Part 8 of a 10 Part Series ...

The Tax Break Shenanigans of
TX Lottery Chairman J. Winston Krause

... The 5th Circuit of Appeals Called It ....
"Krause's Tax Chicanery"

Texas Lottery Commission
Where Is The Missing Money?
Was this the PERFECT Crime?
Was it embezzlement? Fraud? Theft?
Or sheer incompetence?


brought to you by
The Lotto Report

Series Began: August 1, 2013
Part 1: Posted August 1, 2013
Part 2: Posted August 4, 2013
Part 3: Posted August 7, 2013
Part 4: Posted Aug 13, 2013
Part 5: Posted Aug 20, 2013
Part 6: Posted Oct 22, 2013
Part 7: Posted March 13, 2014
Part 8: Posted April 6, 2014 - Below
Revised 4/7/14 - corrected a date
Revised 4/13/14 - Supporting documents - pdf's

Part 9: Posted ??, 2014

Part 10: Posted ??, 2014

- Watching the Texas Lottery -

Is Chairman J. Winston Krause capable
of recognizing wrong doing and does
he believe in consequences?
What has he done about
the Missing Money situation?
Is He The Right Man
To Chair the Texas Lottery?

Opinions Expressed here are those of Dawn Nettles

... Table of Contents ...
All subjects are on this page - you can either click or scroll down
I would recommend that you just start reading at the top ...

About this story, click here
Krause vs the USA (IRS), click here
The Details/Facts, click here
Was Krause associated with Jenkens & Gilchrist, click here
Krause's trusted confidant, click here
5th Circuit - Tax Chicanery, click here
Court Decisions, Krause lost, click here
Krause fails to compare apples to apples, click here
Krause's omission in his Appointment Application, click here
My communications with Krause, click here
Excerpts - Various and telling, click here
In Closing, click here
Links to supporting documents, click here

About This Story
This story is about a lawsuit filed by J. Winston Krause in
Nov 2008. It is a most intriguing and telling characterization
of Mr. Krause's innermost thoughts and beliefs.

Hopefully, I've written it in layman's terms so all
of you can understand it. This was my goal.

From excerpts, you will learn a lot about
the man who Governor Perry appointed to Chair
our lottery and the man who is directly responsible
for the oversight of Texas Lottery staff, staff's actions
and the $3 billion per year generated by the lottery.

Though I do find it of the utmost importance to clarify
- that it appears - Governor Perry had no way of knowing
about Krause's lawsuit as Krause failed to include
it in his 2009 Appointment's application.

After you read the details of Krause's lawsuit, ask yourself in
the end, how can we trust Krause's judgment? How can we
be assured that he will honor his ethical obligations? Is he
being transparent in his motives with his votes and in his
non-disciplinary actions for staff's wrong doing regarding the
missing money, the Draft Report and the lottery keeping
prize money

Can a person who attempted to shelter millions in income
from being taxed be trusted to oversee a state run $3 billion a
year gambling operation where he has a moral obligation and
a fiduciary duty to both the state and the People of this State?

How can we trust someone who obviously should have
known better and who failed to use simple logic and
common sense in his decision making for the sole
purpose but - to use his words - "there was
an opportunity to make a profit.

Now let's look at the details ...


J. Winston Krause vs the United States of America
- (IRS) -
Filed November 25, 2008 - Closed Oct 12, 2010
Case #: A-08-CA-865-SS - District Court
Case #: 10-50312 - 5th Circuit of Appeals

Links to supporting documents can be found at the bottom of this page.
For the sake of attempting to protect Mr. Krause's personal information,
I will not post all legal documents. However, all documents are public
records and can be obtained in their entirety from either
the Courts or from your Pacer account.


... Krause vs the United States of America ...
- IRS -

Between 2008 and 2010, J. Winston Krause hammered
his way through the legal system. He was attempting to
obtain a refund for penalties and interest he'd paid
($112,466) after the IRS disallowed an income
and a deduction (loss) found on his 2002 &
2003 tax returns.

Krause ONLY disputed a "40%" penalty assessed
by the IRS. He claimed the IRS could not charge
"40%" for disallowing a deduction. Though, as it
turns out, he was mistaken - WRONG.

