According to testimony, Hall and Morris, who operated a business under the name Numbers and Beyond, solicited individuals to claim large tax refunds base on withholdings from bogus Forms 1099-OID with Morris as the preparer. Morris and others fabricated forms to make it appear they had been issued by legitimate financial institutions. Withholding amounts on the forms were used to offset or exceed his clients' tax liabilities. Armstrong received a refund of $1.6 million and moved most of the money to shell companies and offshore bank accounts. The government is seeking forfeiture of Armstrong's private plane and two pieces of real property purchased with the fraud proceeds, one of which is a house in Brighton, Colo., purchased through Larry Hall by a nominee land trust.
The maximum penalty for mail fraud has a maximum penalty of 20 years and prison and a fine of up to $250,000 per count. Filing false claims carries a maximum five-year term and the same fine while engaging in monetary transactions in property derived from mail fraud and conspiracy to defraud the U.S. each have a maximum 10-year term and fine of up to $250,000 per count.
Morris was found guilty of three counts of mail fraud, seventeen counts of filing false claims against the United States and one count of conspiracy to defraud the United States. Armstrong was found guilty of one count of mail fraud, eight counts of filing false claims against the United States, three counts of engaging in monetary transactions in property derived from mail fraud and one count for conspiracy to defraud the United States.