My January 13th post notes that divorcing spouses can employ nominees, (i.e. intermediaries), to secretly purchase property, conceal bank accounts, etc. Prosecutors claimed Attorney Orion Douglas Memmott similarly used nominees to hide assets from the IRS. Mr. Memmott’s 2010 superseding indictment asserted Mr. Memmott hid assets from the IRS by “placing real property in the names of nominees…” It charged him with attempted tax evasion (26 U.S.C. § 7201) and perjury/false statements (26 U.S.C. § 7206 (1). Prosecutors alleged Mr. Memmott hid real estate titled in the name of Mr. Memmott’s nominee, his ex-wife Sheila Enos-Boyd. Mr. Memmott was found guilty of these charges and on December 15, 2014, the Court sentenced him to 18 months of prison.
THE RED FLAGS
In addition to hiding real estate through his nominee, prosecutors accused Mr. Memmott of embezzling hundreds of thousands of dollars from law firm clients and friends. One of Mr. Memmott’s victims was Merrill Osmond, lead singer of the world famous Osmond family. Mr. Memmott is believed to have embezzled $60,000 from Mr. Osmond. Another victim was Ms. Ranelle Wallace, who was left homeless by Mr. Memmott because he reportedly embezzled $37,000 from her. Prosecutors claimed Mr. Memmott hid these and other funds he embezzled, in business bank accounts belonging to his nominees. Mr. Memmott’s suspected use of nominees to conceal assets, was just one red flag of fraud in his case. Other red flags were: Mr. Memmott’s claim at his June 9, 2005 IRS Form 433-A, that he had no bank accounts; Mr. Memmott’s alleged use of back-dated promissory notes; and Mr. Memmott’s suspected use of a business bank account instead of a trust account.
B) Mr. Memmott’s June 9th 433-A Form
When the IRS determined that Mr. Memmott owed about $655,555 in unpaid personal federal income taxes for years 1993-1999, it assigned IRS Revenue Officer Miller to search for Mr. Memmott’s assets. On June 9, 2005 Officer Miller had Mr. Memmott execute an IRS Form 433-A, Collection Information Statement. At this June 9th Form, Mr. Memmott indicated he had no personal bank accounts. This was a red flag for Officer Miller who testified at Mr. Memmott’s trial that: “I just found it very odd that the defendant was an attorney, a businessman, he was receiving Social Security, but he had no personal bank accounts. So that was kind of an indicator of fraud for me because it just was so out of the ordinary to have someone of that stature not have a personal bank account.”
C) The Alleged Back-Dated Promissory Notes
Although Mr. Osmond wired Mr. Memmott a total of $60,000 to be invested on Mr. Osmond’s behalf, the Court’s August 21, 2013 findings of fact said Mr. Memmott embezzled this money. At Mr. Memmott’s trial, Mr. Osmond basically testified he phoned Mr. Memmott because Mr. Memmott was the subject of an IRS investigation. According to Mr. Osmond, Mr. Memmott then “told me that if things go awry for whatever reason, which he did not think they would, that he wanted to send me these promissory notes, but he would back-date them so — so they would be in my hands. But the sad part is he said not to tell anybody.”
After their phone discussion, Mr. Memmott then allegedly sent Mr. Osmond two back-dated promissory notes concerning a supposed loan between the two. If Mr. Memmott did send the back-dated promissory notes as mentioned above, it would have of course been a red flag of fraud.
D) Suspected Use Of A Business Bank Account Instead Of A Trust Account
Ms. Ranelle Wallace’s testimony at Mr. Memmott’s trial was summed up at the Government’s Sentencing Memorandum which said “Ranelle W. testified that she transferred funds to the defendant to be placed in a medical trust following a plane crash that left her with serious medical problems.” At her April 20, 2007 phone interview with IRS Special Agent Shawn Breslin, Ms. Wallace mentioned she first met Mr. Memmott because she sought advise about her “terrible divorce”. Ms. Wallace reportedly wired Mr. Memmott $37,000 on June 8, 2005 so he could establish a trust for her. During the April 20th interview, Ms. Wallace apparently said Mr. Memmott never returned her money and that she was left destitute and homeless.²
The Court indicated that Ms. Wallace sent Mr. Memmott $37,000 by wiring it to a bank account held by a business entity named Cinemax. Mr. Memmott is thought to have been a signatory on the Cinemax account³ and the Court found Mr. Memmott used this account for his day-trading of stocks. If Mr. Memmott caused Ms. Wallace to transfer her monies into the Cinemax account, Mr. Memmott would have violated California Rule Of Professional Conduct 4-100. The Rule prohibits attorneys from commingling a client’s funds with their own and also requires attorneys to deposit client funds into trust accounts. Mr. Memmott’s suspected violation of the Rule, was another red flag of fraud in his case.
First Image courtesy of Flickr (Licensed) by DonkeyHotey.
¹The IRS 433-A FORM has been partly redacted for privacy reasons.
²Mr. Memmott’s Reply Memorandum To Government Sentencing suggests that as of December 8, 2014, Mr. Memmott made restitution in the amount of $21,250 to Ms. Wallace.
³At his February 1, 2010 declaration, Mr. Memmott stated he was signatory of the Cinemax bank account.
Copyright 2015 Fred L. Abrams