He NEVER disputed the underlying tax issue.
(Shown in detail below)

After 3 failed attempts in District Court, Krause then
took his battle all the way to the 5th Circuit of Appeals
where he lost again. In the end, there would be
no refund for Mr. Krause.

In essence - and my interpretation is - the Courts told
Krause he had been a bad, bad boy and this was
the consequences he was going to pay for
trying to pull a fast one.

... OH MY ...
The Other Side Speaks ...

In Oct 2006, the IRS issued Krause a
Statutory Notice of Deficiency which increased
his tax liability and imposed interest and penalties
at 40%. The notice also detailed the adjustments
to Krause's 2002 and 2003 tax returns. Krause
paid the additional tax and the interest and
penalties and he did NOT contest the
adjustments made by the IRS.

Hmmm ....

Two years later, on March 6, 2008, Krause filed
for a refund for the interest and penalties he had
paid stating that the IRS could not assess 40% for
"merely disallowing a deduction."

After no response from the IRS, Krause filed a lawsuit
on Nov 25, 2008 and amended it on Feb 17, 2009 which
- by the way - was 3 days before submitting an Appointment
Application to the Governor's office.

At any rate .... in response to Krause's lawsuit ...

The IRS claimed the deduction Krause took was a "gross
valuation misstatement
" and they owed him nothing.

The IRS countered that the accuracy-related penalties
applied to 1) a Son of BOSS tax shelter scheme;
AND 2) Krause failed to contest that determination at
the appropriate time, and it was too late to do so now.

- The Details -

First ... What is "Son of Boss" tax shelter?
Here's the best way for me to explain it you ... In a nutshell,
as you will see below, it was an attempt by some taxpayers
to avoid paying taxes. In lawsuits, they use words
like tax avoidance, shady tax dodges, tax break
shenanigans, abusive tax breaks, tax evasion,
tax scams ... you get the picture ... Look ...

Excerpt - Google Search .... Only 1 page ...


That "40%" ... it appears ....

the IRS CAN assess 40% IF the value or adjusted basis
of property claimed on a tax return is 400% or more.

In Krause's case, his value was inflated by 14,000%
(Yes, I said fourteen thousand percent)

Excerpt - United States of America (IRS) Response - Filed 11-02-09

Don't know about you, but this is what I'd call serious inflation! Whoa ....

Do understand ... while the the specific facts regarding Krause's tax
shelter were not relevant to his lawsuit, the facts were relevant to
the penalty imposed which was WHY Krause filed a lawsuit.

Facts - the "Disallowed Loss"
(Remember, Krause did not challenge
the disallowed deduction

Like many tax shelters, Krause's was complex
in detail but simple in principal. Despite the fact that
the IRS had identified the Son-of-BOSS tax shelter as
an abusive tax transaction in 2000, several years before
Krause engaged in it
, Krause nonetheless engaged in it
for his own personal benefit - he said, "there was an
opportunity to make a profit.
" Krause WAS aware of the
2000 IRS notice pertaining to the Son-of-BOSS tax shelter.

The facts of Krause's case ...

Mr Krause bought Canadian dollars for $20,000.

Mr. Krause sold the Canadian dollars for $19,542

True loss ... $500 (rounded up)

--- BUT ---

Mr. Krause claimed on his tax return that he
paid $2.8 million for the Canadian dollars

Mr. Krause showed a loss of <$2,791,250> on his 2002
tax return (filed Oct 2003). He carried forward a portion
of that loss to his 2003 tax return (filed Oct 2004) but
a month later - Nov 2004 - Mr. Krause apparently
had second thoughts and amended his 2003 tax return.

As seen in the following excerpts ....

(For complete transaction details, read the
IRS's Nov 2, 2009 filing, click here)

1) Excerpt - United States of America (IRS) Response - Filed 11-02-09

2) Excerpt - Krause's Deposition - page 92 -93

Hmmmmm ...

I would like to know how Krause can justify this in
his own mind - it's flawed logic and would be too
good to be true ... thousands vs million. C'mon ...

