Returning its verdict Wednesday morning, a federal jury in Seattle convicted developer Winston Bontrager and girlfriend Pauline Anderson on 25 counts related to a purported tax fraud alleged to have enabled them to hide millions of dollars from the IRS.
The fraud is thought to have kept $2.7 million from tax collectors.
Prosecutors claimed Bontrager began hiding his income immediately after finishing a prison sentence for fraud. Anderson was alleged to have hidden money in bank accounts in her native Australia, while Bontrager was said to have used his development firm, Alexandria Investment Co., and shell companies to siphon money without IRS knowledge.
Convicted as charged, Bontrager and Anderson each face decades in prison when they are sentenced later this year. An appeal is expected.
Agents with the IRS criminal division have been investigating Bontrager and Anderson since at least 2010. Writing the court, one claimed the couple had been living in luxury while paying little, if any, income taxes since 1997.
IRS investigators also contended bankrupt multi-millionaire developer Michael R. Mastro was involved in one of the suspicious transactions, suggesting that he and Winston Bontrager arranged for $9 million to be wired to an Australian bank account for reasons unclear.
Mastro dodged a federal prosecution by fleeing to France, where he and his wife remain after successfully fighting extradition.
Bontrager was previously sentenced to 3 1/2 years in prison for a fraud that cost the Oregon Public Employees' Retirement Fund $362,000. He rebounded well after prison, forming the Alexandria Investment Co. the year he was released.
In the 11 years that followed, Alexandria Investments and several associated corporations made $47 million by developing three business parks in Vancouver. Of that income, about $25 million was not reported to the IRS.
IRS investigators armed with a search warrant previously raided several homes and businesses associated with the Bontrager, Anderson and Bontrager's family.
Writing the court previously, an IRS agent contended Bontrager, 64, shared a $1.9 million Bellevue apartment with Anderson while reporting negligible amounts of income to the IRS.
"(They) are living lavish lifestyles residing in million-dollar homes in Washington, driving luxury automobiles, and vacationing in million-dollar winter homes in Southern California," IRS Special Agent Joseph Lopez said in court documents. A review of their personal tax records since 1997, Lopez continued, "revealed little, if any, federal income taxes paid over the years."
Bontranger and Anderson purchased a Rolls Royce Seraph with $132,000 in company money, bought a 6.17 carat diamond and spent over $3.4 million in credit card purchases, portions of which went to pay for cosmetic surgery, travel, clothing and shoes.
They're also alleged to have hidden a Bentley sedan, a $300,000 wine collection and a vacation home from tax collectors.
Bontranger's three multi-million-dollar projects in the Vancouver area included the Eastgate Plaza Development, for which his company purchased a 47-acre swath of land.
Lopez noted that Mastro - the Seattle developer thought to owe creditors $338 million more than he has - was paid $4 million after a 23-acre section of the property was sold to Walmart for $9.9 million in 2004. Mastro bought out much of the project for $14.4 million after the industry took a turn for the worse in 2007.
The IRS agent claimed that Anderson wired $9 million to Australian bank accounts under the direction of Bontrager and Mastro.
In October 2010, the state Department of Financial Institutions filed administrative charges against Mastro alleging he misled as many as 175 investors while soliciting $100 million for various real-estate investments.
State investigators found that Mastro violated securities laws numerous times, in part by obscuring a "liquidity crisis" in his real-estate business, according to a Department of Financial Institutions statement.
Mastro settled the matter by agreeing to pay a $100,000 fine once his investors are repaid in full; he also agreed not to offer certain securities in the future.
Convicted of tax evasion and making false statements, Bontrager and Anderson, 65, are expected to be sentenced Nov. 22 by U.S. District Judge Richard Jones.
Bontrager was convicted on nine tax counts and eight counts of making false statements, while Anderson was convicted on 11 tax counts.