The former director of the Virginia-based Airlie Foundation and two affiliated organizations have been accused of civil tax fraud by the Internal Revenue Service, which is claiming nearly $2.8 million in back taxes and penalties and is threatening to lift the foundation's valuable tax exempt status, Airlie officials said yesterday.
Dr. Murdock Head, the former executive director of the Warrenton foundation who was convicted last year of engaging in a criminal conspiracy, disclosed the IRS claim in an interview. "I just got really zapped," he said.
"This IRS has set out to virtually annihilate and eliminate [the Arlie-affiliated organizations] and Dr. Head," Colin Thomas, Head's accountant, asserted in a telephone interview. "You almost have to see that there is a personal vendetta involved."
Head and the two Airlie affiliates plan to challenge the IRS claims in Tax Court, Thomas said.
IRS officials declined to comment, citing privacy restrictions governing income tax matters. An IRS spokesman said, however, that the Airlie Foundation's exemption from federal income taxes is still in effect.
Head, 56, was convicted by a U.S. District Court jury in Alexandria last October of a single conspiracy count and was sentenced by Judge Oren R. Lewis to three years' imprisonment. He is appealing his conviction to the 4th Circuit Court of Appeals in Richmond and is free on a $5,000 personal recognizance bond.
At the time of Head's sentencing, Judge Lewis noted that the Airlie founder was, "for all practical purposes, broke." Head's financial statement then showed his personal liabilities exceeded his assets by about $126,000. His lawyers have said he previously donated more than $1 million to the Airlie Foundation, a conference center and retreat that bills itself as an "island of thought" in the Virginia countryside.
The conspiracy count against Head was a sweeping one, including allegations of bribery and tax violations. Head was accused, in part, of arranging to bribe former U.S. representatives Daniel J. Flood (D-Pa.) and Otto E. Passman (D-La.). The Washington Post later reported, however, that the jury interpreted the count narrowly and did not believe Head guilty of scheming to bribe either congressman.
Instead, The Post reported, the jurors found that Head had conspired to commit tax infractions, including arranging an improper $11,000 loan to a former IRS agent.
The jury acquitted Head of two separate tax evasion counts. Ten other bribery and tax violation charges have been dismissed.
Head referred questions about the new IRS claims to his accountant. Thomas said the assessments against Head and the two organizations totaled $2,775,289 and included $2,180,028 levied against Head personally. A 50 percent penalty was imposed by IRS on the allegedly unpaid taxes, Thomas said, and interest charges may later be assessed.
Thomas said the IRS claims stem partly from allegations made by federal prosecutors during Head's trial. IRS disallowed more than $1 million in deductions claimed by Head as donations to Airlie and assessed additional taxes against Head for his alleged personal use of boats and money belonging to Airlie-affiliated enterprises, Thomas said.
In addition, IRS officials have notified Airlie officials that they intend to challenge the foundation's tax-exempt status since the 1960s and are considering levying other assessments against Airlie affiliates, Thomas said.Such claims, he noted, could amount to tens of millions of dollars.
The 20-year-old Airlie Foundation is on more than 1,700 acres of gently rolling farmland in the foothills of the Blue Ridge Mountains near Warrenton, almost 50 miles west of Washington. Airlie-affiliated organizations have received more than $15 million in federal contracts and grants over the years.
Despite the recent controversies, the foundation has continued to do a thriving business offering government agencies and private organizations secluded sites for conferences. Raven's Hollow Ltd., a film-making firm affiliated with Airlie, produces educational films and did much of its business for federal agencies.
After his conviction, Head stepped aside as executive director of the Airlie Foundation. He also relinquished his day-to-day duties as a professor and chairman of the George Washington University department of medical and public affairs.
Thomas, a member of the Warrenton accounting firm of Surles and Associates Ltd., said the nearly $2.2 million IRS claim against Head covers the years 1970 through 1977. "It's absurd because he does not have, or begin to have, the means with which to pay that," Thomas remarked.
IRS assessed about $400,000 in back taxes and penalties against Raven's Hollow from January 1971 to May 1977, Thomas said. In part, he said, these claims stemmed from disallowance of business expenses, which figured in Head's trial. The IRS, according to Thomas, also is seeking nearly $200,000 from the Airlie Trust, which was set up as a vehicle for Airlie investments. f
Among the items cited in the IRS tax claims, Thomas said, was a controversial cash fund of more than $90,000. U.S. prosecutors had termed this a secret "slush fund," allegedly set up through a phony system of duplicate billing and used to pay bribes. Head contended it was a legitimate "contingency fund," used for business expenses.