DENVER — A defense expert witness told jurors Wednesday that trust taxation is one of the most complex and misunderstood areas of tax law, as attorneys for four defendants accused of participating in an alleged tax-fraud conspiracy concluded their case in federal court.
Brandon Lagarde, a Louisiana tax attorney, certified public accountant, and partner with Eisner Amper, testified for the defense in the trial of Estes Park resident Marcie Predmore and codefendants Roderick Prescott, Suzanne Thompson, and Weldon Wulstein.
Federal prosecutors allege the four defendants conspired with Larry Conner and Timothy McPhee, Predmore’s husband, to promote, sell, and implement what the government describes as an abusive trust tax shelter designed to help business owners avoid paying federal income taxes on most of their business income.
According to a superseding indictment, prosecutors contend the defendants and others instructed clients to assign business income to a series of trusts and a purported “private family foundation” to create the appearance that the income no longer belonged to the taxpayer. Although the income was reported on trust tax returns, prosecutors allege the trusts claimed improper deductions to reduce their tax liability to zero while clients continued to control and use the money.
Lagarde spent much of his testimony challenging the notion that trust-related expenses can be easily categorized as either legitimate or improper deductions. He told jurors that trust law often involves “gray areas” requiring detailed analysis of trust documents, tax regulations, and the specific facts surrounding each expense.
“Trust tax law is very nuanced and very confusing,” Lagarde testified, explaining that whether an expense is allowed under a trust document is a separate question from whether it qualifies as a tax deduction under federal law.
Lagarde reviewed educational materials associated with the trust structure at the center of the case and testified that some statements contained in the documents were accurate, some depended on individual circumstances, and others were “wrong or very misleading.”
He said the materials sometimes blurred the distinction between expenses a trust is permitted to pay and those deductible for tax purposes.
The defense expert repeatedly emphasized that trust taxation requires specialized knowledge. He told jurors that even experienced accountants can make mistakes when preparing trust returns and described a previous case involving a multibillion-dollar company in which a trust return was prepared incorrectly, creating significant tax complications.
Lagarde also testified that determining whether trust expenses are deductible often depends on highly technical provisions of the tax code. Administrative expenses, trustee fees, and expenses associated with managing trust property can qualify for deductions in some circumstances, he said, but each situation requires an individualized analysis.
During cross-examination and redirect examination, Lagarde acknowledged that trust structures can be used for asset protection, but said trusts also serve many other legitimate purposes, including estate planning, probate avoidance, and management of family assets. He further testified that accountants generally do not begin their work assuming a client’s trust is a sham arrangement.
The defense rested its case Wednesday afternoon after Lagarde’s testimony.
Following the close of evidence, U.S. District Judge Regina M. Rodriguez spent more than an hour reading detailed jury instructions outlining the legal standards jurors must apply during deliberations.
Rodriguez repeatedly emphasized that the defendants are presumed innocent and that the government bears the burden of proving every charge beyond a reasonable doubt.
“The law does not require a defendant to prove his or her innocence or produce any evidence at all,” Rodriguez told jurors. She defined proof beyond a reasonable doubt as evidence that leaves jurors “firmly convinced” of a defendant’s guilt and instructed them to acquit if they believe there is a real possibility a defendant is not guilty.
Rodriguez reminded jurors that they may consider only evidence admitted during the trial and that attorneys’ arguments, questions, and objections are not evidence. She also instructed jurors not to speculate about testimony or exhibits that were excluded from evidence.
Rodriguez devoted significant attention to witness credibility, telling jurors they are the sole judges of whether testimony is believable and should consider factors such as honesty, memory, motives, and personal interests.
She also instructed jurors to carefully evaluate testimony from cooperating witnesses, including those who pleaded guilty in related tax cases or testified under grants of immunity.
The judge further reminded jurors that some defendants exercised their constitutional right not to testify.
“No presumption of guilt may be raised, and no inference of any kind may be drawn from the fact that a defendant does not take the witness stand,” Rodriguez said.
A recurring theme in the instructions involved the defense of good faith. Rodriguez told jurors that an honestly held belief that one is complying with the law is a complete defense to charges requiring proof of willfulness, even if that belief later proves incorrect. However, she said disagreement with tax laws themselves does not constitute a defense.
Predmore, Prescott, Thompson, and Wulstein are charged in Count 1 with conspiracy to defraud the United States in violation of 18 U.S.C. § 371. Prosecutors allege the defendants conspired to impede and obstruct the lawful functions of the Internal Revenue Service by promoting and using the trust structure.
Predmore also faces six counts of tax evasion covering tax years 2016 through 2021. To convict on those charges, jurors were instructed that prosecutors must prove Predmore owed substantial taxes, intended to evade assessment or payment of those taxes, committed an affirmative act in furtherance of that effort, and acted willfully.
Thompson and Wulstein each face six counts of aiding and assisting in the preparation of materially false federal income tax returns in violation of 26 U.S.C. § 7206(2). Jurors were instructed that prosecutors must prove the defendants knowingly helped prepare returns that falsely understated income and did so willfully.
The government alleges Prescott, through his business, The Stewardship Institute, promoted the “private family foundation” component of the program, taught workshops with Conner, McPhee, and Predmore, advised clients on spending foundation funds for personal purposes, and oversaw the preparation of foundation documents.
Prosecutors further allege that Predmore, Conner, and McPhee referred clients to Thompson’s bookkeeping business, The CFO Agency, and to Wulstein’s tax-preparation firm, Wulstein Financial Services.
According to the indictment, Thompson and her employees prepared financial statements for clients using the trust structure and forwarded those records to Wulstein for tax return preparation.
The charges stem from the same alleged scheme that led to the September 2023 indictment of Conner and McPhee. McPhee pleaded guilty and was sentenced in December to 12½ years in federal prison.
Rodriguez instructed jurors that punishment must play no role in their deliberations.
“If you find a defendant guilty, it will be my duty to decide what the punishment will be,” she said. “You should not discuss or consider the possible punishment in any way in deciding your verdict.”