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Case: 1:03-cv-03904 Document #: 882 Filed: 04/29/15 Page 1 of 3 PageID #:16108

UNITED STATES DISTRICT COURT FOR


THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
KEVIN TRUDEAU,
Defendant.

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Case No.: 03-C-3904


Hon. Robert W. Gettleman

RECEIVERS MOTION FOR LEAVE TO FILE RESPONSE INSTANTER


Robb Evans & Associates LLC hereby moves for leave to file the attached Receivers
Response to Trudeaus Motion to Compel the Receiver to File Tax Returns and File a Status
Report (the Response) instanter and to extend the deadline for Trudeaus reply brief by one
day. In support of its Motion, the Receiver states as follows.
1.

On April 7, 2015, the Court entered a briefing schedule with respect to Defendant

Kevin Trudeaus Motion to Compel the Receiver to File Tax Returns and File a Status Report
requiring response by the Receiver on April 28, with replies due May 12, and a status hearing on
May 21.
2.

On April 28, the Receivers CFO, Anita Jen, unexpectedly became ill and was

unable to complete her final review of the Receivers response. Ms. Jen is the person most
familiar with many of the relevant facts asserted in the Receivers response. Although other
Receiver personnel attempted to assist Receivers counsel in finalizing the Response, at
approximately 6:00pm Pacific time, the Receiver determined the Ms. Jens assistance would
ultimately be necessary.

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3.

Counsel for the Receiver conferred with Trudeaus counsel by email informing

them of the circumstances and proposing to extend the briefing schedule by 1 day. Trudeaus
counsel promptly responded they had no objection. Given the lateness of the hour, the Receiver
was unable to seek an extension before the Courts deadline and apologizes for any
inconvenience to the parties or the Court.
4.

The Receiver does not believe any party or interest would be prejudiced by

permitting the Receiver to file its Response instanter and extending the time for Trudeaus reply
by a day to May 13.
WHEREFORE, Receiver respectfully requests the Court enter an Order (a) granting the
Receiver leave to file the attached Response instanter and (b) extending the time for Trudeau to
file his reply by a day to May 13.
Dated: April 29, 2015

Respectfully submitted,
ROBB EVANS & ASSOCIATES LLC,
RECEIVER
By: /s/ Blair Zanzig
(One of Its Attorneys)
Blair R. Zanzig (No. 6273293)
John F. Hiltz (No.6289744)
HILTZ & ZANZIG LLC
53 West Jackson Blvd., Suite 205
Chicago, Illinois 60604
Telephone: 312.566.9008
Fax: 312.566.9015
Counsel for Robb Evans & Associates LLC,
Receiver

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CERTIFICATE OF SERVICE
I, Blair R. Zanzig, an attorney, hereby certify that, on the 29th day of April 2015, I caused
a true and correct copy of the foregoing Receivers Motion to File Response Instanter to be
served through the Courts Electronic Case Filing System on the following:

Kimball Richard Anderson


kanderson@winston.com
Thomas Lee Kirsch, II
tkirsch@winston.com
Andrew Sullivan
asullivan@winston.com
Michael Mora
mmora@ftc.gov
Jonathan Cohen
Jcohen2@ftc.gov
Amanda B. Kostner
akostner@ftc.gov
David OToole
dotoole@ftc.gov

/s/ Blair R. Zanzig

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EXHIBIT 1

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UNITED STATES DISTRICT COURT FOR


THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
KEVIN TRUDEAU,
Defendant.

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) Case No.: 03-C-3904
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) Hon. Robert W. Gettleman
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RECEIVERS RESPONSE TO TRUDEAUS MOTION TO COMPEL


THE RECEIVER TO FILE TAX RETURNS AND FILE A STATUS REPORT
Robb Evans & Associates LLC, the court-appointed receiver in the above-captioned case
(the Receiver), respectfully submits this Response Opposing Defendant Kevin Trudeaus
Motion to Compel the Receiver to File Tax Returns and File a Status Report (the Motion).
BACKGROUND
A.

The Receiver Has Properly Filed All Tax Returns for Entities Whose Assets the
Receiver Assumed Actual Control.
In its August 7, 2013 order (the Receivership Order), the Court appointed Robb Evans

& Associates LLC as the Receiver over Trudeaus Assets, the Trudeau Entities, and any
affiliates or subsidiaries thereof controlled by Trudeau or any Trudeau Entity. (8/7/2014 Order
IV [Dkt. #742].) The Receivership Order defined the Trudeau Entities to include without
limitation 29 enumerated entities.1 In addition to the entities listed in the Receivership Order, the

Those 29 entities included as Trudeau Entities are: 0913372 B.C. Ltd.; 0913376 B.C. Ltd.;
Advantage Solutions Ltd; Alliance Publishing Group, Inc.; APC Trading Limited; Direct
Response Associates, LLC; GIN USA Inc.; Global Information Network FDN; Global Sales
Solutions A.G., International Pool Tour Inc.; K.T. Corporation Limited; KMT Fiduciary Trust;
KT Capital Corporation; KT Radio Network Inc.; Natural Cures, Inc.; Natural Cures Health
Institute; Natural Cures Holdings Inc.; NBT Trading Limited; N.T. Trading S.A.; Pool Licensing
1

