Honest People - Can they be wealthy too?

[quote="MossySF]

	Quote:
	These people cannot be millionaires! They don't look like millionaires, they don't dress like millionaires, they don't eat like millionaires, they don't act like millionaires--they don't even have millionaire names. Where are the millionaires who look like millionaires?

[/quote]

That is like the old story about the financial advisor who took his client down to teh marina to show where all the advisors kept their yachts. The customer asked: "Where are all the customers' yachts?"

A good read is "The Millionaire Next Door" and the sequels. It talks about how teh vast majority of wealthy people live very modest lives and follow the principles discussed on this forum.

Two of the most successful people alive today are Warren Buffet and teh guy who started Ikea. Warren Buffet is very down to earth and lives modestly. His luxury is a visit to Dairy Queen. The Ikea guy is worth billions but has never flown first class. He started out dirt poor selling pencils and erasers from his bicycle. Both got where they are by working hard, living modestly, and keeping things simple.

This is for Money Blogger who, a few days ago, suggested that starting a business produced all sorts of opportunities for tax advantage. Perhaps so, but it produces traps to as this guy will be able to think about for many years while he sits in prison.

FOR IMMEDIATE RELEASE
TAX
THURSDAY FEBRUARY 28, 2008

KANSAS-BASED TAX SCHEME PROMOTER CONVICTED IN $78 MILLION FRAUD
WASHINGTON – Michael Craig Cooper today was convicted in Kansas City, Kan., on tax and fraud charges after a six week jury trial, the Justice Department and Internal Revenue Service (IRS) announced. Cooper was the president and founder of Renaissance - The Tax People, which was headquartered in Topeka, Kan.

According to the evidence introduced at trial, from 1997 until 2002, Cooper and others conspired to defraud the United States and Renaissance clients by marketing a program that purported to educate individuals on how to start a home based business in order to fraudulently convert personal expenses into business deductions through false and misleading representations. Cooper assisted clients in preparing and filing false tax returns on which the clients claimed tax deductions by falsely characterizing personal expenses as business expenses. In this manner, clients illegally reduced their taxable income by deducting personal expenses, including children's allowances, commuting expenses, educational expenses and vacation expenses. This scheme was also promoted under the name Advantage International Marketing (AIM).

In December 2006, Cooper was charged in a superseding indictment with one count of conspiracy to defraud the United States, 56 counts of assisting in the preparation of a false tax return, 36 counts of mail fraud, 11 counts of wire fraud and 44 counts of money laundering.
“Citizens who pay their fair share of taxes can rest assured that the Department of Justice will continue to utilize all our resources to prosecute those who choose to cheat and engage in fraud,” said John A. Marrella, Deputy Assistant Attorney General of the Justice Department Tax Division. “To those citizens who choose to engage in tax fraud, our warning is: we are going to prosecute you and do our best to put you in jail.”

Cooper faces a maximum sentence of 20 years for each of the most serious counts of conviction and a fine of up to $250,000 for each count. The government also sought forfeiture of $84 million in proceeds from the fraud, including, United States currency, land, vehicles, gold coins, bank accounts and life insurance policies. U.S. District Court Judge Carlos Murguia will be holding a hearing on the forfeiture prior to sentencing, which is set for May 19, 2008.
“Mr. Cooper exploited his customers and attempted to steal from the honest taxpayers of the United States,” said Eric F. Melgren, the U.S. Attorney for the District of Kansas. “Despite all the cunning marketing, Renaissance-The Tax People was nothing but a scam.”

Defendants Daniel Joel Gleason, Jesse Lyala Cota, Todd Eugene Strand, Thomas Steelman Sr., Frances Ruth and Elizabeth Crotts pled guily to charges related to this scheme and testified at trial. Gleason, Cota, and Strand were charged in the indictment with Cooper.

Gleason, previously the owner and operator of a tax preparation service, My Tax Man, pled guilty on Oct. 10, 2006 to conspiracy to defraud the United States and aiding and assisting in the preparation of filing of false tax return. Cota, a former IRS District Director for the Southern District of California, plead guilty on March 27, 2006, to conspiracy to defraud the United States. Strand pled guilty on March 27, 2006, to conspiracy to defraud the United States and one court of mail fraud. In his plea, Strand admitted that the conspiracy defrauded Renaissance customers of more than $75 million and caused a tax loss of more than $20 million.
“Marketing programs to take illegal tax deductions through false and misleading representations, isn’t tax planning; it’s criminal activity,” said Eileen Mayer, Chief, IRS Criminal Investigation. “IRS Criminal Investigation has made the investigation of individuals who market or who intentionally buy into abusive tax schemes a national priority. Today’s conviction speaks strongly to our successful efforts in stopping this growing area of fraud.”

