Plea entered by Stephen Parks in coal tax credit fraud case | Arkansas Blog

Wednesday, May 27, 2015

Plea entered by Stephen Parks in coal tax credit fraud case

Posted By on Wed, May 27, 2015 at 2:34 PM

U.S. Attorney Chris Thyer announed today that Stephen K. Parks, 61, of Little Rock had pleaded guilty to a fraudulent coal tax credit scheme and the government seized more than $7 million in property.

Parks faces 27 months in prison if a judge approves the deal. He must pay restitution of $845,000 to the IRS, forfeit jewelry purchased with ill-gotten money and forfeit $7.5 million in property already seized, plus other pieces of real and personal property, but not a home at 2020 N. Spruce St.

Thyer said Parks filed no tax return for Global Coal LLC, produced no coal and had no coal refinery. But he sold non-existent tax credits to finance his lifestyle, including a house in the Heights on Stonewall Road that was to be torn down to expand the yard of the Parks' home, a government news release said.

The case has been bubbling for years, with Arkansas Business coverage dating back at least to 2012.  In March, Parks and his wife, Anna, sued the IRS over raids of their home and business.

UPDATE: Dustin McDaniel, one of Parks' attorneys, issued a news release after the government's announcement. He emphasized no charges would be brought against Park's wife and other companies originally involved in the three-year investigation. He said King Coal, a company Parks headed, was in the coal production business. He said the business transactions were complicated and going to trial presented significant risks and expense. He said the plea was "fair, but heartbreaking for Mr. Parks and his family."

The government news release follows:

Christopher R. Thyer, United States Attorney for the Eastern District of Arkansas, announced today that Stephen K. Parks, 61, of Little Rock, Arkansas, pled guilty on May 27, 2015, to a one-count Federal Information charging him with wire fraud relating to a fraudulent investment scheme involving the sale of refined coal tax credits.
Wednesday’s plea hearing took place in Little Rock before U.S. District Judge J. Leon Holmes. The plea agreement is governed by Federal Rule of Criminal Procedure 11(c)(1)(C), which, if accepted by Judge Holmes, binds the Court to the terms of the plea agreement. In the plea agreement the parties stipulate to a sentence of 27 months imprisonment, plus multiple forfeitures. If at the time of sentencing the Court does not accept the plea agreement and all terms, Parks will have the opportunity to then withdraw his guilty plea.

“Stephen K. Parks’ fraudulent sale of non-existent refined coal tax credits was a flagrant abuse of the tax code,” Thyer stated. “Despite the fact that no federal tax return for Global Coal LLC was filed; no coal was produced, refined, or sold to an unrelated third party; and Global Coal LLC had no facility in place to refine coal, Parks approved the sale of the non-existent federal tax credits. He then used the fraudulently obtained funds to give his wife $40,000 and purchase a house in the Heights, which was intended to be torn down and used as a back yard for his family. The tireless work of the IRS and FBI has resulted in the resolution of this investigation and the recovery of approximately $7.5 million, a house, an office building, two investment accounts, and five vehicles, including a 2008 Bentley.”

“With today’s guilty plea, Parks admitted his role in a scheme to finance his own lifestyle at the expense of the American taxpayer,” stated Assistant Special Agent in Charge David Shepard with the Federal Bureau of Investigation in Little Rock. “We appreciate the hard work of our partners at the U.S. Attorney’s Office and the 
Revenue Services, and we will continue to work together to pursue those who choose to use their official position for personal gain.”

In addition to serving 27 months in federal prison, if the agreement is accepted, the plea agreement contemplates $845,000 in restitution payable to the IRS, forfeiture of all jewelry purchased with money obtained from the sale of Ecotec Coal and Global Coal tax credits, and consent to the forfeiture of all property seized to date, including approximately $7.5 million, plus other pieces of real and personal property in Case No. 4:13-CV-00054 SWW, with the exception of a home at 2020 N. Spruce Street, Little Rock, AR, and approximately $73,000 seized from that home.