He inflated his costs by 14,000%. Unbelievable.

This must be the ultimate definition of "fuzzy math" ...

About Krause's amended 2003 tax return ....
The amended return was filed one month (Nov 2004)
after he filed his original 2003 tax return (Oct 2004)

The reason given at the time was it was amended ....
"return as filed reflected a NOL (net operating loss)
and taxpayers now wishes to disregard the NOL
(net operating loss) in determining their income tax

... But ...

in Krause's deposition he said his reason was ...


Notice that Krause says, "settlement issue WAS coming
" - Well, a tidbit you should know .... on May 5, 2004,
which was PRIOR to Krause's filing his first AND even his
2003 return, the IRS had already announced a
settlement initiative
applicable to taxpayers who
had invested in a "Son-of-BOSS" tax shelter.

Krause admitted receiving the settlement initiative and he admitted
advising his clients regarding the settlement initiative but despite
receiving this notice and the fact that some of his clients had
settled, Krause chose not to participate because ...

Excerpt - Deposition - "Settlement" page 28

WHY ...
did Krause say it was because "the settlement issue
was coming out
" when the settlement was actually out
in May PRIOR to completing both 2003 tax returns?

I can't help but wonder if Mr. Krause was hoping
to avoid paying the taxes he actually owed.

Was he hoping the IRS wouldn't catch it in time
so he could get away with it like others had?

OR was he hoping the IRS wouldn't catch it
at all allowing him to get away with it?

Did he not like the costly terms associated
with the IRS Settlement Initiative?

Which were ... Eligible taxpayers had to concede 100% of
the claimed tax loss, pay all applicable interest and accept the
imposition of a penalty unless they had previously disclosed their
participation in the transaction. Participating taxpayers were
allowed to deduct as a loss their out of pocket transaction
cost, which were typically promoter and professional fees.

In Krause's case, I don't think he ever paid promoter
and professional fees - though I'm not positive -
it's kinda hard to know for sure .... See ....

Fee's - Which statement is true?

Statement 1 - Deposition page 49

Statement 2- Deposition page 27

Oh well, what can I say about any fee's
Mr. Krause may have paid. He had TWO
different answers regarding paying fee's. I
just wonder which answer was the truth?

Krause Could Have Settled
Krause could have settled but chose not to. Instead
he boldly sued for a return of the interest and
in District Court then carried his case to the 5th Circuit
of Appeals
where he lost again. It appears to me that
he doesn't believe in
consequences for wrongdoing.

Krause's stubbornness kept him from
recognizing that he had erred BIG TIME. He's
guilty of the same thing regarding lottery issues.

Do you realize that had he not filed this lawsuit,
no one would have known about his involvement with
the Son-of-BOSS unconscionable tax shelter scheme?

I often wonder what Krause and Governor Perry have
in common since it appears Governor Perry has
no tolerance for wrong-doing.

... Uh--oh ...

Was Krause Associated With Jenkens & Gilchrist?

Excerpt - United States of America (IRS) Filing - Nov 2, 2009 - page 20

Excerpt - Krause Deposition - page 30 - Jenkens Involvement?

For those of you who may not know, the law firm
- Jenkens & Gilchrist - was sued by the IRS in 2003. This was
BEFORE Krause ever filed his questionable 2002 tax return too.

In March of 2007, Jenkens settled by paying a $76 million fine
agreed to CEASE practicing law effective March 31, 2007.
This was before Krause filed his lawsuit too.

Whether Krause believed in Jenkens or was suckered by
Jenkens is irrelevant to me because Krause is an educated
man who should have known that some things are too
good to be true. It is my opinion he was involved
to make a buck - anything to make a buck.

Excerpt - Google Search Results "Jenkens" - showing JUST one page ...

Excerpt - Chicago Tribune, May 2004

I wonder IF this is how the IRS found Commissioner Krause?
It's no wonder that Krause didn't dispute - in 2006 - the
disallowed tax and income on his 2002 and 2003 returns.

Meet Krause's Trusted Confidant
... Attorney Paul Daugerdas ...