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Receiver identified the following eleven additional entities, though to date the Receiver has
identified no substantial assets held by any of these entities: Alliance Real Estate Holdings,
LLC; Natural Cures Real Estate Holdings LLC; Shop America (USA) LLC; Custom Fulfillment;
Direct Response Marketing; Natural Cures Health Limited; Trudeau Training Team LLC;
Natural Cures.com, Inc.; Telephone Advisory Service LLC; Self TV, Inc.; and Shop America
Marketing Group.
Pursuant to Section 468B of the IRS Code (26 U.S. Code 468B), the Receiver created a
Qualified Settlement Fund (the QSF), effective August 7, 2013, for purposes of administering
the receivership assets. In September 2014, after timely filing for an extension, the Receiver
filed federal and state tax returns on behalf of the following entities: (a) Alliance Publishing
Group, Inc.; (b) GIN USA, Inc.; (c) Global Information Network Foundation; (d) International
Pool Tour, Inc.; (e) KT Corporation Limited; (f) KT Radio Network, Inc.; (g) Natural Cures,
Inc.; (h) Trudeau Approved Products, Inc.; (i) Trustar Productions, Inc.; and (j) Website
Solutions USA, Inc.2 Additionally, the Receiver filed federal and state returns for the QSF. As
reflected in those returns, none of the Trudeau Entities on whose behalf the Receiver filed tax
returns reported any taxable income in the face of offsetting QSF expenses.
Attached to the return for each of the Trudeau Entities on whose behalf the Receiver filed
a return, the Receiver attached a statement substantially in the form of Exhibit A in which the
Receiver made various disclosures and qualifications. Among those disclosures, the Receiver

LLC; Sovereign Trust; The Whistle Blower, Inc.; TRUCOM, L.L.C.; Trudeau Approved
Products Inc.; Trudeau Management Inc.; TruStar Marketing Corporation; Trustar Productions,
Incorporated; Website Solutions Switzerland GmbH; and Website Solutions USA Inc.
2
In January 2015, the Receiver provided copies of these returns to Trudeaus counsel. Given the
volume and typically non-public information included in a tax return, the Receiver has not
attached them to this publicly-filed response, but will make them available to the Court for in
camera review or to the FTC upon request.
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explained that such filing was being made on behalf of the corresponding Trudeau Entity based
on the Receivers control of assets as provided for by Treasury Regulation 1.6012-3(b)(4). The
Receiver also notified the IRS that any tax liability from before the receivership is a prereceivership expense and an appropriate claim must be filed with the Receiver. The Receiver
also noted that to the extent the Receiver relied on pre-receivership records, the Receiver had no
assurance that such records were complete or accurate.
Through these returns, the Receiver has fully accounted to the IRS for all assets the
Receiver was able to assume actual control over since its appointment.
B.

The Receiver Has Not Filed Returns for Trudeau Entities for Which It Has No
Assets or Records.
The Receiver did not file returns for the entities for which the Receiver had either no

accounting records or very limited, dated records. Specifically, the Receiver had no accounting
records for (a) Custom Fulfillment; (b) Direct Response Marketing; (c) Natural Cures Health
Limited; (d) Trudeau Training Team LLC; (e) Natural Cures Holdings, Inc.; (f) Natural
Cures.com Inc.;or (g) Shop America Marketing Group. For the following entities, the Receiver
had no records of any activity in several years: (p) Telephone Advisory Service LLC (no activity
after 2006); (q) Self TV, Inc. (no activity after 2005); (r) Alliance Real Estate Holdings, LLC
(no activity after 2008); (s) Direct Response Associates LLC (no activity after 2011); (t) KT
Capital Corporation (no activity after 2012); (u) Natural Cures Real Estate Holdings LLC (no
activity after 2007); (v) Pool Licensing LLC (no activity after 2006); (w) Shop America (USA)
LLC (no activity after 2009); (x) The Whistle Blower, Inc. (no activity after 2011); Trucom,

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LLC (no activity after 2012)3; (y) Trudeau Management Inc. (no activity after 2008); and (z)
TruStar Marketing Corporation (no activity after 2012). In addition to lacking any records on
which to base a return, the Receiver is unaware of any existing assets held by these entities and
thus never had control over any such assets.
C.

The Receiver Had No Control Over Any Of The Remaining Overseas


Entities.

The remaining Trudeau Entities consist of overseas asset shelters that Trudeau failed to
turnover control while maintaining variously that he either lacked control over them or the
entities were empty shells with nothing to turnover. The Court had found that Trudeau had
created these entities, with the assistance of Mark Lane, as part of an elaborate scheme . . . to
put [Trudeaus] assets beyond the reach of the FTC. (See FTC Proposed Findings III.A [Dkt.
#713].) In furtherance of that scheme, Trudeau organized a number of the Trudeau Entities in
locales throughout the world renowned for their resistance to United Status jurisdiction,
including: GIN FDN (a Nevis multiform foundation); APC Trading (Belize); Website
Solutions Switzerland GmBH (Switzerland); NBT Trading Limited (Hong Kong); KMT
Fiduciary Trust (registered in Mauritius); K.T. Corporation (Isle of Man); Sovereign Trust
(Cook Islands); NT Trading S.A. (Panama Corporation); Advantage Solutions Ltd.
(Seychelles); 0913372 B.C. Ltd. (Canada); 0913376 B.C. Ltd. (Canada); and Global Sales
Solutions, A.G. (Switzerland) (collectively, the Overseas Shelters). The Court found that
Trudeau controlled these entities through nominees and figureheads, including Natalia Babenko,
Neil Sant, and Lee Kenny. (Id. II.A.5.) Specifically, although many of the entities were held
in the name of Trudeaus wife and other nominees, the Court found that Trudeau himself was
3

