Case 2:10-cv-05856-JHN -PLA Document 23 Filed 03/11/11 Page 1 of 13 Page ID #:462

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8 UNITED STATES DISTRICT COURT
9 CENTRAL DISTRICT OF CALIFORNIA
10 UNITED STATES OF AMERICA, ) Case No. 2:10-cv-05856-JHN-PLAx
)
11 )
Plaintiff, ) ORDER GRANTING MOTION FOR
12 ) PRELIMINARY INJUNCTION [10]
vs. )
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GWENN WYCOFF and FRANK ) Judge: Jacqueline H. Nguyen
14 OZAK, )
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15 Defendants. )
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The matter before the Court is Plaintiff’s Motion for Preliminary Injunction
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(docket no. 10) filed on October 8, 2010.1 The Court previously deemed the
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matter appropriate for decision without oral argument and took the matter under
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submission. See Fed. R. Civ. P. 78(b); Local Rule 7-15. The Court has
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considered the briefs filed in connection with the Motion, and for the reasons
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stated herein, the Court GRANTS the Motion for Preliminary Injunction.
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I.
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BACKGROUND
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This action by the United States of America (“Plaintiff” or “Government”)
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has been requested by the Chief Counsel of the Internal Revenue Service (“IRS”),
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a delegate of the Secretary of the Treasury, and commenced at the direction of a
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Despite Defendants’ assertions to the contrary, this motion was timely filed
31 days from the selected hearing date of November 8, 2010. See Local Rule 6-1.
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1 delegate of the Attorney General, pursuant to the provisions of 26 U.S.C. §§ 7402

2 and 7408. The Government alleges that Defendants Gwenn Wycoff and Frank
3 Ozak (collectively “Defendants”) are involved in the promotion, creation, and
4 operation of abusive trusts. On August 6, 2010, Plaintiff filed a Complaint
5 against Defendants alleging that Defendants jointly advise individuals and
6 business operators about the benefits of establishing abusive “common-law”
7 trusts, which they falsely claim will allow their customers to avoid the payment of
8 federal income taxes. (Compl. ¶ 5.) Plaintiff describes the trusts as follows:
9 The trusts [Defendants] help create (and also, in many cases, directly
assist in the management and operation of) purport to hold an
10 individual’s personal as well as business assets. Through this, the
Defendants assert, the trust, rather than the taxpayer, “owns” or
11 comes to “own” the assets or business interests. The trusts then
“manage” these assets for the customers, paying taxpayer expenses
12 and providing them money when needed, as well as investing some
monies placed in the trusts. Wycoff and Ozak frequently act as paid
13 trustees for the trusts they urge and help their customers to create,
and thus provide more than mere up-front assistance in creation of
14 the trusts.
15 (Id.) Plaintiff seeks an injunction under 26 U.S.C. § 7408, which allows courts to
16 enjoin persons who promote the adoption of abusive tax schemes under §§ 6700
17 and/or 6701, and under § 7402, which allows courts to issue an injunction to
18 enforce the internal revenue laws.
19 II.
20 DISCUSSION
21 A. Res Judicata
22 Defendants assert that the doctrine of res judicata bars this action as a result
23 of the U.S. Attorney’s Office’s action against their colleague, George E. McCalip,
24 in United States of America v. George E. McCalip, Case No.
25 2:08-cv-04786-CAS-FFMx (“McCalip”). “Res judicata bars a suit when ‘a final
26 judgment on the merits of an action precludes the parties or their privies from
27 relitigating issues that were or could have been raised in that action.’”
28 ProShipLine Inc. v. Aspen Infrastructures Ltd., 609 F.3d 960, 968 (9th Cir. 2010)
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1 (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)). McCalip was simply a
2 petition by the IRS to Enforce IRS’s Summons filed against Respondent George
3 E. McCalip in his capacity as Trustee of Defendants’ Kenzington Fund
4 Irrevocable Trust. The sole issue before the Court in McCalip was whether the
5 IRS’s summons was appropriate—a matter which presumably led to the
6 information necessary for the U.S. Attorney’s Office to initiate the present
7 litigation. The substantive issues of fraud were not, and could not have been,
8 raised in that matter. Accordingly, Plaintiff’s action is not barred by res
9 judicata.
