January 6, 2005 | Read Time: 1 minute
The U.S. Department of Justice has dropped its lawsuit against a San Diego financial-services company in which it had charged the business with defrauding the government and investors by selling questionable tax shelters — including one that allegedly allowed clients of the company to falsely claim charitable donations.
Instead, the Justice Department said in a statement, it is pursuing other investigations of the company, Xelan. The company is under criminal investigation by a federal grand jury, and the IRS is suing Xelan to recover hundreds of millions of dollars that it says is owed by users of Xelan investment and insurance plans.
Separately, the IRS is challenging charitable deductions claimed by some Xelan clients.
By withdrawing the fraud suit, the Justice Department ends its effort to shut down the company’s operations immediately. The withdrawal comes after a federal district court judge last month declined to extend a temporary restraining order that had frozen some $500-million in assets held by Xelan clients, saying that the government had failed to provide sufficient evidence that entities owned by the company were selling abusive tax shelters rather than taking legitimate tax deductions.
Lawyers for the company and its officials say they deny any wrongdoing (The Chronicle, November 25).
The case is United States v. L. Donald Guess, et al., No. 04 CV2184-LAB.
