April 13, 2007 — The four men indicted on charges they used the V.I. Economic Development Commission program to illegally dodge taxes have all pleaded not guilty.
The men illegally claimed a 90 percent federal tax break on more than $300 million funneled through the St. Croix-based company Kapok Management, L.P., the U.S. Department of Justice said.
According to the 21-count indictment, James A. Auffenberg Jr., a prominent car dealer in Swansea, Ill., illegally avoided more than $74 million in taxes from 1999 to 2002 by joining Kapok as a partner and shipping money to Kapok, run by Peter G. Fagan of De Leon, Texas; James W. Ferguson III of Amarillo, Texas; and J. David Jackson of St. Croix.
Auffenberg and the others pleaded not guilty earlier this week. A judge allowed them to be released without posting bond, according to articles in the Belleville (Ill.) News-Democrat. None of them can travel to the territory or anywhere else outside the continental U.S. without a judge's permission.
Through his lawyer, Auffenberg has denied any wrongdoing and said he consulted with attorneys and accountants before investing in the Kapok tax shelter, the News-Democrat reported. Auffenberg "trusts the judicial system and he will fight the charges," said his attorney, Jeff Demerath of St. Louis. A magistrate judge set a June 4 trial date in U.S. District Court in Illinois.
V.I. companies that qualify under the Economic Development Commission program can legally reduce their local and federal taxes if the owners live in the islands. Money eligible for tax credits has to be generated by the V.I.-based company.
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