Prometheus 6

U.S. Sues 2 Over Gold-Mine Tax Promotion
By LYNNLEY BROWNING

The Justice Department filed two lawsuits on Thursday in a move against what it said was a fraudulent gold-mining scheme sold to dozens of wealthy investors, including seven current or former National Football League players.

Prosecutors say the promoters of the investment, known as Midas, for mining interest development action strategy, promised investors a return of at least 34 percent if they invested refunds they got after filing amended tax returns that claimed bogus deductions related to supposed gold-mining expenses in Colorado, Arizona and elsewhere.

According to prosecutors, the amended returns generated large tax refunds for earlier years. Investors were to give those refunds to the promoters as their investment in the mining project, and in some cases they did so.

The Justice Department lawsuits did not name the professional football players, but said that one was from Texas and another was from Georgia.

One lawsuit, filed in Federal District Court in Houston, named an accountant, Eric J. Peterson of Channelview, Tex., as defendant. A second lawsuit, filed in Federal District Court in Seattle, named another accountant, William H. Camp Jr. of Washington, D.C., as defendant. According to the lawsuits, the investment’s promoters falsely told customers that the federal government had set up a program that allowed taxpayers to receive tax refunds and invest the money in redevelopment of inactive mines. Investors were asked to invest $10 million over 10 years. In some cases, the lawsuits contend, the mines did not exist, did not have licenses or had reserves far below what promoters promised.

The Midas investments were promoted by Merendon Mining of Colorado, a part of the Merendon Mining Corporation of Calgary, Alberta. The corporation is affiliated with the Institute for Financial Learning, also based in Calgary, which is operated by an investor named Milo Brost.

Merendon Mining, which has affiliates and subsidiaries in the United States, Canada and Honduras, was mentioned in the injunctions but was not named as a defendant, nor were its affiliates. The Justice Department declined to answer questions on why it had not named Mr. Brost or his organizations as defendants, but the Internal Revenue Service usually goes after tax preparers when trying to shut questionable tax shelters. In February 2007, the Alberta Securities Commission censured and fined the Institute for Financial Learning for its role in a Canadian investor fraud, known as Strategic Metals.