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Air America's Owners No Strangers To Fraud

The founders (and current majority owners) of Air America Radio, Sheldon and Anita Drobny, are no strangers to schemes that run afoul of the law. Sheldon and Anita peddled tax shelters in the late 1970's before they were caught by the IRS. From FindLaw:

During the late 1970's, Sheldon Drobny, a former IRS agent, was a partner in the accounting firm of Adler & Drobny, Ltd., based near Chicago, Illinois. Drobny promoted (and he and his wife invested in) two "research and development" programs purportedly designed to develop the substance known as "aloe vera" for commercial purposes. "Aloe vera" is an extract of the Aloe Barbadensis plant, and today is used in many skin-care and personal hygiene products. The Drobnys, on their joint federal income tax return for 1979 (prepared by Sheldon Drobny), claimed certain losses as deductions in connection with their investment in the aloe vera research and development programs. In 1983, the Illinois District Director of the IRS (based in Chicago, Illinois) disallowed these deductions, after determining through investigation that they were part of an impermissible "tax shelter" scheme, and informed the Drobnys that they were liable for a $10,877 tax deficiency. The District Director also notified Sheldon Drobny that he was liable for a civil fraud penalty (or "addition to tax") in the amount of $5,439.

...On June 26, 1986, the Tax Court entered its decision in Drobny I, ruling in favor of the IRS. The opinion, authored by Judge Simpson, concluded that the Drobnys were not entitled to claim losses arising from the aloe vera programs' research and development expenditures as deductions on their jointly-filed 1979 return. The court disallowed these deductions because of compelling evidence that "the investment programs entered into by the petitioners were primarily intended to produce tax savings without any significant likelihood of an economic profit." The tax tribunal also found that Sheldon Drobny was liable for a civil fraud penalty (or "addition to tax") under 26 U.S.C. sec. 6653(b), reasoning that he had "[known] that some or all of the research and experimental expenditures arising from the programs were not deductible and . . . intentionally reported losses [as deductions] . . . on his 1979 income tax return, resulting in a fraudulent underpayment of tax." The court in its opinion referred to the evidence of Sheldon Drobny's fraudulent conduct (i.e., his knowingly claiming impermissible deductions) as "considerable," noting that in light of Drobny's expertise, knowledge, and sophistication in the area of tax law, it was highly improbable that he had unknowingly claimed impermissible deductions.

Hugh Hewitt has more on the numbers behind the Air America/Gloria Wise Club loans.

Previous Coverage

Air America Muddies the Waters in Missing Money Case
Air America's Charity Scam Denials Don't Ring True
Air America Steals Half Million Dollars From Bronx Kids Charity


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Comments (6)

It's a good old fasioned bl... (Below threshold)
Paul:

It's a good old fasioned blogswarm.

Hmmmm.I think some... (Below threshold)
ed:

Hmmmm.

I think some more details are in order. If they were spending money to research "aloe vera" and the Tax Court disallowed the investment because the investment wasn't done to generate a profit, then why are we using "aloe vera" almost everywhere?

Wouldn't the successful use of "aloe vera" in many markets and products show that the Tax Court was in fact wrong?

No, ed, it proves that the ... (Below threshold)
Scriptfox:

No, ed, it proves that the Drobny's weren't serious about it. That sort of business could be legitimate, but that doesn't mean that every company formed for those purposes is.

E.G. if he had said he was operating a recording studio, then bought all of the equipment, rented the building, and then didn't spend any money on promotion or actual recordings so that everything would be a dead loss... that would be fraudulent. It has no bearing on the legitimacy of other recording studios.

I'm going to start a beer c... (Below threshold)
TCO:

I'm going to start a beer critiquing business. All of my consumption is an expense...

Anyway...it amazes me how the libs love to take tax deductions. I remember a friend of mine in my 20s back in the NAV who was practically a socialist (saying things like we should confiscate wealth over 100K)...at tax time, we go to send in our stuff. I've got my EZ with standard deduction only. He's ordered a bunch of pamphlets (and this was pre-internet) that his uncle sent him. For all I know he was deducting uniforms (not really allowed), etc. Anyhow...I don't know what his details were. But I was amazed. Seeing that I had no idea what he could have for a deduction. And that he was always talking about how taxes should be higher.

Reminds me of Hill and Bill deducting 5 bucks for Bill's used boxers. Come on. Used boxers are rags. Put em on ebay and see what you get. (this was pre-celebrity btw).

I'm still ruminating about ... (Below threshold)
-S-:

I'm still ruminating about the fact that Hugh Hewitt "endorsed" (so it's said) new L.A. militant Hispanic mayor, Villiarosa. And denounced Colorado's Tancredo based upon false allegations (a whole denouncement based upon alleging Tancredo said that which he did not say, and yet Hewitt managed to diss the guy based upon what Hewitt alleges Tancredo said while Tancredo didn't)...

I dunno. I think the RNC is a big tent party and there's room for a lot of opinions and a lot of voter variety, but, just saying, sometimes, some of these sources who propose to represent Republicans don't really. Worth thinking about, anyway. Until I reach a conclusion, I'm not taking seriously any more advice from the Grey Area folks.

To be clear, I can't stand ... (Below threshold)
-S-:

To be clear, I can't stand Air America, so don't misunderstand my hesitation (^^)...it's not hesitation about Air America, but in embracing information from Gray Area folks.




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