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advised Howard and petitioners regarding the purported tax
benefits of offshore trusts.
In 1982, with the assistance of Howard, Armstrong, and
Green, petitioners established an ALA-type of offshore trust
program. Five sham trusts were established and domiciled in
Grand Turk, the capital of the Turks and Caicos Islands, located
in the British West Indies, under the names of five shell
companies (namely, DCH Management (DCH), Ledner Consulting Co.
(Ledner), DARA Co. (DARA), Cosmos Investment Co. (Cosmos), and
Alpha Associates (Alpha)).
Bank accounts were then opened in California, one account
each under the name of four of the five trusts. Howard was a
trustee and an agent for Alpha, and Howard held signatory
authority over the DCH, Ledner, DARA, and Cosmos bank accounts.
An interest-bearing investment account was also maintained
in California under Alpha’s name with the Capital Preservation
Fund of the First Interstate Bank of California (the Alpha
account). The Alpha account was maintained under CCMI's
corporate identification number. Rachel held signatory authority
over the Alpha account.
Pursuant to petitioners' offshore trust program, funds
transferred into the trusts represented profits realized by CCMI.
During 1982 and 1983, $174,308 in profits of CCMI was
transferred from CCMI through the offshore trusts and ultimately
to the Alpha account. With Howard's participation, the profits
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