For completeness, in reviewing its records, the Receiver has found one Quickbooks transaction
for Trucom LLC indicating a $23.11 transaction in 2013. The Receiver is reviewing that
transaction to determine what, if any, additional reporting requirements it may trigger.
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knowledgeable about their finances and asserted control over those entities by directing his
nominees to open bank accounts overseas and exhorting them to get money out of the usa and
into banks overseas . . . never keep more money in the usa than needed . . . . TAP, NCINC,
KTRN, NCHI, WSS, and every company NEEDS accounts OFF SHORE!!!!!!! Very little
money should be held in us accounts. (Id. II.B.1.ii.4 (at pg.13); see also II.B (describing
evidence of control generally).)
Notwithstanding the Courts findings that Trudeau controlled the Trudeau Entities,
Trudeau throughout the receivership steadfastly held to the fiction of the asset protection scheme
that he lacked control over them. Based on that fiction, Trudeau claimed he was unable to
turnover control of the overseas entities beyond U.S. jurisdiction. For example, claiming a lack
of control, Trudeau refused to turnover all financial records of the Overseas Shelters used to
operate the GIN Club, stating: Trudeau does not have access to the financial records of all of
the companies that the FTC has identified as Trudeau-Affiliated Entities, including Global
Information Network Foundation (GIN FDN). (Trudeaus Response in Opposition to the
FTCs Post-Hearing Brief in Support of Its Contempt Motion [Dkt. 725] n.6; see also Trudeaus
Statement Regarding Purging Civil Contempt [Dkt. #776] at 3-4 and n.3 (denying control of GIN
FDN and Website Solutions Switzerland).) Trudeau also had his nominees provide letters
expressly asserting their ownership of the Trudeau Entities and refusal to turn over control to the
Receiver. (See, e.g., 10/19/2013 Email from L. Kenny to K. Trudeau (attached as Exhibit E to
Dkt. #776) ([WSS and GSS] are my businesses . . . . The receiver nor order is recognized in
Switzerland or the UK, further compounded by the fact that it is being based on an incorrect
assumption that you own or control the entity anyway.); 10/19/2013 Letter from L. Kenny to K.

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Trudeau (attached as Exhibit F to Dkt. #776) (I do not recognize or agree that any entity you
describe in the letter is under the jurisdiction of the order, receiver or court.).)
As a further basis for claiming an inability to turnover control to the Receiver, Trudeau
maintained that the offshore entities were created as non-operating shell entities because,
according to Trudeau, it was beneficial to have already-created shell business entities for future
dealings. (See Decl. of Jonathan Cohen Related to FTCs Statement Regarding the Need for
Coercive Sanctions 19 [Dkt. #759-1] (attached as Exhibit A to FTCs Statement Regarding the
Need for Coercive Sanctions [Dkt. #759]).)
Thus, while the order appointing the Receiver nominally gave the Receiver control over
all of the listed Trudeau Entities, Trudeau did not transfer actual control of the Overseas
Shelters to the Receiver. Where the Receiver through its own efforts was able to collect assets,
such as redirected offshore credit card payments, the Receiver filed an appropriate return on
behalf of Global Information Network FDN. However, other than GIN FDN, the Receiver never
had actual control over assets of the Overseas Shelters or sufficient accounting records on which
to base a return. Accordingly, the Receiver is unable to file any returns on behalf of those
entities.
D.

Prior to the Appointment of the Receiver, Trudeau Failed to Timely File Tax
Returns on Behalf of Himself or the Trudeau Entities.
Trudeau fails to provide the Court any detail regarding the full scope of tax issues he and

the Trudeau Entities potentially face and thereby obscures the full range of issues raised by the
blanket relief he seeks. Specifically, prior to the appointment of a Receiver, Trudeau failed to
ensure that many of the Trudeau Entities he controlled timely filed tax returns. Based on its
review of the records turned over to it, the Receiver understands that many of the Trudeau
Entities have not filed tax returns since 2010 and in some cases longer. In its correspondence

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to Trudeaus counsel dated February 20, 2015, the Receiver included a table identifying to the
Receivers knowledge the latest tax returns for ten of the Trudeau Entities, with none more
recent than 2010. The Receiver located no tax returns for many of the other Trudeau Entities,
including the entities through which Trudeau operated the GIN Club. Although the Receiver
invited Trudeau to provide further information regarding the pre-receivership tax liability of the
Trudeau Entities, Trudeau offered no response. (See Mot. Ex. F at 2.) The Receiver has made
additional inquiries to Mark Lane to ensure that Mr. Lane has turned over all tax returns as the
Receiver previously requested.
Likewise, Trudeau offers no description of his own tax situation. In seeking documents
and records from the Receiver, Trudeaus former tax counsel informed the Receiver that Trudeau
had retained them with respect to an audit of Trudeaus 2008 personal taxes, federal tax liens
outstanding for unspecified taxable years, and preparation of unspecified federal and state
individual income tax returns. (See Ex. B (8/28/2013 Correspondence to Lillian Lee) at 2.)4
Trudeau provides no background as to the scope of those issues or their current status. Rather,
Trudeau demands the Court to compel the Receiver to file Trudeaus personal tax returns and
pay any outstanding taxes, leaving it to the Receiver and Court to guess as to whether Trudeau is
demanding the Receiver address any and all past tax issues or just those for tax years following
the Receivers appointment. Indeed, the Receiver is unaware of any income flowing from the
Trudeau Entities that the Receiver had actual control over to Trudeau post-receivership. The
Receiver cannot know what other income Trudeau received from other entities like those that
remained in control of his nominees like Lee Kenny. Thus, the Receiver is not in position to file
anything other than a nominal return on behalf of Trudeau for the post-receivership period.

