Tax-fraud case moving to Florida

An Ashland man and two of his employees will remain in custody as they await transfer to Florida to face trial for their alleged participation in a federal tax-fraud scheme.

U.S. District Court Judge Mark D. Clarke on Thursday told Eugene "Gino" Casternovia and Rod Pendell of Ashland, and Mark Lyon of Williams, that he had carefully considered the character testimony offered by friends and family stating the defendants were men of good character and could be trusted to appear in Florida if released. However, Clarke ruled the evidence presented by prosecutors shows the men say their permanent residence is Panama, and that they participated in an elaborate offshore tax evasion scheme designed to defraud the U.S. government of income tax revenues.

"The court finds it difficult to rule you are not a flight risk," Clarke told each defendant.

About 20 people attended Casternovia's hearing at the federal courthouse in Medford on Tuesday. Several more attended Thursday's hearing on behalf of Pendell and Lyon.

The U.S. Department of Justice contends Casternovia presented and sold tax-fraud schemes at various trade shows and conferences around the world, including a presentation for 400 people aboard a cruise ship in the Mediterranean Sea in May 2007.

Federal prosecutor Byron Chatfield told Clarke that Casternovia was a flight risk because he has successfully moved $3.4 million into offshore accounts, and an additional $1.2 million is "unaccounted for."

Casternovia represented himself at Tuesday's hearing, stating through tears he has known the indictments were coming since 2006. He has been in and out of the country several times and could have fled if that were his intent or character.

"I am not a flight risk," Casternovia said.

Casternovia and his wife, Kathryn, have lived in Ashland for 25 years and owned the now defunct Northlight vegetarian restaurant and the Rainforest Cafe. Kathryn Casternovia and her daughter, Amanda, wept and stood Thursday as Clarke ruled the men would remain in custody and marshals escorted the prisoners out of the courtroom.

The federal criminal injunction alleges Casternovia's company, Southern Oregon Resource Center Educational Services (SORCE), worked as a vendor for a Florida-based company, Pinnacle Quest International (PQI), to promote the scams, which involved the use of fabricated offshore accounts to help customers conceal their assets.

In addition, Casternovia allegedly told customers that the federal income tax system is voluntary and that they could opt out of their tax obligations by revoking or not using their Social Security and other government identification numbers.

Kathryn Casternovia said her husband is determined to fight the charges and will likely appeal Clarke's detention ruling — here or in Florida, she said.

"A lot of the charges and allegations are completely inaccurate and untrue," said Amanda Casternovia.

The defendants face possible 25-year prison sentences and $750,000 fines if convicted of conspiracy to commit money laundering. They remain lodged in the Jackson County Jail without bail.

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