Jerome Schneider and his co-defendant Eric Witmeyer were indicted by a Federal Grand Jury in San Francisco on December 19, 2002.  They were charged in the Indictment with one count of conspiracy and 22 counts of mail and wire fraud in connection with the marketing and sales to U.S. taxpayers of offshore banks and/or corporations.  The defendants then caused those entities to be decontrolled which was a process used by the defendants to attempt to conceal the U.S. taxpayer's ownership in the offshore bank or corporation, in order to evade IRS reporting requirements for taxpayers having an interest in foreign accounts and to evade the payment of tax on income transferred to and/or earned by the offshore bank accounts. Eric Witmeyer, an attorney, pled guilty to the conspiracy count on January 23, 2003, and agreed to co-operate with the government against Mr. Schneider.

In pleading guilty to conspiring to defraud the United States, Mr. Schneider admitted that he and Mr. Witmeyer conspired to defeat and obstruct the lawful functions of the Internal Revenue Service in its ascertainment, computation, assessment and collection of income taxes owed by U.S. taxpayers.  He admitted marketing  and selling to U.S. taxpayers offshore entities such as those licensed by the South Pacific Island of Nauru as international banks and other offshore corporations, doing business in Vancouver, B.C., Canada, under the names Premier Corporate Service, LTD; Premier Financial Advisors, LLC; Premier Management Service LTD and Wilshire Publishing. 

Mr. Schneider represented to U.S. taxpayers that by means of their ownership of the offshore entities, and so-called decontrol documents to be prepared by counsel such as Mr. Witmeyer, the U.S. taxpayers could conceal from the Internal Revenue Service, their ownership and control of funds or assets they caused to be deposited into bank or brokerage accounts held in the name of the offshore banks in financial institutions located outside the United States.  Mr. Witmeyer, at Jerome Schneider's direction and request, based upon form documents that Mr. Schneider supplied to Mr. Witmeyer, agreed to act as counsel for the U.S. taxpayer and prepare the so-called decontrol documents for the U.S. taxpayers who purchased an offshore entity from Mr. Schneider.  Jerome Schneider marketed and sold offshore entities to U.S. taxpayers for approximately $15,000 to $60,000.  Mr. Witmeyer "decontrolled" the offshore entity for a fee of approximately $15,000.

The so-called decontrol process included transferring the U.S. taxpayer's interest in the offshore entity to a so-called Independent Foreign Owner (IFO) in exchange for a promissory note in an amount large enough to make it appear as if there was bona fide and negotiated sale of the offshore entity to the IFO.  The amount of the promissory note was not the result of negotiations between the U.S. taxpayers and the IFO.  Rather, it was an arbitrary amount set by Mr. Schneider.

Jerome Schneider selected the IFO for the U.S. taxpayers and despite the purported decontrol of the offshore entity, Mr. Schneider understood that the U.S. taxpayers in fact owned and controlled the offshore entity and any accounts opened up in the name of the offshore entity in any financial institution located outside the United States.  Jerome Schneider used financial institutions and entities located outside the United States to conceal the activities of the offshore entities from the Internal Revenue Service.

Jerome Schneider has agreed to cooperate with the government in it's continuing investigation of the U.S. taxpayers who purchased offshore entities as well as others who might have advised those taxpayers.

The sentencing of Jerome Schneider is scheduled for September 10, 2004 before Judge Illston in San Francisco.  The maximum statutory penalty for the conspiracy count in violation of 18 U.S.C. § 371 is five years and a fine of $250,000.  However, the actual sentence is dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and will be imposed in the discretion of the Court.

The prosecution is the result of an investigation by agents of IRS CID.  Jay R. Weill is the Assistant U.S. Attorney who prosecuted the case.