Tax scheme lands Butler doctor in prison

Followed ‘Cracking the Code’ teachings

A Butler anesthesiologist described by the government as a “longtime tax cheat” and who according to federal agents adopted the anti-tax theories of a convicted felon, hid money in the Channel Islands and even created a bogus church in Nevada, is headed to federal prison for failure to pay nearly $1 million in income taxes.

U.S. District Judge Arthur Schwab on Thursday imposed a 30-month sentence on Dr. James G. Allen Jr., 54, who was prosecuted by the tax division of the Justice Department.

Allen, who pleaded guilty to filing 16 false returns for himself and his wife, also an anesthesiologist, had followed the teachings of “Cracking the Code” by tax protester Peter Hendrickson. The book advocates the idea that money earned for services is not taxable. Hendrickson was convicted of tax crimes and sent to federal prison.

“The defendant is a highly educated man who knew that the law required him to report all the income that he and his wife received for their work as anesthesiologists,” said prosecutors Melissa Siskin and Carl Brooker in sentencing papers.

But, they said, he didn’t want to pay taxes and adopted Hendrickson’s scheme by filing returns that only reported small amounts of income from interest and dividends instead of the $3 million the pair earned as doctors from 2010 to 2017.

The criminal division of the IRS said Allen also took steps to conceal the couple’s assets and income, such as depositing money in an account in the Bailiwick of Jersey, one of the Channel Islands known as a tax haven, buying $92,000 in cryptocurrency and $296,000 in gold, and wiring money to Colombia to buy a house there. Allen’s wife is from Colombia.

In 2004, Allen also created the Kenpo Unification Church in Nevada and registered a vehicle, property and a bank account in the name of the church, prosecutors said.

In all, Allen ducked out on about $900,000 in taxes. Judge Schwab ordered him to pay $1,084,658 in restitution to the IRS, which represents the total plus interest.