By Special Agent Janet Oakes
Public Information Officer
IRS Criminal Investigation
St. Paul Field Office
Financial fraud schemes come in many forms and can show up in unlikely places. One common thread is the intent to deceive, most often at the expense of others who are innocent and unsuspecting. IRS Criminal Investigation has seen the resurgence of a financial fraud scheme that involves filing false Forms 8300 with the IRS for large fictitious cash transactions. The intent of the fraud is to harass the innocent parties, often in positions of authority, named on these false documents.
Currency Reports and Forms 8300
Under the authority of the Bank Secrecy Act (BSA), Treasury enacted regulations imposing currency reporting requirements. The statutes were created to document the illicit flow of illegal cash and untaxed proceeds and are, therefore, closely related to the activities of tax evaders and money launderers. These currency reports require providing identifying information when conducting financial transactions in large amounts of currency. This enables IRS Criminal Investigation Special Agents to pursue those who are using the anonymity of cash to separate their identity from their illegal transactions.
Primarily, the currency reports are filed by financial institutions when they get currency in excess of $10,000 in a single transaction, or in a series of related transactions. These forms are known as the Currency Transaction Report (CTR), Currency Transaction Report Casino (CTRC), and the Report of Foreign Bank and Financial Accounts (FBAR). There is also a Suspicious Activity Report (SAR) which is designed to encompass the transactions in which the financial institution knows, or suspects, the money was derived from illegal activities. Included in this suspicious activity would be transactions that are part of a plan to violate federal laws and financial reporting requirements (structuring).
In addition to these currency reports, the Internal Revenue Code Section 6050I requires that any person in a trade or business receiving more than $10,000 in cash must file a Form 8300 with the IRS. Again, this form is essentially asking for identifying data of the individual providing the cash and the nature of the transaction. Those individuals who are interested in circumventing laws, and creating havoc for those they target, have utilized the Form 8300 to create a fictitious record of large amounts of currency transacted. The innocent party may not know unless contacted by the IRS that these forms have been created and submitted to the IRS with their name listed as the transactor.
Forms 8300 are being filed in conjunction with another scheme involving false financial instruments. The instruments are “Sight Drafts,” payable on demand to the U.S. Treasury. The use of Sight Drafts, also known as Bills of Exchange, to defraud financial institutions has proliferated with the upsurge in use by radical militia groups. These fictitious financial instruments resemble bank cashier’s checks and have been issued in amounts exceeding $10 billion. IRS Criminal Investigation has taken an aggressive role in these types of investigations by using the charge Title 18 USC Section 514 (Fictitious Obligations). This statute was enacted to prosecute individuals and groups who use these bogus instruments to defraud financial institutions as well as the IRS. Title 18 Section 514 is a class B felony and carries a maximum term of imprisonment of 25 years.
IRS Criminal Investigation has investigated several schemes involving the fraudulent use of Forms 8300 and fictitious Sight Drafts in Wisconsin in recent years. Since 2003, 5 cases have been sentenced in Wisconsin relating to this type of scheme.
In October 2005, James Theyerl of Manitowoc was sentenced to 10 months in prison, 5 years of supervised release, and ordered to pay a $4000 fine on his federal criminal convictions for filing a false IRS Form 8300 with the Internal Revenue Service (IRS) and submitting fictitious financial instruments to the Wisconsin Department of Revenue. According to a news release issued by the United States Attorney’s Office in the Eastern District of Wisconsin, Theyerl plead guilty to failing to pay sales and use taxes on his charter boat and car repair businesses. Theyerl had filed 13 false Form 8300 with the IRS against officials from the Department of Natural Resources, the Manitowoc County District Attorney’s office, the Kewaunee County Judge, and the clerk of the court. In addition, Theyerl plead guilty to one count of filing a fictitious financial instrument with the Wisconsin Department of Revenue.
Most recently, on April 25, 2006, Dennis Gutknecht from Black River Falls was sentenced in Madison to 4 months imprisonment and one year supervised release for filing false statements with the IRS. Gutknecht pleaded guilty on February 13, 2006. According to a news release issued by the Western District of Wisconsin’s Office of the United States Attorney, the evidence showed that Gutknecht sought to harass and intimidate numerous individuals for their various roles in connection with his 1999 Buffalo County Circuit Court conviction. The individuals included social workers, a psychologist, a district attorney, judges, his own defense attorney, and the two victims of his crime. In a scheme designed to trigger an IRS investigation of these individuals, Gutknecht falsely reported to the IRS that these individuals engaged in illegal cash transactions involving millions of dollars. Gutknecht’s motivation appears to have been retaliation.
A document whose design and intent was to aid in the fight against money laundering has actually become a retaliatory weapon by creating fictitious, suspicious records against innocent parties. Commonly known as “frivolous Form 8300 filings” this activity is designed to harass those who have had the misfortune of dealing in some official capacity with unscrupulous individuals who believe this act of retaliation will be an effective means of making their point against the government and its institutions. However, as the courts are beginning to show, it is a dangerous game to play with felony criminal convictions as the outcome.