Valley residents sentenced for tax crimes

ANCHORAGE -- A recent ruling by a U.S. District Judge sent two Valley residents convicted of tax crimes to a federal prison and ordered them to pay nearly half a million dollars in restitution to the Internal Revenue Service.

On April 1, Valley residents Helen M. Smith, 59, and her brother Leroy Sbrusch, 56, both of Wasilla, were sentenced to serve two years in federal prison for tax evasion, failure to file returns, and conspiracy to defraud the IRS. A week earlier, co-defendant Ken Smith, 61, of Big Lake, had been sentenced to serve 15 months for his role in the conspiracy.

The three were convicted on Dec. 5, 2003, by a federal jury after a three-week trial. All three were convicted of conspiracy to defraud the IRS. Sbrusch and Helen Smith were also each convicted of failure to file 1996, 1997 and 1998 income-tax returns, and also of evading Smith's 1998 income taxes, and Sbrusch was convicted of one count of structuring financial transactions to avoid currency transaction reporting requirements in 1998.

In the April 1 ruling, U.S. District Court Judge James K. Singleton ordered Helen Smith and Sbrusch to pay more than $485,000 in restitution to the U.S. government for back taxes. After serving their prison terms, each defendant will be on supervised release for three years, and will be required to cooperate with IRS examinations of their tax liability.

Evidence presented at trial showed that Helen Smith owned two laundromats in the Valley in the 1990s: Wasilla Wash Day and Wash Day Too of Palmer. Her gross income was over $440,000 for 1996, over $540,000 for 1997, and over $700,000 for 1998. Despite these figures, she failed to file a tax return for any of these years, or any year since. In fact, neither Helen Smith nor Sbrusch filed a return since 1990.

After the sale of Wasilla Wash Day for $700,000 in April 1998, evidence presented in court showed that the defendants engaged in a complicated scheme to launder the resulting profits in order to evade collection by the IRS.

The three defendants reportedly used various means to conceal the proceeds, including the purchase of $45,000 in gold and silver under a third-party name, the acquisition of land in Texas under false names, and simply having large-denomination cashier's checks issued to nonexistent entities and keeping them in their office for six months to a year.

U.S. Attorney Tom Bradley, who prosecuted the 2003 case, said that the crime came to light when IRS investigators subpoenaed Sbrusch's bank records from Matanuska Valley Federal Credit Union, from which he withdrew cash sums totaling over $20,000 in April 1998.

According to IRS regulation, any currency transaction of more than $10,000 must be reported by the bank involved to the IRS.

The methodical process undertaken by the defendants is a point of interest in itself, according to Dan Wardlaw, IRS Special Agent. Sbrusch testified that he and Helen Smith attended seminars and purchased books offered by California tax activist Lynne Meredith and her organization, "We the People." Sbrusch admitted purchasing "trusts" from Meredith that were used to hold assets purchased with the proceeds of the Wasilla Wash Day sale. He also testified that he and Helen Smith attended an "investment seminar" in Fiji at which Meredith was a speaker.

Meredith and several associates are currently on trial in federal court in Los Angeles on similar charges of conspiracy to defraud the IRS and failure to file returns.

Evidence at trial also implicated Ken Smith, who received a lesser sentence than Helen Smith and Sbrusch, as being involved in the sale of other "trusts" used to evade taxes. Sbrusch testified that he and Helen Smith purchased several trusts from Ken Smith, but denied that they were tax-related.

According to IRS officials, this conviction sends a strong message to both local residents and people everywhere in the country.

"If anyone thought that enforcement of the Internal Revenue laws was on the decline, I invite you to consider the results of this investigation," said Steven J. Pasholk, Special Agent in Charge of IRS Criminal Investigation for Alaska and Washington. "The sentences imposed today represent very real and substantial consequences for cheating on one's income taxes."

Contact Daniel Spoth at daniel.spoth@frontiersman.com.