Congressional Testimony by Mark R. Secrist
Testimony By Mark R. Secrist, Statement
Chairman Lewis, Ranking Member Boustany and Members of the Subcommittee on Oversight, thank you for this opportunity to participate in these discussions concerning the efforts made by the IRS to assist economically distressed taxpayers. I am most fortunate to have been born in the United States, and I have grown to appreciate the tremendous blessing it is to be a citizen. I enlisted in the Army in 1973 during the Vietnam conflict. I received an appointment to the United States Military Academy at West Point. I received a commission as a 2nd Lieutenant in the Marine Corps and served as a C-130 tanker pilot. I am currently living in Winchester, Virginia with my wife and six children. I am also serving as a pilot for a major commercial airline. I consider it an honor and a duty to pay taxes for the operation of this country as I have always done, and I am pleased to read Commissioner Shulman’s comments when he remarked:
“We need to ensure that we balance our responsibility to enforce the law with the
economic realities facing many American citizens today. We want to go the extra
mile to help taxpayers, especially those who’ve done the right thing in the past
and are facing unusual hardships.”
Contrary to the statement of Commissioner Shulman, my testimony today is that the IRS has misapplied tax law and has even broken law as I will document to the Subcommittee. My testimony today will illustrate astonishing misapplication of the facts and the law that does not take into account the IRS Mission Statement to apply the tax law with “integrity” and “fairness.”
This is a time that is very stressful for my family and me. I am facing a most unusual hardship caused by extraordinary misapplication of the law by the IRS arising out of the fact that I am a victim of an offshore Ponzi scheme. I am 54 years old, I have had a flawless record in paying my taxes and fulfilling my tax obligations to this wonderful country, but the “unthinkable” has happened. I was financially destroyed by white-collar criminals, on the island of St. Kitts, who were running a complex and elaborate Ponzi scheme that hurt me and many other US citizens as well. In exchange for $300,000, sourced from refinancing my home, I was promised 20% interest. The $300,000 was embezzled. The problem has been exacerbated by an IRS examination which resulted in approximately $1.1 million in section 6677 penalties on the money that was embezzled. The IRS also assessed a 75% penalty for civil fraud for making contributions to two 501(c)(3) approved churches. I believe that the Subcommittee and Commissioner Schulman need to know the facts about IRS misconduct in this matter.
General Statement of the Issues for the Subcommittee.
I got caught up in an offshore Ponzi scheme operated by Administrative Services Limited (ASL) and its successor in interest (BMT). Each of these companies, and others, were Kittitan entities set up, beneficially owned, and controlled by two Americans, Bill Gagnon and his wife, Mary Estes. I sent them approximately $300,000 in exchange for a 20% return. ASL would not let me invest the $300,000 unless I agreed to pay them for two foreign non-grantor trusts formed by ASL under St. Kitts law. The money was embezzled. I was assessed the 35% penalty under section 6677 for not filing a Form 3520 to report an interest in a foreign “grantor trust.”
In order to assess the 6677 penalty, the IRS “deemed” a non-grantor trust to be a grantor trust. The 6677 penalty was assessed even though the Department of Justice stated that the trusts formed by ASL were “sham” trusts. The penalty was assessed even though the High Court of St. Kitts has held that I was a victim of fraud and that ASL and others conducted a Ponzi scheme. The penalty was applied even though the “deemed” grantor trusts are void from their inception under the law of St. Kitts. The penalty was assessed even though there is court testimony from ASL insiders that my money never got into a foreign trust. The penalty was assessed even though I have demonstrated “reasonable cause” under section 6677(d) that included full due diligence, reliance on a CPA, reliance on a private ruling letter from IRS Puerto Rico, reliance on Kittitian Attorneys Inniss and Inniss, reliance on State Department Website commenting on the development of the Gagnon Resort, and reliance on two expert tax attorneys. The penalty was assessed because the IRS took the view that a “sham trust” can be deemed to be a valid trust so that the IRS could assess the 6677 penalty for not reporting an interest in a foreign grantor trust. If that were not enough, I have been assessed tax on the 20% interest income that I did not receive even though the IRS knows that the money was embezzled. I was also hit with a 75% civil fraud penalty for making documented contributions to two 501(c)(3) churches located in the U.S. I also want the Subcommittee to know that this matter was brought to the attention of the National Taxpayer Advocate on the issue of whether the IRS can take the inconsistent position of deeming a sham trust to be a valid trust solely for the purpose of assessing the 6677 penalty. The National Taxpayer Advocate considered the issue but elected to defer to the IRS examiners even though the position of the IRS on taking inconsistent positions is unpublished.