Excerpts From Deposition Referring to Mr. Daugerdas

Excerpt - Krause Deposition - page 48 - 49

Excerpt - "1999" - page 53

Let's see ... if I'm reading this correctly, on pages 48 and 49,
Krause says he only talked to Mr. Daugerdas 5 to 10 times
regarding the Son-of-BOSS tax shelter taken in the tax
years of 2002 and 2003. I interpret that Mr. Krause is
making it sound like he barely knows Mr. Daugerdas.

But later - page 53 - Krause acknowledged he wrote
Daugerdas in 1999 regarding something totally
different - "BEST."

Now keep in mind that Krause's deposition was taken
on Sept 30, 2009. Jenkens & Gilchrist had shut down in
March 2007 and Daugerdas was indicted. in June 2009

A very good reason to downplay an association
with Mr. Daugerdas. Huh? But look at all
these communications with Mr. Daugerdas ...

Sept 20, 2000 - Letter from Daugerdas to
Krause's client - Krause copied
page 126 & 127

Page 137 - Krause to Mr. Daugerdas July 2000

Page 136 - Mr. Daugerdas to Krause's Client ... Oct 2000

Page 138 - Krause faxes Mr. Daugerdas ... May 2000

Page 139 - Krause faxes Mr. Daugerdas -
RE: Client's concerns ... Nov 30

Gee, I wonder what the legislature
would think about this remark?

Page 140 - Krause depends on "Paul" Daugerdas
to advise Krause's clients

June 2009 - Daugerdas indicted for Tax Fraud ...

Excerpt - Google Search - "Paul Daugerdas"

2013 - Daugerdas Convicted of Tax Fraud Scheme
Faces up to 58 years of prison time

I think I have figured out why Krause refuses to give
any consideration to anything that I may say or suggest.
It's because I'm not a crook or out to make a fast buck
but would rather see the lottery make an honest buck
fair games of chance.

I suggested rounding prizes up OR down - Krause
favored and
approved rounding down only. Guess
he's out for
every penny he can get - huh? But you
when doing taxes, you round both ways.

And as we've clearly seen, he wanted reimbursement
of penalties and interest he had paid - he did after all -
not contest the additional taxes and he did pay them so
gee - he thinks he shouldn't have to be fined or punished
for his trying to pull a fast one on the government.

And to think, this man Chairs our Lottery.


... The 5th Circuit used the term ...
tax chicanery"

Do you remember in Part One where I showed you the
Texas Lottery's "Core Values?" In part, it said ... "We value and
require ethical behavior by our employees, licensees and vendors
Hmmmm .......... they left out Commissioners and Chairs ...

Excerpt - 5th Circuit Court of Appeals Decision ... page 6

chicanery (??'ke?n?r?)
n, pl -eries
1. verbal deception or trickery, esp in legal
quibbling; dishonest or sharp practice
2. a trick, deception, or quibble

chi•can•er•y (??'ke? n? ri, t??-) n., pl. -er•ies.
1. the use of sly or evasive language, reasoning,
etc. to trick or deceive.
2. a tricky or deceitful maneuver; subterfuge.

I'll bet Mr. Krause was angry when he read that!
(sarcastic remark)

- Courts Decisions - Krause Lost -
But read the interesting and telling excerpts found in the rulings
(Courts rulings (pdf's) can be found at the bottom of this page)

Excerpts - 5th Circuit of Appeals - Decision - October 2010

Court rules in favor of the United States of America - (IRS)

One man with many entities .... I wonder, why does Krause need so many companies?

Oh me oh my ... Loss appears on Krause's "Personal" Return ....

Krause's business (KAAS) was a hoax for tax avoidance? Hmm .....

Court says "Attributable to the fraudulent <$2.79 million> loss" ... Hmmm ....

Excerpt - District Court Order - March 29, 2010

Whoa .... I think the Judge made himself quite clear ... This reminds
of how staff at the Texas Lottery talks to and treats me. And the
description of Mr. Krause is dead on regarding how Krause "disagrees!!"
If I had a dime for each time Krause has disagreed with me I'd be rich. <grin>

But you want to know a secret ... at least I think I finally figured out why he
never agrees with me - these proceedings are quite telling about his
way of thinking. I think he suffers from stinkin' thinkin'.

