A Utah federal judge ordered a Utah man accused of operating a $200 million Ponzi scheme to be held in contempt for his failure to turn over assets to the court-appointed receiver. Allen Jacobson, charged with his father Wendell in what Utah authorities say is one of the largest Ponzi schemes uncovered to date, is alleged to have withheld over $200,000 in tax refunds that should have been turned over to the receivership estate. United States District Judge Bruce Jenkins agreed, ordering the turnover and forfeit of those assets to the receivership estate and reserving the option to impose further sanctions.
In a May 2012 filing, the court-appointed receiver, John A. Beckstead, contended that Allan Jacobson had violated the court-imposed asset freeze when they received $208,393.33 in state and federal tax returns that were not disclosed to the receiver and instead "secretly deposited into undisclosed bank accounts" held by Jacobson's wife, Cami. While Jacobson (but not his wife) was released from the asset freeze in March 2012, his wife was not. In the filing, the SEC detailed a series of transactions taking place in late 2011 and early 2012 between bank accounts held by the Jacobsons and undisclosed to the receiver. In these accounts, the receiver presented evidence that the Jacobsons deposited state and federal income tax refunds into the accounts, only to turn around and covert the funds to cashier's checks made out to Ms. Jacobson. For example,
On January 26, 2012, C. Jacobson and A. Jacobson endorsed and deposited into the account two checks from the State of Utah. Both are income tax refund checks. The first check (Warrant Number T4621485) was dated January 20, 2012, and was for $51,037.34. The second check (Warrant Number T4621486), was also dated January 20, 2012, and was for $112,493.40.
...The account records show that on January 27, 2012, C. Jacobson purchased five cashier’s checks from the Bank of American Fork using a total of $74,600 of the funds from the income tax refunds deposited the previous day. The cashier’s checks were for $6,800, $9,200, $8,600, $20,000, and $30,000. All were made payable to C. Jacobson who also withdrew $9,500 in cash from the account.
None of these transactions were disclosed to the receiver. The receiver also contended that the Jacobsons had failed to turn over a 2008 BMW 528xi as previously ordered by the court. Finally, the receiver informed the court that he had learned of an impending sale of the Jacobsons' personal residence, held in the name of Ms. Jacobson, and that any net proceeds were properly payable to the receivership rather than the Jacobsons.
The restating of previously-filed tax returns is an often-overlooked source of funds in a receivership. Somewhat ironically, Ponzi scheme perpetrators rarely fail to timely file their income tax returns detailing their income from the scheme. That large income is in turn often accompanied by a substantial tax liability to the IRS. However, after the discovery of fraud, insiders of the scheme can usually amend previously-filed returns to seek overpayment of taxes for phantom trading profits and newly-discovered investment losses. Investment losses can then be "carried back" over a period of several years through the filing of a Form 1045 with the IRS, sometimes resulting in refunds in the millions of dollars for larger schemes.
Follwing the discovery of the missing funds, Jacobson turned over $170,000 to the receiver and stated that the remaining $50,000 had been paid to a former attorney.
A copy of the SEC's motion for contempt is here.