The story surrounding Larry E. Conner, a promoter of tax evasion strategies, has resurfaced recently with notable implications for his clients, particularly one Ryan L. Ulibarri, a dentist from Fort Collins, Colorado. As outlined in my previous article, Conner peddled a convoluted tax scheme involving multiple layers of trusts, foundations, and tax-exempt entities that purportedly resulted in clients paying little to no federal income tax on their business income. These “pure trust” schemes, known by various names, have been around for decades and regularly attract the attention of the Internal Revenue Service (IRS), leading to legal repercussions for both promoters and participants. Conner’s clients, including Ulibarri, are now contending with serious legal challenges as federal indictments highlight their alleged engagement in widespread tax evasion.
Ulibarri’s case, detailed in the indictment U.S. v. Ulibarri (Aug. 21, 2024), exemplifies how the pure trust strategy was executed. He supposedly avoided over $1 million in federal income taxes after paying Conner $50,000 for his services. Central to Ulibarri’s approach was the establishment of multiple trusts: income from his dental practice was assigned to the Smile High Trust, which then funneled the income through other trusts before finally reaching a family foundation designated as a charitable entity. Even dining on the apparent success of this tax strategy, Ulibarri continued to utilize his assets from these trusts as if nothing changed in the management of his finances.
Despite alarming warnings from a qualified attorney and CPA, who called the scheme “wacky” and inappropriate for a dental practice, Ulibarri disregarded the caution and proceeded with Conner’s plan. His actions included the unorthodox transfer of dental practice bank accounts to an unfamiliar bank, illustrating a blatant disregard for legal norms. Over the years from 2015 to 2022, Ulibarri falsely claimed more than $5 million in deductions related to the Smile High Trust, reportedly observing no income attributed to the trust. This trust structure, described as a “Pure Trust Organization In Common Law,” was fundamentally flawed, using terms that hold no legitimate legal grounding.
The subsequent layers in Ulibarri’s scheme further demonstrated unsound financial management. Allegations in the indictment reveal that the Title of Liberty Family Trust, like the Smile High Trust, had no actual income while Ulibarri purportedly used funds from it for personal expenses, including mortgage payments and substantial life insurance premiums. The Rod of Iron Charitable Trust, another element of this dubious structure, continued the trend wherein income was falsely reported leading to deductions. Ulibarri even funneled personal expenses through a foundation purportedly established for charitable purposes, misleadingly claiming significant deductions that were designed to obscure illicit activities.
The pure trust arrangement at the heart of Ulibarri’s operations has long been recognized as a scam throughout its nearly fifty-year existence. Participants, including Ulibarri, are likely to face severe consequences upon conclusion of the trials set for 2025. Although rampant among certain professions, particularly dentists and chiropractors, the involvement in such tax schemes transcends mere victimization. Ulibarri, alongside other participants in the scheme, undoubtedly had some awareness of the wrongdoing involved, especially considering the clear advice received that cast serious doubt on Conner’s strategy. The underlying psychological calculus—temptation of saving on taxes versus risk of penal outcomes—played a significant role in propelling these individuals into noncompliance with tax laws.
Despite the passage of time and evolving methods, pure trust scams like the one purportedly utilized by Ulibarri and promoted by Conner continue to draw participants. Their consistency in offering a way to evade federal income taxes underscores the opportunism presented by scam artists. Ulibarri thought he would outsmart the system; however, the structure’s complexity only served to reveal its inherent flaws, preventing any legitimate financial benefits from being obtained and ultimately resulting in the unraveling of an illegal operation justified under the guise of financial strategy. As this case unfolds, it demonstrates the dangers of falling prey to purportedly sophisticated tax strategies that deceptively promise financial advantages while violating the law.
Looking ahead, the trials of Ulibarri and Conner—each with the potential for legal precedents—are set against a backdrop of ongoing IRS scrutiny and public awareness of abuse involving trusts in tax strategies. Legal repercussions for those involved not only include potential prison terms but also underscore the critical importance of sound legal and financial advice when attempting to navigate tax responsibilities within legitimate frameworks. The case serves as a cautionary tale for professionals and similar practitioners, highlighting how even educated individuals can sometimes be lured into illicit schemes despite valid warnings.