10 B. Standard for Preliminary Injunction
11 Plaintiff seeks a preliminary injunction pursuant to 26 U.S.C. § 7408.
12 “Courts use a specialized standard when reviewing preliminary injunctions issued
13 pursuant to 26 U.S.C. § 7408.” United States v. Schiff, 379 F.3d 621, 625 (9th
14 Cir. 2004). An injunction may issue if (1) the person engaged in conduct subject
15 to penalty under 26 U.S.C. § 6700 or § 6701, among other sections; and (2) the
16 injunction is appropriate “to prevent recurrence of such conduct.” 26 U.S.C. §
17 7408(b).
18 Section 6700 imposes a monetary penalty on any person who
organizes, promotes or sells “a partnership or other entity,” “an
19 investment plan or arrangement,” or “any other plan or
arrangement,” and in connection therewith makes or furnishes a
20 statement about the tax consequences of participating which he
knows, or has reason to know, is false or fraudulent.
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U.S. v. Cohen, 222 F.R.D. 652, 653 (W.D. Wash. 2004); see 26 U.S.C. § 6700(a).
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Section 6701 imposes penalties on any person who (1) aids, assists,
23 or advises with respect to the preparation or presentation of any
portion of a return; (2) knowing or having reason to believe that such
24 assistance or advice will be used in connection with any material
matter, and (3) who knows that such portion of the return, if used,
25 would result in an understatement of another person’s tax liability.
26 Cohen, 222 F.R.D. at 653; see 26 U.S.C. § 6701(a).
27 In determining the likelihood of recurrence of the conduct, courts consider
28 factors including the following:
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1 (1) the gravity of the harm caused by the offense; (2) the extent of
the defendant’s participation; (3) the defendant’s degree of scienter;
2 (4) the isolated or recurrent nature of the infraction; (5) the
defendant’s recognition (or non-recognition) of his own culpability;
3 and (6) the likelihood that defendant’s occupation would place him
in a position where future violations could be anticipated.
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United States v. Estate Pres. Servs., 202 F.3d 1093, 1105 (9th Cir. 2000).
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Plaintiff also seeks an injunction pursuant to 26 U.S.C. § 7402(a), which
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gives “district courts ‘a broad range of powers to compel compliance with the tax
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laws,’ even in instances ‘when such interference does not violate any particular
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tax statute.’” Cohen, 222 F.R.D. at 653 (quoting United States v. Ernst &
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Whinney, 735 F.2d 1296, 1300 (11th Cir.1984)). Section 7402(a) provides that
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district courts may issue injunctions broadly “as may be necessary or appropriate
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for the enforcement of the internal revenue laws.” § 7402(a).
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The Government must prove each element required for an injunction by a
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preponderance of the evidence. Estate Pres. Servs., 202 F.3d at 1098.
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C. Findings of Fact
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Based on the evidence submitted, the Court finds as follows:
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1. Ozak acts as general manager of the Kenzington Fund, an organization
17 through which the Defendants have in the past promoted their activities.
Wycoff acts as trust administrator and/or protector for several of the trusts
18 described herein, besides helping to establish them. Both Defendants are
heavily involved in the promotion, creation, and operation of the trusts at
19 issue in this lawsuit.
20 2. Defendants jointly advise individuals and business operators about the
benefits of establishing “common-law” trusts, which they claim will allow
21 their customers to avoid the payment of federal income taxes. The trusts
they help create (and also, in many cases, directly assist in the management
22 and operation of) purport to hold an individual’s personal as well as
business assets. Through this, the Defendants assert, the trust, rather than
23 the taxpayer, “owns” or comes to “own” the assets or business interests.
The trusts then “manage” these assets for the customers, paying taxpayer
24 expenses and providing them money when needed, as well as investing
some monies placed in the trusts. (Lee Decl. ¶¶ 5–7.)
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3. Through management of the taxpayers’ assets and funds, the trusts purport
26 to distribute their income to certain named beneficiaries, to make it appear
as if the trusts have no resulting tax liability. Such beneficiaries, however,
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1 prove to be illusory—off-shore entities with falsified addresses that are

merely intended to create the appearance of legality. (Lee Decl. ¶ 11,
2 Cheung Decl. ¶ 22.)
3 4. Ozak and Wycoff represent to customers that the creation of such trusts
allows individuals to “legally” avoid federal income taxation, because the
4 trusts (rather than the taxpayers) own and control the trust’s res. The
Defendants’ customers either do not file income tax returns, or file returns
5 that suggest they have little or no income. The trust tax returns similarly
show distribution of almost all trust income to other entities and thereby
6 claim no income as well. (Cheung Decl. ¶ 7; Chynoweth Decl. ¶ 14.)
