Ex-Tax Collector Gets Prison Term for Tax Evasion

A former Orange County tax collector is going to prison for tax evasion.

On Monday, a federal judge sentenced Harold E. Nichols to five years in prison for his role in a $2-million gold-fraud scheme that the U.S. attorney’s office said was carried out so he could “buy a house in Puerto Vallarta, Mexico, support a mistress and purchase offshore banks.”

Nichols, 61, was convicted in July of tax evasion, conspiracy and using false Social Security numbers after raising nearly $2 million between 1983 and 1985 for phony Newport Beach gold-mining operations, including Dore Capital Corp. and Jupiter Mining Corp.

From 1974 until 1980, Nichols was a collection officer with the Orange County treasurer-tax collector’s office. The scheme was not related to his official duties as tax collector.

“He went from being a tax collector to evading taxes and engaging in this conspiracy,” said Assistant U.S. Atty. David A. Sklansky.

Federal officials proved in court that Nichols had diverted much of the money--including some sent to a Swiss bank account--into his own pockets and failed to pay federal taxes on any of it. He didn’t even file tax returns.

“He would write checks on the company’s account to pay personal expenses,” Sklansky said. “Sometimes he would put on the check--in the memo section--something indicating a business purpose when, in fact, it wasn’t.”

The prosecutor said Nichols wrote a number of checks--totaling more than $10,000--to his mistress, who did no work for the gold companies. “On one of the checks (to the woman), he wrote ‘secretarial services,’ ” Sklansky said.

U.S. District Judge David V. Kenyon ordered Nichols to begin his sentence in three weeks. Nichols represented himself in court but asked the public defender’s office to serve as “advisory counsel” because he is not a lawyer.

He could not be reached for comment Monday.

Nichols and a partner--John C. Fulton--held mining seminars around Orange County to attract investors, promising high returns on supposed gold sites in the Mojave Desert. Fulton, 63, pleaded guilty to charges related to the gold scheme last year and was sentenced to two years in jail and ordered to pay a $10,000 fine. Fulton also was convicted in 1980 of conspiracy, insurance fraud and grand theft in connection with a staged gold robbery and was sent to jail in 1984 after his appeal failed. “Nichols was aware of the fact Fulton had this prior conviction, but they didn’t tell anyone,” Sklansky said.

Once Fulton was in jail, Nichols relied on a telephone solicitation service to secure new investors and continue the scheme, Sklansky said.

Besides failing to file tax returns, Nichols was convicted of using phony Social Security numbers. Tax collectors--like Nichols once was--depend heavily on authentic Social Security numbers to trace an individual’s income.

Although he didn’t deny such falsifications, Nichols defended them as a religious practice.

“He claimed at trial that he was following the dictates of his religious beliefs,” Sklansky said. He added that Nichols maintained that the Social Security number system was “unconstitutional, immoral or blasphemous--or some combination thereof.”

Fulton and Nichols spent some of the investors’ money to purchase shell banks in the Marshall Islands and Montserrat, according to federal investigators, who traced some funds there.