Examples of Non-filer Investigations - Fiscal Year 2011
The following examples of non-filer investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Texas Couple Sentenced for Tax Evasion
On September 30, 2011, in Marshall, Texas, Timothy J. Patton and his wife, Dawn G. Patton, of Big Sandy, Texas, were sentenced to 40 months and 36 months in prison, respectively. They were also ordered to pay $571,734 in restitution to the Internal Revenue Service. The Pattons were found guilty on July 7, 2011, of conspiracy to attempt to evade federal income tax and five counts of attempting to evade federal income tax. According to information presented in court, beginning in 2000, the defendants stopped filing federal income tax returns and began insisting that their employers not withhold any federal income tax. Each provided false W-4s to their employer, claiming that each was single and exempt from income tax. They also had their employers begin issuing paychecks to the Office of the Patriarch of the Gathering of the House of Israel, an entity created by Timothy Patton using an invalid Employer Identification Number. The Pattons would regularly refuse to provide a social security number to their employers. The defendants, who insisted on being referred to as Brother T and Mimi, claimed that they were not the individuals named in the indictment.
Debt Collectors Sentenced for Mail Fraud and Tax Evasion
On September 26, 2011, in Buffalo, N.Y., Timothy E. Arent, of Clarence, N.Y., was sentenced to 150 months in prison and ordered to pay $780,000 to the IRS. Neil G. Wieczkowski, of Buffalo, N.Y., was sentenced to 72 months and ordered to pay $60,000 to the IRS. Both men were convicted of mail fraud and tax evasion. Arent and Wieczkowski were also ordered to pay $3.6 million in restitution to the victims of their scheme. From October 2006 through October 2009, Arent and Wieczkowski illegally purchased debtor information from two former employees of a Buffalo debt collection business and impersonated law enforcement officers, attorneys, judges, paralegals, and legal assistants in an attempt to coerce victims into making payments on the fictitious debt. During a three year period, Arent and Wieczkowski received approximately $6.8 million in checks written by over 1,000 victims across the country. From 2005 through 2008, Arent received over $2.1 million in income, on which he failed to pay taxes, resulting in a tax loss of approximately $780,000. During the same period, Wieczkowski received over $170,000 in income, on which he failed to pay taxes, resulting in a tax loss of approximately $60,000. Arent was ordered to forfeit approximately $2 million in assets that the government seized during the investigation.
Michigan Business Owner Sentenced to Prison for Tax Evasion
On September 20, 2011, in Detroit, Mich., John Walter Kaber, of Bloomfield, Mich., was sentenced to 37 months in prison, two years of supervised release and ordered to pay $868,319 in restitution to the IRS. According to the plea agreement, Kaber was the owner of Merchant Processing, a business that installed credit card processing systems. Despite earning substantial income from Merchant Processing, Kaber did not file on time his U.S. Individual Income Tax Returns for tax years 1991 and 2005. Kaber filed Forms 1040 for tax years 1992-1996 and 2000-2004, but he did not pay the taxes due. Kaber also did not pay a portion of the employment taxes that were due to the IRS during the 2000-2003 tax years. To carry out his tax evasion scheme and to conceal his income and assets from the IRS, Kaber, among other things, used his wife’s name to purchase and refinance two parcels of real property and to purchase a boat, boat slip and vehicle. Kaber also sought to prevent the IRS from collecting unpaid taxes from his bank accounts by, among other things, cashing checks rather than depositing them in the bank, depositing business receipts into his wife’s checking account and removing his name from a joint bank account after it became subject to an IRS levy. Kaber’s total tax due for the 1991-1996 and 2000-2005 tax years, including both income taxes and employment taxes, is $868,319.
Ohio Man Sentenced for Failing to File Corporate and Personal Tax Returns
On September 9, 2011, in Cleveland, Ohio, Jose E. Celeste, also known as Joseph Celeste, was sentenced to 14 months in prison and one year of supervised release for corruptly endeavoring to impede and obstruct the due administration of the tax laws. According to court records, from approximately January 2002 through February 2006, Celeste attempted to conceal from the Internal Revenue Service (“IRS”) the income and tax liabilities arising from the operation of a corporate dance studio business solely-owned by his wife. Celeste failed to file corporate and personal income tax returns for the years 2002 through 2005 and engaged in various conduct to hinder the IRS from being able to determine, assess, and collect taxes, including – depositing more than $900,000 of corporate receipts into both corporate and personal bank accounts during 2002 - 2004; paying personal and business expenses from both types of accounts; cashing a substantial amount of 2005 corporate receipts and using at least part of the cash for personal purposes; and issuing business checks to pay credit card charges for both personal and business expenses. During 2005, he also made a number of wire transfers of currency in a manner to avoid triggering the bank’s requirement to issue a currency transaction report (“CTR”) to the IRS, including structuring $65,020 of currency into seven wire transfer transactions at two banks over a four-day period in November 2005. Finally, Celeste made a number of false statements to IRS criminal investigators in February 2006. At sentencing, the parties stipulated that Celeste failed to report and pay $167,481 in personal income taxes for 2001 through 2005. Shortly before sentencing, Celeste filed the delinquent corporate and personal income tax returns for those years and paid $45,959 toward his tax liabilities.
