For years, Las Vegas-area dentist, Leslie Kotler, hid his salary in an effort to avoid paying taxes. This week, Kotler learned the consequences of his actions: 13 months in prison. He must also serve three years of supervised release and pay restitution of $712,280, including more than $100,000 in civil penalties. Before his sentencing, Kotler paid a total of $450,429 in back taxes, interest and fraud penalties.
Kotler pleaded guilty two years ago to evading taxes for nearly a decade. As part of his plea, he admitted to using nominee bank accounts and phony trusts to hide income and assets from the Internal Revenue Service (IRS). Kotler also admitted to understating his income on false income tax returns. To thwart IRS collection efforts, Kotler also filed a false bankruptcy petition understating his assets by nearly $400,000 (that bankruptcy action was eventually dropped).
Officials painted the sentence as appropriate, with Acting Assistant Attorney General Ciraolo calling it a “heavy price for his egregious conduct in evading both the assessment and payment of taxes.”
Acting Special Agent in Charge Michael Brock of the IRS-Criminal Investigation Las Vegas Field Office called Kotler’s actions “a theft from the American public” and emphasized, “To build faith in our nation’s tax system, honest taxpayers need to be reassured that everyone is paying their fair share. The IRS-Criminal Investigation Division, along with the Department of Justice, will investigate and prosecute those who violate our tax system.”
While any jail time is a significant punishment, the overall sentence felt light considering the scope of Kotler’s actions. He didn’t just avoid taxes: he went to great lengths to hide his assets from collections and clogged the court system with bogus bankruptcy claims to escape paying what he owed. So what gives?
The answer can be found in his earlier plea. As part of his agreement, Kotler agreed to cooperate with prosecutors and IRS agents in part of a larger investigation into bogus tax shelters and sham trusts. Under the agreement, he must “provide complete and truthful information and testimony” about other individuals involved in what was a characterized as a nationwide tax scheme.
Kotler had previously been named in a civil complaint filed by the Department of Justice involving three defendants, Wayne Reeves, Diane Vaoga and James Stoll. Stoll operated Systems Corporation of America and, according to the complained, referred to himself as a “highly specialized paralegal” who created trusts, corporations, and limited-liability partnerships as part of a sham-trust scheme. Stoll was accused of working with Wayne Reeves, a CPA, and his wife, Diane Vaoga to sell the scheme which, according to the government, “enables participants to illegally shelter income and to hide assets from the Internal Revenue Service (IRS) through a series of bogus entities designed to disrupt and interfere with IRS tax assessment and collection efforts.”

Kotler was allegedly counseled by Reeves to use the trust scheme to avoid taxation. According to the complaint, “Over the years, Dr. Kotler has paid tens of thousands of dollars to Reeves for his bogus tax advice and to Stoll for his entity formation and registered agent services.” A permanent injunction was issued to prevent the defendants from continuing to market the schemes.
Kotler’s dental license remains active, according to the Nevada Dental Board of Examiners.

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Author

Kelly Erb is a tax attorney and tax writer.

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