Indian American admits to tax fraud scheme
Rao Garuda faces 8 years in prison; to pay back $2.7 million as restitution
An Indian American financial planner from the Cleveland area in Ohio has pleaded guilty to conspiracy to defraud the United States and assisting in the filing of a false tax return.
Rao Garuda, President and CEO of Associated Concepts Agency, Inc. (“ACA”), allegedly engaged in a scheme — known as the Advanced Legacy Plan or the Ultimate Tax Plan — to assist high-income individuals in unlawfully reducing their taxes, according to a Justice Department press release.
READ: Several Indian Americans charged in $53 million Covid relief fraud (July 7, 2023)
For his role in the scheme, Garuda caused or intended to cause a tax loss of more than $2.7 million, which he agreed to pay back as restitution to the United States, the release stated.
Garuda is scheduled to be sentenced on November 14, 2023, and faces a maximum penalty of five years in prison for conspiracy to defraud the United States and three years in prison for the false return count. He also faces a period of supervised release, restitution, and monetary penalties.
ACA’s former Chief Operating Officer previously pleaded guilty to conspiracy to defraud the United States on Sep 26, 2022.
READ: Indian American charged with $5 million Covid-relief loan fraud(March 1, 2022)
To accomplish the scheme, Garuda and other coconspirators instructed clients to (a) transfer assets to an LLC in exchange for 100% ownership interest in the LLC, (b) assign the 100% ownership interest to a charity controlled by co-conspirators, and (c) claim a charitable contribution tax deduction for the purported donation.
According to court documents, Garuda and others marketed the scheme as a way for clients to receive the tax deduction without relinquishing control over the LLC or its assets.
After executing the scheme, clients could access the assets inside the LLCs through tax-free loans. Garuda marketed the scheme despite being warned by several attorneys over the years that the scheme was illegal, such as one attorney describing the scheme as “clearly fraudulent.”
READ: Indian American pleads guilty to $25 million Covid-relief fraud (March 25, 2021)
Garuda and others also assisted clients in claiming charitable contribution tax deductions after the close of the tax year by backdating documents to make it look as if clients executed the scheme in a prior year.
To do so, Garuda and others directed clients to use preexisting LLCs (sometimes referred to as “Shelf LLCs”) that Individual A had created and formed at the end of the prior year and backdate documents to make it appear as if the clients owned and assigned ownership interests in the Shelf LLCs in the prior year, the release said.
