Examples of Nonfiler Investigations - Fiscal Year 2012
The following examples of nonfiler investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Florida Man Sentenced for Failure to File Tax Returns
On June 6, 2012, in Tampa, Fla., Ronald Galan, of Palmetto, was sentenced to 12 months and one day in prison for failing to file income tax returns. Galan was also ordered to pay $164,829 in restitution to the Internal Revenue Service. Galan pleaded guilty on March 5, 2012. According to court documents, during 2005 through 2009, Galan generated income totaling approximately $2,718,787. Despite his earnings, Galan willfully failed to file income tax returns for any of these years.
Ohio Pharmacist Sentenced for Failing to Pay Taxes
On June 4, 2012, in Youngstown, Ohio, Ronald E. Lidderdale, of Magnolia, Ohio, was sentenced to 12 months and one day in prison and one year of supervised release for failing to file federal income tax returns. According to a written plea agreement, Lidderdale, who owned and operated a pharmacy and gift shop, failed to file income tax returns on which he was required to report adjusted gross income of approximately $249,497, $336,800, and $324,734 for 2004, 2005, and 2006, respectively. Lidderdale failed to pay approximately $281,341 in income taxes owing on that income.
Self-Proclaimed “Governor” of Alabama Sentenced for Tax Fraud
On May 29, 2012, in Montgomery, Ala., Monty and Patricia Ervin, of Dothan, Ala., were sentenced to prison for conspiring to defraud the United States and tax evasion. Patricia Ervin was also sentenced for structuring transactions to avoid bank reporting requirements. Monty Ervin was sentenced to 120 months in prison. Patricia Ervin was sentenced to five years of probation, with the condition that she spend 40 consecutive weekends in jail. The Ervins were also ordered to pay $1,436,508 in restitution to the IRS. The Ervins owned and managed Southern Realty, a property management company in Dothan, Alabama. Based on the evidence introduced at trial, the Ervins amassed hundreds of investment properties over the last decade, receiving more than $9 million in rental income. Despite receiving this income, the couple paid no federal income taxes. As the evidence showed at trial, the couple concealed their assets from the IRS by placing investment properties into the names of nominees. Patricia Ervin also structured deposits into Southern Realty’s bank account in an effort to evade federal currency reporting requirements.
Former Owners of Excavation Business Sentenced For Tax Fraud
On May 15, 2012, in Boston, Mass., Paul Brown and Raymond Brown, brothers, were both sentenced to 36 months in prison, three years of supervised release, and ordered to pay $50,000 fines as well as more than $900,000 in restitution to the Internal Revenue Service and the Massachusetts Department of Revenue. The brothers were convicted in February 2012 of conspiracy to impair, impede and obstruct the Internal Revenue Service’s efforts to collect income taxes and tax evasion by hiding income from their excavation business. According to court documents, between 1996 and 2006, the Browns owned and operated J.P. Brown & Sons, a Dracut-based excavation company. Through their business, the brothers earned almost $2 million in income over four years. Neither paid any taxes on that income, and both failed to file personal federal income tax returns. The brothers concealed much of their income by, among other things, placing assets in their wives’ names, taking draws from the company in cash, accepting property in exchange for services rendered by J.P. Brown, and depleting the company bank account by purchasing more than $1 million in gold and silver.
Asphalt Paver Sentenced for Failing to File Tax Returns
On May 9, 2012, in Detroit, Mich., Andrew Stanley was sentenced to 21 months in prison, one year of supervised release and ordered to pay $259,379 in restitution to the IRS for failing to file tax returns. According to court documents, in October 2011, Stanley pleaded guilty to five counts of failing to file personal tax returns. From 2004 through tax year 2008, Stanley earned income by working in Michigan as a private asphalt paver. During this time, Stanley received gross income of over $950,000 but failed to file federal income tax returns which resulting in a tax loss of over $259,379.
Former CEO of New Jersey Payroll Services Company Sentenced for Attempted Tax Evasion
On May 2, 2012, in Newark, N.J., Jerry Carter Jr., the former chief executive officer and sole owner of First Priority Pay (FPP), was sentenced to 27 months in prison and three years of supervised release for trying to evade almost $477,000 in tax payments. Carter has agreed to pay $833,586 to the IRS, representing taxes and penalties. According to documents filed in this case and statements made in court, FPP was based in Hoboken, N.J., and provided payroll services to its approximately 3,500 clients throughout the United States, including handling direct deposits and paycheck services, preparing payroll tax returns, and collecting and paying clients’ payroll taxes to the IRS and various state taxing authorities. Carter admitted that for calendar years 2007, 2008 and 2009, he intentionally failed to provide the IRS with true, correct, and complete information regarding the more than $1.8 million in income that he received in connection with his position as CEO and owner of FPP, which resulted in a tax loss of approximately $476,832.