Just think - two days later Krause appealed to the 5th Circuit of Appeals.

Krause Fails to Compare Apples to Apples
In Krause's lawsuit, he cited a couple of cases
- Heasley v Commissioner
and Todd v Commissioner -
to support his arguments. But the cases he chose
to support his beliefs were shot down big time
by the IRS and the 5th Circuit of Appeals.

Even I wondered why he would use these cases
under the circumstances and I'm not even a lawyer!

Read on to understand ...

- Excerpt - 5th Circuit - Oct 2010 Decision -

- Excerpt - United States of America (IRS) Filing 11/2/09 -

Excerpt - Krause Deposition - "Heasley & Todd" - page 39

If this is an example of Krause's logic, how
could we ever trust him to oversee our lottery?

It would be hard to compare the Hensley's to Mr. Krause.
The Hensley's were blue collar taxpayers who had been
duped by their financial advisor. Mr. Krause - on the
other hand, is a college graduate, a lawyer, a tax advisor
he opted to take a deduction for himself that he
have known better to take ...... (see next excerpt).
Clearly he did to make a dollar for himself.

Excerpt - USA's Filing 11/2/09 - page 4

In reality, it appears to me he was attempting to dupe
the government the same as he's duping lottery players
by adopting unfair games of chance. He doesn't even
ask questions about the games most of the time and
he doesn't even require Mr. Grief to discuss new games
with the Commissioners prior to proposing a new game.

Krause has allowed the staff at the lottery to get away with
losing a minimum of $600K, no consequences for failing
to balance a checking account and no consequences have
been paid for changing a "draft" report so drastically.

I wonder how he can "logically" explain all of this
to the People of Texas?

- About Krause's Omission In His -
Governor's Appointment Application

To serve the Governor of Texas, one has to submit an application
offering their services. Below are 5 excerpts - each is explained
if an explanation is needed.

Excerpt 1 - Feb 20, 2009 - Appointment Application - Krause Wrote ...

How can this answer be correct? Shoot, he's currently suing
the IRS
for a refund for penalties and interest imposed
because they disallowed a deduction he tried to take.
He didn't even dispute the deduction.

Hmmm, now look at Excerpt 2 - the filing dates of his lawsuit.
Notice his filing on Feb 17, 2009 then
3 days later -
on Feb 20, 2009 - he submitted his application to the Governor.

Excerpt 2 - District Courts "Docket Text" - "Feb 17, 2009"
(Shows filing dates & description of documents filed)

Excerpt 3 - Certification of Applicant - Last page
of Appointment Application ... Signed 2/20/09

Do you suppose it's possible that Mr. Krause "forgot" about
his lawsuit when he submitted that application to the Governor?

OK - maybe ... Mr. Krause just figures it's nobody's business! <grin>

One thing about it - at least now I understand why the
Texas Lottery nor the Commissioners didn't appear to
care about my findings on Kelly Cripes application.
I suppose if you do things this way then you'd be two
faced if you came down on somebody else for doing
the same thing you did. Huh?

Maybe all of this is why nothings been done about
the missing money too. After all, Krause tried to make a
little extra so what's wrong with someone possibly
pulling off the perfect crime - why catch them?

- Excerpt 4 - Deposition of J. Winston Krause
Gawd ... look what he said about being
Appointed by the Governor ...
Sept 30, 2009

Page 16 & 17

Mr. Krause's answer is not entirely true. Mr. Krause left
out the part that you have to apply first to serve under
Governor. It is my opinion that he led these lawyers to
believe that he just received a call from the Governor out
of the blue. Kinda cocky ... huh? What do you think?

Oh, and how 'bout that comment about GTECH being the
"biggest contract" in state government - sounds to me like
he's bragging!Is he using an intimidation strategy here?

Excerpt 5 - July 13, 2012 - Governors Appointments Application
Now he remembers the lawsuit! Hmmm ...

Well, here it is 3 years later and Mr. Krause suddenly
remembers that lawsuit ... I just
love the way he down
plays it ...
"Tax court case disputing IRS adjustments."

