2 defendants in UMDA case to be sentenced in New York

Robert Pfaff and John Larson, two primary defendants in an ongoing civil case brought by United Micronesia Development Association on Saipan, should be sentenced to as much as 24 years in federal prison for tax fraud, according to a brief filed by federal prosecutors in U.S. District Court in New York late last week. Pfaff and Larson will be sentenced on April 1 by U.S. District Judge Lewis Kaplan.

Pfaff and Larson were convicted by a federal jury of multiple counts of tax evasion in December 2008 in U.S. v. Stein—a case billed as the largest criminal inquiry into tax fraud in the history of the United States. The two former executives of the accounting firm of KPMG were convicted of selling illegal tax shelters (called “BLIPS”) that helped wealthy clients evade well over $100 million in taxes.

In their brief, prosecutors John Hillebrecht and Margaret Garnett of the U.S. Attorney’s Office in Manhattan say that based on sentencing guidelines Pfaff and Larson should receive from 19 to 24 years in prison. According to the brief, “We recognize of course that these guidelines ranges are sobering. But we submit that the virtually unprecedented enormity of the BLIPS fraud, coupled with the pivotal roles in that fraud played by each of these defendants and the personal profit they derived from the fraud, makes a sentence with the guidelines range appropriate and reasonable.”

In April of 2007 UMDA filed a civil suit against Pfaff, Larson, and a number of their associates in Superior Court of the of the Commonwealth of the Northern Mariana Islands (“CNMI”) to recover millions of dollars for harm done to the company over a ten year period ending in 2006 when Pfaff was a director and shareholder in the company.

Pfaff is also under separate criminal indictment in the same New York federal court in a related case that is scheduled for trial in New York later this year.

According to attorney Robert O’Connor, who represents UMDA in the Saipan case, “This second federal indictment relates to Pfaff’s alleged criminal activities around the globe, including the misuse of UMDA accounts and assets. It supports many of the key allegations made by UMDA against Pfaff and his co-defendants in the civil suit. We intend to show at our trial in Saipan that these actions by Pfaff and others cost UMDA and its shareholders many millions of dollars.”

UMDA was founded in 1966 in Saipan. Over the years, UMDA has been involved in a wide range of businesses, including airlines, cable systems, shipping, and resort properties. UMDA’s shareholders include the government or governmental entities of the CNMI, Palau, Federated States of Micronesia, and thousands of individual Micronesians and their families. [B][I](UMDA)[/I][/B]