No. 54: Daniel Carpenter and a Host of Criminal AllegationsDaniel E. Carpenter (Simsbury, CT), attorney and businessman, was scheduled to report to a federal prison on Friday, June 20. His saga involves cases over more than a decade in federal district courts, circuit courts of appeal, and the Supreme Court. Among the federal agencies involved in the cases are the Department of Justice, the Department of Labor, the Department of the Treasury, and the Internal Revenue Service (IRS). Several cases are ongoing despite Carpenter's incarceration.
The Section 1031 Fraud Allegations
Carpenter owned and operated Benistar, Ltd. and its subsidiaries. One Benistar function was to act as an intermediary in Section 1031 property exchanges. That section of the Internal Revenue Code allows the owner of investment property to defer capital gains taxes on the sale of the property by rolling the proceeds of the sale into the purchase of replacement property. However, the tax deferral is lost if the owner (the "exchangor") takes possession of the sale proceeds. Therefore, companies such as Benistar offer to act as an intermediary by holding the proceeds in escrow until the exchangor is ready to close on the replacement property.
Carpenter promoted the services of Benistar by offering to hold the funds safely, pay a small amount of interest, and provide the funds when needed. However, without the knowledge or consent of the exchangors, Carpenter embarked on a highly speculative program of options trading in the hope of generating large gains for himself.
419, 412i, Captive Insurance and section 79 plans continue to get large IRS fines.
By Lance Wallach
Life insurance agents recently have started pushing the newest variety of high
ticket items. After the IRS has almost put 419 plans out of business and severely
curtailed abusive 412i plans they needed another way to sell large commission
life insurance policies. Many of the promoters of the 419 and 412i plans are now
promoting section 79 and captive insurance plans. They claim that these plans
allow businesses to tax deduct life insurance. These promoters as in the past
claim, that most of the benefits would be for the business owners. I have been an
expert witness in many cases against these abusive plans and my side has never
lost a case.
Recently my office has been receiving over fifty calls per month from people that
are being threatened with large IRS fines. Most of these people (including CPAs)
do not understand why this is happening. These fines are primarily the result of
greed. Insurance company, insurance agent, plan promoter and even IRS greed.
Insurance companies are always looking for ways to sell large amounts of life
insurance. Taxpayers are constantly looking for larger tax deductions. Insurance
agents want to earn large life insurance commissions. The IRS has started
additional enforcement action against taxpayers and accountants.
Taxpayers must report certain transactions to the IRS under Section 6707A of the
tax code, to help detect, deter, and shut down abusive tax shelter activities. For
example, reportable transactions may include participants in 419,412i, or other
insurance plans sold by insurance agents for tax deduction purposes. Other
abusive, listed or reportable transactions could include captive insurance and
Section 79 plans, which are usually sold by insurance agents for tax deductions. Read more here
Did Benistar or Another Promoter of Abusive 419 or Other Plans Cause You Harm or Get You Audited by the IRS?
Would you like to ......Get All Your Money Back?
Successfully Fight The Internal Revenue Service?
Be Made Whole?
Have Your Problem Resolved With The Least Amount of Aggravation?
Sue the &#@!....s who got you into this mess!!You should NEVER try to handle an IRS audit by yourself.You certainly can't successfully sue without expert help.You will need expert assistance for Benistar abuses, audits, problems, lawsuits, or other issues and trouble.
Abusive Insurance, Welfare Benefit, and Retirement Plans
The A2Z Directory March 2011
The IRS has various task forces auditing all section 419, section 412(i), and other
plans that tend to be abusive. Most insurance agents sell these plans. The IRS is
looking to raise money and is not looking to correct plans or help taxpayers. The
IRS calls accountants, attorneys, and insurance agents “material advisors” and
also fines them the same amount, again unless the client’s participation in the
transaction is reported. An accountant is a material advisor if he signs the return or
gives advice and gets paid. More details can be found on http://www.irs.gov and
Bruce Hink, who has given me written permission to use his name and
circumstances, is a perfect example of what the IRS is doing to unsuspecting
business owners. What follows is a story about how the IRS fines him each year
for being in what they called a listed transaction. Read more here
Collection United States Courts Opinions
SuDoc Class Number JU 4.15
Court Type District
Court Name United States District Court Northern District of Illinois
Office Location Chicago
Case Type civil
Nature of Suit Other Contract Actions
Cause 28:1330 Breach of Contract
Party Names Financial Life Services, LLC, Counter Claimant
Avon Capital, LLC, Counter Defendant
The Thomas D Philipsborn Irrevocable Insurance Trust dated July 10, 2005, Counter Defendant
Avon Capital, LLC, Defendant
Benistar Admin Services, Inc., Defendant
Benistar, LTD, Defendant
Donald Trudeau, Defendant
Andrew I. Philipsborn, Plaintiff
The Thomas D. Philipsborn Irrevocable Insurance Trust, Plaintiff
Financial Life Services, LLC, Third Party Defendant
Andrew Philipsborn, Third Party Defendant
Thomas Philipsborn, Third Party Defendant
Avon Capital, LLC, ThirdParty Plaintiff
Financial Life Services, LLC, ThirdParty Plaintiff
Opinion Filed Date November 18, 2013
Docket Text MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 11/18/2013: For the reasons stated herein, Third-Party Defendant Financial Life Services, LLCs Motion to Dismiss for Lack of Jurisdiction [ECF No. 97] is denied. Fourth-Party Defendants Thomas Philipsborn and Andrew Philipsborns Motion to Dismiss for Failure to State Claim [ECF No. 109] is denied. Status hearing set for 12/11/2013 at 09:00 AM.Mailed notice(wp, )
was arrested, and in June 2008 he was convicted. On Wednesday, close to six years later, he was sentenced. The news release below doesn't mention it, but Carpenter had appealed his initial sentence, and a judgment in his favor was then appealed by prosecutors, who eventually won.
