Two Guilty of Fraud in Scheme Pushing Phony Tax Shelter

Two men were convicted Friday on charges of promoting a uranium mine tax shelter that encouraged hundreds of investors to claim $22 million in phony income tax deductions.

Melvin Lloyd Richards of Sherman Oaks, chief executive officer of a company that owned hundreds of mining claims in New Mexico, and Jerome V. Saitta of Marina del Rey, a salesman and organizer for the tax shelter, were convicted of one count of conspiracy, 10 counts of mail fraud and 10 counts of aiding in the filing of false income tax returns.

The jury could not reach a verdict on a third defendant, Allen C. Stout, also of Sherman Oaks and corporate secretary for the company. His attorney moved for dismissal of the charges.

“My argument was that while Mr. Stout was involved in the financial aspects of the corporation, he had no knowledge of the fraud,” said Stout’s lawyer, Jan Lawrence Handzlik.

The three men were accused of seeking investments totaling $6.6 million from more than 650 investors to develop mineral uranium claims, according to Assistant U.S. Atty. Nancy Wieben Stock, who prosecuted the case.

Typically, investors paid $5,000 of the development cost, with the remaining $20,000 needed on each contract to be raised through the sale of “options” to third parties.

The defendants allegedly told investors that the extra $20,000 had been paid and represented that the total amount of each contract, $25,000, could be claimed as a write-off. But in fact, no option funds were ever paid and the receipts distributed to investors were phony, Stock said.

The jury deliberated nearly three days at the conclusion of a four-week trial before U.S. District Judge Jesse W. Curtis.