Ex. __ refers to the corresponding exhibit attached to this Response.


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To the extent Trudeau is demanding the Receiver act with respect to pre-receivership
activities, the Court has already observed in the context of Trudeaus tax counsels prior motion
to compel: One [thing] is documents relating to prior years that the receiver has absolutely no
obligation to file any kind of tax returns because they werent in possession of any property.
(Ex. C. (11/21/2013 Hearing Tr.) at 8:4-7.)
ARGUMENT
Having for years flouted his obligation to file tax returns for himself or the entities he
controlled, Trudeau now apparently asks the Court to make the Receiver indiscriminately
responsible for filing returns for Trudeau and all of the Trudeau Entities while also paying any
tax liability -- all at the expense of the consumers Trudeau harmed. Trudeau even seems to
demand the Receiver file returns for entities that Trudeau previously claimed were mere empty
shells without explaining why he now believes such entities need to file returns. Trudeaus
pattern is familiar: disclaim any personal knowledge about his own finances while asking the
Court to provide a prophylactic order that he can later tout as excusing him from responsibility.
Trudeau bases his entire argument on the language of the Receivership Order purporting
to give the Receiver full control over the Trudeau Entities and Trudeaus assets. Trudeau ignores
the reality that for many of the Trudeau Entities, Trudeau failed to transfer control over those
entities or their property and fully disclose the financial information and corporate/tax status of
each entity. In the absence of such actual control, the Receiver has no obligation to file returns
beyond those it has already filed and would, in any event, have no basis for doing so. The
Receiver has already filed current returns fully accounting to the IRS for all assets that have
come under its control.

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A.

The Receiver Has Properly Filed Returns for All Trudeau Entities for Which
the Receiver Has Possession of the Companys Property.
Treasury Regulation 6012(b)(3) requires a receiver to file returns with respect to a

corporation only where the Receiver has possession of all or substantially all of the companys
property. 26 C.F.R. 6012(b)(3). In an Private Letter Ruling where, like here, the defendant
had used foreign companies to conceal assets, the IRS determined the Receiver was not required
to file returns because the Receiver was not in complete control of all property and business of
the corporation, and was unable to prepare complete and accurate returns for the companies. See
IRS Letter Ruling No. 200219018, a copy of which is attached as Exhibit C. Although private
letter rulings are not precedential (see 26 USC 6110(k)(3)), it nevertheless illustrates that the
Treasury Regulations do not require a receiver to do the impossible by filing returns for entities
they have no actual control over or lack a basis to prepare accurate returns.
Accounting for the assets and income that the Receiver collected to date, the Receiver
filed 2013 returns for the corresponding entities from which those assets were derived. The
Receiver anticipates doing the same for 2014 and has already filed for appropriate extensions.
The Receiver did not and could not file returns for the Overseas Shelters that were organized
in foreign jurisdictions over which the Receiver had no actual control. Nor did the Receiver file
returns for entities for which the Receiver had no records or had no complete information
regarding their financial and corporate/tax status.
Other than citing the Receivership Order, Trudeau alleges no factual basis to support his
demand that the Receiver is in any position to file returns for every one of the Trudeau Entities.
Trudeau ignores the fact that he precluded the Receiver from controlling themindeed, the very
purpose behind Trudeaus use of many of the entities was to put them beyond the reach of the
FTC and U.S. Courts. Accordingly, the Court should deny Trudeaus demand that the Receiver

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file returns for every Trudeau Entity regardless of whether the Receiver has any basis or ability
to file such returns. Where appropriate and able, the Receiver has already satisfied its
obligations under the Tax Code with respect to the Trudeau Entities.
B.

As Trudeau Failed to Turnover All of His Assets to the Receiver, the


Receiver Is Unable to File Complete and Accurate Returns on Behalf of
Trudeau.
A receiver is not required to file a return where the receiver has only part of an

individuals property or information. The Receiver is only required to file a return on behalf of
an individual where the receiver stands in the place of the individual. Treasury Regulation
1.6012-3(b)(5) provides:
A receiver who stands in the place of an individual must make the return of
income required in respect of such individual. A receiver of only part of the
property of an individual need not file a return, and the individual must make his
own return.
26 C.F.R. 1.6012-3(b)(5). While the Receivership Order directed Trudeau to disclose and turn
over all of his assets to the Receiver, Trudeau failed to do so. Trudeau instead concealed his
assets, obscured the true owner of such entities, and attempted to put them beyond the reach of
the FTC. Throughout the Receivership, Trudeau repeatedly failed to make a full disclosure of
his assets ultimately causing the Court to incarcerate Trudeau in an attempt to coerce him to fully
comply. Any of the reports filed by the Receiver in this case detail Trudeaus obfuscation and
refusal to turnover all of his assets, including a myriad of transactions hidden behind the shroud
of the asset protection scheme constructed by Trudeau and the well-compensated Mark Lane.
The Receiver cannot know what income Trudeau received from his other assets in the possession
of Lee Kenny, Natalia Babenko, or any of Trudeaus other nominees. Under those
circumstances, the Receiver is neither required to nor could prepare or attest to the accuracy
of a tax return on behalf of Trudeau. The Court should deny Trudeaus Motion.

