Shell Companies and Tax Fraud—a $1 Billion Scheme

tax fraudRecent arrests in a $1 billion tax crime serve as a cautionary tale for tax professionals considering the true cost of preparing and filing fraudulent tax returns.


In 2018, a group of approximately 40 agents from the IRS: CI and the FBI raided the law firm of Dallas tax attorney, Joseph Garza. On a website, Mr. Garza, 79 years of age, notes he has practiced tax and transactional law for more than 30 years. In October 2022, Mr. Garza was indicted and pled not guilty on 18 counts of wire fraud, conspiracy, and 22 counts involving false income tax returns.


On its face, this criminal tax matter was not complicated. Mr. Garza enlisted certified public accountants to create shell companies to assist high-net-worth clients avoid tax liability. Clients were able to wash money through the shell companies and see the money transferred back to them free of tax. Mr. Garza and the group created fake business reports, claimed false expenses and deductions, and drafted fictitious contracts. Returns prepared by the CPAs working with Mr. Garza’s clients were able to conceal approximately $1 billion in taxable dollars from the IRS. Mr. Garza ran the tax fraud scheme from 2012 through 2021. The IRS estimates the tax loss at more than $200 million.


In November 2022, another tax attorney and two CPAs were charged with five counts of preparing fraudulent tax returns, along with counts of conspiracy and wire fraud. Of the group, a Special Agent with the Dallas Field Office of IRS: CI said “...They face severe consequences, including jail time and substantial fines. Today's indictments reinforce our commitment to every American taxpayer that the dedicated women and men of IRS Criminal Investigation will continue to work tirelessly to identify and prosecute tax professionals who devise illegal tax shelters to evade the tax obligations of their wealthy clients."


Although Mr. Garza has been indicted, the criminal tax investigation of his business dealings is ongoing. With a trial ahead, Mr. Garza could face 20 years in prison for each count of wire fraud, three years for each count of filing a false tax return, and 20 years for wire fraud. His co-conspirators face five years for each count of filing a false income tax return, and 20 years for wire fraud.


The defendants in this matter are all knowledgeable, experienced, tax professionals. The allegations are serious and likely to result in prison time if these defendants are found guilty. While profit was likely earned over the long term of this fraud, loss of liberty and financial and personal ruin may lie ahead. If you are involved in questionable tax practices, a payroll tax issue, or other criminal tax controversies, consider a real cost-benefit analysis and speak with an experienced criminal tax defense lawyer about your options.


Seek an experienced criminal tax defense law firm when you face a criminal tax charge or other tax litigation

From offices in Cleveland and Chicago, the tax attorneys of Robert J. Fedor Esq., LLC provide trusted representation on criminal tax defense, offshore tax investments, and compliance matters to clients locally and abroad. Call us at 800.579.0997 or contact us today.


Understanding Tax Fraud