Federal prosecutors allege Duncan John MacDonald and three others sold sham trusts that they said would let clients put off taxes forever, while still letting those clients keep control of their own income and assets. The government says the setup allowed more than $1.5 billion in income to be tucked out of sight and deprived the Treasury of more than $200 million.
On Wednesday, in federal court in Dallas, MacDonald entered a plea of not guilty. A judge ordered him held without bond after prosecutors said he posed a "serious risk" to flee and obstruct justice, according to court records.
Prosecutors say the group often charged clients north of $100,000 to create these trusts. MacDonald, who ran a firm called Economic Strategist along with other entities, allegedly told clients the trusts would let them "own nothing but control everything."
The government says MacDonald raised $2 million from investors for a venture he said would market the shelter through digital trusts, but instead used the funds to purchase a 2021 Rolls Royce Ghost and to put funds toward an Ocean Alexander 28E. At that time, he was barred from selling securities that were not registered with the SEC, prosecutors said.
One co-defendant is Sarah Duren. Prosecutors say MacDonald and Duren for years presented themselves publicly as married. Duren appeared in court Wednesday and pleaded not guilty. "We anticipate that she is an innocent spouse and relied on the wisdom of her husband, maybe to her detriment," said her lawyer James Whalen, who added that, after MacDonald left prison, the two considered themselves married under common law.
In 2013, after pleading guilty in a healthcare fraud case, MacDonald received a five-year prison sentence. The Justice Department said he was 50 when he was sentenced in 2014. The SEC also sued him in 2013, and a decade later the court entered a final judgment ordering $8.8 million in restitution. Prosecutors say he and Duren also hired a company to scrub negative information online about his businesses and past conviction.
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Tax attorneys warned clients away from the trusts, according to the indictment. One wrote, "It remains my very strong recommendation to take steps to rectify the situation and to mitigate your criminal exposure." Another cautioned: "It's tax fraud and those provisions don't allow for free tax gains."
Federal prosecutors spotlighted the MacDonald matter and said the Justice Department's National Fraud Enforcement Division has lately brought tax-fraud cases against over 70 individuals. For years, the Internal Revenue Service has gone after promoters of abusive shelters, and US Attorney Ryan Raybould is prioritizing white-collar cases. "The defendants orchestrated a sprawling, multimillion-dollar operation that encouraged wealthy clients to hide their income behind fraudulent trust structures, depriving the United States Treasury of more than $200 million in lawfully owed revenue," Raybould said Thursday.
The charges against him include wire fraud, tax evasion, conspiracy to defraud the US, engaging in monetary transactions with criminally derived property, and helping prepare false income tax returns. A copy of the indictment was supplied by Raybould's office, though it was not yet available in court records. Attempts to reach MacDonald's attorney for comment were unsuccessful. The bottom line: heightened scrutiny of complex tax plays raises legal risk for promoters and anyone entangled with them, a factor that can ripple into how capital is raised and where it flows.
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