My testimony will illustrate abusive IRS examination tactics, and a refusal to follow the law. For that reason there is very serious IRS misconduct that I can document under the facts and under the law.
I can document the following facts:
1. The High Court of St. Kitts determined that ASL and BMT conducted a Ponzi scheme and that I am a victim of fraud.
2. The Department of Justice determined that ASL was a fraudulent tax shelter and that the trusts were sham trusts.
3. Investor data held in respect of over 100 US citizens was demanded and received by IRS examiners in this matter (William Everett and Louis Pacho, Manager) in violation of the MLAT Treaty between the US and St. Kitts. This data was demanded of BMT Ltd, a St. Kitts company with no place of business in the US. The IRS has no jurisdiction over BMT Ltd, yet despite this, Mr. Everett of the IRS purported to issue a summons against BMT Ltd, at BMT’s request. Failure to follow the law is a serious issue under section 7214(a)(3) of the Code.
4. The IRS Examiners returned the data on 3 government CDs, with all of the private data of investors including social security numbers and bank account numbers. This data was returned to be used by ASL and BMT’s owners and officers in their defense of a class action law suit in St. Kitts in which I was a claimant. The data was made available to third parties. The investors, whose data this was, had not consented to it being sent by the IRS to the third party concerned, one Janet Conway, an unlicensed private investigator based in Blue Bell, Pennsylvania; who was retained by BMT at one time. I believe that disclosure is prohibited by section 6103 and 7213 of the Code.
5. I reported the IRS misconduct for Everett’s disclosures, to TIGTA. Incredibly, TIGTA did not find IRS misconduct when the IRS examiners sent off tax return data with the potential for identify theft to third parties, contrary to section 6103 and section 7213 of the Code.
6. The 3 CDs with confidential data were sent to BMT’s investigator, Janet Conway, to help in its defense against me and other claimants. Since ASL and BMT were ultimately found to be liable to the claimants, the IRS examiners at minimum provided assistance to their efforts to avoid that liability
7. I have a letter from Martin Kenney & Co, an English law firm which acts for me in St. Kitts, that states that the foreign trusts were void from their inception under the law of St. Kitts. The IRS has treated the Ponzi trusts as valid trusts solely for the purpose of assessing the 35% 6677 penalty on the money that was embezzled.
8. There is court testimony by insiders filed in my St. Kitts action, that most of the investor income was embezzled by Mr. Gagnon and his successors, and that Gagnon controlled entities kept false records to record the fictional 20% investment return.
9. The IRS and the case law conclude that in the case of abusive tax shelters, “substance” prevails over “form.” For that reason I got in touch with the National Taxpayer Advocate for assistance on the 6677 penalty. There is no precedent for treating a “sham trust” as a trust solely for the purpose of filing the 6677 35% penalty. I argued that if the IRS wanted to take an inconsistent position and disregard a sham trust and then take a conflicting view that it is a trust, they should publish that position first. Otherwise, the IRS cannot meet its Mission Statement to apply the tax law with “integrity” and “fairness.” The NTA took no action because the IRS said that they wanted to take this inconsistent position even though the IRS has not published that inconsistent position. The NTA deferred to the IRS examiners.