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C.

Trudeaus Demand That The Receiver Pay Trudeaus and The Trudeau
Entities As Yet Undetermined Tax Liabilities Is Premature.
Because no one has identified any unpaid tax liability by any of the Trudeau Entities, it is

entirely premature to order the Receiver to pay what are at this stage entirely hypothetical claims.
Contrary to Trudeaus assertion otherwise, the Receiver has not categorically refused to pay the
tax liabilities of any receivership entity. Rather, the Receiver told Trudeau that to the extent
that any tax is owed, the Receiver would need Court approval to pay such amount and that the
Receiver had not received any specific claim from Mr. Trudeau or anyone else requesting
payment of any outstanding taxes.5 (See Mot. Ex. F at 2.) To date, Trudeau has provided no
specific information regarding his tax liabilities or even communications he has had with the IRS
regarding any such liabilities.
At the same time, and as a practical matter, the Receiver is acutely aware of the need to
account for tax liabilities before making any distributions from the receivership estate. Whether
any tax liabilities here are properly paid by the receivership depend on, among other things, the
entity owing the liability, the assets traceable to that entity held by the Receiver, and the basis of
distributions by the Receiver. The Receiver has taken no steps to make any distributions other
than current operating expenses and administrative expenses as approved by the Court. Before
any such distribution is made, the Receiver anticipates establishing a claims process and notice
procedure to be approved by the Court. The Receiver is in the process of consulting with the
FTC, who will ultimately be responsible for distributions to consumers, over an appropriate
5

Since then, the Receiver was forwarded a notice from the IRS for overdue taxes from
December 31, 2003, for an entity called TruStar Global Media Ltd an offshore entity that is not
even expressly named as a Trudeau Entity in the Receivership Order. While its investigation
continues, the Receiver is unaware of any assets it holds on account of such entity. The notice
does provide a convenient example of Trudeaus failure to meet his tax obligations the original
tax claim on the notice appears to have only been a little under $20K in 2003, but having been
neglected by Trudeau for more than a decade has now grown to over $250k. (See Mot. Ex. G.)

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claims process. Until then, the Court should reject Trudeaus demand to compel the Receiver to
pay as yet unidentified claims.
D.

As Anticipated, the Receiver Has Been Far Less Active Since The Last Status
Reports Thereby Ameliorating Any Compelling Need for Interim Reports.
As anticipated by the Receiver in its July 2014 report to the Court, the Receiver

transitioned into a period of lower activity6 associated primarily with collecting payments due
under the GIN Sale Agreement and other remaining assets. (Receivers Fourth Report [Dkt.
864]; see also Mot. Ex. B (January 7 Correspondence to Trudeaus Counsel) (You had also
asked about the Receivers final report. The Receiver is continuing to collect payments due from
the sale of the GIN Club assets which are to run into the summer and wont be filing a report
before then.).) With little activity to report and the next status date set for July 9, 2015, the
Receiver had not filed a status report in the interim. The Receiver is finalizing the latest
financial results and will include a brief status report with its fee application.
With respect to the forensic accounting, in the absence of any immediate relevance, the
Receiver delayed filing it so the final report, including the related exhibits expected to exceed
380 pages can be updated to reflect all of the latest information. The Receiver has also used
the interim period to refine and clarify the description of the accounting heavy narrative. Unless
the Court prefers otherwise, the Receiver anticipates issuing a final report, which will include all
the forensic accounting review and detailed analysis over Trudeaus personal accounts and 24
Trudeau Entities, as well as approximately 400,000 records from Neil Sants computers, no later
than June 30, 2015 in connection with its other wind-down activities.

Except for work on the forensic accounting report.


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Dated: April __, 2015

Respectfully submitted,
ROBB EVANS & ASSOCIATES LLC,
RECEIVER
By: /s/

Blair R. Zanzig
(One of Its Attorneys)

Blair R. Zanzig (No. 6273293)


John Hiltz (No. 6289744)
HILTZ & ZANZIG LLC
53 West Jackson Blvd., Suite 205
Chicago, Illinois 60604
Telephone: 312.566.9008
Fax: 312.566.9015
Counsel for Robb Evans & Associates LLC, in
Its Capacity as Receiver

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EXHIBIT A

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EXHIBIT B

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oRD0t'llnwGnoup
August 28, 2013
VIA FAqSrMrr,E EO (8:18) 768-8802
leeGrobbevans.com
AND
TO lillian
TO brick kaneGrobbevans. com

Lill-ian Lee
Robb Evans and Assocj-ates,
Receiver of Kevin Trudeau
As sets
11450 Sheldon Street
Sun Valley, CA 91352-II27

LLC

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Document #: 882-2 Filed: 04/29/15 Page 6 of 19 PageID #:16130
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Case: 1:03-cv-03904 Document #: 882-2 Filed: 04/29/15 Page 7 of 19 PageID #:16131

EXHIBIT C

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Case: 1:03-cv-03904 Document #: 882-2 Filed: 04/29/15 Page 8 of 19 PageID #:16132

IN THE UNITED STATES DISTRICT COURT


FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

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FEDERAL TRADE COMMISSION,


Plaintiff,
vs.
KEVIN TRUDEAU,
Defendant.

