Long Tax Fraud Comes to an End

SAN DIEGO (CN) - An Encinitas doctor and his wife face long prison terms after being convicted of years-long tax dodges in which they claimed, among other things, that the Secretary of the Treasury was their "fiduciary" and was responsible for paying their taxes, and that tax laws don't apply to them.

Dr. James Francis Murphy was convicted of all eight counts against him, including corrupt interference with tax laws, four counts of presenting fictitious financial obligations, and three counts of false claims.

His wife, Denine Christine Murphy, was convicted of the corrupt interference and false claims charges, the U.S. Attorney's Office said in a statement.

They were convicted after a two-week jury trial.

Prosecutors said the Murphys paid practically no federal income taxes for a decade though they earned as much as $1 million a year from their osteopathic medical practice.

The Murphys used a dizzying array of tax dodges, according to the U.S. attorney's statement: "These schemes included: (1) falsely claiming that they were not citizens of the United States; (2) frivolously claiming that the federal tax laws did not apply to them; (3) fraudulently presenting fictitious documents such as 'Private Offset Discharge and Indemnity Bonds' and 'Bonded Promissory Notes,' purportedly worth hundreds of millions of dollars, as payment on their tax obligations; and (4) fraudulently claiming that the hundreds of thousands of dollars they paid to credit card companies, utilities and other vendors were actually withholdings of federal income taxes, thereby entitling them to over a million dollars in refunds from the IRS. The defendants even claimed that then-Secretary of the Treasury Henry Paulson was their 'fiduciary' and was responsible for paying their taxes."

Corrupt interference is punishable by up to 3 years in prison and a $250,000 fine; presenting fictitious financial obligations by 10 years and $250,000 per count; and false claims by 5 years and $250,000 per count.

"Nothing is certain but death, taxes and prosecution if you don't pay your taxes," U.S. Attorney Laura Duffy said in the statement.

The Murphys are to be sentenced on Sept. 12.

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