TDD (202) 514-1888




WASHINGTON, D.C. - The Justice Department today announced that Democratic fund-raiser, Gene K.H. Lum, pled guilty to violating federal tax laws by falsely claiming more than $7.1 million in tax deductions on tax returns for himself and his wife, which resulted in a tax loss to the government of $2,920,173.

Under the terms of the plea agreement, filed today in U.S. District Court in Tulsa, Oklahoma, Lum admitted that he illegally claimed more than $5 million as a tax deduction on his 1994 tax return for payment of "commissions and fees" which he did not actually incur. Among the claimed false payments of "commissions and fees" was a $2.51 million payment to an overseas account held in the name of a shell company that Lum identified as a silent partner, from which the money was eventually recycled back into Lum's possession.

In addition, Lum admitted that he assisted in the preparation of a 1994 individual income tax return for his wife, Nora T. Lum, in which she claimed a deduction of $797,798 for a charitable contribution she did not make, and a deduction of $1.1 million in payment of "commissions and fees" which she did not incur.

The plea stems from a two count information filed with the court on August 3.

According to the plea agreement, Lum's 1994 individual income tax return, which he prepared, reported income of $5.25 million on his Schedule C, but then offset it with a false $5.18 million deduction for "commissions and fees." The deduction included $2.6 million which had been cycled twice through Dynamic Energy Resources, Inc., a company controlled by

the Lums,

and $2.51 million that he had wired to an overseas account

in December of 1994.

In September of 1995, the Lums began receiving payments back from the overseas account through wires to a Little Rock, Arkansas, law firm and various companies that they controlled.

On Ms. Lum's 1994 individual income tax return, which was prepared by her husband, she reported her $2,564,564 distribution from Dynamic and $300,000 in wages from Dynamic, but offset this with a $797,798 charitable deduction to "Asian Pacific Education Council". However, the council is a shell company controlled by the Lums with no records, is not a charitable organization with the IRS and has never engaged in any charitable, educational or business activities. Lum also deducted $1,124,000 for payments of "commissions and fees", however, no such payments were made by Ms. Lum during 1994.

In May of 1997, the Lums pleaded guilty to a charge of felony conspiracy for making illegal campaign contributions to the 1994 Congressional campaigns. Their daughter, Trisha C. Lum, also pleaded guilty to a misdemeanor charge of a separate campaign finance incident.

Under the terms of this plea agreement, the government agrees that it will not seek an indictment against Ms. Lum.

Lum faces up to three years imprisonment and a maximum fine of $250,000 on each count.

The case was investigated by Tax Division attorney Kenneth M. Breen with the assistance of the IRS' Criminal Investigative Division, the Tulsa, Oklahoma, U.S. Attorney's office and the Public Integrity Section of the Criminal Division.