An Ashland man accused of helping people set up sham businesses to avoid taxes was one of eight people convicted Wednesday of tax fraud by a federal jury in Florida.
Following a monthlong trial in Pensacola, Eugene "Gino" Casternovia, 61, was convicted of conspiracy to defraud the United States and to commit wire fraud and conspiracy to commit money laundering. He faces a possible 25-year prison sentence and $750,000 in fines. Sentencing is set for July 6.
The U.S. Department of Justice contended Casternovia presented and sold tax-fraud schemes at various trade shows and conferences around the world, including a presentation for 400 people aboard a cruise ship in the Mediterranean in May 2007.
U.S. District Judge Margaret C. Rodgers set aside a jury verdict against another Ashland man, Robert Pendell, who was a former employee of Casternovia's, and acquitted him of all counts. Another employee, Mark Lyon of Williams, previously pleaded guilty to all charges filed against him and agreed to testify for the prosecution in the cases concluded this week.
Casternovia was arrested in August 2008. He and his wife, Kathryn, had lived in Ashland for 25 years and owned the now-defunct Northlight vegetarian restaurant and the Rainforest Cafe.
Several of his acquaintances spoke up for him in a September 2008 pretrial hearing in Medford, urging U.S. District Judge Mark D. Clarke to allow him to remain at home while he awaited trial.
Clarke, however, ruled that Casternovia, along with Pendell and Lyon, were flight risks because they allegedly had moved $3.4 million into offshore accounts, and an additional $1.2 million was unaccounted for. He also said evidence presented by prosecutors showed the men claimed their permanent residence to be in Panama.
Department of Justice prosecutors alleged that the defendants promoted fraudulent schemes through Pinnacle Quest International, also known as PQI and Quest International. (PQI was described as an umbrella organization for vendors who sold tax and credit card debt elimination scams.)
Prosecutors said some of the PQI vendors, including Casternovia's Southern Oregon Resource Center for Education (SORCE), sold bogus theories and strategies for tax evasion. For fees starting at $10,000, they said, SORCE assisted clients in the creation of a series of sham business entities in the United States and Panama.
Evidence presented alleged that other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a purported legal defense that consisted of a paper trail of frivolous correspondence.
"The use of abusive trust schemes and fraudulent debt elimination tactics intended to conceal income from the IRS isn't tax planning; it's criminal activity," said Victor S.O. Song, chief of the Criminal Investigation Division of the Internal Revenue Service, after the verdicts.
According to the evidence presented, none of the defendants filed tax returns while they were involved in the PQI conspiracy. Two of the defendants, Claudia Hirmer and Mark Hirmer, were convicted for evading the payment of over $2 million in income taxes, penalties, and interest for years 1996 through 2001.
Prosecutors said another PQI vendor, MYICIS, operated as a computerized "warehouse bank" in which PQI clients pooled their money in an effort to hide their assets from the Internal Revenue Service. MYICIS had 3,000 clients and approximately $100 million in deposits over a three-year period, they said.
According to evidence presented at trial, PQI purported to sell only CDs and tickets to offshore conferences. However, PQI clients seeking the tax evasion and debt elimination vendors were required to join PQI, with the cost of membership ranging from $1,350 to $18,750.
— from local and wire sources