DALLAS — A Dallas attorney who allegedly created "tax shelters" to help high-net-worth clients conceal more than $1 billion in income from the IRS has been federally charged, according to U.S. Attorney for the Northern District of Texas Chad E. Meacham.
Joseph Garza was indicted Tuesday on 18 counts of wire fraud, one count of conspiracy to commit wire fraud, and 22 counts of aiding and assisting in the preparation of fraudulent income tax returns.
Garza, 79, was arrested Tuesday at his home and made his initial appearance before U.S. Magistrate Judge Ramirez on Wednesday.
“This attorney allegedly hid more than a billion dollars of client income from the IRS, conning the U.S. Treasury out of roughly $200 million and lining his own pockets in the process,” Meacham said. “Our country functions best when every citizen pays his or her fair share. We will aggressively pursue anyone who subverts our tax laws.”
According to the indictment, Garza allegedly created multiple shell companies – including shell “services” companies and shell “investments” companies – to create a circular flow of funds to help clients avoid paying taxes, according to Meacham.
"IRS Criminal Investigation and the Department of Justice are working vigorously to stop abusive tax schemes like the ones created by Mr. Garza," said Christopher J. Altemus, Jr., Special Agent in Charge of IRS Criminal Investigation Dallas Field Office. "Mr. Garza exploited his position as an attorney and purported tax expert to try and legitimize his illegal tax scheme. His arrest should serve as a warning that individuals who create elaborate schemes that have no purpose other than to defraud the IRS and shift the tax burden to honest American taxpayers will be prosecuted.”
Garza's shell companies were acting as if they were providing services to the clients’ businesses or serving as family investment vehicles. In reality, the companies had no legitimate purpose other than to move money, according to Meacham.
Garza and some other people allegedly created fake operating agreements, fake service agreements, phony invoices, and false private annuity agreements designed to give the companies the appearance of legitimacy and conceal the scheme from the IRS, Meacham said.
Garza and others then allegedly helped clients prepare and file fraudulent tax returns, including IRS Forms 1120 and 1120-S. They also falsely deducted businesses' expenses for services that were never performed, falsely reported gross receipts for payments that were not earned, and falsely deducted payments from the investment company to the taxpayer for annuities that didn’t exist.
Garza and these other people also underreported the individual taxpayers’ incomes.
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Garza allegedly charged clients a percentage of the predetermined amount of money they had chosen to shelter from taxes. The scheme resulted in more than $1 billion in unreported income and more than $200 million in unpaid taxes, according to Meacham.
If convicted, Garza faces up to 20 years in prison for each of the 18 counts of wire fraud, 20 years in prison for conspiracy to commit wire fraud, and three years in prison for each of 22 counts of aiding and assisting in the filing of false federal income tax returns.
The Internal Revenue Service's Criminal Investigations’ Dallas Field Division conducted the investigation with help from the Federal Bureau of Investigation’s Dallas Field Office. Assistant U.S. Attorneys Renee Hunter, Katherine Miller, and Marty Basu of the Northern District of Texas are prosecuting the case with Trial Attorney Robert Kemins of the Justice Department’s Tax Division.
The investigation is ongoing.