FOR IMMEDIATE RELEASE TAX

SATURDAY, SEPTEMBER 1, (202) 514-2007

1906 TDD (202) 514-1888
WWW.USDOJ.GOV

Justice Department Sues to Stop

Alleged Tax Fraud Scheme
Involving Bogus Tax Exempt
Organizations
Northern California Man Allegedly Sells Fraudulent
“Corporation Sole” Program
WASHINGTON – The Justice Department announced today that it has sued to
block William J. Kennedy of Livermore, Calif., from selling an alleged tax fraud
scheme. The complaint, filed in U.S. District Court in San Francisco, alleges that
Kennedy falsely advised customers that they can use an entity known as a
“corporation sole” to avoid paying federal income taxes.

Kennedy conducted his business through an entity he calls the “Ear of Malchus,”
which is referenced in the New Testament. According to the complaint, the IRS
estimates that Kennedy’s tax-fraud scheme results in an annual loss to the federal
Treasury of $500,000.

Some states authorize corporations sole to enable religious leaders to hold property
and conduct business, the complaint states. But tax benefits are available to a
corporation sole (or any other organization) only if the organization qualifies as a
tax exempt religious or charitable organization under federal tax laws. The
complaint alleges that Kennedy falsely advises customers that corporations sole used
for their personal benefit can qualify as tax-exempt religious organizations.

The government’s complaint states that Kennedy charges his customers between
$15,000 and $25,000 to participate in the corporation sole scheme. The suit asks the
court to order Kennedy to remove from his website all information advertising the
scheme and to give the government a list with his customers’ names, addresses and
Social Security numbers.

Corporation-sole scams are listed in the IRS’s annual list of the “Dirty Dozen” tax
scams http://www.irs.gov/newsroom/article/0,,id=136337,00.html. The Justice
Department has obtained permanent injunctions against a number of people who
sell corporation-sole scams. Two examples are found at
http://www.usdoj.gov/tax/txdv05657.htm and
http://www.usdoj.gov/tax/txdv05030.htm.

Since 2001, the Justice Department’s Tax Division has obtained injunctions against
more than 200 tax preparers and tax-fraud promoters. More information about the
Justice Department's efforts against tax-scam promoters can be found at
http://www.usdoj.gov/tax/taxpress2006.htm. Information about the Justice
Department's Tax Division can be found at http://www.usdoj.gov/tax.

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