More than 4,000 doctors and dentists who invested in tax shelters with San Diego-based xélan could owe more than $420 million in back taxes and interest, the U.S. Justice Department announced Thursday.
A federal judge yesterday issued a temporary restraining order to freeze more than $500 million in assets from xélan and its entities and principals in an allegedly fraudulent tax-reduction scheme. That money is held in investment accounts controlled by xélan and Barbados-based Doctors Benefit Insurance Co.
According to the government, xélan and its agents allegedly advised its doctor and dentist members to invest in tax-avoidance and reduction schemes disguised as supplemental disability insurance or phony charitable deductions. On June 30, xélan and four of its entities filed for Chapter 11 bankruptcy protection from creditors.
The Internal Revenue Service has been investigating xélan's tax shelters and blocked the company's sale this summer. "This action protects the government's interest while we complete the investigation," said Kevin Brown, commissioner of the IRS' Small Business/Self-Employed Division, in a news release.
On its Web site, xélan said the firm describes itself as a membership organization dating to 1971 that provides "state of the art financial information, products and services tailored to the needs of its doctor members."
The Web site does not refer to the assets freeze or its bankruptcy filing, and xélan officials could not be reached for comment at deadline.