Three Missouri Business Owners Sentenced For Tax Evasion
On September 7, 2011, in Springfield, Mo., Denver A. Wood, his father, Thomas A. Wood, and David D. Large, all of Branson, were sentenced in to prison for tax evasion. Denver Wood was sentenced to two years in prison and ordered to pay $181,103 in restitution. Thomas Wood was sentenced to 18 months in prison and ordered to pay $11,581 in restitution. Large was sentenced to one year in prison and ordered to pay $198,517 in restitution. On November 29, 2010, Thomas Wood pleaded guilty to two counts of income tax evasion and Denver Wood pleaded guilty to three counts of income tax evasion. Large pleaded guilty on January 13, 2010, to participating in a conspiracy to commit tax evasion. According to information in court documents, Thomas and Denver Wood and Large owned and operated a travel club business originally named Vacation Travel Outlet from 2000 through 2004. Vacation Travel Outlet marketed travel club memberships that claimed to offer discounted travel prices, including savings on airfare, cruises, hotels, golfing, rental cars and condominiums. They also owned and operated Vacation Services of America from 2003 to 2005. Thomas and Denver Wood admitted that they received income from their employment at those businesses. Thomas Wood admitted that he failed to file an income tax return for 2002 and 2003. Denver Wood admitted that he failed to file an income tax return for 2002, 2003 and 2004. Large admitted that he and his co-defendants attempted to conceal $1,803,728 in income from the Internal Revenue Service. To evade paying the taxes, Large admitted that he and his co-defendants received their distribution of profits from their ownership interests in Vacation Travel Outlet in the form of withdrawals and checks drawn off of the Vacation Travel Outlet bank account and made payable to “cash.” They or their spouses deposited the checks into their individual bank accounts or cashed them at the banks. They also received officer compensation from Vacation Service of America. According to his plea agreement, Large failed to file income tax returns with the IRS for tax years 2000 through 2004. Large also admitted that he and his co-defendants structured financial transactions to evade federal reporting requirements. Under the terms of their plea agreements, Thomas and Denver Wood and Large each agreed to pay restitution to the IRS, which represents the federal income taxes they failed to pay for tax years 2000 through 2004, as well as any interest and penalties they may owe to the IRS.
New Mexico Farmer Sentenced for Tax and Other Charges
On August 30, 2011, in Albuquerque, N.M., Bill Melot, a farmer from Hobbs, N.M., was sentenced to 60 months in prison, to be followed by three years of supervised release, and ordered to pay $18,493,099 in restitution to the Internal Revenue Service (IRS) and $226,526 in restitution to the U.S. Department of Agriculture (USDA). Melot was convicted in April 2010 of tax evasion, failure to file tax returns, making false statements to the USDA, and impeding the IRS. According to the indictment and evidence presented at trial and at sentencing, Melot has not filed a personal income tax return since 1986. In addition, Melot improperly collected more than $225,000 in federal farm subsidies from USDA by furnishing false information to the agency. Specifically, Melot provided the USDA with a false Social Security Number (SSN) and fictitious Employer Identification Number (EIN) to collect federal farm aid. According to the indictment and evidence presented at trial, Melot took numerous steps to conceal his ownership of 250 acres in Lea County, N.M., including notarizing forged deeds and titling the property in the name of nominees. The evidence also showed that Melot used false SSNs and fictitious EINs to hide his assets from the IRS. Additionally, Melot maintained a bank account with Nordfinanz Zurich, a Swiss financial institution, which he set up in Nassau, Bahamas, in 1992. Melot failed to report the Swiss bank account to the U.S. Treasury Department as required by law.
California Contractor Sentenced for Tax Evasion
On August 1, 2011, in Fresno, Calif., Mark Charles DeVries, of Bakersfield, was sentenced to 27 months in prison and ordered to pay a $7,500 fine. DeVries was convicted in May 2010 of tax evasion. According to evidence introduced at trial, in 1999, 2000, and 2001, DeVries was a contractor who performed plumbing work on large commercial projects in the Bakersfield area. DeVries stopped filing individual federal income tax returns in 1995 despite the fact that he had substantial income from his businesses. He attempted to evade taxes through various means, including opening bank accounts using false taxpayer identification numbers and providing his customers false taxpayer identification numbers to use when reporting his income. The total tax due and owing for 1999, 2000, and 2001 is over $85,000.
