The story of microcaptive promoter Celia Clark has come to a close as she has settled with the IRS and fully paid the settlement. The IRS was awarded a judgment against Clark for over $11.6 million, and she settled by paying $5.2 million. This settlement was likely driven by what Clark was able to pay rather than the issues in the case. Another microcaptive promoter recently won a jury trial against the IRS in a similar situation, but the stakes were too high for either side to take the risk, leading to this settlement.
Clark did some smart risk management for herself, immediately closing her law firm and captive operations after a case was decided in favor of the IRS. Unlike other promoters, there were no allegations of Clark doing egregious things like backdating policy documents. This suggests that Clark believed in her interpretation of the tax law, even though she was ultimately found to be wrong. In contrast, many other microcaptive promoters continued selling these products despite knowing they were in the wrong, driven by the profitability of these ventures.
Despite the legal defeats suffered by microcaptive promoters in court, there are still some out there selling these products, primarily using “cell captives” organized as series LLCs. These promoters dismiss court losses as being from inferior-quality programs, suggesting that their own offerings are different. The fact that these promoters have not been shut down is a mystery. Clark may not have been the worst promoter of microcaptives, but she did eventually retire and close her operations after realizing the implications of the Avrahami case.
As Clark’s chapter in the story of microcaptives closes, there will undoubtedly be more interesting chapters on other promoters to come. The saga of microcaptive promoters facing legal challenges and settlements with the IRS continues, highlighting the risks and consequences of promoting these controversial tax strategies. Despite the high stakes involved, some promoters continue to market and sell microcaptives, risking legal action and financial penalties. The future of microcaptive promoters remains uncertain as the IRS and other regulatory authorities crack down on these schemes.