The case was prosecuted by Assistant U.S. Attorney Scott C. Rask and Justice Department Tax Division trial attorney Charles A. O’Reilly and was investigated by the IRS Criminal Investigation.

So in a round-about way, this is a great answer to the original question. Can honest people be wealthy too. Your example as the very reason many people view some of the rich business people to be dishonest and unethical.

If I understand correctly, we've reached an understanding that honest people can be wealthy, and in this case, dihonest people can too. But be sure... The truth always catches up to you. So in this (great example by the way), when you unethically take advantage of a tax system that depends on the honor of self-reporting you will eventually get burned. This man may have got rich quick, but he also lost it quick. What was it a six week trial?

Anyway, if you want to be rich, remember, be honest. It may take longer, but at least you can keep it and with a clean conscience.

_________________
Guy Gagnon

Business Relations Technologist
Angulus Marketing Ltd.
http://www.howtomanagemoneytips.com

Starting and structuring a business the right way does give you many more tax benefits than a typical W-2 employee. You can do it legally and ethically but you do have to know how to do it.

I work with businesses every day to help them lower their tax liabilities and manage themselves better. Most of it comes from having the right mindset when you go into it. You also have to understand the differences in a sole prop, S-Corps and C Corps. Each has it's own advantages and disadvantages.

By combining a C-Corp and S-Corp you can generate some substantial tax savings, huge opportunities for retirement planning along with a variety of other legal deductions that you don't get access too as an employee. It takes effort and money to set those up though so you definitely want to make sure you are going to generate enough revenue to cover your expenses.

Remember Buffet complains that his secretary pays a higher percentage in taxes than he does. He owns the business and she works for it. Plus he gets a ton of dividends too. You can also lower your tax liability by investing in tax free muni bond funds but that's a discussion for a whole 'nother day

_________________
Scott Lovingood
Creating Wealth

TheWealthSquad wrote:

Starting and structuring a business the right way does give you many more tax benefits than a typical W-2 employee. You can do it legally and ethically but you do have to know how to do it.

I work with businesses every day to help them lower their tax liabilities and manage themselves better. Most of it comes from having the right mindset when you go into it. You also have to understand the differences in a sole prop, S-Corps and C Corps. Each has it's own advantages and disadvantages.

By combining a C-Corp and S-Corp you can generate some substantial tax savings, huge opportunities for retirement planning along with a variety of other legal deductions that you don't get access too as an employee. It takes effort and money to set those up though so you definitely want to make sure you are going to generate enough revenue to cover your expenses.

Remember Buffet complains that his secretary pays a higher percentage in taxes than he does. He owns the business and she works for it. Plus he gets a ton of dividends too. You can also lower your tax liability by investing in tax free muni bond funds but that's a discussion for a whole 'nother day

Optimizing a business to reduce tax liabilities is entirely different from starting one to lower your personal tax liabilities. That was what was originally suggested.

There are advantages such as those you mentioned. But it is a minefield. The IRS is now going after abusive S-corps as well as some of the special retirement plans offered to businesses to avoid taxes.

Abusive S-corps will eventually get hit. Of that I am sure. Too many people hear they don't have to pay SE tax and simply don't pay themselves a salary. I agree that will come under severe scrutiny.

I am talking about following solid case law, setting up regular C-corp with corporate benefits, matching 401k, etc with a single owner and paying a salary with all the appr. taxes. Use an S-corp for contract work for the C-corp to reduce some SE tax but still pay the SE tax on a reasonable portion of it. It is more complicated than a straight C or S corp but eliminates double taxation while maximizing legal and legitimate deductions.

Takes more work up front and from an accounting standpoint but at certain income levels can save a HUGE amount in taxes while piling up significant dollars for retirement and benefits.

PS and none of the above should be taken as legal or tax advice. Please be an adult and consult with the appropriate people before setting something like this up.

_________________
Scott Lovingood
Creating Wealth

TheWealthSquad wrote:

Abusive S-corps will eventually get hit. Of that I am sure. Too many people hear they don't have to pay SE tax and simply don't pay themselves a salary. I agree that will come under severe scrutiny.