Civil actions commenced in the Superior Court Department on January 9, 16, 22, and 23, 2001; February 6, 2001; September 20, 2001; and April 30, 2002.
Following review by the Supreme Judicial Court, 451 Mass. 343 (2008), motions for sanctions and for a new trial were heard by Stephen E. Neel, J.
Anthony R. Zelle for Gail A. Cahaly & others.
Michael B. Keating for the intervener.
1 Jeffrey M. Johnston; Bellemore Associates, LLC;
Massachusetts Lumber Company, Inc.; Joseph Iantosca, individually and as trustee of the Faxon Heights Apartments Realty Trust and Fern Realty Trust; and Belridge Corporation. 2 Benistar Ltd.; Benistar Employer Services Trust
Corporation; Benistar Admin. Services, Inc.; Carpenter Financial
Group, LLC; Molly Carpenter; Daniel E. Carpenter (collectively,
the Benistar defendants); Merrill Lynch, Pierce, Fenner & Smith, Inc.; and U.S. Property Exchange; Bingham McCutchen LLP, intervener in the sanctions proceedings.
Benistar 419 Plan Services, Inc. Single-handedly Shapes 419 Plan Jurisprudence
by COSGROVE LAW GROUP, LLC
Since its creation in December 1997, the Benistar 419 Plan, has brought much scrutiny to the tax interpretation of 419 plans. Created by Daniel Carpenter, the purpose of the Benistar 419 Plan was to provide life insurance to employees through a company’s contributions to a multiple-employer welfare benefit plan. The Plan initially set itself apart by touting its fully deductible tax features. The IRS, however, has since determined that contributions to Benistar 419 plans do not fit the parameters of §419A(f)(6), as they ultimately maintain separate accounts for each employer enrolled in the plan, and therefore are not tax deductible. As a result, companies were forced to pay tens of thousands of dollars in back taxes, despite tax deduction promises, and the legal world has seen a surge in cases regarding the matter.
In one such case, Mark Curcio and Barbara Curcio, et al. v Commissioner of Internal Revenue, No. 1768-07, 2010 WL 2134321 (U.S. Tax Ct. May 27, 2010), the court set out to determine “whether payments to the Benistar 419 Plan & Trust for employee benefits are ordinary and necessary business expenses under section 162(a).” The court concluded that said contributions did not fulfill the definition of “ordinary and necessary” business expenses. This decision stemmed from the set up of the Plan. “[P]etitioners had the right to receive the value reflected in the underlying insurance policies purchased by Benistar Plan. Peitioners used Benistar Plan to funnel pretax business profits into cash-laden life insurance policies over which they retained control.” The Plan has since been continuously been referred to as an abusive tax shelter, causing plaintiffs in many 419 related cases to question whether Benistar knowingly made misrepresentations to clients.
In Stephen Ouwinga et al. v John Hancock Variable Life Insurance, No. 1:09-cv-60 2010 WL 4386931 (W.D. Mich. Oct. 29, 2010), the plaintiff claimed the Benistar 419 Plan violated RICO, the Racketeer Influenced and Corrupt Organizations Act, which the court subsequently shot down. In Arrow Drilling Co., Inc., et al. v Daniel Carpenter, et al., No. Civ.A. 2:02-CV-09097, 2003 WL 23100808 (E.D. Pa. Sept. 23, 2003), Plaintiffs alleged the Benistar 419 Plan violated ERISA, the Employee Retirement Income Securities Act. Here the court determined that “Plaintiffs are not employer-sponsors, but rather, employers who, acting on behalf of its employees, brought this suit pursuant to ERISA §503.” Since employers cannot sue under ERISA, the court dismissed all ERISA related claims made by Plaintiffs.
More You Should Know
Graham-Bingham Irrevocable Trust et al v. Trudeau et al [We have downloadable decisions or orders for this case]
Filed: April 30, 2012 as 2:2012cv00755
Plaintiff: Graham Bingham Irrevocable Trust , Henry W Dean
Defendant: Donald Trudeau , Greenwich Bay Management LLC
Cause Of Action: Diversity-Breach of Contract
Court: Ninth Circuit › Washington › Washington Western District Court