California Pediatrician and Husband Sentenced for Tax Evasion
On April 30, 2012, in Fresno, Calif., Elisabeth Ann Bossingham and her husband, Brett Allen Bossingham, of Woodlake, were each sentenced to 51 months in prison. The Bossinghams were convicted by a jury on February 9, 2012, of one count of conspiracy to defraud the United States by impeding the Internal Revenue Service (IRS) in its ability to assess and collect income tax and four counts each of tax evasion. According to testimony presented at trial, the Bossinghams properly filed tax returns between 1997 and 1999. In 2000, however, the Bossinghams began to actively conceal their income from the IRS. They used an offshore bank account and engaged in a “warehouse banking” scheme where depositors pool their money in a single bank account to avoid IRS detection. They created false liens against their property to “strip” the equity from it to stop future IRS collection efforts. The Bossinghams also did not file tax returns from 2000 through 2003, and when each of them did finally file four tax returns in 2007, the returns were demonstrably false.
Virginia Man Sentenced for Filing a False Refund Claim and Failing to File Tax Returns
On April 27, 2012, in Alexandria, Va., Richard Jaensch, of Annandale, Va., was sentenced to 36 months in prison and three years of supervised release for corruptly endeavoring to impede the IRS, filing a false claim for a refund and failing to file tax returns for 2004 through 2007. Jaensch was also ordered to pay $197,984 in restitution to the IRS. According to evidence introduced at trial, Richard Jaensch, a self-employed plumber, failed to file personal income tax returns beginning in 2002. The first tax return he filed after 2002 was a false 2008 tax return claiming a $774,052 refund based on false Forms 1099-OID. Over the years, Jaensch also obstructed and impeded the IRS; for example, he filed numerous documents claiming, that he and his wife, Janet Jaensch, were not required to file federal income tax returns. Jaensch caused his wife to present letters to her employer directing them to stop withholding federal income taxes from her salary. His wife was a former high-level civilian employee in the Department of the Navy. She pleaded guilty to willfully failing to file a tax return and was sentenced on December 13, 2011, to three years of probation and ordered to pay more than $137,000 in restitution to the IRS.
Oklahoma Insurance Agent Sentenced for Failure to File Tax Returns
On April 26, 2012, in Oklahoma City, Okla., Barry Brockman was sentenced to 24 months in prison, one year of supervised release and ordered to pay $241,406 in restitution to the Internal Revenue Service (IRS) for failing to file federal tax returns. According to court documents, Brockman worked as an independent insurance agent in Oklahoma City. He failed to file federal tax returns for calendar years 2003, 2004 and 2005 while earning over $300,000 in that period.
Florida Woman Sentenced for Interfering with the IRS and Filing False Tax Returns
On April 26, 2012, in Miami, Fla., Roanne Eye, of Plantation, was sentenced to 60 months in prison and three years of supervised release. The evidence at trial revealed that Eye attempted to obstruct and interfere with the functions of the Internal Revenue Service (IRS), including telling her employer not to comply with IRS notices and submitting IRS forms falsely claiming she was exempt from income tax withholding. In addition, Eye failed to file timely income tax returns for tax years 1996 and 1999 through 2005. In March 2006, she filed tax returns for 1996 and 1999 through 2005, all of which falsely claimed refunds to which she was not entitled. She subsequently filed fraudulent returns for tax year 2006. Eye falsely claimed more than $1 million in fraudulent refunds. In addition to filing the fraudulent income tax returns, Eye flooded the IRS with frivolous letters sent to IRS offices throughout the United States and Puerto Rico challenging the authority of the IRS to collect taxes from her.
Massachusetts Financial Advisor Sentenced on Tax and Contempt Charges
On April 24, 2012, in Boston, Mass., Kevin P. Mahoney, of Attleboro, Mass., was sentenced to 60 months in prison and ordered to pay $367,000 in restitution to the Internal Revenue Service (IRS). Mahoney was convicted of corruptly endeavoring to obstruct the administration of the Internal Revenue laws, filing false tax returns with the IRS and criminal contempt of court. Evidence at trial showed that Mahoney had failed to pay all of his taxes for the years 1996 through 2001 but had attempted to pay tax-related debts by submitting to the IRS more than $2.2 million in fictitious financial instruments, called Bills of Exchange, and checks drawn on a closed bank account. After filing for bankruptcy, Mahoney caused a worthless promissory note to be submitted to the IRS as purported payment for approximately $805,000 in taxes that Mahoney owed at that time. The evidence also showed that Mahoney submitted to the IRS false individual income tax returns for the years 2000 through 2006 that he knew failed to report more than $1.3 million in taxable income received from various financial institutions. Along with his tax returns, Mahoney had submitted altered Forms 1099-MISC on which he changed to zero the amount of non-employee compensation that the financial institutions had reported paying him. Mahoney also filed a false 2007 Nonresident Alien Tax Return in which he falsely claimed a refund of almost $389,000. The U.S. District Court for the District of Massachusetts had permanently enjoined Mahoney in July 2002 from, among other things, engaging in conduct that interfered with the administration of the Internal Revenue laws. Mahoney committed criminal contempt by violating the permanent injunction in that he assisted in the preparation and submission to the IRS of income tax returns for other people that falsely claimed more than $50 million dollars in refunds based on false Forms 1099-OID and a Form 1099-C falsely reporting $300 million in debt purportedly owed to a third party by an IRS employee.
