Colorado Man Pleads Guilty to Defrauding Taxpayers of $45 million

A Colorado man pleaded guilty to conspiring to defraud the United States and tax evasion through an illegal tax shelter. 

 Timothy McPhee, of Estes Park, promoted a fraudulent tax shelter to taxpayers across the country from 2018 through 2023.

He also pleaded guilty to wire fraud related to his fraudulent investment scheme, according to court documents. 

He used a business trust, a family trust, charitable trust, and a private family foundation. McPhee taught clients who purchased the tax shelter how to use the trusts and foundation to evade paying federal income taxes on nearly all their income. 

McPhee instructed clients to assign nearly all their business income to the trusts and to all false tax returns that made it seem as if that income belonged to the trusts, not the client. He also told clients to spend the money in the trust bank accounts on their own personal expenses and to fraudulently claim those expenses as deductions on the trust tax returns. 

As a result, clients who used the tax shelter paid taxes on only about 2% of their income. But because the clients funded the trusts, controlled the money in the trusts, and benefitted from the trust funds, the income was taxable to the clients themselves. 

McPhee plead guilty. 

He acknowledged that he gave directions to clients that he knew directly contradicted IRS guidance and that he deliberately ignored warnings from accountants and attorneys that the tax shelter was fraudulent and illegal. 

In total, use of the tax shelter caused a loss to the United States of about $45 million in unpaid federal income taxes.

 McPhee also personally used the tax shelter to conceal from the IRS more than $5 million in income earned from 2016 through 2021. McPhee avoided about $1.8 million in federal income taxes he owed those years. 

From January 2023 through May 2024, McPhee also operated and promoted a fraudulent investment scheme called the “ROI Cash Flow Fund.” 

McPhee promoted the fund as an opportunity for investors to earn a 3% monthly payout on a principal investment. He falsely told investors that the ROI Cash Flow Fund would generate monthly returns by sending the investors’ funds to a third-party borrower who would engage in foreign exchange currency trading. 

McPhee received over $8 million to bank accounts he controlled. He used the monney to make monthly 3% payouts to investors. 

He also spent investor funds on his own personal expenses and investments, including by sending more than $2 million in investor funds to a bank account he held in the name of one of his trusts. 

McPhee is scheduled to be sentenced on Oct. 23. He faces a maximum penalty of five years in prison for conspiring to defraud the United States, a maximum penalty of five years in prison for tax evasion, and a maximum penalty of 20 years in prison for wire fraud. 

A federal district court judge will determine any sentence. 

Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division made the announcement. The FBI and IRS Criminal Investigation investigated the case. Trial Attorneys Lauren K. Pope and Amanda R. Scott of the Tax Division are prosecuting the case.

Editor’s Note: President Trump is leading America into the “Golden Age” as Democrats try desperately to stop it.  

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