Idaho man, Overstreet, loses resort in Mexico after IRS sting

Idaho StatesmanJanuary 3, 2013 

The beachfront property on the Baja California peninsula was remote and undeveloped when Thomas Dale Overstreet bought it for $25,000 in 1995.

Over the next 15 years, the small-town Idaho bar owner pumped money into a resort project and kept it in the name of his 20-year-old son, a Mexican citizen.

Overstreet was ready to sell his Fruitland bar in 2011 and retire to his personal paradise, but an undercover IRS investigation brought criminal charges that ended with his sentencing last month in a Boise federal courtroom. The 67-year-old is in custody at the Ada County Jail awaiting placement at a federal prison, where he’s set to spend 46 months for tax evasion and illegal gambling.

He also gave up ownership of the Flying High Resort and the land it sits on in La Paz, Mexico, under a judgment issued by U.S. District Judge Lynn Winmill.

And he’s required to pay more than $5 million as part of a criminal forfeiture that targeted nearly everything he owned.

U.S. Attorney Wendy Olson praised the senior citizen’s prison sentence in a prepared statement that called paying taxes a “solemn duty” of all Americans.

A review of documents associated with Overstreet’s case shows that a long-running illegal gambling operation led to his undoing, coupled with years of disregard for tax laws. He detailed the illegal operation to a potential buyer who turned out to be an undercover investigator.

The fate of Overstreet’s Mexican property is still unknown. His son, Dalanay Overstreet, still has time to claim a stake in it. But if he does, Assistant U.S. Attorney Tony Hall, who handles federal forfeitures in Boise, says he’ll fight it in court. Winmill has already concluded that the younger Oversteet was an owner in name only and that his father truly controlled the property.

Thomas Overstreet apologized to Winmill “and the American people” at his December sentencing and said the case has been “humiliating.”

“It was my arrogance that led me to evade my taxes, as well as engage in illegal gambling,” Overstreet said.

Overstreet’s lawyer, Thomas Monaghan of the Idaho federal public defender’s office, declined to comment for this article.

CLUB 7 WAS WARNED

Overstreet owned and operated Club 7, located at 210 SW 3rd St. in Fruitland, since at least 2000. By 2003, an illegal gambling operation was flourishing there and earning him good money, according to court documents. But it didn’t take long for police to notice.

In 2005, Idaho State Police cited Overstreet for allowing gambling and gambling payoffs at the club. He pleaded guilty and paid a $3,000 fine. He also was warned that allowing gambling at his business would result in the loss of his liquor license.

The citation, fine and warning did little to curb the activities. Authorities believe Overstreet never stopped the operation, instead adjusting his procedures to better conceal the activity, including letting customers use, at no charge, an ATM he bought at a trade show in Las Vegas.

He required all payments to be made in cash and would use that money to replenish the ATM and cash third-party checks at no charge, prosecutors say.

He stored the extra cash in a safe in his home above the bar, and he rarely deposited cash into his bank account, according to court documents. Instead, he transported millions in cash to Mexico to fund construction of the resort, documents show.

Of $4.7 million in deposits to Overstreet’s bank account over the years, only $25,000 was cash. Instead, prosecutors said, Overstreet encouraged others to deposit third-party checks into the account. By avoiding cash deposits, Overstreet also avoided federal reporting requirements for currency transactions.

IRS INFILTRATION

He detailed the plan to an IRS agent posing as a potential buyer in April 2011. When the agent asked whether his sales system was connected to a computer, Overstreet said it wasn’t, because “that’s tied too much to IRS and taxes, all that stuff,” according to court documents.

The undercover agent recorded Overstreet saying that he didn’t want to pay taxes and that he made “way more” than the $120,000 listed as annual profit in 2009 in the business sale advertisement.

Overstreet told the agent that he hadn’t filed a tax return since 1999. Asked whether the IRS ever came after him, he responded that the federal agency didn’t care about bars.

He was wrong.

Federal agents searched Club 7 the next month, and a grand jury indicted Overstreet in September 2011 on 29 felony charges, including aiding and abetting money laundering, illegal gambling, bulk cash smuggling and tax evasion. He’s been in custody ever since.

FORFEITURE TRIAL PRECEDED SENTENCING

Oversteet pleaded guilty in August to income tax evasion, operating an illegal gambling business and conspiracy to commit money laundering. At issue during a trial before Judge Winmill in September was the fate of his Mexican resort and the rest of his assets.

Witnesses included former Club 7 employees who told Winmill of the cash-only procedures that governed the bar.

Winmill also heard from associates of Overstreet, including Tina Youngblood, who said she routinely received $10,000 in U.S. currency at Overstreet’s property in Fruitland with instructions to take the money to Mexico and spend it on the resort.

Winmill also heard testimony about the actual ownership of the resort, which technically is in Dalaney Overstreet’s name. Thomas Overstreet put the property in the boy’s name because Mexico prohibits foreigners from holding the titles to beachfront property.

It is not clear whether Dalaney Overstreet was born a Mexican citizen or later gained citizenship. He graduated from New Plymouth High School in 2010 and has since been living on the property and working on the resort, which opened in November 2011. He didn’t return an email seeking comment.

At his Dec. 5 sentencing, Thomas Overstreet told Winmill that he regrets his years of illegal activity.

“I wish I could turn the clock back,” Overstreet said.

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