I am talking about following solid case law, setting up regular C-corp with corporate benefits, matching 401k, etc with a single owner and paying a salary with all the appr. taxes. Use an S-corp for contract work for the C-corp to reduce some SE tax but still pay the SE tax on a reasonable portion of it. It is more complicated than a straight C or S corp but eliminates double taxation while maximizing legal and legitimate deductions.

Takes more work up front and from an accounting standpoint but at certain income levels can save a HUGE amount in taxes while piling up significant dollars for retirement and benefits.

PS and none of the above should be taken as legal or tax advice. Please be an adult and consult with the appropriate people before setting something like this up.

There is no doubt that properly structuring a legitimate business can reduce taxes and have other benefits. I was mere responding to the claim that somehow starting a business would let an individual suddenly dedct all sorts of things. Obviously if one knows the law or works with th eright professionals there is a lot that is possible.

The secret to success is to work hard and don't expect to be able to retire in 5-7 years because you are doing nothing but gambling. I don't think you realize how hard it is to do what you are suggesting. You are talking about google growth.

______________________
AccStation Corp deals

	dadan wrote:
	The secret to success is to work hard and don't expect to be able to retire in 5-7 years because you are doing nothing but gambling. I don't think you realize how hard it is to do what you are suggesting. You are talking about google growth.

I completely agree. I was just saying that if that that type of income and hours would be fine with me, but only for a few responsible years of saving. Now it is unlikely achievable, and you're correct to suggest working hard and honestly, with realistic expectations

_________________
Guy Gagnon

Business Relations Technologist
Angulus Marketing Ltd.
http://www.howtomanagemoneytips.com

Hi everyone,

I have recently come accross a great book. It's older, however I've found it to be a very useful personal development book, in reprograming my self-talk and reinforcing in my mind my core beliefs and developing superior habtis. It was written by Shad Helmstetter, Ph.D. 'What To Say When You Talk To Yourself'

Have any of your read it?, or do you have any other suggestions regarding how an investment of time in personal development has helped with your personal finances?

Thanks,

_________________
Guy Gagnon

Business Relations Technologist
Angulus Marketing Ltd.
http://www.howtomanagemoneytips.com

I do know a lot of wealthy people. I would say that you have many wealthy people that are very honest people. What is odd is the wealthier they are, the more honest they seem to be. Strange but I've seen this in quite a number of people that I know. For those that inherited their money, frankly, I can't say that they would be different than the general population, but they might be more honest on the notion that they didn't ever have to play any cut throat games. I don't know that many people that inherited their wealth. I feel for your question though because I have a good friend that is a federal prosecutor and if he drives around the wealthiest neighborhoods, its amazing the stories he can tell about the people that live there and how they made their money. Truly scary.

For the people that made their money on their own I'd separate them into how they made their money. In cutthroat businesses I would agree that many of them got their money by being underhanded. Maybe not dishonest but they screwed over a lot of people in the process of making their money. They may have done it openly so I can't say that they were dishonest in it, even if I don't like it. Many of them actually pride themselves in how they operated their businesses even if others think it isn't fair. I knew one lady that specifically would hire salespeople that were "broken" and pay them low wages. Again, not necessarily dishonest but not a practice that many people would agree with.

Businesses that have a special niche, technology, etc. operate in a world where you don't need to be dishonest to beat your competitor. If you have a one-of-a-kind product, it is pretty easy to make money and never have to cross the line to dishonesty. I think that's why so many tech startups attract idealists for employees. Those employees often reinforce the honesty factor for the founders as the employees will leave if they feel that management is dishonest. Compare that to the garment industry where open dishonesty is rampant.

The other thing I can say is that many of these people have dual personalities. At home they may be the best father/mother, husband/wife, and church-goer (temple, mosque, you name it) and completely honest, but at work they view things differently. A sort of business battlefield where the ends justifies the means, winning is everything, and different rules apply. So its very difficult to simply categorize them as honest or dishonest. I know there are people who think an dishonest person is a dishonest person, but some of these people weigh losing 500 jobs vs. their personal ethics.

One of the things that young entrepreneurs and managers need to think about is the potential conflict between their personal ethics and what you need to do to win in certain industries. There are just certain areas that I wouldn't advise going into because of the lack of ethics in the industry. Idealists will tell you that you can enter that industry and do it differently and win, but they are idealists and the reality is much more grim.