7 The Kenzington Fund
8 5. The Defendants personally created a common-law trust for themselves—the
“Kenzington Fund,” an entity that was itself a common-law trust, as well as
9 an organization through which they initially promoted their ideas. Wycoff
and Ozak established the Kenzington Fund trust in 1997. Wycoff is currently
10 the administrator and secretary of the Kenzington Fund, while Ozak is the
general manager. A third party and close associate of the Defendants, George
11 McCalip, acts as a trustee of the Kenzington Fund. (Lee Decl. ¶¶ 9–10.)
12 6. Wycoff and Ozak initially promoted their tax scheme via the Kenzington
Fund’s website, “www.kenzington.com.” In 2004, however, after they
13 became aware of the IRS’s investigation into their activities, they shut that
website down and began utilizing another website, “www.passingbucks.com”
14 to promote their advice and products. The registered owner of this new
website is the Kenzington Fund Trustee, George McCalip. (Lee Decl. ¶ 13.)
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7. Since its creation, the Kenzington Fund has routinely failed to file required
16 federal tax forms and pay taxes due. It last filed an income tax return in 2003,
which the IRS audited. That return reported income of $95,246.00, but an
17 offsetting distribution deduction of $95,246.00, thus allowing the Kenzington
Fund to report no taxable income. The IRS determined through its audit that
18 the Kenzington Fund had never made any such distributions. Based in part on
that determination, the IRS made a jeopardy assessment against the
19 Kenzington Fund of $56,734. As of April 30, 2010, the Kenzington Fund
owes unpaid taxes, plus penalties and interest, in the amount of $105,142.
20 (Lee Decl. ¶ 12.)
21 Dissemination of Wycoff and Ozak’s Tax-Avoidance Scheme
22 8. Since establishment of the Kenzington Fund, and now through the
“passingbucks.com” website, Wycoff and Ozak have promoted the creation
23 of common-law trusts as a means of evading income taxes. On such websites,
they have posted articles specifically advocating that individuals create
24 common-law irrevocable trusts for these reasons. Wycoff and Ozak also offer
for sale numerous printed materials that promote their trust-creation scheme.
25 For example, the Kenzington website sold newsletters, reports, and common-
law trust books. Posted on that website was an article entitled “Give It Away
26 and Get It,” written by Wycoff, as well as another article entitled “Own
Nothing, Control Everything.” (Lee Decl. ¶ 15; Ex. 5 to Lee Decl.)
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“The Art of Passing the Buck”
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9. In 2008, the Defendants published and began to sell a two-volume work
3 entitled The Art of Passing the Buck, which contains false statements about the
internal revenue laws. Wycoff and Ozak advise customers to purchase the
4 books to obtain more information about the trust scheme they advocate.
Wycoff and Ozak offer these books for sale via the “passingbucks.com”
5 website as well as through seminars and discussions at which they speak; the
books have also been promoted on a radio show in 2008 by their associate Mr.
6 McCalip. The first volume costs $39.95, with the second (which contains
more detailed instructions for how to establish and make use of the trusts
7 advocated by the Defendants) going up in price to $500. (Lee Decl. ¶ 16.)
8 10. The purported “author” of The Art of Passing the Buck volumes is Charles
Arthur, but Mr. Arthur does not exist. The volumes were in fact written under
9 that pseudonym by a “consortium” of individuals, including Wycoff, Ozak,
and McCalip. Ozak himself is the general manager of Charles Arthur
10 Enterprises, the volumes’ publisher. (Lee Decl. ¶ 17.)
11 11. These two related volumes (and, in particular, the more costly second volume)
provide a road map for the creation of the trusts through which Wycoff and
12 Ozak’s customers understate their tax liability. They discuss at length the
purported tax benefits of common-law trusts, and contain numerous
13 instructions for setting them up. Although neither volume specifically
mentions Wycoff or Ozak by name, both contain in the end pages contact
14 information for “Charles Arthur Enterprises,” along with an invitation to
contact that entity to obtain consulting assistance in the creation and
15 management of a trust. (Lee Decl. ¶ 18; Ex. 6 to Lee Decl.)