Utah Man Sentenced for Conspiracy to Defraud the United States
On April 18, 2012, in Salt Lake City, Utah, Stephen Murphy was sentenced to 24 months in prison, one year of supervised release, and ordered to pay $83,831 in restitution to the Internal Revenue Service (IRS). Murphy pleaded guilty to one count of conspiracy to defraud the United States. According to information disclosed at his hearing, Murphy filed numerous false income tax returns for the years 2002 through 2009, espousing various false and frivolous tax positions. Specifically, he filed a false return for 2002 reporting zero income and zero tax due, on the ground that he was “not a U.S. person” subject to tax. He filed several subsequent false returns fraudulently claiming income tax refunds, including a false return for 2008 based on fictitious Forms 1099-OID. Also disclosed at the hearing, Murphy established two fake charities, which were actually just names attached to his personal bank accounts. He fraudulently claimed “charitable contribution” tax deductions for funds siphoned to these accounts. As part of his scheme, Murphy submitted Forms W-4 to his employers vastly overstating his withholding allowances, so as to minimize or eliminate tax withholdings from his wages. Murphy admitted that he intended to cause a loss exceeding $200,000 to the U.S. Treasury.
Former Pennsylvania State Auditor Sentenced for Tax Evasion, Obstructing and Impeding IRS
On April 10, 2012, in Harrisburg, Pa., Troy A. Beam, of Shippensburg, was sentenced to 74 months in prison. Beam was convicted on May 4, 2011, by a federal jury of tax evasion, obstructing and impeding the due administration of the Internal Revenue laws, and willful failure to file federal income tax returns. According to evidence introduced at trial, Beam, a former certified public accountant and former state auditor in the Pennsylvania Auditor General’s Office, operated a home construction business known as “Sunbeam Builders,” as well as owned and operated two real estate businesses that purchased, rented and sold real estate. Despite earning substantial income from these businesses, as well as other activities, Beam failed to file any federal income tax returns since April 1996. In April 1996, Beam filed false amended federal income tax returns for 1992, 1993 and 1994, seeking tax refunds for taxes he previously had paid for those years. The evidence at trial proved that from 1999 to 2007, Beam earned more than $10.3 million in gross income from his various home construction and rental property businesses. Beam obstructed the IRS in its attempt to calculate and collect his taxes by using numerous sham trusts and other entities, including North Star Investment Holdings Ltd. to hide his income and assets. He used North Star to set up a bank account in the Cayman Islands into which he deposited nearly $3 million of income derived from his construction business.
Florida Man Sentenced for Tax Evasion
On March 27, 2012, in Tallahassee, Fla., Lennie Fulwood, Jr. was sentenced to 57 months in prison on four counts of tax evasion. According to court documents, between 2005 and 2008, Fulwood ran a music store selling CDs and DVDs at the Tallahassee flea market. During the same period, Fulwood deposited more than $1.7 million in cash into accounts at five Tallahassee banks. The majority of the cash Fulwood deposited went into accounts held solely in his brother’s name, even though the money belonged to Fulwood himself. Fulwood used the cash to purchase $683,000 in commercial and residential properties, which he titled in his brother’s name. Having hidden his assets in his brother’s name, Fulwood failed to file personal tax returns on the income he had earned. The IRS determined that Fulwood had a taxable income of $1.1 million and owed a total of more than $285,000 in taxes.
Honolulu Firearms Business Owner Sentenced on Tax Charges
On March 27, 2012, in Honolulu, Hawaii, Arthur Lee Ong was sentenced to 51 months in prison and ordered to pay $1 million in restitution to the Internal Revenue Service (IRS). Ong was convicted by a federal jury on November 7, 2011, of conspiracy to defraud the United States and six counts of tax evasion. According to evidence introduced at trial, Ong, the owner and operator of Thunder Bug Inc., dba Magnum Firearms, failed to report to the IRS millions of dollars of income he earned from the sale of firearms and related products to federal, state, county and military agencies, as well as to the general public. Ong, with the assistance of a Hawaiian attorney, created multiple sham trusts in 1990 to hide his income and assets. He stopped filing personal income tax returns beginning in 1994 and also filed false tax returns on behalf of the sham trusts that fraudulently reported to the IRS that the income from his businesses was attributable to these trusts and not to him. The evidence at trial showed that Ong evaded more than $600,000 in federal income taxes from 2000 to 2006.
