Monday, April 21, 2008

Legal Thriller Book Author Reports: Outrageous Offshore Employee Leasing Scheme--A Scam Secret Few Recognize

--Con Artists at their Most Bizarre. Scam Imagination Running Wild

Like a contortionist who can't make ends meet, some con artists will try anything.

In this con, it's the employer who is the scam "artist," the architect of a really imaginative form of scamology. If his lofty ambition is to walk on the moon, this is the scam world equivalent. Ever hear of "employee leasing?" Offshore, yet. Here's how it works:

> Because of dire straights produced by red ink on balance sheet, just plain chiseling, cunning, or flat-out con man tendencies, employer arranges with valuable, high paid employee for circumstances under which said employee will resign.

> Employee then signs a contract with an offshore employee leasing company.

> The offshore company indirectly leases the employee's services back to his original employer, using a domestic leasing company as an intermediary.

> The employee then performs the exact same duties that he did before his resignation. His pay is resumed at his prior level, or increased.

> The funds to pay him are sent offshore as deferred compensation.

> The deferred compensation is then paid to the employee as a loan.

> The employer now claims that neither employment taxes nor income taxes are payable because these funds were paid, outside U.S. jurisdiction, as a loan derived from his deferred compensation account.

What kind of a Loony Tunes arrangement is this? A legal thriller novel could not have a more twisted plot. One party not fooled by this contortionist's view of tax law is IRS. One promoter is doing 6 years of hard time. A San Diego doctor is awaiting sentencing. Motive? Who knows? Maybe some form of bizarre death wish. In prison good behavior gets you time off; in the outside world good behavior gets you more work. Some sort of perverted envy? Could that be it?

30 comments:

Bern said...

It does sound like a plot taken from a novel.

Jack Payne said...

In scratching around I find it remarkable that so few people have ever heard of this. Which makes me wonder, for the few who get caught, how many get away with variations of this type scam?

Meyer said...

I heard through a round about source that an old college pal of mine was caught up in some sort of murky employment contract like this. I wonder how widespread this is.

Ione Hesber said...

What will they think of next?

Alice W said...

My ex-husband got caught in some kind of web like this...it had to do with his employment contract, but I never was able to find out what the trouble was. But, there was plenty of trouble, and it had to do with overseas something. That is all I know.

Brandi Magill said...

Talk about a soap opera! That is quite the twist...

Jack Payne said...

Yes, all of you guys, as Brandi says, "That is quite the twist."

Since I wrote this piece, I've been digging for more information, intending to do a follow-up article on this subject.

No dice. Can't find anything. Apparently this sort of scam activity is kept well under wraps.

Warren M said...

No matter how you slice and dice it this has to be one of the bigger problems for IRS. With the zillions of dollars top execs are taking home these days, this must run into some real big money in taxes. It's amazing the extent to which these con men will go, and the innovative scams they can come up with.

JoelsBackDoor said...

When I was working for wages I was once hit up by a head hunter with a strange offer to switch jobs. Their contract had a lot of dubious language in it, with reference to deferred compensation and such. (No offshore though.)
Didn't sound right. I passed on it and later quit the rat race, and now I employ myself.

robertstevenson said...

Thanks for the heads up, Jack. The more information "out there" about this type of scam, the less effective these jerks can be.

Dee said...

Jack, Jack, Jack where do you find these things? Better yet how do these scam artists devise these methods to further add to this devious art of scamology?

I truly have never heard of employee leasing. Walking on the moon Jack or scraping the bottom of the barrel?
They'd be better off trying to get away with being a non-profit organization.

Mr. Grudge said...