10. The section 6677 penalty can be abated for “reasonable cause” under section 6677(d). I raised substantial reasons for “reasonable cause” but the IRS refused to discuss any of the reasons for “reasonable cause” including reliance on a tax attorney with 40 years IRS experience who advised me that Form 3520 does not have to be filed if the foreign trust is a sham trust.
11. The IRS in Puerto Rico apparently provided a “Private Ruling Letter” to ASL, dated 8-23-98, from District Director Guaynabo, that states (1) The ASL trust structures are code compliant valid structures, (2) They are not a tax avoidance or evasion trust, (3) They are Non-Grantor Trust which are not reportable on Forms 3520/3520A. – (PRL) 19981007, letter 729 (Rev.7-97)
Chronological Statement of the Facts.
1. In 1999, I picked up a flyer and a card at church from a neighbor who had just heard Mr. Bill Gagnon speak. Gagnon and his wife were the owners of ASL, a St. Kitts company. My neighbor said that Bill Gagnon was a Christian Minister businessman who was involved with the building and the construction of a resort project on the island of St. Kitts that was nearing completion. I was told that the resort was 85% rented out most of the time to people from the UK and other parts of the world, and that it was generating income for those who could invest in the project. I flew down to St. Kitts in 1999 to meet Mr. Gagnon personally. He acted in a very professional manner as he persuaded me to be a better steward of my money by investing it wisely. He introduced me to his staff, gave me a tour of the resort he was promoting for investment, and provided me an opportunity to stay in a room at the resort. I chose not to accept his offer to stay at the resort. I wanted to have more time to speak with him to learn all I could during my short visit and accepted his offer to stay at his home. During my visit he told me he was an ordained minister and that he had previously served as a missionary in Africa for over twenty years. I heard him passionately speak of spiritual matters and watched him lovingly care for his quadriplegic wife, Mary Estes, all of which made me to believe he was sincerely a man of God and could be trusted. I also saw the completed buildings with people in them. I toured the individual rooms that were filled with fine teak wood furniture and beautiful décor immaculately maintained. I saw the buildings that were under construction with workers present, and I saw the blueprints for the entire project including the pool and restaurant.
Special notices were given to me by Brad Woodard (the CFO of ASL) informing me that a staff of attorneys and legal professionals were on the job and currently involved in maintaining trust documents for other clients, thus keeping us in full compliance with the US tax law. Mr. Brad Woodard, was held out as an expert accountant and would regularly communicate his analysis of U.S. tax laws to me. Mr. Woodard assured me that Mr. Gagnon’s organization was U.S. tax compliant. A letter, dated 14 January 1999, by the respected and prominent St. Kitts law firm of ‘Innis and Innis’ stated that:”the trust document structures were legal and compliant with US tax law and IRS rules and regulations. They are Non-Grantor status according to three US CPA’s, therefore no legal and no annual IRS 3520 or 3520A forms need to be filed.” Even the Federation of St. Kitts government said the trusts were legal and compliant with US tax law and IRS regulations in a letter dated 12 April 1999, by GA Dwyer Astaphan, Minister. I’ve shown good faith, reasonable cause and reliance on professional counsel as I’m ignorant of the complexities associated with this type of trust.
ASL was a St. Kitts Corporation that Mr. Gagnon claimed had a ‘start to finish’ plan for a complete package with the staff to walk me through it. I decided to invest also because Mr. Gagnon promised a 20% return on my investment. So convinced was I of ASL’s knowledge, professionalism and legitimacy that under its guidance and direction I took out two equity loans on my house and sent two large checks into the Paradise Beach Investment totaling approximately $300,000.
2. In order for me to invest, Mr. Gagnon said that everyone desiring the 20% return must have ASL create a foreign trust structure that involved one domestic trust and two foreign trust documents. Mr. Gagnon and the staff explained to me that I was not the owner of the trust, only the administrator of the trust.
