 years imprisonment and three years of supervised release.
He was denied bond while the case proceeded to appeal, where he attacked the trial delays. Wasson argued that the indictment should be set aside under the Speedy Trial Act, which generally provides that a federal trial must commence within 70 days after the defendant is charged or makes an initial appearance. Delays must be justified by the court, either on the oral or written record, to toll the act’s requirements.
The 7th Circuit rejected Wasson’s two claims against the repeated continuances, finding that McCuskey was adequately specific in explaining the delays.
“The record of the two hearings in question coupled with the District Court’s written denial of Wasson’s motions to dismiss certainly satisfies [the Speedy Trial Act’s] standard,” Judge Ilana Rovner wrote for a three-member panel.
“We are hard-pressed to see how Wasson was prejudiced by the continuances,” she added. “They ensured Wasson and his counsel had adequate time to deal with the complex and voluminous discovery and to adjust his defense in light of Starn’s death and Wolgamot’s plea.”
The federal appeals court also rejected Wasson’s “insufficient evidence” challenge, pointing out that he sent the IRS a series of letters signed by his clients that refused to acknowledge the agency’s authority, disavowed control over the trust assets, and threatened lawsuits if the IRS pursued audits.
“We cannot square Wasson’s avoidance of the IRS with his stated belief that the Aegis trusts were legal,” Wood wrote.
The court furthermore affirmed Wasson’s sentencing under the 2008 guidelines, even though the maneuver caused a four-level increase in Wasson’s offense level.
“Wasson acknowledges our holding in United States v. Demaree … that the advisory nature of the guidelines eliminates any ex post facto problem with changes that retroactively increase the sentencing range for a crime,” Wood concluded. “Although he urges us to reconsider our holding and reminds us that ours is a minority view among the circuits … he offers nothing new to convince us that we should change course on this issue now.”