WASHINGTON -- Cloyd F. Angle had a plan to avoid paying taxes. Unfortunately for the family of the late San Joaquin Valley almond farmer, it didn't work out too well.
Now, Angle's estate owes more than $2 million in unpaid taxes as well as several hundred thousand dollars in penalties. Family members also must face an unflattering portrait of the one-time Cal-Almond patriarch included in a federal judge's new ruling.
On Monday, U.S. Tax Court Judge Mark V. Holmes dismissed claims filed on behalf of Angle's estate as well as his widow, Bonnie Angle. The judge did not hide his disdain for the tax-shelter effort that included offshore accounts, a proposed renunciation of U.S. citizenship and a series of "magic" and "convoluted" transactions.
"Back in the real world," Holmes wrote at one point, following a description of Angle's apparently fanciful tax-shelter plan.
Telephone and e-mail attempts to reach three of the attorneys who have represented the Angle estate were unsuccessful Tuesday. Two of those attorneys formally withdrew from the case following a 2005 trial.
From his ranch in the Stanislaus County town of Hughson, Angle had built a remarkably successful business. Incorporated in the 1970s, Cal-Almond by the mid-1990s was processing about 25,000 tons of almonds annually. This was nearly 10 percent of the San Joaquin Valley's total, making Cal-Almond one of the nation's top four almond processors.
By 1994, Angle's son Tyler owned 51 percent of the company. Though Cloyd Angle owned the other 49 percent, his participation in company affairs had withered.
"Cloyd wanted out -- but only if he could get enough money," Holmes noted in his 22-page opinion.
Enter the Virginia-based Morven Partners, which was trying to expand its already large nut business. Angle told a Cal-Almond executive that he would fend off Morven's feelers by "throwing out a number that they wouldn't accept." Instead, Morven Partners quickly agreed by October 1994 to buy Cal-Almond for $20 million.
"Cloyd's only concern about selling the company was that he would have to pay taxes on whatever he received," Holmes wrote. "But then he spotted an advertisement for books and tapes on offshore tax planning by a man named Jerome Schneider in SkyMall, a mail-order catalog found in the backs of airplane seats."
Schneider was poorly educated but very aggressive in promoting tax shelters. He eventually would plead guilty in 2004 to charges of conspiracy to defraud the United States, serving six months in prison and agreeing to testify against former clients.
Well before any indictments, Holmes wrote, Cloyd Angle "bit down hard on this lure" of tax shelters offered by Schneider. The two men eventually conceived a plan.
The general idea, Holmes explained, was to transfer Angle's shares in Cal-Almond to offshore companies in exchange for a private annuity. Angle and his wife would then "renounce their American citizenship, and defer recognition of the gain from Cal-Almond's sale to Morven until it could be distributed tax free to an expatriated Cloyd in a country that didn't have an income tax."
Cloyd and Bonnie Angle eventually became citizens of St. Kitts and Nevis in the Caribbean, and later moved to Canada.
In the British Virgin Islands, Angle picked two "off-the-shelf" corporations named Molseberry Ltd. and Padang Securities. Holmes noted Angles selected these as the companies to which he would sell Cal-Almond stock "not because they had any assets or because he'd actually performed due diligence on them -- which he hadn't -- but because he liked the names."
Morven Partners eventually completed the purchase of Cal-Almond, though the company announced in 2002 that it would put the almond-processing firm up for sale. Cloyd Angle died in May 2004.
Holmes dismissed the Caribbean corporations associated with the tax-shelter efforts as "artificial foliage," and rejected the Angle estate's arguments that the family had reasonably relied on tax advice. Consequently, the judge assessed a 20 percent "accuracy related" penalty on top of the $2 million-plus in taxes owed as part of the original Cal-Almond sale.