3. A few years later, in 2001, Mr. Gagnon died from a heart attack. Mr. Gagnon’s wife, Mary Estes, then assumed control of the Gagnon organization. Mary was a quadriplegic M.S. sufferer. She died in 2003. Shortly before Mary Estes’ death, Roland Thomas took control of the Gagnon organization, including the resort complex. Mr. Thomas kept control until sometime in 2007. As a result of four years of hard fought litigation in St. Kitts, I and my co-claimant established that a constructive trust was impressed upon the Resort which Gagnon had used our money to buy and develop. Mr. Thomas denied knowledge of me and others, under oath, as a person(s) who had invested in the resort. Thomas hoped to get rid of the investors in ASL, so he would be able to keep the resort property without any obligations to me and the other ASL investors whose money was embezzled.
4. I began a class action lawsuit in St. Kitts in 2003 against ASL, BMT and others. At the time I commenced my action, Roland Thomas was CEO of BMT. Mr. Thomas is a British citizen who I believe currently resides in the Las Vegas area. (BMT is a St. Kitts company with no presence in the U.S.) I am one of the lead claimants against BMT and others for recovery of the assets of BMT.
5. In 2004, Judge Baptiste (a St. Kitts Judge) ordered BMT and Mr. Thomas, (the CEO of BMT in 2004) to produce the personal and financial records it held of myself (and the records of 125 other US citizens who had invested also) that were located on the property. These records would have proven my case against ASL, BMT and others. Mr. Thomas did not obey Judge Baptiste’s court order. However, Mr. Thomas went back into the courtroom, seven days later, and testified before Judge Baptiste that, “There were no records to be found.” – A direct lie.
6. To get around the Baptiste Order, Thomas called the IRS and made contact with Agent Louis Pacho (group manager) and Agent William Everett who worked for Mr. Pacho. These two federal employees coordinated with Mr. Thomas by supplying him with an IRS summons. The IRS summons was signed by Mr. Everett and was directed to Mr. Thomas as CEO of BMT. Under the MLAT Treaty between the US and St. Kitts, data held in St. Kitts can only be requested by the IRS in a criminal matter. The Summons was a civil summons. Before the data left the island, according to sworn affidavit testimony of certain “whistle blower” employees, Mr. Thomas instructed the office manager to destroy all documents pertaining to the ASL investors and to “bleach” computer records. The Court of St. Kitts was denied critical evidence needed to support my claims. The data received by the IRS from BMT was data which it was not entitled to request or obtain. The IRS summons was in breach of (a) the Baptiste Disclosure Order; (b) the US – St. Kitts MLAT Treaty; and (c) the St. Kitts Confidential Relationships Act 1985.
7. Two years went by, and a number of “whistle-blowers” who worked for BMT, at that time, surfaced. Their combined testimony concerning the presence of the records on the property and what these records contained was enough to convince Judge Belle that Judge Baptiste was lied to by Mr. Thomas, and others acting for BMT in 2004.
8. In 2006, Judge Belle ordered BMT to produce these same records in three days, or its defenses would be completely struck out and BMT would be prevented from filing any other defense as well. Mr. Thomas was caught in a lie. Janet Conway (an unlicensed Pennsylvania private investigator hired by Mr. Thomas) and professional advisors working for BMT made an urgent plea to IRS Agent Everett for the data to be returned to them ASAP to comply with Judge Belle’s order. The data was needed to satisfy the Order made by Belle J. in October, 2006. A letter written by Mr. Thomas to IRS Agent William Everett, dated, March 17, 2006, contains Mr. Thomas’ urgent request for an inventory to be done on all of the data that was sent by him pursuant to the IRS summons. Mr. Thomas tells Mr. Everett that he is being falsely accused of improprieties by myself and that the private/taxpayer data is absolutely needed for BMT to defend itself from these false accusations. Mr. Thomas accused the Claimants of fraud and communicated that charge to Mr. Everett. Mr. Everett proceeded to help the Defendants even though Mr. Everett and his manager were conducting IRS examinations on the investor-Claimants at that time.
