A federal court on Thursday officially barred a Northern Virginia man from promoting tax shelters - the final chapter in a case federal investigators said involved selling fraudulent shares in "sham" cemeteries to help customers claim tax deductions from investment losses or charitable donations.
Prosecutors said Michael A. Strauss, his son Patrick B. Strauss and a third man, Joseph C. Barreiro, claimed to have bought into cemeteries in New York and Virginia and then offered to use them to help their customers avoid taxes.
Investigators said the three men "took in millions of dollars from their taxpayer-customers, and provided to those taxpayer-customers approximately $35 million in fake losses and phony charitable deductions." Over five years, the men "never generated a single dollar of revenue, let along a single dollar of profit" for their customers, the investigators said in their complaint.
The men said every $1 investment would earn their customers $5 in tax benefits.
Mr. Strauss' wife, however, vehemently denied the charges and said her husband - from whom she is separated - is being singled out by former business partners trying to shift attention away from their own troubles.
"He is a [poor] money manager, I'll give you that. [But] this was not a deal to defraud anyone," Jan Strauss said.
The Justice Department said the three men needed to be banned permanently from setting up tax shelters because they repeatedly had skipped from scam to scam for more than a decade, always staying one step ahead of law enforcement.
It's one of a series of actions the department takes each year to shut down tax preparers or other businesses it says engage in tax fraud.
The transactions involved in the cemetery cases were complicated and overlapping, according to the Justice Department, which explained one case like this: "That means, according to Strauss' and Barreiro's account, a company Strauss and Barreiro co-managed, owned and controlled - Memorial Specialists - supposedly bought an 'asset' that (even if real) they already owned, from another entity that they co-managed, owned and controlled - Orbis (NY) LLC - and that together Strauss and Barreiro purportedly 'agreed' to pay each other $70 million."
In June, Mr. Barreiro and the younger Mr. Strauss entered into agreements barring them from promoting tax shelters. Thursday's order adds the elder Mr. Strauss to that list, closing out the government's efforts to shut the men down.
The Justice Department said it wouldn't comment on whether criminal charges were in the offing but said it usually uses civil proceedings to shut down scams in a timely manner.
Patrick Strauss said he signed the government's agreement last year because his business is separate from the tax deals prosecutors detailed.
"If you read what I signed and the government's press release, it is clear that I didn't admit to the allegations," he said. "I agreed to sign the injunctive order because I am a real estate developer and have nothing to do with the cemetery business."
For her part, Mrs. Strauss said the government has erroneously targeted her family. She said she has photos of the cemetery in New York that prove it is real and said the cemetery in Virginia is a legitimate place whose license lapsed but that already has at least one person buried there.
"This was not a Ponzi scheme. This was a tax-deferral deal that turned into a tax shelter. There was money spent on the cemeteries. They were going to give them to charitable burial sites," she said.
She said her husband is in Georgia and that she didn't have a number she could provide to reach him, but she said he agreed to Thursday's agreement because he's tired of fighting.
"He left everything he had here. They busted him out in legal fees ... He's dealing with cancer. At this point, he's giving up. That's all this is about," she said.
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