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No. 03 C 3904
Chicago, Illinois
November 21, 2013
1:30 p.m.

TRANSCRIPT OF PROCEEDINGS - Motion


BEFORE THE HONORABLE ROBERT W. GETTLEMAN
APPEARANCES:
For the Plaintiff:

UNITED STATES FEDERAL TRADE COMMISSION


BY: MS. ELIZABETH C. SCOTT
55 West Monroe Street, Suite 1825
Chicago, Illinois 60603-5001

For the Defendant:

WINSTON & STRAWN LLP


BY: MR. THOMAS L. KIRSCH II
MS. KATHERINE E. ROHLF
35 West Wacker Drive
Chicago, Illinois 60601-9703

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LAW OFFICES OF DEBRA A. BUETTNER PC


BY: MR. JUSTIN D. SCHEID
8 Executive Court, Suite 3
South Barrington, Illinois 60010
GORDON LAW
BY: MR. ANDREW B. GORDON
1 First Bank Plaza, #207
Lake Zurich, Illinois 60047
Official Court Reporter: NANCY L. BISTANY, CSR, RPR, FCRR
219 South Dearborn Street, Room 1706
Chicago, Illinois 60604
(312) 435-7626
nancy_bistany@ilnd.uscourts.gov

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Case: 1:03-cv-03904 Document #: 882-2 Filed: 04/29/15 Page 9 of 19 PageID #:16133

APPEARANCES: (Continued)

For the Receiver:

HILTZ WANTUCH & ZANZIG


BY: MR. BLAIR R. ZANZIG
53 West Jackson Boulevard, Suite 205
Chicago, Illinois 60604

For the Proposed


Intervenors:

SALEM & SHIMKO, P.C.


BY: MR. DANIEL SHIMKO
446 Avenue P
Brooklyn, New York 11223

Also Present:

Mr. Kevin Trudeau


Mr. Brick Kane - Via Telephone

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requesting. And that's why we think during -THE COURT: Well, either you have it or you don't.
If you don't have it, that's one thing.
Some of this is for information. Some of it is for

documents. If it means digging around for information, that I

can understand there might be some resistance. But if there's

documents that are in your possession that you could locate

without any problem, I don't see an issue about that.

And we're only talking about 2013 tax returns.

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MR. SCHEID: No, your Honor. If I could --

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THE COURT: So you're talking about others.

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MR. SCHEID: If I could just --

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THE COURT: But the receiver wasn't appointed until

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2013, so I don't see how the receiver would be responsible for

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returns for other years.

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MR. SCHEID: And if -- your Honor, if I may clarify

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that point. The documents are in the -- currently in the

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possession of the receiver. Now, these are old documents that

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relate to the tax years 2008, 2011, and 2012. However, they

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were located in the Westmont facility that Mr. Trudeau no

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longer has access to; and therefore, we're requesting what is

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very basic accounting records, general ledgers, information

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relating to wages, compensation that may have been paid during

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those taxable years.

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Now, the next issue will be the 2013 tax return, but

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we're not quite there yet as well.

THE COURT: Luckily we're nowhere close to it.

I would say that I agree. We're talking about two

different things. One is documents relating to prior years

that the receiver has absolutely no obligation to file any kind

of tax returns because they weren't in possession of any

property. And then there's a 2013, for which the receiver

might be responsible or might not be. I don't really know.

And that, of course, can be -- that return can be

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continued into October of 2013. So we have a long way to go.


Why don't you guys try to work this out before I

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start getting briefs on it, and the next time we get together

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you can let me know whether you've done that or not. I would

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hope that you can give them documents in your possession and

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leave it at that. As far as responsibility for returns, we can

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revisit that at another date.

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MR. SCHEID: Your Honor, may I make one more point of


clarification?
THE COURT: You wanted to file an appearance, too; is
that correct?
MR. SCHEID: Your Honor, I filed an appearance this

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morning, and my co-counsel filed an appearance, along with the

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motion, yesterday afternoon.

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But with respect to the 2013 income tax return, while


we can extend the filing of the return, the tax owed is due on

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EXHIBIT D

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Internal Revenue Service

Department of the Treasury

Number: 200219018
Release Date: 5/10/2002
Index Numbers: 6012.00-00, 6012.04-00

Washington, DC 20224

Person to Contact:
Telephone Number:

(202) 622-4910
Refer Reply To:

CC:PA:APJP:01/PLR-154862-01
Date:

February 6, 2002

Legend
Receiver

Defendants

Individual 1

Individual 2

Individual 3

Corporate Defendant 1

Corporate Defendant 2

Corporate Defendant 3

Corporate Defendant 4

Corporate Defendant 5

Company 1

Tax Year 1

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CC:PA:APJP:01/PLR-154862-01
Tax Year 2

Tax Year 3

Date 1

Date 2

Dear
This is in response to your request dated September 27, 2001, and supplemental
correspondence for a private letter ruling under section 6012 of the Internal Revenue
Code. Specifically, you request the following rulings:
1. That Receiver is not required to file federal income tax returns for Tax Years
1, 2, 3, and any taxable year during the duration of the receivership with respect
to the following Defendants:
a.
b.
c.
d.
e.
f.
g.
h.

Individual 1;
Individual 2;
Individual 3 (and/or the estate of Individual 3);
Corporate Defendant 1;
Corporate Defendant 2;
Corporate Defendant 3;
Corporate Defendant 4; and
Corporate Defendant 5.

