Four Lancaster County men have been charged in a $400,000 tax-evasion scheme that allegedly was carried out through aliases, offshore bank accounts and bogus paper transactions, officials with the U.S. Attorney's Office Eastern District of Pennsylvania announced Tuesday.

An indictment filed the same day charged Chester A. Bitterman Jr., 76, of Willow Street — and his sons, Craig L. Bitterman, 50, of Strasburg, C. Grant Bitterman, 48, of Willow Street, and Curtis L. Bitterman, 55, of Lancaster — with one count each of conspiring to defraud the United States.

Craig Bitterman also is charged with one count of obstruction of justice, according to a news release issued by the Eastern District office.

The men are the father and brothers of Chester "Chet" Bitterman III, a county man who was kidnapped and shot to death in 1981 by Colombian guerrillas while on a missionary trip with Wycliffe Bible Translators.

The 15-page indictment alleges that the men, partners in Bitterman Scale Company, a Willow Street firm, transferred their personal and business assets to trusts purchased from Commonwealth Trust Company, a firm, according to the indictment, whose primary purpose is assisting its customers to evade taxes.

The news release also says that nine principals of the Commonwealth Trust Company, based in Conroe, Texas, have been previously charged and convicted in the Eastern District of Pennsylvania. The co-founder of the company was convicted of conspiring to defraud the Internal Revenue Service.

By utilizing the CTC trusts, it appeared as though the defendants had little or no assets or income when, in reality, they retained complete access and control over their financial affairs, prosecutors allege.

The defendants paid themselves in cash and allegedly arranged bogus payments — in the form of leases and management fees — between the many trusts that held their business assets, according to a release accompanying the indictment.

Such trusts included Bitterman Scale Company, Tidewater Leasing, Friendship Leasing Services, The Chesterfield Group and Alanmore Foundation, according to the indictment.

In tax returns submitted for the trusts, the defendants then took fraudulent deductions for the bogus payments to create the appearance of minimal or no taxable income, according to the indictment.

According to the indictment, the defendants also allegedly funneled funds through bank accounts in the names of WJM Resources and Conestoga Co-Op to make it appear they had no affiliation with the accounts. Prosecutors also allege the defendants opened a post office box in the name of WJM Resources to hide correspondence from the IRS.

After the IRS levied the defendants' business bank account, the indictment alleges, the defendants instructed their customers to pay another trust to avoid IRS collection efforts.

In efforts to further conceal their assets from the IRS, the indictment alleges the defendants:

• Used aliases and bank accounts in the names of trusts to make tuition payments for their children appear as if they were scholarships from third parties.

• Used offshore bank accounts in the British Virgin Islands to hide their money and then used wire transfers to bring the funds back to the U.S.

• Arranged for sham transfers of real estate to their children.

• Placed their own bogus liens or mortgages on their personal assets so it would appear that the defendants had no assets that could be levied or seized.

Prosecutors also allege that, upon a grand jury subpoena served on BSC in April 2005, requiring the production of trust records, defendant Craig Bitterman shipped those records to Commonwealth Trust Company's "Trustee Services" in Texas to hide them from the grand jury.

After receiving a second such subpoena in June 2005, Bitterman sent additional records to Texas and New Mexico to hide them, the indictment alleges.

If convicted, Craig Bitterman could face a maximum sentence of 15 years in prison, a three-year period of unsupervised release and a $500,000 fine. If convicted of the conspiracy charges, his three co-defendants could face a maximum sentence of 5 years in prison, a three-year period of supervised release and a $250,000 fine.

Chester Bitterman Jr. was reportedly out of the area Tuesday night while Grant Bitterman and Curt Bitterman, reached at their homes, declined comment. Craig Bitterman was not immediately available for comment Tuesday.

The case was investigated by the Criminal Investigation Division of the IRS and is being prosecuted by Assistant U.S. Attorney Vineet Gauri.

jtodd@lnpnews.com