I just wonder if the Governor's Office, the Ethics Commission
or the DA's Public Integrity Unit will have the same attitude
as the Lottery has regarding certifying applications with a
signature. You can rest assured, I'm certainly going to find out
as I will be filing complaints and objections.


- FYI -
Google's Definition of "Lies by Omission"

"The biggest lie about lies is that a lie of omission is not a lie! ...
those who use this type of lie, have conned themselves into
believing that to intentionally remain ...

"Omission seems to become a lie when you intentionally
hide something from someone. If you know what you
are omitting is in fact relevant and ...

"Unlike a white lie, fibs rarely include those lies or omissions that
are meant to do good. ... It is a type of deception involving denial
coupled with rationalization in ... presentation of facts in a way
that is literally true, but intentionally misleading.


My Communications (E-mails) With Chairman Krause
Pertaining To His 2008 - 2010 Lawsuit

My 1st Message - 2/28/14

Chairman Krause Replies 2/28/14

My Response to Krause's Message 2/28/14

Chairman Krause Replies - 3/3/14

"Have fun?" ... What a response.

What I think is a "pity" is the knowledge of how many
people lie, cheat, scam, murder and steal in this world.

With all due respect, it appears you were wrong (erred) in
thinking that the IRS could not impose 40%. Your case
is being used by legal experts in teaching ....

"How NOT To Litigate A Partnership"

How NOT to Litigate a
Partnership Tax Controversy

In part it reads .....

"Krause again demonstrates that the taxpayer must follow the proper procedures in contesting IRS adjustments. When the IRS issues an FPAA to a partnership, the partnership itself must contest the adjustments made in the FPAA, even when the individual taxpayer and entities totally under the taxpayer’s control are the only general and limited partners in the partnership. Perhaps because of his total control over KAAS and the identity of interests, Krause may have mistakenly thought that he and the partnership were the same entity, and that he had all of the procedural remedies that an individual taxpayer typically has."

(Link to full story at bottom of page)




- Excerpts -
From Court Filings & Krause's Deposition

Very interesting stuff ... Just a variety of remarks ...

About Krause's Many Companies ...

Krause was asked to describe his business(s). After his brief
description, he was asked why would he need an entity different than
Krause & Associates to do what he had just described.
Krause's response ...

Page 32 ...

Hmmm ... interesting ...
to make it 'seem' like"

I don't know about you but I'd call this
deceiving to say the least.


Mr. Krause is a lawyer who is Board Certified in tax law;
he's Certified in Estate Planning and Probate Law. He's just
one person yet he has many different business names for a
ONE man show ... Below is a listing of his companies ...

2008 Lawsuit
Krause v United States
of America (IRS)

TX Ethics Commission
Found in Category

"Interest in Business Entities"
As seen in Krause's
Personal Financial Statement (PFS)

Entities Identified
in Krause's Deposition


Krause & Associates LP
Krause &
Associates, LP
Krause &
Associates, LP
** Krause & Associates
Advance Strategies (KAAS)
KrauseCo KrauseCo
Krause Holdings, Inc Mursch Partners, LP Mursch Partners, LP
Krause Management, LC
(It's really an LLC)
Krause Holdings Krause Holdings
Mursch Partners, LP Interfase Capital
Partners, LP
Interfase Capital
Partners, LP
Interfase Capital
Managers, LLC
Interfase Capital
Partners III, LP
Interfase Capital
Partners III, LP
Boulevard Oaks
Interfase Capital
Managers, LLC
Interfase Capital
Managers, LLC
SLHK Investments,
JBS Holdings, LP
Boulevard Oaks
Boulevard Oaks
JWK Realty
Investments, Inc
JWK Realty
Investments, Inc
* Balcones
Partners, Ltd
* Balcones
Partners, Ltd

* Balcones just happens to be the name of his street too.

** Entity originated in 2001 - was "in business" in 2001, 2002, 2003.
IRS alleged KAAS "was a hoax and existed for the
sole purpose of tax avoidance

- FYI -
Krause failed to answer all questions to "IF SOLD" on
his Personal Financial statement given to the Ethics Commission.
The answers applicable to "IF SOLD" were either "Net Gain" or "Net Loss."