If the only way to win in an industry competing for business is to bribe an official say in a foreign country, what are you going to do as the CEO or the VP of Sales? If you don't want to make that difficult decision and others, you shouldn't head into that industry, unless you want to get a pink slip for letting your revenues decline while your competitors keep getting every contract. But people who pass judgment on those that have never been in their shoes should really refrain from doing so. I do agree with some of the other comments that if you are truly a dishonest person, you don't last long in business. Your customers leave you, employees won't follow you and your reputation keeps you from getting partners.

The question you pose is an excellent one to think about. But I would say bottom line there are many, many ethical people in business that are wealthy and the one's that aren't, they may get wealthy, but their reputation is tarnished amongst the people in the know. The truly dishonest end up paying for it at some point, but they still may be driving a nice Mercedes and living in a big house. Doesn't mean they are happy.

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LiveCheap.com Live the Good Life....Cheaply

Wow LiveCheap

That was really in depth. I think that was the most comprehensive reply this discussion has received.

If they were available to give... I think you deserve a gold star.

They aren't, so I'll thank you for your input instead.

Cheers,

_________________
Guy Gagnon

Business Relations Technologist
Angulus Marketing Ltd.
http://www.howtomanagemoneytips.com

Hi Everyone,

Along the lines of six degrees of separation, I was curious how many people we know (virtually) who are not only honest, but wealthy.

The reason I want to do this is to continue promoting the idea that average and ordinary, hard-working and honest people cand become significant successes.

Caution - Please don't use real names, just mention whether they're family, friend, associate, etc.

Let us know what they did to become who they are to have achieved this success

Let us know know what makes you consider them honest.

Thanks all,

I think this will be interesting.

_________________
Guy Gagnon

Business Relations Technologist
Angulus Marketing Ltd.
http://www.howtomanagemoneytips.com

I know lots of wealthy people, but my two faves are below.

My grandparents - Pop didn't graduate from high school, was drafted in WWII, figured out a way to get into OCS, came back from Army started job in mail room of a large company, served in Korea, went back to same company and retired many years later as president of his division (one of three of what is now huge multinational company).

My grandmother was a stay at home mom for much of their preretirement years, but she worked during Pop's service during WWII (and again when he served during Korea) and worked in real estate after kids were older. Gram also was in charge of their budget and finances. They were also very careful with money, Gram made her own clothes for years and they saved for 25 years before they took a trip to Europe.

My grandparents also invested in real estate and spent the first 10-15 years of "retirement" managing their real estate and another business.

Pop will tell you that he worked with a lot of men and women who were better educated and much smarter than he, but he worked the hardest and he always tried to figure out a way to say yes to his boss. He also told me never to leverage the home you live in (i.e. take equity and use it for down payment in real estate investments or other investments). He would also tell you that his partnership with Gram was key to his success, he never, ever could have achieved his professional success and their financial success without the partnership.

Second story, retired relative who spent his entire career in the military. He never earned much money but the military provides other opportunities, he got his MBA on Uncle Sam's dime. He also invested in real estate and the stock market (he is still investing a limited amount in the stock market even though he is 65+ and has made half a million in stock profits this year) by living below his means. He self managed his stock investments, still does, and dedicated a good amount of time to educating himself, research, etc. He also will tell you that key to his wealth was to pay off his mortgages early and no children. In his retirement he also gets a military pension and great military health care at the base near his home.

I think the key to both stories of success, is hard work, living below one's means, loyalty, and alternate means to obtain income (i.e. real estate for grandparents, stocks for other relative).

All three are impeccable in their honesty.

_________________
Sam

http://adventures-of-sam.blogspot.com
(Follow Sam's financial and real estate adventures.)

Sam wrote:

I know lots of wealthy people, but my two faves are below.

.....My grandparents also invested in real estate and spent the first 10-15 years of "retirement" managing their real estate and another business......

.....Second story, retired relative ....

I think the key to both stories of success, is hard work, living below one's means, loyalty, and alternate means to obtain income (i.e. real estate for grandparents, stocks for other relative).

All three are impeccable in their honesty.

Sam,

Thanks for the input.

I think your grandfathers' story is a true testament that anyone with desire can make it. Traditional education can definitely help, but is not mandatory for success. Their drive and determination and willingness to be creatice and thinik outside the 9-5 box is probably what afforded them the life they lived.

Keep in touch,

_________________
Guy Gagnon

Business Relations Technologist
Angulus Marketing Ltd.
http://www.howtomanagemoneytips.com