FOR IMMEDIATE RELEASE TAX FRIDAY, APRIL 5, 1996 (202) 514-2008 TDD (202) 514-1888 SIX PROMOTERS OF LONG-RUNNING TAX EVASION SCHEME SENTENCED WASHINGTON, D.C. -- A federal judge today sentenced six Minnesota residents convicted of income tax evasion to prison terms ranging from 10 to 96 months, the Department of Justice announced. They were convicted last November for operating and promoting a tax-evasion scheme for almost 14 years, including several years in defiance of a court order to stop, the Department said. U.S. Attorney David L. Lillehaug of Minneapolis and Assistant Attorney General Loretta C. Argrett of the Tax Division said the sentences were imposed by Judge Michael J. Davis of U.S. District Court in St. Paul, Minnesota, on James Noske and his sister, Joan, John Ellering and Imelda Spaeth, all of Richmond, Minnesota; and Loren Scherping and his brother, Laverne, of Freeport, Minnesota. "This was an intricate and complex case that took many months to develop and involved the presentation to the jury of more than 30 witnesses and 600 exhibits," said Argrett. "We hope it sends a clear and loud warning to other would-be tax dodgers that we will investigate and prosecute vigorously those who try to cheat the government." Lillehaug commented, "No one loves to pay taxes, but each of us must pay a fair share. This case puts away some of Minnesota's most notorious tax evaders who urged others to do likewise." James Noske, the central figure and leader of the group, was sentenced to 96 months imprisonment with three years supervised release. Joan Noske was sentenced to 78 months imprisonment with three years supervised release. John Ellering was sentenced to 30 months imprisonment with three years supervised release. Imelda Spaeth was sentenced to 10 months imprisonment and three years supervised release. Loren Scherping was sentenced to 12 months imprisonment and three years supervised release. And Laverne Scherping was sentenced to 12 months imprisonment and three years supervised release. Davis denied bond pending an appeal. He ordered the defendants to surrender voluntarily, except for James Noske who was taken into custody. James and Joan Noske, John Ellering, Imelda Spaeth and Loren and Laverne Scherping were convicted November 9, 1995, of numerous felony charges following an eight-week trial. The Noskes, Ellering and Spaeth were convicted of conspiring to defraud the United States by operating and promoting an intricate tax evasion scheme that used hundreds of so-called "business trusts" and dozens of allegedly non-profit corporations to evade paying about $1.4 million in federal income taxes. They operated the scheme for nearly 14 years, continuing the illegal operation even after the U.S. District Court in St. Paul issued an injunction in 1984 ordering the Noskes to discontinue promoting the trusts. James and Joan Noske and Loren and Laverne Scherping also were convicted, in a separate felony count, of conspiring to evade the payment of nearly $500,000 in income taxes owed by the Scherpings. Additionally, James and Joan Noske were convicted of tax evasion with resect to the Scherpings' income tax liabilities and Joan Noske was convicted of five counts of structuring financial transactions for the Scherpings to evade the filing of federal currency transaction reports. James Noske was found guilty of conspiracy to defraud the United States, conspiracy to evade the payment of income taxes and tax evasion. Joan Noske was found guilty of two counts of conspiracy, one count of tax evasion and five counts of structuring financial transactions to evade the filing of currency transaction reports. Ellering and Spaeth were found guilty of conspiring to defraud the United States and the Scherpings were found guilty of conspiring to evade payment of income taxes. A seventh defendant, Dwaine Weber, was acquitted of conspiracy to evade payment of the Scherpings' income taxes. The investigation was conducted by the Criminal Investigation Division of the Internal Revenue Service. The prosecution was handled by Department Tax Division Trial Attorneys Corey J. Smith and Wade W. Parrish. ##### 96-158