Iowa Man Sentenced on Tax Charges
On March 19, 2012, in Omaha, Neb., Patrick Bohall, of Sioux City, Iowa was sentenced to six months in prison; one year supervised release with the first six months being served on home confinement; and ordered to pay $287,546 in restitution for failing to file income tax returns. According to court documents, Bohall is an insurance agent. Bohall advised his tax preparer in 2001 that he was paying too much in taxes and had joined a plan to learn how to not pay taxes, but was advised by his tax preparer that he had to pay taxes. His 2003 return was prepared by a preparer in California and contained false statements that erased his taxable income. Bohall did not file any returns or report any income for the 2004 to 2006 tax years. By filing a false return and failing to file subsequent returns Bohall avoided a tax due and owing of $287,546.
Former IRS Employee Sentenced for Tax Evasion
On March 8, 2012, in St. Louis, Mo., Richard Saunders, formerly of St. Louis, was sentenced to 72 months in prison and ordered to pay more than $6 million in restitution to investors and nearly $446,000 to the IRS for operating a Ponzi-style investment scheme. According to court documents, Saunders operated and was affiliated with a business known as Advisors Capital Holdings, Inc. (ACH), in St. Louis County. Investors in the scheme were promised guaranteed returns, based on off-shore annuities. In reality, the investors who were paid returns on their investments were normally paid using investment funds obtained from other investors, rather than from returns on legitimate investments. Between 2002 and January 2008, Saunders spent, paid and diverted millions of dollars in investor funds. Some of the funds were transferred to overseas accounts, including accounts in Thailand. Saunders, a former IRS employee, failed to file timely returns for tax years 1992-1998 resulting in a total of $445,836 in taxes owed to the IRS.
Utah Man Sentenced for Interfering with the Administration of Tax Laws
On February 23, 2012, in Salt Lake City, Utah, Kenneth J. Neilson, of St. George, was sentenced to 30 months in prison, three years of supervised release and ordered to cooperate with the Internal Revenue Service (IRS) in filing all outstanding tax returns. Neilson pleaded guilty in April 2011 to one count of interference with the administration of tax laws. As a part of a plea agreement, he admitted that he corruptly tried to obstruct or impede federal revenue laws from about March 1996 to June 2005. In addition, Neilson admitted that the financial information he provided to the IRS was different from information he reported to lenders from whom he was seeking loans. He also admitted claiming to be a sovereign citizen of the State of Utah and not subject to laws of the United States. As stated in the sentencing memorandum, Neilson obstructed and impeded the collection of delinquent taxes owed by him by placing assets in the name of third party nominees and forging signatures of third parties to transfer properties. He used numerous layers of trusts to mask his own ownership of assets, using a purported church as a method of avoiding taxes, filing frivolous tax returns, reporting contradictory financial information to the IRS, mailing frivolous materials to the IRS as part of a tax avoidance scheme, and sending harassing letters to the IRS.
Minneapolis Man Sentenced for Orchestrating $20 Million Investment Scam
On February 17, 2012, in Minneapolis, Minn., Michael Joseph Krzyzaniak, aka Michael Joseph Crosby, was sentenced to 151 months in prison. Krzyzaniak orchestrated four different investment scams that lured people into investing millions of dollars in ventures that were never finished. Krzyzaniak pleaded guilty on June 28, 2011 to one count of wire fraud and one count of income tax evasion. In his plea agreement, Krzyzaniak admitted that from 2003 through January of 2011, he conducted a scheme to defraud individuals in Minnesota and elsewhere by convincing them to invest money in prospective business projects, which, in fact, turned out to be fraudulent. In total, investors provided Krzyzaniak with between $20 and $50 million for investment. Krzyzaniak told investors their money would be invested in a particular project, and that they could expect a substantial investment return. Krzyzaniak admittedly spent large portions of the funds provided him to pay for personal expenses, fund his lavish lifestyle, and distribute lulling payments to earlier investors. In some instances, Krzyzaniak invested funds but only in an effort to prevent the fraud from being discovered. In addition, Krzyzaniak admitted that between 2004 and 2007, he failed to file federal income tax returns or pay income taxes.
Maryland Man Sentenced for Filing False Claims for Tax Refunds and a False Retaliatory Lien
On February 16, 2012, Andrew Isaac Chance, of Clinton, Md., was sentenced to 65 months in prison for filing false claims for tax refunds and for filing a false retaliatory lien against a federal prosecutor. Chance was convicted by a federal jury on November 18, 2011. At the time he filed the false retaliatory lien and false claims for tax refunds, Chase was on federal supervised release for a 2007 tax conviction. According to evidence presented at trial, Chance was convicted and sentenced to 27 months in prison in 2007 for filing a false claim for an income tax refund for the tax year 2005. Shortly after he was released from prison for that crime, he filed a UCC Financing Statement with the Maryland Department of Assessments and Taxation, falsely claiming that the federal prosecutor, who prosecuted the 2007 case, owed him $1.313 billion. The evidence at trial established that a year after filing the false lien, Chance filed three false claims for tax refunds for tax years 2007, 2008 and 2009 seeking a total of $900,000. These three false tax returns were almost identical to the 2005 return for which he was previously convicted. On the 2005 tax return, Chance claimed he was the Andrew Chance Trust. On the 2007-2009 returns, he claimed he was the Andrew I Chance Trust.
