Texas promoters sold sham trusts that hid $1.5 billion from the IRS, US says

The pitch, as federal prosecutors tell it, was the oldest fantasy in tax avoidance: hand your income to a trust, stop paying tax on it forever, and keep spending it as if nothing had changed. A group of Texas promoters sold that promise to wealthy clients, according to a Justice Department indictment, and the Internal Revenue Service is now counting what went missing.

The detail that turned the case into a headline sits slightly apart from the shelter itself. Prosecutors say Duncan John MacDonald, the promoter they accuse of secretly owning the shelter business, raised money from investors for a related venture and spent it on a Rolls-Royce Ghost and the down payment on a yacht. He was, the indictment says, already under a court order barring him from selling unregistered securities when that money came in.

A trust that changed nothing but the paperwork

The indictment names four Texas residents: MacDonald; Sarah Duren, described by prosecutors as his common-law spouse; Richard Ronald Cayce, who owned the distributorship that licensed the trust product; and Thomas Weickgenant, who allegedly prepared false tax returns for the shelter’s clients. According to the government, the group told clients they could assign their income to the trusts, defer the tax indefinitely and still keep both the benefit and the control of their assets. Some clients were allegedly encouraged to backdate their trusts and file amended returns claiming refunds of taxes they had already paid for earlier years.

That promise is the contradiction at the centre of the case. A trust lowers a tax bill because the person who funds it gives something up. The product described in the indictment told buyers they did not have to give up anything at all, which is why prosecutors treat the trusts as shams rather than as aggressive planning. Weickgenant is also accused of obstructing the IRS when it tried to audit clients, including telling them not to speak with the agency and encouraging at least one client to ignore a federal court order enforcing an IRS summons.

The sellers allegedly ran the same play on their own income

The government says the people selling the shelter applied its logic to themselves. MacDonald and Duren allegedly concealed his ownership of the business, lied to federal investigators, filed false returns, moved their earnings through trusts and paid personal living expenses from nominee accounts held in other people’s names. Cayce allegedly collected millions of dollars in fees that he never reported.

Then came the investors. According to the indictment, MacDonald solicited $2 million to buy shares in a business that would promote the shelter by developing what it called digital trusts. Prosecutors say the money went instead on luxury goods for himself. Bloomberg, which described MacDonald as a felon, identified the car as a 2021 Rolls-Royce Ghost and the boat as an Ocean Alexander 28E, and the Justice Department’s own announcement carried photographs of both.

Twenty-four counts and a $200 million tax gap

A federal grand jury in Dallas returned the indictment on September 22, and the Justice Department announced it on October 14. Prosecutors put the income sheltered through the trusts at more than $1.5 billion and the estimated tax loss to the United States at more than $200 million. Clients typically paid fees above $100,000 for the structure.

All four defendants face a charge of conspiracy to defraud the United States, which carries up to five years in prison. The 24-count indictment also includes aiding in the preparation of false returns, tax evasion and filing false returns, while MacDonald alone faces two counts of wire fraud, each carrying up to 20 years, and three counts of transactions with criminally derived property. IRS Criminal Investigation is investigating, and the case is being prosecuted by the Justice Department’s National Fraud Enforcement Division and the US Attorney’s Office for the Northern District of Texas. An indictment is only an allegation, and all four defendants are presumed innocent unless proven guilty.

The clients were sold a structure in which they could sign everything away and still keep it. If the indictment holds, the investors’ $2 million took the same route, handed to a business on paper and parked, in practice, in one man’s garage.

Tags: texas, IRS, Justice Department, Rolls-Royce, tax evasion, tax shelter