2. That, with respect to filing federal income tax returns for Company 1,
Receiver, as sole director of the corporation shall:
a. Direct the officers of the corporation to prepare, sign, and file federal
income tax returns with respect to Tax Years 1, 2, 3, and all future years
during which Receiver serves as director;
b. Exclude revenues and expenses arising with respect to any and all of
the properties currently titled in the names of the various Defendants; and
c. Generate a single K-1 as part of this process and issue it to Individual
3, his successors, assigns, and/or heirs.
You have expressed that, although Receiver may not be required to file federal income
tax returns with respect to Defendants, Receiver is willing to file information returns on
behalf of Company 1 reflecting the Defendants share of income and gain received by
Company 1 on their behalf for Tax Years 1, 2, 3, and any subsequent tax year in which
he remains Receiver.

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CC:PA:APJP:01/PLR-154862-01
Facts
Individual 1 and Individual 2 are husband and wife, and parents of Individual 3. From
Date 1 to Date 2, Individual 1 owned and controlled several corporations with business
activities throughout the United States. During this time, Individual 1 used nominees,
foreign corporations, and off-shore accounts to conceal ownership of his and Individual
3s assets in the United States. Several companies were formed and used by Individual
1 in his efforts to evade taxes. Each of the corporate Defendants listed above has
been used to evade taxes by Individual 1 and/or Individual 3.
Corporate Defendant 1 was formed by Individual 1. Although initially owned by
Individual 1, the most recent tax returns for Corporate Defendant 1 suggest that all of
the stock is owned by Corporate Defendant 2, a foreign corporation that is owned,
according to the Defendants, by foreign investors. In addition, Corporate Defendant 3
and Corporate Defendant 4 have both been reported as being owned by Corporate
Defendant 1. Corporate Defendant 5 is a company that was owned by Individual 3.
Although questions exist regarding ownership of some of the companies, each has real
property in the United States to which federal tax liens have attached.
During Tax Year 1, the United States brought an action in a United States District Court,
and pursuant to section 7401 of the Internal Revenue Code (Code), sought to: (1)
reduce unpaid federal income and transferee tax liabilities of the Defendants to
judgment; (2) foreclose on federal tax liens against Defendants; (3) sell property subject
to the federal tax liens; and (4) upon proper application, have a receiver in equity
appointed. The action was brought against Defendants and third parties holding
security interests in certain real properties subject to the federal tax liens. By the
courts order, Receiver was appointed primarily to take possession of and manage the
real properties subject to the federal tax liens, protect the tenants interests therein,
preserve the value of the properties, and provide for the orderly sale of the properties in
a manner and on terms, as directed by the court.
Pursuant to the appointment, Receiver took control of the real properties subject to the
federal tax liens. Although title to the properties was held in the names of the various
entities under the receivership order, revenues and expenses generated by all of these
properties have been handled through accounts managed by Company 1, an S
Corporation formed by Individual 3.
Although the record owners of the stock of Company 1 are listed as Individual 3's
children, the Internal Revenue Service (IRS) determined that Individual 3 is the
beneficial owner of the stock and seized the stock as personal property of Individual 3.
At a special meeting of the shareholders, Receiver took possession of the stock from
the IRS. Shortly thereafter, the court confirmed that Individual 3 owned the stock of
Company 1, with his children as nominees. The real properties held in receivership
continue to be managed by Company 1, with Receiver as sole director of the
corporation.

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CC:PA:APJP:01/PLR-154862-01
Individual 1 and Individual 2 currently reside in one of the rental properties held in
receivership. Individual 3 left the United States shortly after the IRS made jeopardy
assessments against him. Since then, a suggestion of Individual 3s death has been
filed with the federal court. However, no death certificate has been filed and no probate
proceedings initiated with respect to the suggestion of his death.
Law and Analysis
Receivers Filing Obligations for Individual Defendants
Section 6012(a) of the Code provides, in part, that returns with respect to income taxes
shall be made by every individual, with certain exceptions, and every corporation
subject to taxation.
Section 1.6012-3(b)(5) of the Income Tax Regulations (regulations) requires a receiver
who stands in place of an individual to file the required income tax return with respect to
that individual. However, section 1.6012-3(b)(5) also provides that when the receiver
has only part of the property of the individual, he is not required to make the return and
the individual must file his own.
In the present situation, with respect to Individual 1 and Individual 2, Receiver is not
required to file income tax returns because he does not have all of their property.
Individual 1 has used multiple nominees, foreign corporations, and off-shore accounts
to conceal ownership of his assets in the United States. While Receiver has
possession of properties owned by some of the companies created by Individual 1, he
does not have all the property owned by Individual 1 and Individual 2. Therefore, he is
not required to make the necessary federal income tax returns for Individual 1 and
Individual 2.
Likewise, Receiver is not required to file income tax returns for Individual 3. Receiver
has possession of Individual 3s stock in Company 1, but has no other assets owned by
him. Since Receiver does not have possession of all property owned by Individual 3,
he is not required to make the necessary federal income tax returns with respect to
Individual 3.
Receivers Filing Obligations for Corporate Defendants
Section 6012(b)(3) of the Code provides that in a case where a receiver, by order of a
court of competent jurisdiction, by operation of law or otherwise has possession of or
holds title to all or substantially all the property or business of a corporation, whether or
not such property or business is being operated, such receiver shall make the return of
income for such corporation in the same manner and form as corporations are required
to make such returns.
Section 1.6012-3(b)(4) of the regulations provides that a receiver in charge of only a
small part of the property of a corporation need not make the return of income.

