Twin Cities man admits ‘secret trust’ scam yielded $10M tax refund

A Twin Cities man has admitted establishing a phony trust and collecting more than $10 million in a single federal tax return, then using his windfall to buy a house and various big-ticket items, according to federal prosecutors.

Nathan Lloyd Staples, 38, of Mayer, awaits sentencing after pleading guilty in U.S. District Court to filing a false claim for a refund in connection with his tax return for 2022.

The plea agreement between the U.S. Attorney’s Office and Staples notes that federal sentencing guidelines call for a term ranging from 4¾ to 5¾ years. However, federal judges have full discretion when sentencing defendants and are not bound by the guidelines.

Staples remains free on bond ahead of sentencing, which has yet to be scheduled.

Staples received a check from the federal government for $10,121,542 and used some of it for a deposit on a house and to buy a recreational vehicle, three vehicles and luxury purses, the plea filing read.

Also according to the plea agreement:

Staples met someone through family contacts who instructed him on how to submit false tax returns and access the holdings of a “secret trust” maintained by the U.S. Treasury.

This person, identified in public court records only as Individual A, told Staples to set up a family trust and file returns on behalf of it.

Staples expressed doubt about the legality of what Individual A was telling him and found a government website that “secret government trust accounts were false, and there were possible civil and criminal penalties for filing tax returns based on Individual A’s theories,” the plea filing read.

Even so, Staples organized an estate in his name and filed a false return in April 2023 with Individual A’s assistance. He falsely claimed the trust earned $24.4 million in 2022 and $19 million in income tax withheld, $10 million of that an overpayment.

In reality, Staples worked in the restaurant industry, and his household income that year was roughly $100,000.

Individual A went on to urge Staples to amend previous returns that he filed on behalf of himself and his wife and instead resubmit them in the name of the trust.

Staples filed more than three dozen amended terms dating back to 2005 for himself and 2001 for his wife. In total, they asked for $202 million in refunds.

Once Staples received the $10 million refund, he deposited the check in a bank in July and spent more than $1 million of the money in less than two weeks. He paid Individual A $50,000 for his instruction.

Soon afterward, an IRS revenue officer caught on to the fraud, contacted the bank and froze Staples' accounts. The IRS seized purchases made with the ill-gotten gains and recovered all but $784,479 of the government’s money, an amount Staples has agreed to repay.

Neither the plea agreement, the U.S. Attorney’s Office nor Staples' defense attorney have said whether Individual A has been charged along with Staples.