PRISON TERM FOR TAX-AVOIDANCE SCAM

Story first appeared in USA TODAY.

Six years ago, William Reed was a Nevada businessman listed as the corporate officer for more than 1,000 companies purportedly headquartered in a lone Las Vegas office suite.

Now he has a new title: federal prison inmate, sentenced to nine years behind bars.

Nevada Senior U.S. District Judge Philip Pro imposed the sentence Tuesday after Reed pleaded guilty to tax conspiracy, attempted tax evasion and aggravated identity theft in a case involving his part in a thriving mini-industry that helps an untold number of clients attempt to hide financial assets from the IRS and other government agencies, creditors and courts.

Pro also ordered Reed, 63, to pay nearly $4.2 million in restitution as part of the sentence.

A Feb. 2007 USA TODAY report showed that Reed and his company, Asset Protection Group, took advantage of gaps in domestic incorporation laws and virtually non-existent government oversight to promote some U.S. states as secrecy rivals of traditional offshore tax havens.

Asset Protection Group attracted clients in part with a promotional video in which actor Robert Wagner warned that without asset protection, "You could lose everything you've worked so hard for, in a flash." Clients paid as much as $9,800 for the firm's asset protection program and became company consultants.

Reed and the firm typically formed new Nevada corporations for the clients that listed him, not them, as the sole officer. The procedure took advantage of laws in Nevada and other states that often do not require the actual owners of corporations to be disclosed.

"Our consultants purchased the corporations, resold them, and I never knew who actually used them," Reed wrote in a statement filed with the court last week. "Some of our customers used the corporations to hide their assets or income from the IRS."

Reed personally owes more than $34.4 million in taxes, and Asset Protection Group transactions add an additional $14 million in tax liabilities, federal court records show.

Reed's sentence was more lenient than the 12-year term recommended in a presentencing report. But it was harsher than the six-year term defense attorney attorney Paola Armeni urged in a Oct. 8 sentencing memorandum.

While acknowledging that Reed had "failed to pay his own taxes" and continued to engage in activities that "deprived the IRS from collecting money from many others," Armeni argued in the memo that he deserved a lighter sentence based on his help recovering nearly $3 million for the IRS.

Armeni also cited Reed's help providing evidence against alleged co-conspirators, his age and need to assist with care of his 88-year-old mother.

"As someone with no prior criminal activity, I am humbled and humiliated. I'm truly ashamed," Reed wrote in his court statement.

However, Assistant U.S. Attorney J. Gregory Damm argued in a court filing last week that Reed should get no leniency for satisfying a fraction of his overdue tax bill. "The government has made a good faith evaluation of the defendant's assistance to date and has concluded that he has not yet provided "substantial assistance to authorities," Damm wrote.