The Foster Dunhill program, as it was known (it actually involved quite a few companies but Foster Dunhill was the most prominent), was a widespread program of blatant tax fraud perpetrated by a number of individuals, including Stephen Donaldson, Sr., and Duane Crithfield, writes Jay Adkisson, for Forbes.
In essence, privately-owned American businesses paid exorbitant premiums for various insurance coverages to an offshore insurance company controlled, taking a deduction against income for the policies, and then the offshore insurance company purchased an offshore annuity or cash-value policy for the business owner to give them access to their moneys.
Donaldson and Crithfield were indicted for tax fraud, and, as my second article discussed, eventually entered guilty pleas. After that article was written, however, a strange twist of fate occurred as the U.S. District Judge rejected their guilty pleas, and not too long after that the pair went to trial. At a bench trial wherein the judge made the findings of fact (as opposed to a jury trial where laypersons do that), the court on July 12, 2017, entered an Order which found Donaldson and Crithfield guilty of all counts of the crimes charged.
While researching this article, I further discovered that the Vento v. Crithfield case, which I wrote about in my 2013 article, has finally been resolved, by a court affirming the arbitration award in favor of the Ventos and against the Foster Dunhill defendants.
While it has now been 15 years since the Foster & Dunhill deal was the latest tax and asset protection flavor-of-the-day, it is worth remembering that Foster & Dunhill wasn't the first of the "insurance deduction" schemes. A similar tax fraud involving Caduceus Life Insurance Company and Peter J. Peggs, et al., had run prior to the Foster & Dunhill scheme. That fraud also ended in indictments, and the sad dual suicide of Peter J. Peggs and his wife the day before he was to report to prison.
These schemes continue today too. As I wrote last month in my article Beware The Insane New Offshore Insurance Company Deals Sold By Some 831(b) Captive Managers, some promoters are now driving their clients into offshore deals very similar to Caduceus Life and Foster & Dunhill.
The likely outcome is drearily predictable.