Texas Man Sentenced for Tax Evasion
On July 29, 2011, in San Antonio, Texas, Juan R. Gonzalez was sentenced to 30 months in prison, three years of supervised release and ordered to pay $2,400,583 in restitution to the Internal Revenue Service. On January 6, 2011, Gonzalez pleaded guilty to one count of tax evasion for calendar year 2005. According to court documents, from about May 1998 though about June 2006, Gonzalez owned and operated Texas V&J Construction, Inc. (TXV&J), a residential construction business. Although TXV&J produced gross income of $8,999,323 for calendar years 2003, 2004, and 2005, Gonzalez failed to file personal or corporate income tax returns for tax years 2003, 2004 and 2005. Beginning around August 2003 and continuing until about November 2005, Gonzalez structured over $1 million in financial transactions on the TXV&J business bank account to evade bank reporting requirements. He wrote large checks of just less than $10,000 to himself and third parties, most of whom were family members and contract employees. He directed the third parties to cash the checks and return the money to him. Gonzalez then used the money to pay for a variety of business and personal expenses, including payroll for his subcontractors and salary to himself. He kept no formal records of how much he was paying to subcontractors and himself. He insisted that his wife file her federal income tax returns using their children as dependents to take full advantage of tax deductions and credits. By not keeping business records and not providing this information to his wife, he caused her to file inaccurate federal income tax returns.
Illinois Podiatrist Sentenced to Prison for Tax Evasion
On July 28, 2011, in Chicago, Ill., Randy L. Pachnik was sentenced to 16 months in prison, two years of supervised release and ordered to pay $679,744 in restitution to the Internal Revenue Service (IRS). Pachnick pleaded guilty to one count of tax evasion in January 2011. According to his plea agreement, during 2006, Pachnik was a podiatrist who served patients through two medical groups – Preferred Podiatry Group of Northbrook, Illinois, and Midwest Physicians Group of Orland Park, Illinois. To conceal his income from the IRS, Pachnik directed these medical groups to make checks for his fees payable to two purported organizations - Western Enterprises and Rama Enterprises. Pachnik entered into an agreement with Western Enterprises, an unincorporated entity in Maryland, for it to receive checks on his behalf. Western Enterprises deposited the checks, retained 10 percent for itself and issued checks payable to Pachnik, which he deposited into his personal checking account. To further conceal his income from the IRS, Packnik directed Preferred Podiatry Group to issue checks to Rama Enterprises Business Trust, an unincorporated entity wholly owned by Pachnik. Pachnik used the Rama Enterprised bank account as his personal bank account. During 2006, Pachnik received income gross income of $1,015,469. On this gross income, he owed federal income tax of $332,289. Pachnik failed to file any income tax returns or pay incomes taxes for calendar years 2001 through 2005, 2007 and 2008. Pachnik sent frivolous communications to the IRS challenging its ability to levy taxes and impose liens for the taxes he owed from 2001 onwards. He also filed a frivolous lien for $4 million against an IRS officer who attempted to collect the taxes Pachnik owed.
South Dakota Man Sentenced for Tax Fraud and Failure to Appear
On July 26, 2011, in Sioux Falls, S.D., Thomas R. Kelley, of Salem, South Dakota, was sentenced to 70 months in prison, five years of supervised release and ordered to pay $96,710 in restitution to the IRS for tax fraud, passing fictitious United States Treasury bonds, and failure to appear. Kelley was convicted of tax fraud charges and other financial crimes in May 2010, but failed to appear at his August 23, 2010, sentencing hearing. After a four-month search, he was arrested in December 2010. He was convicted of willful failure to appear in April 2011. Throughout the two trials, Kelley claimed to be a “sovereign citizen,” arguing unsuccessfully that certain federal laws did not apply to him. Kelley was originally indicted in October 2009 for filing a false income tax return, impeding the Internal Revenue Service, tax evasion, willful failure to file tax returns and uttering fictitious obligations (private discharging and indemnity bonds, private offset bonds, and bonded promissory notes).
