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Two Tampa Bay area consultants agree to federal plea deal in offshore tax shelter case

Published Aug. 8, 2015

TAMPA —Two financial consultants accused of helping corporate clients reduce tax debt through the purchase of sham insurance policies have signed plea agreements admitting to a related crime punishable by up to three years in prison.

Duane Crithfield, 68, of Dade City and Stephen Donaldson Sr., 69, of Tampa are expected to plead guilty Tuesday in U.S. District Court to one count of aiding and assisting fraud and false statements.

In exchange, prosecutors would drop two other counts, including conspiracy to defraud the government.

Court records describe Crithfield as a director of Citadel Insurance Co. Ltd. and Donaldson as chairman of Foster & Dunhill, a financial consulting firm.

Federal authorities claim the men promoted business protection policies as part of a fraudulent offshore tax strategy.

Clients paid premiums to insure against unlikely risks and got a business expense deduction on taxes. But no insurance claims were made and they got most of the money back as a tax-free loan after it was shifted into a life insurance account.

But the Foster & Dunhill tax strategy caught on with other wealthy clients, too.

A federal district judge in Texas found that a pair of oil and gas company owners, John Thomas and Lee Kidd, paid $4.5 million in premiums, avoiding taxes on the income. At the end of a year, about $3.8 million was transferred into a cash-value life insurance account.

"Thomas and Kidd withdrew all $3.86 million within one day of the transfer as policy loans," the 5th U.S. Circuit Court of Appeals wrote in an opinion on a related tax case.

The Tampa case, filed more than two years ago, was scheduled to go to trial this fall until the plea agreements were signed and filed this week.

If Crithfield and Donaldson plead guilty as expected, they will be sentenced at a later date.

Contact Patty Ryan at pryan@tampabay.com or (813) 226-3382.