Mark Ellis, head of Indiginet Inc., Pleads GUILTY to Tax Fraud – Prison in his future?

It’s that time of year when folks begin to receive their W-2’s and organize or re-organize their data for the preparation of their tax returns – TAX SEASON.  It’s also a time for the IRS and government to become active in their pursuit of those who feel that they are above the law – tax cheaters.  And, those who face the chilling grips of the IRS will find that there is little compassion given when it comes to punishment.  My guess is – that means prison for Mark Ellis.

Mark Thomas Ellis, president and CEO of Winsted Holdings, pleaded guilty to a tax charge in U.S. District Court in Los Angeles.

The company, which was known as Indiginet before Ellis bought control in 2003, sold billions of shares of nearly worthless penny stock in an environmental care company, broadband Internet service provider, and medical spa franchiser before the Securities and Exchange Commission stepped in. In the tax case, Ellis admitted to owing $750,000 to the Internal Revenue Service.

Ellis, of Long Beach, entered his guilty plea after previously being summoned to appear to answer charges that he subscribed to a false personal income tax return for the 2004 tax year. The allegations are contained in a criminal information filed by prosecutors last year.

According to his plea agreement, Ellis admitted that, in 2004, he received over $748,000 from the company for his own personal use, providing himself with compensation in addition to his salary that he used to pay for personal expenses and to invest in an unrelated business. In addition, Ellis admitted that he did not disclose to his accountant who prepared his tax return that he had received the additional income and compensation from the company.

Now…not disclosing is blatant tax fraud and something that doesn’t play well with federal prosecutors.

In his plea, Ellis admitted that he knew that his 2004 tax return was false and that it was illegal to file a false tax return with the IRS. Ellis stated that he knew that he had received the aforementioned income and that he failed to report it on his 2004 tax return.

In addition, Ellis acknowledged that he received additional payments totaling $1,497,537 from Indiginet or Universal Broadband Communications Inc. in 2003, 2005 and 2006. Ellis admitted that he deliberately failed to report these payments on his personal tax returns for the years indicated.

In total, Ellis received $2,246,271 that he did not report to the IRS for the years 2003 through 2006.  He agreed that the resulting tax loss to the government, due to his underreporting, amounts to over $725,000.  Ellis also agreed as a part of his plea that he is liable for the fraud penalty imposed by the IRS, which amounts to 75 percent of the tax due, on the amount of tax he owes to the government.  U.S. District Judge Terry J. Hatter ordered Ellis to appear for sentencing on April 19, 2010. When sentenced, Ellis faces up to three years in federal prison and fines totaling $100,000.

Now, unlike the case with actor Wesley Snipes where the failure to report and/or file was based on a weak argument that the tax law was unconstitutional, Ellis appears to have taken the position that he just didn’t want to pay and therefore didn’t report.

While I am not proud of the fact that I, too, spent time in federal prison for tax evasion (I failed to pay tax on embezzled money), I know that many were in prison for tax crimes.  In our system of ‘voluntary’ compliance – PRISON – is an important deterrent to encourage those who might attempt to thwart the system.  For that reason I fully suspect that Ellis will spend time in federal prison – and it’s not ‘Club Fed’.  I’ve been there I know!

Ellis will be sentenced April 19, 2010


7 Responses to Mark Ellis, head of Indiginet Inc., Pleads GUILTY to Tax Fraud – Prison in his future?

  1. Tax Man says:

    The IRS e-flie system is now open, most W-2s and 1099s will be in mail in the next couple of weeks. Is everybody ready for tax time?

  2. Just Curious says:

    Just curious as to whether anyone knows what sentence Mark Ellis received. I recall that his sentencing was to occur on April 19th, but I haven’t seen anything in the news about his sentence.

  3. Godot says:

    Just Curious,

    It’s delayed to June 7, 2010.

    Not sure why.?.


  4. Aqcess Investor says:

    From 1995 to 2001, AQCESS Technologies, Inc raised 28M through selling private stock to investors to fund their flagship product known as the QBE. AQCESS ran into problems with the SEC, stopped selling stock, ran out out of money and closed its doors in 2001/02. Through shareholder proxy, Mark Ellis acquired all rights to Aqcess Technologies and the QBE. I was told that Ellis then switched AQCESS shareholder stock to QBE Technologies, which was later acquired by another Mark Ellis company, Indiginet Inc. Does anyone know what happened to the AQCESS/QBE investors? Does anyone know if Ellis ever did anything with the QBE. The QBE was the first computing tablet and I am curious what Ellis did with the intellectual property. If anyone knows anything, please contact me at Thank you.

  5. Jack Hicks says:

    Stock fraud figure sentenced – Mark Ellis, a former Orange County penny stock operator, was sentenced Monday to 18 months in federal custody for tax evasion.

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