9. At this point, Agent Everett came to the rescue of BMT by quickly, and voluntarily providing all of the data requested by BMT on 3 government CD’s printed from Atlanta, GA. However, the IRS agents did not send the data directly back to BMT. Agent Louis Pacho or his assistant sent the data to Janet Conway. She did not have authority from any of the individuals whose data was on the discs, to view the private taxpayer data. At that time, Janet Conway was operating her business unlawfully, as she did not have a private investigator’s license, which is required by the state of Pennsylvania. The IRS agents chose to deal with her anyway and provided her the private/taxpayer data on 3 government printed disks that were not encrypted. Over 630 pounds of US citizen’s private data were on these disks. The Federal Trade Commission’s protocol for data breach is currently being followed.
10. The data on the IRS CD’s satisfied the demand of Judge Belle, and as a result, the lawsuit continued to rage on, burning-up more of my assets, totaling over 1 million dollars of additional attorney fees. Finally, the St. Kitts government seized the property. Based on current information, the St. Kitts government then quickly sold the property to the Marriott Hotel for an undisclosed amount. The Kenney Firm (my attorneys) is now engaged in an effort to obtain appropriate compensation from the Government of St Kitts. This effort is currently going on, and may last for years to come. If the IRS agent(s) did not take the private/sensitive data from BMT in 2004, and then give it back in 2006, I would have (1) won the lawsuit sooner and (2) I could have sold the Resort for top-dollar as I had a purchaser willing to buy it from me. I would have been able to pay my attorney fees and to completely recover financially from this.
11. On September 27, 2007, the High Court of St. Kitts along with the attorneys representing both the defendants and the claimants concluded that I, along with the others, was a victim of fraud. My money was in fact embezzled by Mr. Gagnon and others. The court determined this to be a Ponzi scheme as noted by Judge Belle, who presided over my case, and made the court order that concluded my lawsuit against the defendants.
Judge Belle wrote on September 27, 2007:
“The financial schemes marketed to the Claimants and operated by Bill Gagnon, and following his death by Mary Estes, were nothing more than a mechanism to cause the Claimants to unknowingly and unwillingly invest their money into an elaborate and fraudulent ponzi scheme that collapsed under its own weight.” 7
12. I have been charged by the IRS Civil Penalties for tax year(s) 1999, 2000, 2001, 2002, and 2003 totaling $1,174,934.50 for violations under IRC 6038, 6038A, 6677, and 6679.
I was audited by IRS Agent Eugene Nelson (50-19235) on April 26, 2006, concerning my involvement with ASL. My case languished on his desk for almost 2 years after the audit until I received a letter from him dated, January 8, 2008. I was given 30 days to respond to the penalties he had determined that I owed. However, after looking closely at Mr. Nelson’s work, my CPA and I noticed that he did not take into account that I amended my taxes in January of 2005. Mr. Nelson also has charged me with civil fraud as well, based on donations that I gave to (two) legitimate churches that are still currently recognized on government web sites as being 501(c)3 organizations. I was given misinformation by Mr. Gagnon to induce me to give money to the churches. Mr. Gagnon told me that I could receive a future economic benefit from doing so; however, no future benefit promised by Mr. Gagnon was received by me. My attorney wrote a protest letter to Mr. Nelson. Mr. Nelson provided no response to my attorney’s protest letter. My case was mysteriously transferred to Mr. Everett. No reason was provided by Mr. Nelson for the transfer. My case has been with Mr. Everett now since February 2009 to the present. Mr. Nelson has accused me of civil fraud assessed under section 6663 of the Code and the negligence penalty under section 6662(a). I do not understand why it should take over three years to examine the tax return of a victim of a Ponzi scheme. I am just a W-2 employee.
