They might sound like the same New Age, offbeat religions that pepper today’s American landscape: Desert Rose Ministries, Abundant Blessings, Overseer of Endless Streams and His Successors.
But you won’t find these Arizona religious groups in any neighborhood directory of churches. They don’t have temples. They don’t hold services.
Instead, state and federal authorities say they are individually owned corporations, called corporations sole, that were set up to dodge income taxes. Promoters of the schemes rake in large fees and, in one case, used them as part of a pyramid scheme, authorities say.
The corporation-sole schemes are at the heart of two Arizona legal cases that have ensnared pastors, churchgoers and others in court cases alleging fraud and tax evasion.
“(The promoters) exploit legitimate laws to establish sham, one-person, non-profit religious corporations,” the Internal Revenue Service warns on its Web site.
Their customers often are attempting to avoid paying the correct income tax, Phoenix IRS spokesman Bill Brunson said.
In one of the Arizona cases, federal prosecutors accuse Pastor Elizabeth Gardner and her husband, the Rev. Ric Gardner, of running a corporation-sole scam through their Dewey church, the Bethel Aram Ministries.
Department of Justice lawyer Martin Shoemaker said the Gardners have been charging people for years to set up corporations sole, claiming the religious designation will keep them from having to pay income tax.
Elizabeth says that she and her husband are innocent and that the IRS has gone too far in filing the civil suit. She says that federal prosecutors have falsely accused her of wrongdoing and that there is nothing wrong with corporations sole. “It’s not a scam,” she said. “They have no case against me. A corporation sole is for a totally legal religious purpose.”
Not all corporations sole are set up to dodge taxes. Legitimate ones are traditionally filed by the individual leader of a church as a way to manage church assets and protect the assets from creditors. Corporations sole, like churches, are not required to file income-tax returns.
But for years, including last year, the IRS has listed corporations sole as one of the 12 most common types of tax scam.
As many as 17 states, including Arizona, have specific laws for setting up corporations sole, and some states extend the benefits to other types of non-profit agencies, such as community arts groups and cemetery groups.
Thousands of corporations sole are set up in Nevada. A records check of filings with the Nevada Secretary of State’s Office revealed that 189 individuals with Arizona addresses have filed corporations sole.
The IRS says unscrupulous promoters use seminars and the Internet to market such corporations to individuals with no bona fide church affiliations. They say people are charged thousands of dollars in setup fees and told that, by becoming corporations sole, they won’t have to pay taxes or declare substantial income because they now have church-exempt tax status.
Shoemaker alleges that the Gardners have charged more than 80 people as much as $1,600 each to set up corporations sole.
The Department of Justice is asking a federal judge to stop the Gardners from “organizing, promoting, marketing or selling any tax-shelter plan.”
Prosecutors are also demanding that the Gardners provide a detailed list of their clients, saying people who paid the Gardners for corporations sole may also be violating the law by dodging income taxes.
“The defendants’ actions, if not stopped, may result in penalties and other civil and criminal sanctions being imposed on these customers,” Shoemaker said in the civil complaint.
Elizabeth Gardner contends she has never accepted payment to set up a corporation sole. She said she instead accepts donations. She also says she doesn’t have any actual revenue because she has taken a vow of poverty. Any money raised goes to her church, Bethel Aram Ministries.
The Gardners’ Web site for Bethel Aram reads like an ad for corporations sole, with books and tapes for sale, advice and dissertations on the government and religion.
On the site, the Gardners argue that the government has no right to interfere in church business. They say mainstream churches have been tricked into becoming an arm of the government and have lost their autonomy by filing tax statements as 501(c) 3 non-profit corporations.
“We need to recognize the organized church as it is, a part of government Babylon, repent of this harlotry, obey the Lord, and come out of her!” the Gardners say.
Gardner, who said she is a paralegal and legal researcher, is representing herself against the government. A U.S. District Court judge in Phoenix is reviewing the case and could award summary judgment this month.
If she loses, Gardner said she will appeal “all the way to the Supreme Court.”
The Gardners’ case is one of many that suggest a resurgence in recent years of corporations sole.
A Virginia couple, for example, were convicted in July of running a pyramid fraud scheme that bilked $31 million out of 1,300 people using corporations sole.
In that case, people were promised huge returns on investments and told that they needed to set up a corporation sole to keep the government from taking their money.
This is similar to allegations in another Arizona corporation-sole case, which could go to court in October.
State and federal investigators say Chandler residents Ed Purvis and Greg Wolfe charged individuals thousands of dollars to form corporations sole such as Desert Rose Ministries, Abundant Blessings and Overseer of Endless Streams and His Successors. The purpose was to keep from paying taxes on investment revenue, authorities say.
Investigators with the Arizona Corporation Commission say the men raised millions of dollars from churchgoers in Arizona and 12 other states as part of a pyramid scheme, in which money from new investors is used to pay dividends to old investors.
Purvis and Wolfe have denied any wrongdoing, saying their company, Nakami Chi Group Ministries International, is legitimate.
Among investors who set up corporations sole through Purvis and Wolfe are pastors and church members at Vineyard Church in Avondale and Chandler Christian Church. Many of them have defended Purvis and Wolfe, saying there is no evidence of a crime.
Records show that Vineyard Pastor John Farmer had a corporation sole called Impact Ministries International. He has said he used his corporation to help other Christian charities. Other corporations sole tied to Purvis and Wolfe included Spirit Filled Ministries and Eagle Aerie Ministries International.
Purvis and Wolfe told investors that Nakami was worth $170 billion and controlled assets around the world, including gold mines, Australian developments, telecommunication firms and a Phoenix technology company.
An Arizona Republic investigation raised questions about the size and holdings of Nakami, which uses a Scottsdale post-office box as its company business address.
Purvis and Wolfe face multiple criminal charges related to Nakami, including the bribery of a Chandler police officer and harassment of public officials.
The Corporation Commission, which regulates securities sold in Arizona, is seeking to shut down Nakami, fine Purvis and Wolfe and order them to repay investors.