Couple acquitted of tax fraud

Pam and James Moran are taking their time driving home from Seattle to Montrose, Colo., since it seems like they have all the time in the world.

That hasn't always been the case. For the past seven years, they've lived with the possibility that they would spend their middle age behind bars.

Things were darkest just after Christmas 2004, when a federal jury in Seattle convicted them — along with 10 others — in a massive conspiracy and tax-evasion scheme known as Anderson's Ark and Associates, based in Seattle. Hundreds of investors lost as much as $62 million in the scheme, which involved sham investments and tax shelters in Costa Rica.

The Morans each faced seven years in prison and were ordered to pay restitution of more than $30 million.

The couple appealed and won a new trial. And last week — almost three years to the day of their convictions — another Seattle jury acquitted them of a combined 74 felony counts following a 21-day trial. "We chose to take a stand and let the truth be told," Pamela Moran, 56, said Thursday by phone.

"We knew that if the truth was told, we would be vindicated," added James, 59.

The truth, however, came at a heavy price. The Morans lost hundreds of thousands of dollars of their money — and money belonging to family and friends — to the Anderson Ark investment scheme. Forfeitures, attorneys' fees and years as accused felons have pretty much wiped them out financially.

Still, said Pam Moran, it is hard to feel anything but relief.

"We're just trying to put our feet on the ground," she said. "It has taken character and perseverance and our faith in God to see us through this."

The Internal Revenue Service began an investigation into Anderson's Ark and Associates in 2000. The case was handled by attorneys from the Department of Justice's Tax Division in Washington, D.C. The Morans were suspects because they had been recruited by company founder Keith Anderson to help recruit investors, and were paid on commission.

Jon Zulauf, Pam Moran's Seattle attorney, said they were a kind, Christian couple who were duped and used by Anderson and others involved in the scheme. The government, he said, should have realized that because the Andersons were pouring all of their own savings, commissions and money from relatives and friends into the AAA "investments." James Moran's parents, for example, lost $258,000.

"Why would they do that? It was because they believed in the product," Zulauf said. "So the notion that they knew what was really going on is absurd."

What was really going on was this: Anderson was recklessly investing tens of millions of investor dollars, which were supposed to be safe and bringing in huge returns from tax shelters in South America, according to court documents. When he lost money, Anderson began paying investors with money from fellow investors.

Keith Anderson was convicted and sentenced to 20 years in prison and ordered to pay $43 million in restitution and penalties. Other defendants received between two and 15 years in prison for their roles.

Zulauf and James Moran's defense attorney, Peter Mair, point out in court filings that it is an "absolute defense" to an income-tax prosecution if a taxpayer has a good-faith belief that what they are doing is legal. Pamela Moran, according to court documents, had been told by several accountants and attorneys that the Anderson Ark's investments appeared legitimate. "And they probably were — on paper," said Zulauf.

However, when Pamela Moran attempted to testify during the 2004 trial about that advice, government lawyers objected — even though they later conceded in court documents that she should have been allowed to speak.

U.S. District Judge John Coughenour sided with prosecutors at trial and refused to allow that testimony.

A panel of 9th Circuit Court of Appeal judges ruled in April that Coughenour's ruling was "an abuse of discretion," reversed the convictions and ordered a new trial. It lasted 21 days, again in front of Coughenour, and ended last week with a full acquittal. Both wept at the verdict, Mair said later.

"It's rewarding that the system prevailed, even after all this time," said Pamela Moran. "But now we have to pick up the pieces and rebuild. This has cost us everything. But still, it's a beginning."

Mike Carter: 206-464-3706

or mcarter@seattletimes.com