Agents query Osborne income

Businessman diverted millions in corporate funds, IRS alleges

April 16, 1999|By Cheryl Lu-Lien Tan | Cheryl Lu-Lien Tan,SUN STAFF

An Arnold businessman who wants to turn his mansion on St. Helena Island into a private club allegedly has been concealing an income of millions of dollars from the Internal Revenue Service since 1994, according to an affidavit filed after a two-year federal investigation.

Keith J. Osborne, president of Fantasy Island Management Inc., received millions of dollars in 1992 and from 1994 to 1997 but sporadically filed tax returns in those years, according to the affidavit IRS special agents Michael R. O'Hanlon and Antonio Gomez filed last month to obtain an April 7 search warrant. It was unsealed this week.

IRS agents seized 44 boxes of financial records, letters and computer discs and computer equipment last Friday from Osborne's home in the 1100 block of Asquith Drive and from the mansion on his 6.5-acre property on St. Helena Island. Agents also obtained evidence by searching his trash. They began investigating Osborne in February 1997 after receiving an anonymous letter about him in late 1996, the affidavit said.

"Osborne has committed corporate diversion of corporate receipts by directing and spending the large amounts of corporate income for his personal use and benefit," the affidavit said. "It has been seen in the IRS filing records and tax returns that very little receipts were reported on any individual or corporate income tax returns by Osborne and his affiliated corporations, if any tax returns were filed at all."

Osborne did not return phone calls to his two homes, but his attorney, Richard D. Bennett, said his client is working with the IRS.

"This matter has been blown out of proportion," Bennett said. "I really don't think it was necessary for the IRS to proceed as they did. It's certainly a traumatic experience when the IRS comes traipsing through your home. He is seeking to cooperate in every way that he can."

Osborne started holding wedding parties on St. Helena Island, in Round Bay on the Severn River, two summers ago. The parties angered Crownsville residents, who said noise from the parties traveled across the water and disrupted their neighborhood, and Annapolitans, who complained that wedding guests were taking up parking spots in their already clogged downtown.

Anne Arundel County Administrative Hearing Officer Stephen LeGendre ruled against granting a variance last month that would have helped Osborne set up his planned Private Club at St. Helena.

The club also has caught the attention of county officials, who sued in October to stop him, contending the company was running a commercial operation on property zoned for residential use.

The IRS affidavit states that Osborne, on behalf of the "Osborne Group" -- one of 21 corporations he has under his name -- received $1.9 million from Ameron Corp. in 1992, $1.95 million from Ohio Pattern Works in May 1997, and $6.9 million in late 1994 and 1995 from Total Containment Inc.

Osborne did not fully report those sums in tax returns, the affidavit said.

Instead, his various companies filed returns reporting incomes varying from $43,930 to $179,654, the affidavit said.

The affidavit also noted Osborne's $1.1 million purchase of St. Helena Island, among other luxury items bought in recent years, such as a 35-foot powerboat.

David Plymyer, deputy county attorney, said a hearing for the county case has been set for May 6.

"If some other action is taken against Mr. Osborne first, we don't anticipate it's going to have any impact on enforcement action on our end," Plymyer said. "We're doing the best we can here."

Pub Date: 4/16/99

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