Fast Cars, Mansions, Casinos — and a Tax Evasion Tale that Doesn’t Add Up
by Byrne Hobart
Your typical leveraged buyout kingpin lives in a swanky Park Avenue apartment, or maybe a hollowed-out volcano in the South Pacific. But that doesn’t mean you can’t get some good old-fashioned tax dodging and company buying-out, right in the middle of Utah.
Husband and wife team Lester and Jeanette Mower liked the idea of trading companies for fun. The weird thing is that the confusing part is the legal part: they would create new businesses, merge them with existing public companies, and sell the stock. That meant a blizzard of paperwork, lots of legal fees, and transactions with dozens of banks and brokers. That’s the complicated part.
Next comes the simple part: once they sold their shares — they never paid taxes.
The strangest part? their take from the scheme was $30 million. They were dodging the capital gains tax. Which means that, had they not cheated the IRS, they would be forced to make do with a mere… $24 million.
So why did they do it? It’s exactly hard to have a nice life with $24 million, especially in a low-cost state like Utah. So what’s really going on? Two possibilities:
They had a legitimate business and a serious gambling problem. Some of the news articles mention time spent in nice casinos. Perhaps the schemers were living like regular old rich folks, one of them skimmed off the tax money to gamble it away.
They were crooks, but the IRS busted them before the SEC could. Utah has a long history of shady stock market dealings, including a huge Uranium penny stock bubble in the 50’s. According to Forbes, it’s “by far the country’s smallest city where the scam-fighting U.S. Securities & Exchange commission has an office.”. Just based on that, there’s a chance these scammers were doing some penny-stock pump-and-dump activity, but that busting them for tax evasion would be easier (the SEC is busy these days, and the fines don’t always cover the profits, much less punish the scammers).
You can read about the whole scheme right here.