I initially took a 100% charitable deduction for all of my cash contributions. When I consulted an expert tax attorney, he advised me to amend my tax returns because I was told by Mr. Gagnon that 90% of the charitable contribution would provide some kind of an economic benefit in the future. I now know, as will be discussed below, that I was given misinformation by Mr. Gagnon, or his agents, to induce me to give cash payments to the 501(c)(3) churches. I disallowed myself the 90% benefit in Jan. 2005.
To illustrate the extreme nature of the IRS examination, Nelson has charged me with having received interest income from the 20% Ponzi interest income even though I did not receive the income and there is now strong evidence that ASL kept “dummy” records to reflect interest income. This evidence comprises (a) the sworn testimony of Derrick Fraites, who worked for several years as the Office Manager within ASL and BMT under Bill Gagnon, Mary Estes, Robert Estes and Roland Thomas; and (b) copies of those dummy records, which Mr. Fraites described and exhibited to his affidavit, sworn in the St. Kitts Action. It cannot get more bizarre to have ASL steal my money, and then be charged with taxable income from the money embezzled.
The cash contributions were made to 501(c)(3) churches. I have canceled checks for all of the charitable contributions. Mr. Nelson saw and reviewed all of the checks that were given to the churches. It is basic law that all taxpayers are entitled to charitable contributions when they donate money to 501(c)(3) churches.
I provided Mr. Nelson with communications that were received by the IRS. In these communications, I expressed my personal emotions about my reliance on the “ministry” of Bill Gagnon, a minister who took advantage of my Christian faith. These documents were in the possession of Mr. Nelson and show my good faith, reliance on a Christian Minister, and my “good faith” in placing investments with ASL.
This reliance is sufficient to justify “reasonable cause” under section 6664(c) of the Code for the penalties proposed by Mr. Nelson under section 6662. Obviously, if there is “reasonable cause” for a negligence penalty, it would be impossible to prove “willfulness” under section 6663.
A report from CPA Audry Pomerening, dated February 1, 2008, indicates that Mr Nelson disallowed the charitable deductions twice and gave no credit for the taxes paid to the charities.
Under new facts, I may have been wrongly told that the churches did not keep all of the money donated to them. More importantly, I had no obligation under law to monitor what a church does with donations and how they expend donations for religious purposes. The IRS is required to follow the law under the clear language of section 170. See section 7214(a)(3) of the Code.
There is no technical authority for Mr. Nelson to invent interest income on embezzled money, nor is there authority for a finding that if a taxpayer is embezzled, then the taxpayer should be charged with civil fraud for having his money embezzled.
In summary, Nelson has made audit adjustments and alleged civil fraud without any justification in fact or in law. During the examination conference, Mr. Nelson did not mention civil fraud in any way. No allegation of civil fraud should be made by Mr. Nelson merely because a taxpayer is a faithful Christian. Further, Mr. Nelson cannot make the case that bogus interest income that was based on a false set of books to cover up embezzlement is taxable income.
Department of Justice Determines Administrative Services, Ltd. used sham domestic and offshore trusts, in the case of Victor Carlysle Sullivan, Jr. 1/12/2007.
The Complaint filed by the Department of Justice states ASL operated a tax-fraud scheme. The ASL tax scheme involves the sale and use of sham business organizations and offshore trusts. Paragraph 16 of the complaint states: The reason that the customers fail to report their assets and the income filtered through these trusts [reference is to the failure to file Form 3520] is that the trusts are simply sham entities formed without any economic purpose. Paragraph 32 states: The intent and effect of the ASL offshore tax scheme is to promote, aid, and abet federal income tax evasion.
The IRS is required to follow the determination by the Department of Justice that the trusts created for Taxpayer in the present case by ASL are sham trusts. In addition, I consulted Carlyle Sullivan, a CPA to prepare my tax returns. I relied on Mr. Sullivan for my ASL investments. Reliance on a CPA is “reasonable cause” under the section 6664 regulations. Obviously, if negligence can be abated by reliance on a “professional” there is even a stronger reason why there is no civil fraud in my case.
