A former top executive of Charlotte-based North Carolina National Bank is suing the IRS for more than $200,000 in refunds after claiming he was fleeced by an international Ponzi scheme.
Luther Hodges Jr., who once served as chairman of the board at Bank of America predecessor NCNB, filed his suit this month against the Internal Revenue Service in federal court in Charlotte. In his case, Hodges is seeking penalties he claims the IRS erroneously charged him for not reporting investments Hodges says were never made in the first place in the scheme masterminded by financier Allen Stanford.
Allen was sentenced to 110 years in prison in 2012 for a $7 billion fraudulent operation involving certificates of deposit offered at the Stanford International Bank in the Caribbean. Prosecutors said Stanford lied to investors, promising safe investments but instead channeling their money elsewhere, including to fund a luxurious lifestyle.
The IRS charged Hodges penalties after he failed to file reports required to disclose investments in foreign bank accounts, according to his suit filed Friday.
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But Hodges didn’t see the need to disclose the CDs for tax years 2008 and 2009, because Stanford’s arrest was being widely reported by news outlets in early 2009, according to the suit. At that point, it was “common knowledge” that the CDs from Stanford’s firm “were unequivocally instruments of fraud, had no value at all, and essentially did not exist,” according to the suit.
In essence, the IRS disregarded well-known public information about Stanford’s scheme in penalizing Hodges for not reporting the CDs, the lawsuit says.
Hodges has paid $245,362 in penalties after a special audit conducted in March 2017, his lawsuit says, adding that the IRS has taken no action on refund claims Hodges filed.
“I think the IRS is dead wrong,” Hodges told the Observer. “We had to sue in order to get the money back. It’s been almost a year waiting on them to respond.”
In a statement, IRS spokeswoman Patricia Russomagno said generally the IRS does not comment on litigation.
Hodges, who now lives in Blowing Rock, was part of NCNB during its early days of growing into what would eventually become Bank of America. He wrote about his banking career in a 2016 book, “Bank Notes,” on North Carolina’s ascendancy to a major financial services hub.
Hodges, whose father had been the 64th governor of North Carolina, also had stints in politics. In the early 1980s, he was the first U.S. Deputy Secretary of Commerce, appointed by President Jimmy Carter. His political career also included an unsuccessfully run for a U.S. Senate seat in the late 1970s.
Researcher Maria David contributed.