U.S. Sues 3 Men in Nationwide Tax Scheme

The U.S. government sued three men Thursday, claiming they gave faulty advice on how to avoid paying taxes as part of a “nationwide bogus tax refund scheme.”

The suits, filed in federal courts in Georgia, Florida and Pennsylvania, allege the three men wrongly told clients, one of them a Huntington Beach firm, that Section 861 of the Internal Revenue Code exempted them from taxation on all domestic income.

They “have preyed on uninformed taxpayers, convinced them to pay exorbitant fees for erroneous advice and sold them a theory that has been rejected as frivolous by every judge who has examined it,” said Eileen O’Connor, the assistant attorney general in charge of the Justice Department’s Tax Division.

According to the government, Thurston Bell of Hanover, Pa., operated a Web site and sold recordings of his seminars on how to take advantage of Section 861. Bell may have had as many as 100 individual and corporate clients, the government says.

David Bosset, a tax preparer in Clearwater, Fla., improperly claimed refunds based on Bell’s advice, the Justice Department said. Bosset also has sold false Section 861 material and charged clients more than $100 an hour to explain how to avoid paying taxes, the government said.

The third, Atlanta accountant Harold Hearn, used materials purchased from Bell to help clients in 11 states file improper returns, the U.S. said. The IRS erroneously refunded at least $168,782 to Hearn’s clients.

In the lawsuits, the government says all three men ignored IRS warnings about the Section 861 theory. The suits seek to stop Bosset and Hearn from preparing federal income tax returns.

The complaint against Bell said he claims to have used the Section 861 argument to obtain tax refunds for seven employers, including $215,454.16 for No Time Delay Electronics in Huntington Beach. The business, along with the home of its owner, George “Nick” Jesson of Fountain Valley, was raided in May by state tax agents.

The agents seized financial and employment records, but no charges have been filed against Jesson, who has challenged the search warrant.

“They decided that by terrorizing us we’d go away. Well, we won’t,” said Jesson, who is running for governor as a Republican.