Hi Jack,
On behalf of JD (The Uneasy Supplicant) and myself, I'd like to extend an invitation to you to join the Society of the Midnight Wanderers. You may have seen our emblem at the tops of various blogs around the internet, and this emblem is an acknowledgement of fine writing. Your work here is an excellent example of investigative reporting, based on your years of experience and expert research. This is an informative and must-read blog. We wish to recognize you for your fine writing and extend this invitation. Our blog ccan be found here: http://midnightwanderersociety.blogspot.com/

and the rules can be found here:

http://midnightwanderersociety.blogspot.com/2008/02/welcome-to-society-of-midnight.html

Should you accept, please copy and paste the MW emblem and place it on your blog and contact me from my blog (Mr. Grudge) using the "Click here to send me an e-mail button." I will then tell you what esle you should know. There is no obligation to do anything as a member. This is strictly to recognize you as a writer. The blog and everything else is all for a sense of community. I am grateful for your participation, and there are not regrets should you decline this offer, just continued blogging friendship. Have a great day. -Mike (Mr. Grudge).

Terry said...

Sounds like a great honor, Jack, the Society invite I mean. From the standpoint of writing quality you sure do qualify...hope you will jump at this honor.

McAlee said...

Do you really think these sleezes want to go to jail, Jack? I got to agree with you, that would be perverted behavior.

Swubird said...

Con Man:

Great post. I had never heard of this scam. It's wild. You have to admire its tenacity. Every time I visit your site, I come away with a dropped jaw!

Happy trails.

Kevin Goodman said...

I once slipped with a friend of mine when I said “accounting has got to be one of the most boring aspects of business”. My friend then told me ‘You would be surprised at how creative accounting can be’. By that time I was kicking my own ass because my friend had both bachelors and masters in finance with CPA and CFA credentials.


Is it me or you cranking out newer post faster?

Skillareli2 said...

This concept is so wild, it sounds like it comes right out of a movie script.

Jack Payne said...

Warren, this is a HUGE problem for IRS.

Joel, employment contract hanky panky is very widespread, and, sadly, is one of the most hush-hush scams around--very difficult to get up-to-the-minute info on it.

And, this leads inexorably into Robert Stevenson's point. That's usually the way it works, Robert, more info, better the catch rate. This is so true with, for example, insurance scams: much information, big percentage of arrests and convictions. But with employment contracts there is so little information that I can only conclude con artists are having a ball in this field of scam endeavor.

And, Dee, I know quite a few other lawyers who never heard of employee leasing either. You are not alone. It's amazing how well-kept this secret has been.

Jack Payne said...

I agree with Terry, Mike. I am honored to accept your invitation.

I've tried to email you about this--about the technicalities--but have been unable to get through to you via email. Hope we can somehow break this barrier.

Jack Payne said...

Swo, wire your jaw and go through the archives sometime when you've got a relaxing half-day to give up. I think, in my some 60 accumulated posts I've already covered about 75% of all the scams out there. A few lawyers, and law school profs have done this and, most state that they came across several scams they had no idea even existed.

Ever heard of Enron, Kevin? They practiced "creative accounting" at a spit and polish level that few in corporate accounting ever achieved. Sadly, it's done all the time, with a magician's now-you-see-it-now-you-don't skill.

You're are, oh, so right, #2, does sound like this scenario was plucked from a movie doesn't it? Or, as I said earlier up this thread, from a legal thriller novel.

Ramis said...

Come to think of it, I never see anything about employee leasing or employment contracts in the F.B.I. or F.T.C. releases. I check several Better Business Web sites. None there either.

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Dee said...

Ramis you've got to come to Jack's blog to discover these things my man. Those guys play catch up.

Terry said...

Glad to see that you accepted my recomendation and accepted the Society honor, Jack.

Meyer said...

I think Dee may have it right. These con men would be better off being a non-profit organization. That's a better way to beat taxes.

The Muse said...

That's interesting, Jack. Talk about conniving and wriggling out of paying the taxes. I knew some guys that worked offshore. I wonder if they were involved in scams like this?

Crissy said...

thanks for the info Jack.. big help to those people looking for work and those working to check on their contracts.. congratulations on the invitation from Mr. Grudge.. very deserving..

Geoffrey said...

That is the most convoluted and bizarre scam I have ever heard of Jack! And as a management consultant in high-tech I've seen quite a few...too many to mention! :) Great blog...very interesting posts. Thank you.

offshore employees said...

I can't believe that is was really happening in real life, i thought it only happened on television..hmmm. what a shame.?!

Anonymous said...

learned a lot