Adolph crafts new bill for scam victims

Friday, December 18, 2009

State Rep. Bill Adolph, R-165, of Springfield, introduced legislation this week that would allow victims of Ponzi schemes to recoup taxes they paid on over-reported income that never actually existed.

Ponzi schemes are essentially fraudulent investment operations in which the schemer pays high-yield “returns” to old investors using new investors’ money, usually while pocketing funds instead of actually investing them in anything.

The schemes are nearly always doomed to fail as new investors taper off and old investors, thinking they have made money, ask for returns that never existed.

Infamous investment banker Bernie Madoff was convicted of just such activities earlier this year, as was Joseph Forte, of Broomall.

Forte swindled dozens of local investors out of at least $20 million between 1996 and 2008. A federal judge sentenced him to 15 years imprisonment last month and ordered him to pay $35 million in restitution to his victims.

How much they will ever actually receive is still anyone’s guess, but House Bill 2153 would at least allow victims of such schemes to recoup taxes they unwittingly paid on nonexistent money.

“Basically, if an individual or business pays income tax on investments that are later revealed to be nonexistent due to fraudulent activity on the part of the investor, that individual or business currently has no ability to recoup that money from the state,” said Adolph in a release. “My legislation would correct that inequity in the law.”

The bill, which was drafted in cooperation with the Pennsylvania Institute of Certified Public Accountants, is currently before the House Finance Committee.