Connecticut Mason Sentenced for Structuring Cash Transactions to Evade Paying Taxes
On February 10, 2012, in Hartford, Conn., Joseph Romanello, of Stamford, Conn., was sentenced to 18 months in prison, three years of supervised release, ordered to file tax returns for the years 2003 and 2004 and to pay $2,736,885 in back taxes, penalties and interest. Romanello pleaded guilty to illegally structuring cash withdrawals to evade reporting income on his federal tax returns for the years 2003 and 2004. According to court documents and statements made in court, Romanello earned income by providing masonry and landscaping services to Connecticut residents. Between approximately January 2003 and March 2005, Romanello structured cash transactions of approximately $2 million by routinely withdrawing cash from various bank accounts he maintained in amounts at or slightly below $10,000 to prevent the financial institutions from filing CTRs. For the years 2003 and 2004, Romanello did not file any federal income tax returns, and he failed to pay a total of more than $1 million in income taxes during those two years.
Optometrist Sentenced for Tax Evasion
On February 9, 2012, in Springfield, Mo., Leslie MacLaren was sentenced to 39 months in prison and ordered to pay $334,003 in restitution for evading income taxes and filing a false tax return. According to court documents, MacLaren claimed a $40 million refund. MacLaren, an optometrist, attempted to evade obligations of approximately $161,773 in various ways, including concealing income and hiding assets. Hidden assets included a three story house on more than six acres, which he titled in his mother’s name, and three vehicles, which he purchased and titled under the name of a fictitious company. Further, he filed a fraudulent bankruptcy petition, resulting in the discharge of back tax liability for the years 1993 and 1995 to 1998. MacLaren also attempted to evade income taxes for the years 2003 through 2006 by failing to file returns, avoiding the use of banks – dealing mostly in cash – and by listing eight dependents and claiming exemption from withholding on an IRS Form W 4 that he provided to a former employer. In addition to the tax evasion counts, MacLaren was found guilty of two counts of bankruptcy fraud, one count of submitting a false claim to the United States and one count of obstructing the administration of internal revenue laws.
Promoter of Anti-Tax Scheme Sentenced for Tax Conspiracy
On January 26, 2012, in Erie, Pa., Donald Turner, aka Don Wood, was sentenced to 60 months in prison, three years of supervised release and ordered to pay $408,034 in restitution to the IRS. Turner was convicted following a jury trial of conspiring to defraud the United States. According to evidence at trial, Turner sold a book titled “Tax Free! How the Super Rich Do It,” which introduced readers to his organization, First American Research (FAR). Through FAR, Turner promoted an illegal scheme to reduce or eliminate an individual’s tax liability through the use of purported offshore entities, among other things. In 1991, Donald Turner had sold the program to Daniel Leveto, a Meadville, Pa., veterinarian. As part of the program, Leveto utilized various methods to conceal his income and assets from the IRS as directed by Turner. One of these methods included the purported sale of Leveto’s veterinary business to an alleged offshore entity called Center Company. Leveto actually retained dominion and control over the veterinary business. In 2005, a jury convicted Leveto of all counts, and he was subsequently sentenced to 46 months in prison.
Former Partner at International Law Firm Sentenced for Failing to Pay Taxes On Over $10 Million of Income
On January 11, 2012, in Manhattan, N.Y., John J. O’Brien, a former partner at Sullivan & Cromwell (S&C), was sentenced to 28 months in prison, one year of supervised release and ordered to pay $2,866,832 in restitution for failing to file tax returns and pay taxes to the Internal Revenue Service (IRS). According to the Information and statements made during court proceedings, from 2001 through March 2009, O’Brien was a partner at S&C, where he handled corporate mergers and acquisitions. From 2001 to 2008, O’Brien failed to file tax returns, notwithstanding S&C’s effort to ensure partners were in compliance with the tax laws. During this time period, he received over $10.8 million in partnership income and owed over $2.5 million in taxes. Instead of paying his taxes, O’Brien paid for various personal expenses, including funding an antique books business that he partly-owned, renovating his lakeside weekend home in the Adirondacks, and traveling internationally. S&C learned of O’Brien’s failure to file returns and to pay taxes to the IRS in March 2009. He formally resigned his partnership at S&C on March 31, 2009.