- Important -

Attorney's are often times “registered agents” for companies
which means that all business and tax matters for the company
goes through the attorney. Or an attorney can just be a "figurehead"
for the company. This often times can explain why an attorney
is named in various business entities and legal filings. I do not
think this applies to the entities listed above though I'm not positive.


J. Winston Krause - Companies Listed -

2009 & 2012 Appointment Application - State of Texas

In his Appointment Application, Krause looks like
a normal person!!!! <grin>


Krause Deposition - RE: Companies ... page 79, 80, 81

Apparently Krause works for FREE too!


Krause Deposition - page 22 & 23 - Companies ...

Excerpt - Companies - Dirty Dozen Tax Scams -
Abusive Tax Structures

- As seen on the IRS website -

"What is an abusive scheme? The Abusive Tax Schemes program encompasses
violations of the Internal Revenue Code (IRC) and related statutes where multiple
flow-through entities are used as an integral part of the taxpayer's scheme to evade
taxes. These schemes are characterized by the use of Limited Liability Companies
(LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs),
foreign financial accounts, offshore credit/debit cards and other similar instruments.
The schemes are usually complex involving multi-layer transactions for the
purpose of concealing the true nature and ownership of the
taxable income and/or assets.

End Companies.


Various Telling Topics ....

Talk about arrogant & cocky ...
"Isn't that a beautiful thing." (A & B)

Page 11 - United States of America (IRS) Nov 2, 2009 Filing

Page 75 Krause's Deposition ...

Wonder what the Judge thought about this remark?


Why didn't Krause seek outside legal advice?

Krause's Deposition - page 62 & 63

Let's see ... by reason of deduction ...
With reference to seeking legal advise on
his transactions - perhaps he didn't seek outside
legal advise because he knew he would most likely
be told he should NOT move forward.
What do you think?


Krause replies,
"To avoid paying Texas franchise tax"
page 126 - Deposition ...

I'll just bet the Legislature loves this one! <grin>

I certainly think that all tax payers should take all
deduction allowed to them but I don't believe in
"trickery" to create a delusion for the sake of a dollar.


"Does that help refresh your recollection?"
IRS attorney to Krause - Krause deposition - page 129 & 130

Hmmm .................


Page 61 ... Do you know Donna Guerin?

Page 163 - "At your [Krause's] request ..."

Hmmmm ....

By the way, Donna Guerin of Jenkens & Gilchrist, pleaded
guilty and was sentenced to serve eight years in prison
and to pay $190 million in restitution.


Page 152 - "Would have made a bunch of money,
like hitting the lottery.
" Gee this sounds
just like lottery players hoping to win.
What are the odds? <grin>

There are so very many excerpts I could take
Krause's deposition that you really should see.
But enough is enough. I think I've made my point
with the few I chose to show. I would advise all
of you to read the deposition in its entirety. A
link can be found at the bottom of this page.


- End Deposition Excerpts -

In Closing ....

In my defense ...
I want to make it very clear that when the
Appointing Committee contacted me regarding
Mr. Krause's appointment to Chair the Lottery last
year, I had no knowledge - at that time - of what
you've read here. Had I read these legal papers or
had any knowledge of this particular incident,
I would have objected strenuously to both
hisoriginal appointment in 2009 and to
his appointment to Chair the Lottery.

It is my belief that Mr. Krause would not
be sitting where he is today had the legislature
known the details of his 2008 - 2010 lawsuit -
but - as you saw, the legislature had no way of
knowing as Mr. Krause failed to reveal this
lawsuit - when asked - in his original (2009)
Appointment application
. He omitted it.

I do agree that our Courts are in place to
protect citizens rights as well as to uphold
the laws and rules that govern our country.
We, as citizens, are supposed to adhere
to the laws and rules - even when we
disagree or "misunderstand" a law or a rule.
Ignorance or a "claim" to ignorance is
NO excuse in the eyes of any Court of Law.