Court Order from the St. Kitts and Nevis Circuit Court.
This Court Order is significant because it is a judicial determination of fraud and it was agreed to by the principal Defendants in the class action law suit I brought with others, in St. Kitts. BMT
was the successor in interest to ASL and held all of the assets embezzled from the investors in St. Kitts, including myself.
Paragraph N. states: It is now apparent that the various financial schemes marketed to the Claimants and operated by Bill Gagnon, and following his death, my Mary Estes, were nothing more than a mechanism to cause the Claimants to unknowingly and unwillingly invest their money into an elaborate and fraudulent Ponzi scheme which ultimately collapsed under its own weight. Under this scheme, investors were promised rates of return upwards of 20% per annum. However, there was never any genuine economic activity underlying the scheme which produced a rate of return. Instead, the Investors’ capital was simply misapplied and paid out as a form of “income” or “return;” used to fund the overhead of the Sherwood/Estes enterprise and the lifestyles of Mr. Gagnon and Ms. Estes; and used to acquire the title to the lands and build the Resort.
Paragraph O states that the Investors’ capital ended up being remitted to bank accounts maintained by BMT while exclusively controlled by Bill Gagon and Mary Estes. Mr. Gagnon was the sole signatory for all of the accounts that he maintained for the claimants.
By this Order, BMT agreed that there was fraud on the ASL investors (including Mr. Secrist). Judgment in default was entered against ASL.
Memorandum from Martin Kenney & Co., (“MKS”) December 6, 2006 and December 13, 2006.
MKS specializes in fraud recovery. MKS was successful in having me and my co-claimant declared to be owners of the Angelus Resort, in place of BMT. Mr. Kenney is an expert in English law, from which the law of St. Kitts is derived. His opinion letter indicates that the foreign trusts located in St. Kitts, purchased by myself are void ab initio.. Mr. Kenney identifies a Ponzi scheme and other fraudulent activities and that all funds transferred to Administrative Services were not under the control of Mr. Secrist. “The trust documents, fabricated by Mr. Gagnon were designed to create the illusion that the administrators had some control over their investment dollars, but this was not the case.” Mr. Kenney concludes that the trusts purchased by Mr. Secrist were “sham trusts.”
Because the trusts were procured by Estes/Gagnon as a centerpiece to their grand scheme of fraud, we say they were not properly constituted from their inception. – Martin Kenney
Kenney has concluded that the foreign trusts never existed!
Affidavit of Derrick Fraites 5/24/2004 before the High Court of St. Kitts 5/24/2004.
Mr. Fraites was the office manager for ASL and he testified under oath that all of the money paid to ASL was embezzled and that ASL kept a false set of books. Mr. Fraites would make fictitious entries into the accounts so that I would see what I had invested. He testified that the entries “were fictitious as the actual accounts were almost always empty. Mr. Gagnon would endorse all of the checks coming in for his own use.”
This further establishes the sham nature of all of the ASL operations. This document is important because it is court testimony made under penalties of perjury, that my money was embezzled and that ASL and other entities within the Gagnon organization maintained a dummy set of books.
IRS Summons Dated March 8, 2004.
The summons was sent to BMT Ltd, a St. Kitts Corporation by William Everett and his manager Louis R. Pacho. There is no jurisdiction for the U.S. Summons on a St. Kitts corporation, therefore, all of the data received by the IRS and used in my examination is unlawful. The IRS has been using data from an unlawful Summons, including the Secrist investment data. Mr. Nelson’s willful use of unlawful data is a 7214(a)(3) violation.
Affidavit of Janet Conway, April 13, 2006 before the High Court of St. Kitts.