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CC:PA:APJP:01/PLR-154862-01
The principle set forth in section 6012(b)(3) of the Code and section 1.6012-3(b)(4) of
the regulations was explained in 1932 by the United States Supreme Court in North
American Oil v. Burnet, 286 U.S. 417, 422 (1932), where the Court held the following:
First. The income earned in 1916 and impounded by the receiver in that year
was not taxable to him, because he was the receiver of only a part of the
properties operated by the company. Under section 13(c) of the Revenue Act of
1916, receivers who are operating the property or business of corporations, and
any income tax due was to be assessed and collected in the same manner as if
assessed directly against the organization of whose business or properties they
have custody and control. The phraseology of this section was adopted without
change in the Revenue Act of 1918, 40 Stat. 1057, 1081, c 18, section 239. The
regulations of the Treasury Department have consistently construed these
statutes as applying only to receivers in charge of the entire property or business
of a corporation; and in all other cases have required the corporations
themselves to report their income. Treas. Regs. 33, arts. 26, 209; Treas. Regs.
45, arts. 424, 622. That construction is clearly correct. The language of the
section contemplates a substitution of the receiver for the corporation; and there
can be such substitution of the receiver for the corporation; and there can be
such substitution only when the receiver is in complete control of the properties
and business of the corporation. Moreover, there is no provision for the
consolidation of the return of a receiver of part of a corporations property or
business with the return of the corporation itself. It may not be assumed that
Congress intended to require the filing of two separate returns for the same year,
each covering only a part of the corporate income, without making provision for
consolidation so that the tax could be based upon the income as a whole.
In the present situation, Receiver does not have possession of or hold title to all or
substantially all the property or business of the corporate Defendants. Many of the
companies may be foreign corporations and have been used to conceal assets owned
by the individual Defendants. Receiver has possession of only certain real property
located in the United States to which federal tax liens have attached. Receiver is not in
complete control of all property and business of the corporate Defendants and is unable
to prepare complete and accurate returns for the companies. Therefore, Receiver is
not required to file income tax returns for the corporate Defendants.
Receivers Filing Obligations for Company 1
In accordance with the requirement in section 6012 of the Code that every corporation
subject to taxation file an income tax return, section 6037(a) provides that every
S Corporation shall make a return stating specifically the items of its gross income and
allowable deductions, the names and addresses of all persons owning stock in the
corporation and the number of shares of stock owned by each shareholder.
Section 1.6037-1(a) of the regulations provides that an S corporation must file Form
1120S, U.S. Income Tax Return for an S Corporation, setting forth the items of gross

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CC:PA:APJP:01/PLR-154862-01
income and the deductions allowable in computing taxable income as required by the
return form or in the instructions issued with respect thereto, and signed in accordance
with section 6062 of the Code by the person authorized to sign a return.
Section 6062 of the Code states that the return of a corporation with respect to income
shall be signed by the president, vice-president, treasurer, assistant treasurer, chief
accounting officer, or any other officer duly authorized so to act.
In the present situation, Company 1 is an S corporation subject to taxation and is
required to make returns of income. Receiver, as sole director of the corporation, is
required to ensure that the necessary returns are prepared and signed by the officer(s)
duly authorized to sign the returns. The income tax returns must be made on Form
1120S and should exclude revenues and expenses associated with the real properties
managed by Company 1 to the extent that they are not items of gross income or
deductions allowable in computing the taxable income of the corporation. Receiver
shall issue the accompanying Form K-1 to Individual 3, his successors, assigns, and/or
heirs, reflecting his allocable share of the income and/or deductions of the corporation
as owner of 100% of the stock of Company 1.
Conclusion
Based on the information provided and the representations made, we conclude the
following:
1. That, with respect to Tax Years 1, 2, 3, and any taxable year during the
duration of the receivership:
a. Receiver is not required to file federal income tax returns for any of the
individual Defendants because he does not have possession of all
property owned by them; and
b. Receiver is not required to file federal income tax returns for any of the
corporate Defendants since he does not have possession of or hold title
to all or substantially all of the property and business of those
corporations.
2. That, with respect to Tax Years 1, 2, 3 and all future years during which
Receiver is director of Company 1:
a. Receiver is required to ensure that federal income tax returns are
prepared, signed by the appropriate official and filed in accordance with
applicable tax laws;
b. Revenues and expenses derived from the properties held in
receivership shall be excluded from the returns to the extent that they are
not items of gross income or deductions allowable in computing taxable

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income for Company 1; and
c. Receiver is required to issue Form K-1 to Individual 3, his successors,
assigns, and/or heirs, as the sole shareholder of Company 1.
Receivers willingness to file information returns on behalf of Company 1 with respect to
each of the Defendants reflecting their share of income or gain received on their behalf
by Company 1 is generally consistent with the purpose of the information reporting
guidelines. Therefore, Receiver should file the appropriate information returns on
behalf of Company 1 with respect to the Defendants showing their share of income or
gain received by Company 1 on their behalf.
This ruling is directed only to the taxpayer(s) requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
Sincerely,
James C. Gibbons
Chief, Branch 1
Office of the Assistant Chief Counsel
(Administrative Provisions and
Judicial Practice)
Enclosures (2):
Copy of this letter
Copy for section 6110 purposes
cc:

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