A Florida financial advisor has admitted to running a scheme involving an illegal tax shelter and wire fraud. Stephen T. Mellinger III, from Delray Beach, confessed in court to his involvement in promoting the fraudulent tax shelter and assisting clients in filing false tax returns.
Court documents reveal that since late 2013, Mellinger collaborated with others to promote the illegal scheme. Clients were led to believe they could claim deductions for "royalty payments" to reduce taxes. However, these payments were a facade, with money circulating back to clients' accounts after deducting a fee.
Mellinger's actions resulted in over $106 million in false deductions and approximately $37 million in tax losses for the IRS. He and a relative gained around $3 million from this operation.
In early 2016, upon learning of investigations into his clients and fund seizures by U.S. authorities, Mellinger stole more than $2.1 million from clients, using part of it to purchase property.
Mellinger's sentencing is set for September 16. He faces up to five years for conspiracy charges and three years for aiding false tax returns preparation. A federal judge will determine the sentence based on guidelines and other factors.
The announcement was made by Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division, Supervisory Official Antoinette T. Bacon of the Criminal Division, and Acting U.S. Attorney Patrick A. Lemon for the Southern District of Mississippi.
The investigation is being conducted by IRS Criminal Investigation and the Department of Defense's Office of Inspector General's Defense Criminal Investigative Service.
Prosecutors include Trial Attorneys Richard J. Hagerman, William Montague, Matthew Hicks from the Tax Division; Assistant U.S. Attorney Charles W. Kirkham; and Trial Attorneys Emily Cohen and Jasmin Salehi Fashami from MLARS.