A high-flying Rockville jet-trading company that has handled planes belonging to Kenny Rogers, Frank Sinatra, Arab sheiks and some of the nation's top corporations has been charged with defrauding the federal government of millions in dollars of taxes.
A federal grand jury in Baltimore handed down the seven-count tax fraud indictment against Omni International Corp. and four of its executives, including its chairman and president. The indictment charges that the company avoided paying taxes by shifting airplane sales transactions to its Bermuda subsidiary, falsifying documents and concealing some financial records from its outside accounting firm.
Between 1974 and 1980, the government charges, Omni put $16.8 million worth of income on its Bermuda subsidiary's books, but only reported $91,574 of that income on Omni's tax returns.
According to the indictment, Omni reported a total of $4.4 million in taxable income in the fiscal years between 1975 and 1980, even though "the taxable income and tax of the corporation . . . were substantially greater than the amounts disclosed."
The government charges that the defendants "willfully and knowingly combined, conspired, confederated and agreed together and with each other to defraud the United States by impeding, obstructing and defeating" the Internal Revenue Service's attempt to collect taxes from the company.
Omni officials deny the charges. "We're obviously disappointed that the government has seen fit to bring indictments against the company," said Evan T. Barnett, vice president for finance and one of those charged. "However, we're confident that the company and its officers are innocent of any wrongdoing. We're looking forward to an early trial so we can get a chance to vindicate the company and its officers."
Omni International, which was originally based in Washington, has for several years been one of the nation's top buyers, sellers and leasers of used jets. Doing business as OMNI International Jet Trading Floor, it is a mart for all manner of aircraft, handling everything from small corporate aircraft to Boeing 707s and other large passenger jets.
Industry sources estimate that Omni handled about $150 million worth of corporate aircraft last year, making it the largest firm in its field. Like others in the business, Omni sometimes buys and sells aircraft in much the same way a used car dealer trades autos, and also works much like a real estate broker, arranging sales for a commission.
A corporate customer looking to replace an executive jet can trade a used jet in to Omni for a newer model. Omni even provides financing, and then sells the traded-in plane in the world market. Many such planes are sold overseas.
In recent years, Omni has sold the two jets owned by the late Elvis Presley, taken Frank Sinatra's plane in trade and sold a jet to Kenny Rogers.
According to the indictment, Omni in 1975 set up a subsidiary in Bermuda called Euro Airfinance to register aircraft in Bermuda and Great Britain. Euro Air paid no taxes to the Bermuda government and was liable for virtually no U.S. taxes.
The company then began switching some of its U.S. jet transactions to the Euro Air subsidiary, the government says. According to the indictment, Barnett and Wayne Hilmer, chairman and majority owner of Omni, "directed that certain aircraft transactions, including the profit therefrom, be placed on the books of Euro Air when, in truth and in fact, as they then and there well knew, these profits belonged to Omni."
The indictment details a number of purchases and sales of aircraft, tracing payments, ownership titles and customers all over the world and illustrating as much about the nature of corporate ownership and leasing--which is often done through offshore companies to gain tax advantages--as it does about Omni's alleged wrongdoing.
One BAC1-11 jet appears in the account several times, leased by Omni for short periods of time to several American companies--usually in the name of offshore subsidiaries of the companies. It was then sold to "Kenny Rogers Ltd., a Cayman Islands corporation to be formed," in April 1980--by Euro Air.
In another transaction, in 1975, Omni bought a BAC1-11 jet and then sold it to Tenneco Inc. for $1 million and the trade-in of two Vickers Viscount aircraft. According to the indictment, Hilmer directed that the purchase and resale of the BAC1-11 be put on the books of Euro Air. In addition, the government says, Barnett told the company's West German banker to split an $850,000 deposit from the sale of the jet among accounts belonging to Omni and Euro Air.
Elsewhere in the indictment, Hilmer is alleged to have shifted a number of aircraft--including, at one point, two Boeing 707 long-range passenger jets--from Omni's books to Euro Air's accounts, while Barnett is alleged to have crossed out the name of "Omni International Jet Trading Floor Inc." from a contract for a Grumman Gulfstream II executive jet and written in "Euro Airfinance Ltd."
In addition to allegations that it evaded taxes by transferring the sales of the planes to Euro Air's books, Omni is also charged with hiding the sales transfer records from its outside auditors, the accounting firm Touche Ross & Co. According to the indictment, in 1976, 1977, 1978, 1979 and 1980, "Barnett removed and caused the removal of certain records from the files of Euro Air prior to their examination by Touche Ross." The employe who prepared the company's tax returns, one of those named in the indictment, is charged with knowing that the returns did not include all of the money earned by Euro Air.
Each of the seven conspiracy and tax evasions counts carries a maximum penalty of five years in prison and a $10,000 fine, plus a repayment of the back taxes, with penalties and interest.