... It is because of Mr. Krause's actions ...
that I have come to question and oppose the appointment
of Mr. Krause as the person to Chair the Texas Lottery. I've
wondered so many times ... why isn't he asking questions ...
why has he not taken action against staff members who
failed to do their jobs ... why are these people getting
raises and praise, why this, why that ... Well, I think I
figured out those "why's" now ...

While Mr. Krause is certainly entitled to his beliefs
and his right to file a lawsuit - this lawsuit sent a
clear message as to his demeanor, his beliefs
and his character - in my opinion.

One has to wonder though, Mary Ann Williamson
was re-appointed to the Texas Lottery Commission on
March 11, 2014 - is she there to replace Mr. Krause?
After all, Mr. Krause learned that I would be posting
a story about him on Feb 28, 2014 so I do wonder
why Ms. Williamson has returned. Maybe he plans
to step down. We'll see.

But you are the ultimate Judge and Jury ... you will form
your own opinion regarding Mr. Krause based on how
you define ... trust, character, integrity, honesty and
respect - qualities that must be found in THE person
responsible for a $3 billion per year state owned
gambling business ... Our State Lottery.

Now I will ask ... Do You Think
J. Winston Krause The Right
Person To Chair Our Lottery?


- J. Winston Krause -
Links to Supporting Documents -

July 13, 2013 & Feb 20, 2009 - Redacted -
Appointments Application (pdf) , Click here

Krause - Original Complaint -
Filed Nov 25, 2008, (pdf) Click here

Krause Amended Complaint
Feb 1, 2009, (pdf) -
Complaint & Exhibits A & B - Click here
Exhibit C - Part 2 - Click here
Exhibit D - Click here

United States of America (IRS) Answer
to Krause's Amended Complaint,
April 7, 2009, (pdf) Click here

Deposition of J. Winston Krause,
Sept 30, 2009, (pdf) Click here

United States of America (IRS) Opposition
to Krause's Motion for Summary
Judgment and Motion for Summary Judgment,
Filed November 2, 2009, (pdf) Click here

United States of America (IRS) - Statement of
Undisputed Facts & Motion for Summary
Judgment, Filed Nov 2, 2009 (pdf), Click here

US District Court Order - Denied Krause's motion for
relief March 30, 2010, (pdf) Click here

5th Circuit Court of Appeals - Oct 12, 2010 -
Affirms District Courts Decision, (pdf) Click here

- Ethics Commission -
Krause's Financial Statements
2009, (pdf) Click here
2012, (pdf) Click here


Here's just a few stories that you may want to read ...

- Dirty Dozen Tax Scams - Abusive Tax Structures - IRS website

How NOT to litigate a Partnership Controversy, click here

Paul Daugerdas Indictment, (pdf) click here

News Story - Paul Daugerdas, The American Lawyer, Dec 2003, click here

The Demise of Jenkens & Gilchrist, click here

Part 9 - A detailed review of testimony during Commission meetings.
Tentative posting date of April, 26, 2014

Part 10 - About those merit raises and promotions.
Date to be announced.


Texas Lottery Commissioners
Chair J Winston Krause (Appointed March 2009)
Jodie Baggett (Appointed Sept 2013)
Katie Stavinoha (Appointed Sept 2013)
John W Townes (Appointed Dec 2013)
Mary Ann Williamson (Resigned 8/16/13 - Re-appointed 3/11/14)

Commissioner Veronica Edwards (Resigned 2/13/14 - Effective 3/31/14)



Series Began: August 1, 2013
Part 1: Posted August 1, 2013
Part 2: Posted August 4, 2013
Part 3: Posted August 7, 2013
Part 4: Posted Aug 13, 2013
Part 5: Posted Aug 20, 2013
Part 6: Posted Oct 22, 2013
Part 7: Posted March 13, 2014
Part 8: Posted April 6, 2014 - Above
Part 9: Posted ??, 2014
Part 10: Posted ??, 2014



Texas Lotto Report
(All About the Texas Lottery)

Dawn Nettles
P. O. Box 495033
Garland, Texas 75049-5033
(972) 686-0660
(972) 681-1048 (Fax)




Table of Contents ... Table of Contents ...