Colorado Couple Sentenced on Tax Charges
On January 10, 2012, in Denver, Colo., Gregory E. White was sentenced to 18 months in prison and three years of supervised release. Mary L. White was sentenced to three years of probation, of which 8 months will be spent in home detention. In October 2011, Gregory and Mary White pleaded guilty to one count of obstructing and impeding the Internal Revenue Service (IRS). In addition, Gregory pleaded guilty to one count of making a false claim with the government. According to court documents, the Whites failed to file individual tax returns for tax years 2000 to 2005. During this time period, the Whites were receiving income through the operation of their business, White Chiropractic Center. Mary worked at the business during 2000 to 2005 acting as the office manager and overseeing its daily operation. Gregory worked as a chiropractor providing services and generating income from patients. From 2006 through 2011, the Whites engaged in a series of acts which were designed to delay, hinder and otherwise obstruct an IRS investigation. Specifically, the Whites submitted personal tax returns to the IRS for 2000 to 2005 which omitted income information. During 2004, the adjusted gross income for the Whites was approximately $74,310, and for 2005, it was $291,730. However, for this time period, no tax returns were filed with the IRS. In addition, Gregory filed a personal tax return Form 1040 with the IRS for tax year 2007 which claimed he was entitled to a refund totaling $116,262. The requested refund was based upon the claim that he had money withheld during the past year in connection with an Original Issue Discount (OID) form. Attached to the return were two original issue discount forms (IRS Forms 1099- OID), which falsely claimed that Gregory White was owed $76,924 and $39,338.
Kentucky Business Owner Sentenced for Tax Evasion
On January 10, 2012, in Bowling Green, Ky., Phillip R. Carr, a business owner, was sentenced to 12 months and a day in prison and ordered to pay $395,367 in restitution to the Internal Revenue Service (IRS). Carr pleaded guilty in August 2011 to three counts of income tax evasion. According to court records, Carr filed federal income tax returns with the IRS for tax years 2004, 2005 and 2006 that claimed no taxable income for those years. During that period Carr owned and operated Rainbow Sports & Printing, a custom printing and embroidery business, as well as rental property in Warren County, Ky. The indictment charged the taxable income for 2004, 2005 and 2006 was actually $258,354, $239,205, and $355,827, respectively and that the total income tax due and owed for all three years was $277,724.
Colorado Man Sentenced for Tax Violations
On January 4, 2012, in Tyler, Texas, Randall Craig, of Aurora, Colorado, was sentenced to 12 months in prison and ordered to pay $376,714 in restitution for failing to file an income tax return. According to court documents, Craig failed to file a tax return for 2003, when he had gross income of just over $212,000. The tax loss for that year was $51,882. The restitution amount includes taxes owed for other years.
Indiana Man Sentenced for Structuring Cash Transactions
On December 21, 2011, in Indianapolis, Ind., Steven Smith was sentenced to 24 months in prison, two years of supervised release and ordered to forfeit $305,050 for structuring monetary transactions. According to court documents, Smith traveled to different banks or branches in different towns, generally on the same day, using cash to purchase cashier’s checks in an attempt to prevent the banks from recording and reporting the amount of currency he had. Between 2005 and 2007 and then again in October 2011, Smith manipulated cash transactions involving just under $700,000. Smith admitted during his guilty plea and sentencing hearing that he had not filed any federal tax returns or paid any federal income taxes since 1994 and that he manipulated his cash at various banks so that the federal government, particularly the Internal Revenue Service, would not know what income he earned. Smith earned income from his business, Frontier Inc., which first did business as Frontier Gun Club in Roachdale, and then did business as Indiana Gun Club in Fortville.
Three Men Sentenced in Investment/Tax Fraud Scheme
On December 21, 2011, in Newark, N.J., a principal of Mid-Atlantic Trustees and Administrators (MATA) and two of the company’s employees were sentenced to prison terms or home detention for conspiracy to defraud the United States through the marketing of two fraudulent products designed to conceal assets from the IRS and fraudulently discharge debt. Michael Balice, of Metuchen, N.J., was sentenced to 48 months in prison; Angel Done, of Queens, N.Y., was sentenced to 12 months of home detention; and Wilson Calle, of Queens, was sentenced to three months of home detention. Balice and Done were convicted by a jury on June 20, 2011, of one count each of conspiracy to defraud the United States, mail fraud and wire fraud. Balice was also convicted of one count of tax evasion. Calle had pleaded guilty to one count of mail fraud during the trial. According to court documents and evidence at trial: Balice was a principal of MATA, a company formed in 2005, which marketed two products to its customers: Pure Trust Organizations (PTOs) and Beneficiaries in Common (BIC). From the formation of MATA through July 2010, the defendants established several hundred PTOs for their customers, the express design of which was to conceal income and other assets from the IRS, thereby impeding the IRS in its tax collection efforts. In creating, marketing, and selling PTOs, the defendants made concerted efforts to make it appear that PTO customers had no control over the assets in the account and the trustees had complete control. The customers, however, always maintained unfettered access to their assets. In May 2007, MATA began to market and sell a second product, BIC, as a debt elimination program. For thousands of dollars per customer, MATA, its principals, and its employees manufactured false and fictitious bonds, often with face amounts of tens of millions of dollars, which were sent directly to the United States Treasury Department. According to MATA, once a customer’s bonds were sent to the Treasury Department and accepted, the customer was “bonded,” and, with MATA’s help, could draw down that bond to pay “public” debt, including mortgage debt, credit card debt, and tax obligations. As part of the BIC process, customers paid MATA to send hundreds of bonds to the U.S. Treasury, the IRS, and other government agencies in an attempt to discharge their tax and other debts. In total, MATA flooded the U.S. Treasury, IRS, and other government agencies with hundreds of billions of dollars in worthless paper. Through the marketing and sale of PTOs and BIC, the defendants collectively made over $3.5 million in illicit gross receipts, most of which was hidden in PTOs controlled by the defendants. None of the defendants paid income taxes on the proceeds, and, in many cases, filed no federal income tax returns at all.