“IRS-Criminal Investigation is committed to unraveling complex fraud schemes,” stated Christopher A. Henry, IRS Special Agent in Charge. “We are proud to work with our law enforcement partners to investigate and prosecute individuals who attempt to enrich themselves by fraudulent means, and the IRS will continue to work to identify and prosecute these types of schemes.”

The refined coal tax credit was added to the tax code by the American Jobs Creation Act of 2004. The credit requires that the refined coal be produced by the taxpayer at a refined coal production facility during the 10-year period beginning on the date the facility was originally placed in service, and sold by the taxpayer to an unrelated person during such 10-year period and such taxable year.

On or about June 1, 2010, Parks formed Global Coal, LLC, and served as its CEO, President and Manager. He was also President of Ecotec Coal, LLC and King Coal, LLC. Global Coal has never refined any coal or sold any refined coal to an unrelated third party, as required by 26 U.S.C. § 45. Global Coal has never had a facility in place to refine coal, as required by 26 U.S.C. § 45. As of March 2015, Global Coal has failed to file any federal income tax returns and has never purported to create refined coal tax credits pursuant to 26 U.S.C. § 45 in any federal tax return. Despite knowledge of these facts, Parks approved and facilitated the sale of nonexistent Global Coal refined coal tax credits through a broker to the investor, representing that the tax credits were valid and available for sale. Parks subsequently used a large portion of the proceeds of that sale for his personal use and the use of his family.

In late 2011, a broker acting on behalf of Parks and Global Coal began communicating with the representative of a potential investor regarding Global Coal and Ecotec Coal refined coal tax credits. Parks represented to the broker that Global Coal tax credits were available for sale and was in communication with the broker throughout the course of the Global Coal tax credit transaction.

On January 9, 2012, the investor agreed to purchase 845,000 Global Coal tax credits and 268,000 Ecotec Coal tax credits for total payment of $723,450. On January 13, 2012, the investor wired $549,250 from a bank in Iowa into King Coal Holding LLC’s account at Delta Trust & Bank in Arkansas. A backdated invoice dated December 30, 2011, reflected the sale of 845,000 Class C Units of interest of Global Coal, LLC, the sole benefit of which is $845,000 of Refined Coal Tax Credits to the investor. The invoice reflected the total due as $549,250 to be wired to a Delta Trust & Bank account with account name “KHC, LLC c/o Global Coal”. The Global Coal, LLC subscription documents reflect that Stephen Parks is the manager and CEO and contain his signature. The documents also acknowledge receipt by Global Coal of $549,250 from the investor. A separate invoice was sent for the Ecotec Coal tax credits, which directed that $174,200 be wired Ecotec Coal’s account at First Security Bank.

From the proceeds of the Global Coal tax credit sale, Parks wrote a $40,000 check to his wife for “Coal Rights Arkansas.” This $40,000 was part of approximately $1.3 million paid to Parks’ wife from 2008-2012 for “advanced royalties.” According to a “Royalty Agreement” backdated to December 1, 2007, Parks’ wife “controls certain mineral rights within the state of Arkansas and King Coal, LLC . . . desires to extract coal from these properties . . .” In fact, Parks’ wife had no interest in any land with coal rights in Arkansas and had no mineral rights to coal during the time she was receiving the “advanced royalties.” In 2014 tax court pleadings, the explanation of Parks’ wife’s receipt of royalties was altered, alleging that Parks’ wife “assisted and facilitated the negotiations” between the parties to a lease agreement regarding coal rights, but witnesses state that Parks’ wife was not involved in the negotiations of the lease agreements.

Also from the proceeds of the Global Coal tax credit sale, a check to Delta Trust & Bank for $301,271.50 was used to purchase a cashier’s check. That cashier’s check was used to purchase 4817 Stonewall Road, Little Rock, Arkansas, a residence located behind the Parks family residence, and was purchased to be torn down and used as a back yard for the Parks family.

The wire fraud charge carries a statutory sentence of not more than 20 years imprisonment, not more than a $250,000 fine, and not more than three years of supervised release. If the plea agreement is accepted, Parks will be sentenced by Judge Holmes at a later date.

The case was investigated by special agents from the Federal Bureau of Investigation and the IRS-Criminal Investigations.

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