16 12. Wycoff and Ozak also spread false information about the IRS in books they
promote. For example, they claim in The Art of Passing the Buck that the IRS
17 “is a foreign organization, based in Puerto Rico, and not part of the U.S.
Government.” The book falsely states that the IRS has no authority to collect
18 money and that federal agents have no jurisdiction over common-law trusts.
(Mot. Prelim. Inj. Ex. B, Vol. II at 204–05.)
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13. The books further highlight several factors the IRS considers in determining
20 whether a trust is a sham, but ignore a fundamental requirement for a valid
irrevocable trust: the true relinquishing of control over the assets placed into
21 the trust by the taxpayer. In this respect, the works fail to mention that a
transfer to an irrevocable trust is invalid for tax purposes unless such control
22 is relinquished, and instead advocates that customers take cosmetic steps to
create the appearance of a relinquishing of control. Thus, the books instruct
23 customers to change the recording deed for their homes, and to pay the
mortgage through the trust, even though the taxpayers continue to occupy the
24 homes as their beneficial owners. (Id. at 159–205.)
25 14. Numerous statements contained within both volumes of The Art of Passing the
Buck relating to common-law trusts constitute false, intentionally misleading,
26 and/or deceptive commercial speech. These statements all propose a
commercial transaction: that taxpayers not merely set up common-law trusts,
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1 but purchase, at considerable cost, The Art of Passing the Buck to do so—and
then directly engage Wycoff and/or Ozak once the trust has been created. As
2 such, the intent of this speech about the nonexistent tax benefits of common-
law trusts is, at bottom, to benefit both Defendants2financially—not to “spread
3 the word” about the Defendants’ political views.
4 The Anna Correy Family Trust3
5 15. In 2003, Dean “Rex” Wilson of Los Angeles, California was persuaded by
the Defendants to create a trust after he saw an advertisement published by
6 Wycoff and Ozak in a medical journal stating that it was possible for trust
grantors to “own nothing, control everything.” He accordingly created the
7 “Anna Correy Family Trust” (as well as additional related trusts),
transferring all of his personal business activity to that trust. (Wilson Decl.
8 ¶ 3; Cheung Decl. ¶ 5.)
9 16. Wycoff and Ozak subsequently prepared the trust documents, created trust
bank accounts, and did other work to set up several trusts on behalf of Mr.
10 Wilson. After 2003, Mr. Wilson ceased filing a personal Form 1040
income tax return, and thus did not report his own salary or income derived
11 from his business activities. (Wilson Decl. ¶ 3; Cheung Decl. ¶ 6.)
12 17. Wycoff and Ozak had exclusive access to the trusts’ bank accounts and
used the trust’s income to pay trust “expenses” as well as their fees. Those
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Defendants’ main objection to the present motion is that the information they
15 publish is protected by the First Amendment. For this reason, the Preliminary
16 Injunction that follows shall only forbid Defendants’ illegal speech. In any event,
17 Where it has been determined that . . . statements regarding [tax advice],
18 which constitute commercial speech, are misleading in the context
contemplated by Congress in enacting [sections 6700 and 7408], and the
19 injunction prohibiting such statements is adequately tailored and
20 construed to enjoin only such commercial speech which has been shown
to be both misleading and likely to promote illegal activity, such
21 representations are not protected by the First Amendment.
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Estate Pres. Servs., 202 F.3d at 1106 (quoting United States v. Buttorff, 761 F.2d
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1056, 1066 (5th Cir. 1985)).
24 3
In addition to the trusts discussed in this order, in 2008, the IRS examined the
25 2005 and 2006 tax returns filed by the “Sterling Paladin Family Trust.” Those returns
26 are characterized by many of the same suspicious features reflected in the trusts set
up by Wycoff and Ozak for Mr. Wilson. (Cheung Decl. ¶¶ 18–26.)
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1 expenses included the payment of bills relating to Mr. Wilson’s business.

At the same time, Mr. Wilson submitted payments he received from his
2 patients directly to the trust. The trust thereupon paid Mr. Wilson a
monthly salary, and if he needed any additional money, he merely took out
3 a “loan” from the trust. (Cheung Decl. ¶ 9; Wilson Decl. ¶¶ 7–8.)