Michigan Nonfilers Sentenced for Tax Fraud Scheme
On December 19, 2011, in Detroit, Mich., David Cusumano and Henry Nino were sentenced to 15 months and 18 months in prison, respectively, for tax evasion. According to court documents, Cusumano was a mechanical engineer who worked at various companies throughout Michigan, and Nino was an electrician with an automotive company. Despite earning substantial income in their respective jobs, Cusumano failed to file income tax returns and failed to pay taxes due to the IRS for tax years 2003 through 2008; Nino failed to file and pay taxes for tax years 2004 through 2008. Both men successfully prevented their employers from withholding federal income taxes from their wages by submitting false IRS Forms W-4 on which they falsely claimed they were “exempt” from income tax withholding. They also attempted to prevent the IRS from determining their tax liabilities and collecting their unpaid taxes by participating in several obstructive schemes. Both men paid tax fraud promoters, including a Florida-based organization called American Rights Litigators/Guiding Light of God Ministries, to submit frivolous and obstructive correspondence to the IRS and to the defendants’ employers, including false complaints that wrongly accused IRS employees of criminal activity. Cusumano and Nino also submitted multiple fake financial instruments to the IRS in a failed attempt to pay off their outstanding tax debts. Court documents state that Nino also attempted to prevent the IRS from collecting his unpaid taxes for the years 1996, 1997 and 2000-2003 by, among other things, transferring the title of his personal residence to a nominee entity called the Michigan Natural Group, using money orders to make mortgage payments and cashing paychecks rather than depositing them in a bank account. They both have to pay restitution for the tax loss to the federal government.
Day School Owners Sentenced on Tax Charges
On December 15, 2011, in Wilmington, Del., Troy and Monnie Dorsey, of New Castle, Delaware, were sentenced to 41 months and 12 months and one day in prison, respectively. The Dorseys were convicted by a trial jury in March 2011 on one count of conspiracy to impede the IRS in the execution of its duties and three counts of filing false tax returns for the tax years of 2004 through 2006. In addition, Troy Dorsey was convicted of eight additional counts of structuring cash deposits to avoid currency transaction reporting requirements. According to court documents, during the tax years 2004 through 2006, the Dorseys did not report any business income from the operation of their school, the Day School for Children. In fact, the Dorseys earned gross business receipts of $129,270 in 2004, $312,901 in 2005, and $260,104 in 2006. In addition, between September 2005 and May 2006, Troy Dorsey deposited cash income from the operation of the Day School for Children in multiple increments under $10,000 to avoid currency transaction reporting requirements.
Two People Sentenced in Multi-million Dollar Conspiracy to Defraud the Government
On December 15, 2011, Newark, N.J., Ronald Ottaviano, of Lewes, Del., was sentenced to 62 months in prison. Harriet Foster, of Tuckerton, N.J., was sentenced to 13 months in prison. Ottaviano, Foster and two other defendants were convicted by a jury on June 20, 2011, on charges of conspiracy to defraud the United States, mail fraud and wire fraud. Ottaviano was also convicted of two counts of tax evasion and one count of money laundering; and Foster was convicted of two counts of failing to file a tax return and one count of money laundering. The jury also returned a special verdict forfeiting a home in Lewes, which the jury found Ottaviano and Foster had purchased using the proceeds of the fraud. Ottaviano, a principal of Mid-Atlantic Trustees and Administrators (MATA), and others conspired to defraud the United States by marketing two fraudulent products designed to conceal assets from the IRS and fraudulently discharge debt. At no time did MATA conduct legitimate business. Instead, MATA marketed two products to its customers: Pure Trust Organizations (PTOs) and Beneficiaries in Common (BIC). Through the marketing and sale of PTOs and BIC, the defendants collectively made over $3.5 million in illicit gross receipts, most of which was hidden in PTOs controlled by the defendants. None of the defendants paid income taxes on the proceeds, and, in many cases, filed no federal income tax returns at all. Ottaviano and Foster spent a portion of their illicit proceeds, more than $500,000, to purchase the Lewes home – in cash.
