A Twin Cities options trader and author who’s been leading courses from his home on how to get investment returns exceeding 150 percent a year is under criminal investigation by the IRS for allegedly evading nearly $350,000 in income taxes and filing false returns.
John D. Ondercin, 45, of Mound, hopes to work out a civil settlement and avoid criminal charges, his lawyer said. He said Ondercin was a “true believer” in what turned out to be an illegal tax-avoidance scheme that he learned at an investment seminar promoted nationwide by Roderick Prescott, of Orem, Utah.
Prescott pitched a scheme to avoid taxes by routing income through nonprofit, family foundations. He was convicted in 2009 of tax evasion and sentenced to 30 months in federal prison. The Justice Department said the scheme cost the U.S. Treasury more than $135 million and bilked more than $20 million from investors.
Ondercin did not respond to messages seeking comment. His attorney, Tom Kelly, said that Ondercin bought Prescott’s tax-avoidance pitch and believed it was legitimate.
“This private foundation idea turned out to be a total tragedy in his life because not only does he have increased tax burdens, but now he’s got a federal investigation,” Kelly said.
Angela Johnson, a criminal investigator with the IRS, said in sworn statement signed Aug. 11 that the agency sent in an undercover agent in 2012 after a civil audit found that Ondercin had substantial underreported income, possible offshore accounts and “items of fraud.”
According to the Johnson’s affidavit, which was used to get a search warrant, Ondercin offered online investment and trading courses through an Internet company called Invest To Success (I2S), which was founded in 2009 with partner Dan Braun of Charlotte, N.C. Johnson wrote that Braun told an undercover agent that he handles the business and marketing side, while Ondercin pitches training packages and offers webinars and trading tips through the website investtosuccess.com.
The website suggests that clients will “ ‘Get Rich Slowly’ By Creating Your Own, Personalized Low-Risk Trading System That will Create Returns Of 5% to 8% (Or More) Every Month — That’s 80% to 152% Annually!”
Braun said Tuesday that he and Ondercin met with IRS officials in December, but added that he had no idea a criminal investigation was underway.
“My understanding was that John was taking care of things,” Braun said. “The IRS made clear we weren’t supposed to discuss the case, so we really haven’t discussed the case.” He declined further comment.
An IRS undercover investigator met with Ondercin several times from 2012 to 2013 to discuss investment strategies and “Ondercin’s suggestions for minimizing tax liabilities,” which allegedly included the establishment of a limited liability corporation or private foundation through which income could be diverted, according to the IRS affidavit.
“That’s a couple million dollar write-off for you,” Ondercin allegedly told the undercover agent. “It’s just as if you took that money and say, ‘Hey, look, I’m going to give it to the Boy’s and Men’s Club.”
Ondercin reportedly told an undercover agent that he learned about the strategy at a seminar. He says he learned that a person could buy a Hummer through a private foundation and all that’s required to write it off is to use it to take kids four-wheeling once a year.
“So if you can incorporate your toys with your nonprofit objective, then to take it as a deduction, it works,” Ondercin is quoted in the affidavit as saying.
The IRS says that Ondercin and Braun each routed their payments from Invest To Success through other business entities. One of the entities, a private foundation set up to help the elderly, victims of Hurricane Katrina and others, listed Ondercin’s parents as officers, but they told the IRS it was “in name only,” the affidavit said. The foundation never filed a required informational tax return and was dissolved by the IRS in 2013.
The IRS says Ondercin routed money through 32 bank accounts in different individual and business names and spent the money on various personal expenses for himself and his family, including time shares, a vehicle, a swimming pool, landscaping, meals, health care, fitness clubs and a massage studio.
Since 2014, Ondercin has filed amended returns that appear to be accurate, the IRS affidavit says, but he has not made a payment on the $324,868 of taxes he owes. The IRS says that Ondercin recently sold his former residence located in Excelsior for but concealed nearly $300,000 in profits that he “spent on personal expenditures.
Investigators obtained e-mails through a search warrant. In one, a witness described attending a trading “boot camp” at Ondercin’s former Excelsior home.
“It appears that Ondercin is using his new home [in Mound] to host classes like he did in the previous house,” the IRS says, citing e-mails as recent as June.
The IRS investigation hasn’t put Ondercin out of business. An online advertisement pitched a July 28 webinar featuring Ondercin, describing him as the “Chief Trading Strategist” at Invest To Success and WINinvesting.com, which claims to be “The UK’s most popular investment training.” The ad says Ondercin has been a full-time trader since 1999, wrote an Amazon bestseller called Options Trading in Nutshell, and has taught his strategies to traders in 53 countries.