4 18. After audit and examination of the Anna Correy Family Trust tax returns,
the IRS determined that the trusts should be disregarded for tax
5 purposes—both because the trusts were sham arrangements with no
economic substance and because they were grantor trusts whose income
6 was taxable to Mr. Wilson individually. As a result, Mr. Wilson’s income
was adjusted to be that of the gross income of the business purportedly
7 operated by the trust, and the IRS recalculated Mr. Wilson’s actual tax
liability. (Cheung Decl. ¶ 16.)
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19. The examination of Mr. Wilson’s income taxes and the trusts opened on his
9 behalf was completed in the summer of 2009. The IRS determined that Mr.
Wilson owed $48,834 in unpaid taxes to the Government. Mr. Wilson
10 agreed to the changes to his tax returns. (Cheung Decl. ¶ 17; Wilson Decl.
¶¶ 14–15.)
11
The Solomon Nabres Family Trust
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20. In 1998, Wycoff and Ozak helped Rita and George Serban of Bakersfield,
13 California set up three related trusts: the Solomon Nabres Family Trust, the
Solomon Family Trust, and the Hagar Family Trust. Rita Serban was
14 established as the three trusts’ executive secretary, and George Serban their
general manager. (Chynoweth ¶¶ 3–4; Serban Decl. ¶¶ 7–8.)
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21. In 2005, the IRS examined the Serbans’ income tax returns and
16 subsequently learned about the trusts they had established. Through the
examination and audit, the IRS discovered that despite the purported
17 separation between the trusts and the Serbans, in fact George Serban had
complete control at all times over the activities of the trusts, including but
18 not limited to check-signing authority, management of the trusts’
operations, and direction of the disposition of trust income, including
19 investment decisions. In addition, the IRS investigation revealed that
entities designated by the trusts as recipients of income distribution
20 frequently had off-shore addresses that, upon checking, did not exist for
that entity, or multiple post office box designations that could not be
21 confirmed by the U.S. Postal Service. The IRS on audit determined that all
three Serban trusts were shams. George and Rita Serban subsequently
22 settled the matter, agreeing to tax deficiencies and penalties that totaled in
excess of $900,000. (Chynoweth Decl. ¶¶ 10–11, 14–15.)
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Obstructive Conduct by Defendants
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22. The indenture agreements governing the trusts that Wycoff and Ozak create
25 all require trustees and trust managers to keep private their trust’s dealings
unless permitted to disclose information by the board of trustees. But they
26 have also counseled their customers (in The Art of Passing the Buck and
elsewhere) to incorporate an “Oath of Privacy” in the trusts they create.
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1 They falsely tell their customers that this oath allows persons with
knowledge of trust business who have taken the oath to refuse to provide
2 requested information about the trusts to federal agents and other
Government personnel. (Lee Decl. ¶ 21; Ex. B, Vol. II, p. 203.)
3
23. The Defendants include penalties of up to $100,000 for any trustees, trust
4 officers, or managers who violate this “Oath of Privacy.” Because Wycoff
and Ozak’s customers are usually designated as trustees or trust managers
5 (so that they can continue to exercise control over the trusts), such penalties
apply to them—and are intended to keep them from disclosing information
6 about the trusts if they are contacted separately by the Government. (Id.)
7 24. The Defendants’ publications further inform readers that only trustees
should “deal with agency officials,” and that they should refer all
8 correspondence to the trustees. This allows Wycoff and Ozak (who are
typically named as the trustees of their customers’ trusts) to interfere with
9 IRS investigations and thereby attempt to shield their customers. (Id. at
204.)
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Harm to the Government and the Public
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25. Wycoff’s and Ozak’s conduct has deprived the Government of substantial
12 tax revenue. In the past six years, the IRS has either directly audited the
tax returns of trusts created by, or with the assistance of, Ozak and Wycoff
13 (including their own Kenzington Fund trust return), or has reviewed the
returns of such trusts in connection with an individual taxpayer’s audit. In
14 four such instances, the IRS has either directly determined that the trust at
issue was a sham (where the grantor’s identity was known) and
15 consequently ruled that the underlying taxpayer owed unpaid income taxes,
or (because the taxpayer accepted the changes before the IRS was required
16 to make an express determination about the trusts in question) simply
settled the matter on terms requiring the taxpayer to satisfy substantial
17 amounts in unpaid taxes and penalties. (Lee Decl. ¶ 23.)
18 26. As of April 30, 2010, the total amount of tax deficiencies assessed in these
four cases involving Wycoff and Ozak’s promotion of common-law trusts
19 is $1,192,212. (Id. ¶¶ 23–24.)