Arizona Real Estate Broker Sentenced on Tax Charges
On December 5, 2011, in Phoenix, Ariz., Sue J. Taylor, of Gilbert, Arizona, was sentenced to 78 months in prison for evading more than $3,000,000 in taxes on income earned from real estate commissions and land sales. Taylor was found guilty by a federal jury on April 28, 2011, of four counts of tax evasion and four counts of willful failure to file tax returns. According to trial evidence, Taylor began filing false income tax returns in 1997 and later simply failed to file any income tax returns or report any income earned through her real estate brokerage, National Landbank. She also hid her income and assets in numerous fictitious business entities, lied to IRS employees, and structured her financial transactions to avoid bank reporting requirements. Taylor previously served more than two years in prison for contempt of court in a separate civil case for refusing to produce records to the IRS.
Colorado Couple Sentenced for Obstruction and Filing False Tax Returns
On November 15, 2011, in Denver, Colo. Gary Neuger and his wife, Beth Neuger, of Colorado Springs, Colo., were sentenced for criminal obstruction and filing false income tax returns. Gary Neuger was sentenced to 24 months in prison, one year of supervised release, and ordered to pay $393,791 in restitution to the IRS. Beth Neuger was sentenced to three years probation, with the first 10 months in home detention, and ordered to pay $31,563 in restitution to the IRS. Both Gary and Beth Neuger pleaded guilty on August 19, 2011. Gary Neuger pleaded guilty to one count of filing a false income tax return and one count of interference with the administration of the Internal Revenue laws. Beth Neuger pleaded guilty to one count of filing a false income tax return. According to court documents, beginning in 1997, Gary and Beth Neuger stopped paying federal income tax. When the IRS began attempting to collect the outstanding taxes, Gary Neuger sent threatening letters to the IRS and filed several lawsuits against IRS revenue agents in state and federal court. Then in February 2005, Beth Neuger filed a series of income tax returns signed under penalties of perjury stating she made zero income and owed zero in income taxes even though she worked as a nurse at Memorial Hospital at the time. Subsequently in April 2005, Gary Neuger filed a series of income tax returns stating he made zero income and owed zero in income taxes while working as a psychologist in a private practice.
Mississippi Man Sentenced for Tax Evasion and Obstruction
On November 10, 2011, in Hattiesburg, Miss., Charles W. “Chip” Irby, Jr., a former stockbroker from Laurel, was sentenced to 108 months in prison and eight years of supervised release. Irby was also ordered to pay a $15,000 fine and $1,063,634 in restitution to the Internal Revenue Service (IRS) as his tax liability with interest and penalties. In August 2011, Irby was convicted of tax evasion for years 1998-2001, failing to file federal income taxes for 2004-2007, and attempting to obstruct the due administration of the federal tax laws. According to the indictment, Irby attempted to evade payment of federal income taxes totaling more than $245,000 for the years 1998, 1999, 2000, and 2001 through acts designed to conceal from the IRS the nature and extent of his assets and their location, such as placing assets in nominee names and filing frivolous documents with the IRS. Irby also failed to file federal income tax returns for 2004, 2005, 2006, and 2007, when he had received income for those four years totaling approximately $197,363. Finally, Irby endeavored to obstruct the administration of internal revenue laws by promoting false information regarding the payment of federal income taxes to others, recruiting them to ignore their federal income tax obligations, preparing false and frivolous documents to send to the IRS such as false affidavits for particular tax years, and undertaking frivolous civil litigation against federal agents and others involved in the criminal investigation to impede its progress.
Kentucky Man Placed On House Arrest for Tax Crimes
On November 8, 2011, in Cincinnati, Ohio, Andrew E. Williams, of Villa Hills, Kentucky, was sentenced to 15 months of home confinement and ordered to pay $49,991 in restitution to the Internal Revenue Service (IRS). Williams pleaded guilty on August 11, 2011, to one count of failure to collect and pay over employment taxes to the IRS. According to court records, Williams was the owner of Club Aqua, Inc., which at the time was doing business under the name Club Ritz, withheld federal income tax, social security tax and Medicare tax from club employees’ paychecks but failed to pay the taxes to the IRS or file quarterly federal income tax returns as required. Williams also admitted that he did not pay his employer’s portion of these taxes. The total loss to the IRS from Williams’ conduct was $81,712, with the unpaid portion of this loss being the restitution ordered at sentencing. Williams’ plea agreement also obligates him to file complete and accurate tax returns with the IRS for all tax years and periods up to and including the date of sentencing, which were required to be filed under U.S. tax laws but have not yet been filed. He also agreed to file with the IRS complete and accurate amended returns for all previously filed incomplete or inaccurate tax returns, and pay all taxes, penalties, and interest due and owing to the IRS.