Feds: Montana-based timeshare program is fraudulent

BOZEMAN — The U.S. Department of Justice is trying to stop a Montana lawyer and others from running or promoting a program that appears to facilitate philanthropic donations of timeshares, but actually led customers to commit tax fraud and didn’t give much to charity, according to a court filing.

The U.S. Attorney’s office filed the injunction in U.S. District Court in Butte on Monday against James Tarpey of Bozeman, two of his companies and three people who did appraisals for the program Donate for a Cause.

IRS investigators say Tarpey’s operation promotes donating unwanted timeshares to charity in exchange for a tax write-off. But the program charges thousands of dollars in fees, federal prosecutors say, and appraisers tied to Tarpey’s companies grossly overvalued the timeshares, leading the sellers to claim improper tax deductions. Customers were also told they could deduct the processing fees they paid to Resort Closings, a business controlled by Tarpey.

Tarpey did not immediately respond to a phone message from The Associated Press on Friday. He declined to comment when contacted by the Bozeman Daily Chronicle earlier this week.

The IRS estimates that since 2010, Donate for a Cause led customers to give away 5,523 timeshares. Based on a review of nearly 3,000 of those files, the IRS determined the defendants caused its customers to take more than $19.4 million in improper tax deductions and claim deductions of $9.1 million for processing fees.

“Defendants’ customers are also harmed because they are liable for any unpaid tax, plus interest and penalties, after having paid to participate in the timeshare donation scheme that failed to deliver the promised tax benefits,” the complaint says. “IRS scrutiny has not deterred defendants from promoting this abusive tax scheme” that exploits the difficulties in the timeshare resale market.

Since 2010, Tarpey’s organization has generated more than $17.6 million in total revenue, but Donate for a Cause has made charitable contributions of less than $1.5 million, the complaint states. Donate for a Cause advertises that it has donated more than $3.5 million to charity, the government said.

The IRS reviewed a sample of appraisals the defendants prepared for timeshares in 2010, 2011 and 2012 and found the timeshares sold on eBay for an average of 3 to 4 percent of the appraised amount. Ninety percent of the timeshares sold for less than $1,000.

The complaint says one customer who purchased a timeshare in Mexico for nearly $11,000 in 2004, paid $2,800 in fees to Resort Closings and received an appraisal for $8,740 for a timeshare that sold for $81.

A Las Vegas timeshare purchased for nearly $30,000 in 2005 was conveyed to Donate for a Cause in 2010. The owner was billed more than $3,300 in fees and the timeshare was appraised at $30,000, but sold for just over $1,000.

The complaint also asks the court to order Tarpey and his businesses to turn over the names, addresses, email addresses, phone numbers and Social Security or tax ID numbers of all customers for whom they have provided a timeshare appraisal since 2010.

Tarpey and the other defendants have a month to reply to the complaint.