Bizarre $160M tax fraud scheme results in long prison terms

The scheme was as audacious as it was ambitious: bilk the Internal Revenue Service out of $160 million in tax refunds based on the bizarre belief that the government had set up secret bank accounts for each American, accessible by utilizing the right tax forms.

But besides being a fantasy, it was also a crime. Friday a federal judge handed down a total of 76 years in prison to four men, one formerly and one currently from South Florida.

“It’s a death sentence! Unbelievable!” complained David Clum, 61, one of the main players in the scheme who received a 24-year sentence. “It’s more than for murderers who commit murder.”

Besides Clum, of Whites Creek, Tenn., U.S. District Judge William Dimitrouleas of Fort Lauderdale sentenced Christopher Marrero, 52, Davie, to 15 years; Michael Beiter, in his 40s, formerly of Coral Springs, to 25 years; and Dale Peters, 58, San Mateo, Calif., to 12 years.

“This was a major fraudulent undertaking that would have swindled the government out of $160 million,” the judge intoned. “There are serious ramifications for it.”

The four were convicted in October of conspiracy and multiple counts of filing false tax returns. According to government prosecutors they co-owned PMDD Services, a national company that filed some 380 tax returns for 180 clients from 30 states seeking more than $160 million in refunds.

The company charged clients $750 for each return, as well as a 10 percent share of any refund. The IRS paid out about $7 million in the false returns, and recovered all but $5.3 million. The company’s clients “received substantial civil penalties and were subject to aggressive collection efforts by the IRS,” prosecutors said.

The scheme was based on Redemption Theory, a claim popular among tax protesters connected to the sovereign citizen movement, which alleges that each individual represents a separate state. The theory, invented in the 1980s by Roger Elvick, a white supremicist, claims that when the government abandoned the gold standard in the ’30s it pledged its citizens as collateral.

Proponents believe the government created fictitious “straw men” and deposited $630,000 into bank accounts for each. Through the manipulation of certain tax forms, individuals could gain access to those funds. Clum and Beiter, the scheme’s main organizers, gave seminars and appeared on talk radio seeking clients to access the money they believed was owed them.

“It appeared to be something all loyal Americans should be doing,” Clum said, voice breaking during a 17-minute statement before sentencing. “My intentions were at all times honorable. I am not an enemy of this country.”

But Assistant U.S. Attorney Jonathan Marx, who along with colleagues Bertha Mitrani and Jed Silversmith prosecuted the case, called Clum a victim of “moral blindness.”

“His moral compass has gone a-kilter,” he said.

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