Conflicting Pictures of Tax Adviser Given Jury in Fraud Case
A tax adviser who drew 5,800 Californians into several bogus tax-shelter schemes, including one that would supposedly exempt entire incomes from taxes, is innocent because he believed that the programs were legal, his lawyer said Thursday.
But federal prosecutors portrayed Charles D. Spurrier, 67, of Huntington Beach as a mercenary who defrauded thousands of gullible people who wanted to reduce their tax bills.
Those contrasting portraits of Spurrier came as jurors began deciding whether the 67-year-old is guilty of tax evasion and fraud charges, punishable by 39 years in prison.
In the 2-week trial in U.S. District Court in Santa Ana, federal prosecutors presented evidence that in a sample of 300 tax returns Spurrier clients underestimated taxes by a total of $365,000.
Spurrier’s Trust Management Group had offices at 2120 Main St. in Huntington Beach from 1981 to 1984, when law enforcement authorities seized records in a raid.
In one scheme, clients were told that by signing “Personal Services Contracts” with Spurrier they could transform their income into non-taxable gifts. For a fee, Spurrier and his staff of tax advisers and salesmen would enroll clients, who often turned over all of their income. In return, they would be issued checks, supposedly “gifts,” amounting to 90% of what they paid.
A federal grand jury indictment alleges that Spurrier’s operation took in $11.2 million, returning about $10.1 million in “gifts,” which he claimed were tax-exempt. The program was created by Frank Forrester of New York, who was convicted of criminal contempt of court in 1984 for refusing to stop promoting the program.
Several of Spurrier’s clients testified, including a physician, two engineers and two college professors.
Justice Department attorney John C. Belcher argued that Spurrier sold the “crazy idea” to people with little tax expertise by “using a lot of legal jargon the investors didn’t understand.”
But defense attorney William A. Dougherty insisted the government failed to prove its case.
“He is not guilty because he honestly believed that he had found a legal tax shelter,” Dougherty said. “He thought what he was doing was legal.”
Spurrier, a Mormon, read widely among authors who criticized the current tax system, including Ezra Taft Benson, former secretary of agriculture and now president of the Mormon Church. Dougherty suggested that Benson’s criticism of the federal tax structure was unusually persuasive for Spurrier, described by three Mormon bishops in the trial as devout.
“If Mr. Spurrier’s belief sounds different to you, that doesn’t mean that he did not believe it,” Dougherty argued. “You don’t have to believe that any of these programs are legal. But you have to put yourself in Mr. Spurrier’s shoes.”
Spurrier also faces $52,000 in fines if convicted on all counts of conspiracy, mail fraud, filing false returns and helping others prepare false returns.
Those charges include a scheme in which Spurrier allegedly assured people that they could legally convert their status to “non-taxpayers.” The scheme was created by Burton D. Linne of Arlington, Va., who is now serving a 5-year prison term for tax offenses. About 23 investors paid $42,500 for forms, newsletters, tapes and other tax-preparation advice, according to prosecutors.
In a third variant, Spurrier developed his own tax shelter called an Alpha plan and sold it to hundreds of investors for as much as $12,000 each, only to have the deductions suggested disallowed by the IRS.
The same jury also is deliberating charges against Spurrier’s two co-defendants, Dennis C. Spurrier, 34 of Huntington Beach, his son, and Thomas R. Smith, 37, of Orange.