2 Indicted in Setting Up of $12.6-Million Tax Scam

Two men have been indicted on charges of setting up a fraudulent tax shelter scheme featuring audiotape instructional programs recorded by celebrities ranging from Tommy Lasorda to Dale Evans, authorities announced Friday.

The indictment, secretly returned by a federal grand jury earlier this month, accuses Johnathan D’Orio and Daniel F. Schustack of bilking 1,150 investors out of more than $12.6 million by inflating the value of the audiotapes and promising investors huge--and illegal--tax credits.

“They tried to aim it at sort of Main Street Middle America,” Assistant U.S. Atty. David Katz said of the tax shelter scheme, which asked investors to buy in with $11,500 each and promised them tax savings of more than three times their investment.

None of the celebrities who recorded the audio tapes--including Lasorda, Evans, Vincent Price, Billy Dee Williams, Pat Boone and Shirley Jones--were aware of the details of the tax shelter and none are accused of any wrongdoing, Katz said.

According to the indictment, D’Orio, 40, of Akron, Ohio, and Schustack, 38, of New York City, began the tax shelter program in 1980 with educational recordings, then switched in 1982 to celebrity tapes.

Lasorda was hired for $7,500 to make a 10- to 15-minute instructional tape on how to play shortstop, and a second tape on how to play third base. Price narrated a cooking tape. Boone told Bible stories.

By secretly selling the tapes between companies controlled by the two men, D’Orio and Schustack were able to persuade inexperienced appraisers to value the tapes at $199,000 each, far more than their actual worth, Katz said.

Investors in each tape were told they were entitled to a $19,900 tax deduction as an investment tax credit, well above the amount they were legally entitled to deduct based on the tapes’ actual worth, Katz said. Investors were also promised large interest and depreciation deductions as well as tax credits, he said.

The indictment also alleges that the two men fraudulently told investors they were entitled to take tax credits long before the tapes were even in production. At least 700 of the 751 tapes featured in the 1982 tax shelter program were not even recorded in 1982, according to the indictment.

Few of the recordings were ever actually distributed, Katz said.

The indictment also charges D’Orio with diverting more than $1 million in December, 1982, and January, 1983, to a Panama bank account.

D’Orio was armed when he was arrested Friday in Akron, Katz said. Schustack will receive a summons to be arraigned on the indictment in Los Angeles.

The two men face a maximum of 60 years in prison and a $65,000 fine if convicted on 16 counts of mail fraud, conspiracy and aiding the filing of false tax returns.