Utahn Gerrit Timmerman III claimed his corporation — "The Office of the First Presiding Patriarch (Overseer) and his/her successors, a corporation sole over/for an unincorporated scriptural society, in the nature of Ecclesia, over/for The Popular Assembly of Astrum Regis" — was exempt from federal income tax laws and that his own income was not taxable.
And, prosecutors say, the Midvale resident and his business partner helped others set up their own sham nonprofit religious corporations, which purportedly would allow them to avoid paying taxes.
The scheme landed Timmerman in prison and earned him a spot this year in an annual Internal Revenue Service Criminal Investigation (IRS CI) report detailing the consequences of tax fraud.
Since its founding nearly a century ago, IRS CI has been investigating suspected violations of the Internal Revenue Code and related financial crimes — targeting citizens who cheat on their taxes, as well as terrorists who hide their illegal income through money laundering.
The agency's fiscal 2015 report, released Dec. 3, shows IRS CI initiated 3,853 investigations nationally, with 3,208 of those probes leading to charges. The conviction rate of cases resolved during the fiscal year, which ended Sept. 30, was 93.2 percent.
The report does not break down data by state or list every case. A handful of cases are summarized under each crime category. The only Utah example in the 2015 report is Timmerman, who was found guilty by a jury of conspiracy to defraud the United States and sentenced in May to 48 months in prison.
In an interview with The Tribune earlier this month, IRS CI Chief Richard Weber said the report reflects the diversity and complexity of the agency's work. It also demonstrates how IRS CI has stayed focused on its mission despite budget cuts during the past several years, he said.
Due to those funding reductions, the number of cases initiated dropped by 444 in fiscal 2015 from the previous year, Weber said. The agency initiated 4,297 cases in fiscal 2014 and 5,314 in fiscal 2013.
Staffing levels are also down. The number of special agents peaked at more than 3,300 in 1995, but as of Sept. 30, IRS CI had 2,316 special agents.
The Las Vegas Field Office, which encompasses Utah and Nevada, has 49 special agents and 12 professional staff members. Of those, 19 special agents and four staff members are based in Utah.
"I think we've done tremendous work," said Weber, who was visiting IRS CI in Salt Lake City on his way to meetings in Las Vegas. But he added that the agency can't continue to do more with less.
Weber said the budget cuts make no sense because the agency brings back billions of dollars to the U.S. Treasury. He pointed to the prosecution of Credit Suisse, a Swiss corporation that was required under a plea agreement in 2014 to pay a total of $2.6 billion in fines and restitution for operating an illegal cross-border banking business that assisted thousands of U.S. clients in concealing offshore assets and income from the IRS.
But despite the funding challenges, IRS CI still tackles complex cases that touch almost every part of the world, often working with other agencies, Weber said.
U.S. Attorney for Utah John Huber said the IRS CI agents are important partners in bringing perpetrators to justice.
"Their expertise in financial crime investigations is invaluable to attorneys in my office as we pursue large white-collar crime cases or investigate money laundering in drug cases," Huber said.
In the 2015 annual report, IRS CI listed its investigative priorities as identity theft; fraud involving tax refunds; international tax fraud; political and public corruption; drug trafficking by organized crime groups; money laundering; and counterterrorism.
Tax-related identity theft increased, with the crime becoming more sophisticated and involving bigger data breaches. Weber said the amount of agents' investigative time spent on ID theft was less than 3 percent nationally about four years ago and is now hovering around 18 percent.
The figures vary among states, with IRS CI personnel in Florida spending nearly 50 percent of their investigative time battling the crime. The time spent in Utah is just under 13 percent.
IRS CI also is part of the counterterrorism effort, Weber said. One of those cases nabbed a Texas man, Michael Wolfe, who tried to travel to Syria to provide material support to ISIL and was sentenced in June to 82 months in prison.
In one of its earlier cases, IRS CI special agents who were sent to Iraq in 2003 identified at least $2 billion in assets stolen by Saddam Hussein and his associates, and assisted in the recovery of more than $1.3 billion of those assets, according to the agency.
"We have the best financial experts in the world," Weber said. "When it comes to terrorism, I truly believe we play a significant role in following the money."
The fiscal 2015 cases included the investigation of soccer governing body Fédération Internationale de Football Association (FIFA), which led to charges of racketeering, money laundering and wire fraud. The FIFA matter started as a tax evasion investigation and snowballed into what Weber describes as the "most complicated international white-collar cases in recent memory" that involved coordination with governments of 33 countries.
Weber described another example in the report as "one of the most horrendous cases I've witnessed" — Michigan oncologist Farid Fata administered unnecessary chemotherapy to hundreds of patients, some of whom did not have cancer, to increase his Medicare billings.
Fata, who submitted approximately $34 million in fraudulent claims, was sentenced to 45 years in prison.
Public corruption cases included the prosecution of former Virginia governor Robert McDonnell and his wife for using his position to solicit payments and loans, and the former executive director of the Virgin Islands Legislature, who was convicted of bribery and extortion.
In addition to catching criminals, IRS CI deters crime and levels the playing field to ensure everyone is treated fairly, Weber said. About 85 percent of taxpayers pay what they owe and they want consequences for the cheaters who intentionally avoid paying their share, he said.
"We send a powerful message when we investigate and prosecute these cases," Weber said.
pmanson@sltrib.com
Twitter: @PamelaMansonSLC
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