Scam doctors

Scam doctors

INVESTING by Dave Szymanski | Tampa Bay Editor

Moira Souza-Shiver wants to go on "Oprah" and testify before Congress to talk about clarifying federal tax law to get faster relief for those stung by investment scams.

The law, which assists victims of investment fraud in recovering a portion of their loss through an often-overlooked tax provision called Section 165, was in initially passed in 1954.

"I'm leaning a little more toward Oprah," says Souza-Shiver, vice president and director of JK Harris 165 Services, a company that works with qualified clients to utilize the provision of Section 165 that potentially allows consumers to accelerate their tax write-off and realize tax benefits. "I think she has more power."

Qualified funds such as IRAs, 401Ks and other non-taxable funds are ineligible for the deduction. Funds must have been taxed at some time in order to be considered appropriate for this deduction.

"Ninety-nine percent of CPAs are unfamiliar with this deduction," says Souza-Shiver, whose first name is pronounced Moy-rah.

The law has helped more than 1,500 clients to substantiate losses and claim millions of dollars in accelerated deductions. As of mid-2007, the firm has assisted clients in recovering more than $54 million in tax benefits, including funds for high profile cases such as Lou Pearlman, the former Orlando-based boy band kingmaker charged with running a massive ponzi scheme.

Souza-Shiver's former parent company, JK Harris & Company LLC, the nation's largest tax resolution firm, has assisted more than 200,000 clients with their tax issues across the United States since 1997. Charleston, S.C.-based Harris bought 165 in 2002 and spun it off in October.

165 Services was incorporated in Florida in May 2001. Developed as a compliment to its sister company, which assisted clients through the arbitration process of investment fraud recovery, 165 assisted injured investors recover a portion of the unrecovered losses through tax benefits.

"165 was the oddball in the JK Harris family," Souza-Shiver says.

Expectations, standards

Assistance with the filing is just a part of the company's service. Monitoring of the claim is required to assure it is handled within promised timeframes. The goal is to avoid any possible delays within its control, as delays are imminent on the side of the IRS due to its workload.

"No one likes dealing with the IRS," Souza-Shiver says.

But 165 sees the agency as an ally, an organization it can work with to help consumers. That's why it has developed processes and standards to dovetail with the agency's preferences.

"We're very detail-oriented and pay close attention to what the IRS is looking for," Souza-Shiver says. "We make sure we're not wasting the IRS' time."

Still, challenges remain. Among them: The IRS has about 43,000 agents and they can misinterpret tax laws or interpret them differently.

Meanwhile, without a change in the tax laws, it will continue to take the same amount of time to qualify consumers and settlements will continue to be delayed. That will hurt elderly investors who can't wait as long as younger consumers.

In the past seven years, there have been 290 investment scams that have affected Floridians, according to 165 Services. Of those 290, 184, or about two-thirds started in Florida. That's largely because of the number of retirees who move to the state and look for safe investments.

The victims, a majority of whom live in California, Ohio and Texas, in addition to Florida, tend to be embarrassed and ashamed. 165 Services has scheduled a public workshop Feb. 27 in Altamonte Springs to educate the public about tax laws. It is also exploring partnerships for the workshops with the American Association of Retired Persons.

"The IRS staff are overworked and underpaid," Souza-Shiver says. "The IRS makes people wait until all the 'i's are dotted and 't's are crossed. Will that take 10 to 15 years? People who are retired will be dead."

Examples of investment scams

High yield investments: Investors are offered high yield from an investment that supposedly backed by banks, the FDIC or the U.S. Treasury. Some have been set up outside the U.S. to avoid regulation;

Misappropriation: Promoters sell interests in a company and proceed to misappropriate the money for their own purposes ultimately causing the failure of the business.

Stockbrokerage churning: There are stockbrokers that promote very active trading in an investment account causing substantial commissions to be charged. When these investments are unsuitable for the investor and the amount of trading leads to substantial losses, the investor may be a victim of "churning."

Stockbrokerage pump and dump schemes: Stockbrokers and their firms that aggressively promote a stock ("pumping") and then quickly sell ("dumping") the stock to give the original investors a profit, injure the later investors at the expense of the original investors.

Pyramid scheme: Investors are offered the chance to buy a membership, upfront in cash, in a pyramid-shaped organization with the objective of finding others to pay to join the pyramid.  The pyramid operators promise payment from selling stock or obtaining a loan.  There is no effort to secure the loan or sell stock and the investors lose their membership fee.

Source: JK Harris 165 Services

REVIEW SUMMARY

Company: JK Harris 165 Services LLC, Tampa

Industry: Tax strategy for people hurt in investment scams

Key: Market firm's track record of tax advice, clarify federal tax law.