20 27. Besides harm to the Government, the taxpayers who have been “assisted”
by the Defendants are themselves potentially subject to large penalties, for
21 erroneous claims on their returns which can amount to as much as 20
percent of the excessive refund claimed. See 26 U.S.C. § 6676.
22
The Defendants’ Statutory Violations
23
28. Wycoff and Ozak promote, assist in, and preside over the creation of
24 common-law trusts as a means of diminishing the actual taxes owed by
their customers, and/or as a mechanism for shielding their customers’
25 actual income from the Government. They provide their customers with a
road map for creating the trust, give advice on how they should be utilized,
26 and also assist in the management of the trusts in many cases by acting as
trustees.
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29. As a product of their promotion of the creation of such sham trusts, the
2 Defendants also arrange for the preparation of fiduciary income tax returns
for their customers’ trusts that reflect significant understatements of their
3 customers’ actual income tax owed, by falsely claiming that all trust
income has been distributed. Many of their customers cease filing
4 individual returns entirely, based on the belief that they no longer need to
do so given the existence of the trust.
5
30. The Defendants not only propagate false and fraudulent information about
6 the tax laws through direct contact with customers, and through the direct
assistance they provide customers in setting up, and then operating, the
7 common-law trusts they promote, but also more generally through the sale
of their The Art of Passing the Buck books and other publications for sale
8 and/or published on the Internet. These publications contain false and
fraudulent statements about the federal income tax benefits of establishing
9 common-law trusts. The publications do not merely contain expressive
political speech, but instead contain commercial speech, the purpose of
10 which is to propose commercial transactions that will benefit the
Defendants directly as well as their customers. Wycoff and Ozak (through
11 Charles Arthur Enterprises) self-publish and sell The Art of Passing the
Buck for the purpose of advertising to potential customers their expertise in
12 creating and managing common-law trusts.
13 31. In engaging in the above-referenced conduct, Wycoff and Ozak know, or
have reason to know, that the advice they provide their customers about the
14 tax advantages of the trusts they create is false and fraudulent. They also
know, or have reason to know, that the promotion activities they engage in
15 result in the material understatement of their customers’ tax liability.
16 D. Conclusions of Law
17
1. Accordingly, Wycoff and Ozak have engaged in conduct subject to penalty
18 under 26 U.S.C. §§ 6700 and 6701.
19 2. A preliminary injunction is necessary to prevent recurrence of the
Defendants’ conduct, because of the gravity of the harm to the Government
20 in the form of lost tax revenue, the Defendants’ extensive participation in
promoting common-law trusts on a recurrent basis, and the fact that the
21 Defendants continue to maintain an active website and offer their books
and lecture services to the public.
22
3. The Defendants therefore are subject to an injunction under 26 U.S.C. §
23 7408.
24 4. 26 U.S.C. § 7402(a) authorizes a district court to issue injunctions as may
be necessary or appropriate for the enforcement of the internal revenue
25 laws, even if the United States has other remedies available for enforcing
those laws.
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5. The Defendants have substantially interfered with the enforcement of the
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1 internal revenue laws by promoting the creation of sham trusts, as well as

their more broad propagation of false information about the federal tax
2 laws through the publication and sale of their books.
3 6. As a result of the Defendants’ misconduct, their customers have failed to
file proper tax returns and consistently understated their actual tax liability.
4
7. The Defendants’ conduct results in irreparable harm to the United States
5 and to the public. There is no adequate remedy at law for their misconduct.
6 8. The Defendants’ conduct interferes with the proper administration of the
Internal Revenue Code because it results in filings with the IRS that hinder
7 the IRS’s ability to determine the correct tax liabilities of the Defendants’
customers.
8
9. Unless enjoined by this Court, the Defendants will continue to promote and
9 administer their tax-fraud scheme.
10 10. Under 26 U.S.C. § 7402(a), the United States is entitled to injunctive relief
to prevent the recurrence of this misconduct.
11
III.