Ms. Conway referenced the fact that an IRS examiner (apparently Everett) advised her that the investigations had been completed and that appropriate documentation and recommendations had been sent to the Department of Justice in Washington DC. It appears that Ms Conway was referring to Mr. Everett. Apparently, the IRS was conducting a criminal examination in the guise of a civil examination because Mr. Everett made contact with the Department of Justice.
For the reasons set out above, it is reasonable for me and my attorney to ask that he be removed as my examiner.
Amended tax returns of Secrist for 1999, 2000, 2001, 2002, and 2003 with evidence of payment.
I was told by Mr. Gagnon that I could make contributions to the two churches and also get a personal benefit in some way. In my original tax returns I took charitable deductions for the full amount of cash paid to the churches. My amended returns, submitted in Jan. 2005, were made just in case the churches did not keep all of the money I contributed to them. However, I have discovered zero data that the churches did not keep all of the money given by myself. In November 2004, I ordered my CPA to remove 90% of the cash contribution benefit that I received from the donations as I was informed by an expert tax attorney that I cannot take the full donation amount as the churches, as I was told, only kept 10% of my donation. I paid all of the back-taxes and the interest to the IRS for this 15 months before any contact with me at all was made by the IRS. I found the problem, I fixed the problem. It’s not a crime to be temporarily deceived and fooled by people who misrepresented the law to me. My conduct negates any willful attempt to not pay my taxes as I have always paid.
TIGTA has failed to provide oversight.
I filed a misconduct complaint against Everett for unlawful disclosure of my tax return data in the 3 CDs sent to Janet Conway to be used by defendants in the class action lawsuit. TIGTA cleared Mr. Everett without seeing the CDs and without discussing the facts with me or my attorney. Obviously, there was a disclosure and the potential for identity theft. It is not clear to me why TIGTA cleared Everett when there appears to have been a clear disclosure violation under section 6103.
Summary and Conclusions.
My testimony is intended to make sure that the Subcommittee on Oversight is aware of the fact that in my case, the IRS did not comply with its Mission Statement to apply the tax law with integrity and fairness. I have also identified IRS documented misconduct for making social security numbers and other financial data available to people not entitled to have that data. I can document the fact that the IRS examiners did not comply with the U.S. MLAT Treaty. The IRS also refused to follow the law on trusts under the applicable law of St. Kitts. I have also identified the fact that in my case the Taxpayer Advocate did not exercise her independent judgment to act as ombudsman for me when the IRS deemed a sham trust to be a valid trust. In effect the IRS recognized a sham trust solely for the purpose of accusing me of not filing a Form 3520 for the fictitious foreign “deemed” grantor trust. This was despite the previous applicable finding in the Carlysle case. I have identified IRS examination that is so outrageous that it was necessary for them to use a fictional grantor trust just so they could find a way to assess a 35% penalty on the money embezzled by crooks in a fraudulent Ponzi scheme. I am a victim. The IRS chose to punish a victim with a new position for which there is no legal precedent. I am available to Members of the Subcommittee to show you all of my documentation and the outrageous positions taken by the IRS. This testimony is submitted in good faith and on the assumption that the Subcommittee is interested in an actual case like mine in addition to the platitudes of the IRS Commissioner and the National Taxpayer Advocate. What is important are actual case histories for true oversight of the IRS. I would encourage the Subcommittee to hold hearings on the subject of IRS misconduct and whether TIGTA is policing IRS misconduct. I would be pleased to be a witness at any Hearing on this topic. The extreme position taken in my case by the IRS is in contrast to the liberal policy taken by the IRS for Ponzi scheme victims in Rev. Rul. 2009-9 and Proc. 2009-20. Although the IRS has provided favorable guidance to the Madoff Ponzi victims by giving them tax relief and “safe harbor” benefits, the IRS has treated me with absurd determinations including assessment of interest income based on demonstrably dummy records.
Mark Richard Secrist
1623 Laurel Grove Road
Winchester, VA 22602
msecrist@hughes.net