12
PRELIMINARY INJUNCTION
13
Based on the foregoing findings of fact and conclusions of law, the Court
14 enters the following preliminary injunction against Wycoff and Ozak:
15 A. Pursuant to 26 U.S.C. §§ 7402 and 7408, the Defendants and their
representatives, agents, servants, employees, and anyone in active concert or
16 participation with them are preliminarily enjoined from directly or indirectly:
17 (1) Organizing or selling tax shelters, plans, or any other arrangements
that advise or assist taxpayers to attempt to evade the assessment or
18 collection of such taxpayers’ correct federal tax, including but not
limited to selling or providing for free to customers any services or
19 assistance whatsoever involving the creation, establishment, or
maintenance of common-law trusts;
20
(2) Engaging in any other activity subject to penalty under 26 U.S.C. §
21 6700, i.e., organizing or selling a plan or arrangement and making a
statement regarding the excludability of income or securing of any
22 other tax benefit, by participating in the plan that they know or have
reason to know is false or fraudulent as to any material matter,
23 including but not limited to the following false statements: (a) that
“common-law” trusts are beyond the Government’s power to tax
24 because they arise as a matter of contract, (b) that the creator of a
common-law trust can transfer his personal or business assets or
25 proceeds into the trust and continue to exercise day-to-day control
over the asset or proceeds in question without incurring any federal
26 income tax liability from that activity, (c) that the business activities
of a trust creator’s business assets transferred into a common-law
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1 trust are not taxable to the trust’s creator, and/or (d) that the creator
of a common-law trust can, through creation of the trust and transfer
2 of personal or business assets or proceeds into the trust, reduce or
eliminate the creator’s individual federal income tax liability;
3
(3) Engaging in any activity subject to penalty under 26 U.S.C. § 6701,
4 i.e., aiding or assisting in, procuring, or advising with respect to the
preparation or presentation of a federal tax return, refund claim, or
5 other document, knowing or having a reason to believe that it will be
used in connection with any material matter arising under the
6 internal revenue laws, and knowing that if so used it would result in
an understatement of another person’s tax liability; and
7
(4) Directly or indirectly organizing, promoting, marketing, or selling
8 any plan or arrangement that advises or encourages taxpayers to
attempt to violate internal revenue laws or unlawfully evade the
9 assessment or collection of their federal tax liabilities, including
promoting, selling, or advocating the use and/or creation of
10 common-law trusts as a means of eliminating if not greatly reducing
their income tax liabilities;
11
B. Pursuant to 26 U.S.C. §§ 7402 and 7408, the Defendants are
12 preliminarily enjoined from using or creating, as well as promoting the use and
creation of, any trusts for themselves or others that have the effect of violating or
13 are employed to violate the law in any means or fashion set forth in Paragraph A
above;
14
C. Pursuant to 26 U.S.C. §§ 7402 and 7408, the Defendants are
15 preliminarily enjoined from acting in any advisory or participatory capacity in
any way for any common-law trusts created by any of their customers,
16 themselves, or any other parties in the past ten years and in which they have
assisted in the creation or management in any way during that time period;
17
D. Pursuant to 26 U.S.C. §§ 7402 and 7408, the Defendants are
18 preliminarily enjoined from filing, providing forms for, assisting in the
preparation of, or otherwise aiding and abetting the filing of Forms 1040 or 1041
19 for themselves or others relating in any way to any common-law trusts, including
the notarization or signing of certificates of service or similar documents in
20 connection with such tax returns;
21 E. Within ten days of entry of this Order, the Defendants shall post on
the “www.passingbucks.com” website a copy of this Order, and shall certify to
22 this Court in writing that they have done so within 30 days of the date of entry of
this Order. This requirement shall also apply to any websites the Defendants
23 shall obtain, initiate, or begin the operation of while this Order remains in effect;
24 F. Pursuant to 26 U.S.C. § 7402, the Defendants are hereby required to
contact by mail (and also by e-mail, if an address is known) all persons who have
25 purchased from them any products, services, advice, or publications associated
with the false or fraudulent tax scheme described in Plaintiff’s complaint in the
26 past five years and provide those persons with a copy of the preliminary
injunction against them, and shall certify to this Court in writing that they have
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1 done so within 30 days of the date of entry of this Order; and

2 G. Pursuant to 26 U.S.C. § 7402, the Defendants shall provide to the
United States a list of all persons who have purchased their products, services,
3 advice, or publications in the past five years, and shall certify to this Court in
writing that they have done so within 30 days of the date of entry of this Order.
4
5 IT IS SO ORDERED.
6 Dated: March 11, 2011 __________________________________
_
7 Honorable Jacqueline H. Nguyen
United States District Court
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