Rapper Ja Rule Sentenced for Failing to File Income Tax Returns Resulting in Over $1.1 Million in Tax Losses
On July 18, 2011, in Newark, N.J., Jeffrey Atkins, the rapper popularly known as “Ja Rule,” was sentenced to 28 months in prison, followed by one year of supervised release for failing to file tax returns with the IRS, after admitting that he did not pay his taxes for five years. Atkins, of Saddle River, N.J., previously entered his guilty plea to three counts of a five-count Information. According to documents filed in this case and statements made in court, Atkins was the sole shareholder of ASJA Inc. and Rule Tours Inc. Atkins admitted that during the five tax years from 2004 through 2008, he received music royalty income from ASJA Inc. and music tour and live performance-related income from Rule Tours Inc. Although Atkins pleaded guilty to charges specifically related to tax years 2004, 2005 and 2006, his sentence took into account the tax loss for all five years, including 2007 and 2008 – a total loss to the government of approximately $1,137,912. Atkins had also agreed to file true and accurate tax returns and to pay all taxes and penalties owed to the IRS.
Virginia Couple Sentenced for Conspiracy to Defraud the United States
On July 11, 2011, in Norfolk, Va., John Scott Miles was sentenced to 30 months in prison and Kathryn Charles Miles was sentenced to 20 months in prison. Both were sentenced to three years of supervised release and ordered to pay $215,591 in restitution. The Miles, a husband and wife, of Mathews County, Virginia, were sentenced for conspiring to impair and obstruct the IRS in the ascertainment and assessment of federal income taxes from 2001 through 2010. At their plea hearings, Kathryn and John Miles admitted to earning taxable income as the owners and operators of a construction business named “Scotts Construction” and “KCM Construction & Design.” Kathryn Miles also admitted to earning taxable income as a nurse at various Virginia hospitals. In 2001, The Miles joined American Rights Litigators, a business they knew sold and promoted tax avoidance methods. Kathryn Miles admitted that, in 2005 and 2006, she submitted six tax returns to the IRS in which she falsely claimed that she earned no wages and in which she did not disclose the operation of her construction business. She submitted falsified tax documents with each tax return. John Miles admitted that he did not file tax returns during the time of the conspiracy.
Louisiana Businessman Sentenced for Failing to File Tax Returns and Impeding the IRS
On July 6, 2011, in Shreveport, La., Randy L. Branch, of Ruston, Louisiana, was sentenced to 18 months in prison, followed by one year of supervised release, for impeding the Internal Revenue Service (IRS) and failing to file a tax return. Branch, the owner and operator of a construction business in Ruston, was charged in April 2010 in a 33-count indictment with failure to file tax returns for tax years 2003, 2004, 2005 and 2006, obstructing and impeding the IRS, and structuring financial transactions. Testimony during his guilty plea proceeding revealed that Branch handled all of his financial transactions in cash to avoid the usual records. Branch would cash almost all business checks and pay the majority of his expenses in cash or cashier’s checks.
Former Kentucky Police Officer Sentenced for Tax Fraud, Bank Fraud and Lying to the IRS
On July 6, 2011, in Louisville, Ky., Curtis Gordon Jr., of Louisville, Kentucky, was sentenced to 39 months in prison and three years of supervised release. In October 2010 a federal jury found Gordon, a former Shively police officer, guilty of numerous charges including filing false federal income tax returns (for years 2003, 2004 and 2005), failing to file federal income tax returns (for 2006, 2007 and 2008), and bank fraud. According to evidence presented in court, Gordon owned and/or operated four different security companies, Commonwealth Security, CSI Security, Kentucky Protection and Patrol, and United Protection and Patrol. Gordon did not report income totaling over $1,000,000 for calendar years 2002 through 2008, and he stopped filing personal federal income tax returns after filing his 2005 tax return.
Texas Man Sentenced to Prison for Failing to Pay Taxes
On July 1, 2011, in Houston, Texas, Jimmy Mitlo was sentenced to 24 months in prison and ordered to pay $555,720 in restitution to the IRS. Milto pleaded guilty in November 2010 to one count of willfully conspiring to impede the IRS from collecting his income tax liabilities from 1989, 1990 and 1991. According to his plea agreement, Mitlo signed a decision document in the U.S. Tax Court in 2000 agreeing that he owed taxes, penalties and accruing interest for those tax years of approximately $349,939. Mitlo also admitted that even though he made substantial amounts of money from 2004 through 2008 by repairing machines and selling scrap metal, he conspired with an unnamed co-conspirator to conceal his income and assets from the IRS instead of paying his old income tax liabilities. Some of the steps that Mitlo or his co-conspirator took to conceal income and assets from the IRS included cashing checks at check-cashing companies; using bank accounts opened in the names of others; failing to timely file income tax returns for years 2001 through 2008; depositing large amounts of cash into the nominee bank accounts; and breaking larger deposits of cash into amounts of less than $10,000 to avoid banking requirements to report cash transactions of $10,000 or more to the U.S. Department of Treasury.
Washington Man Sentenced for Selling Counterfeit Software and Failure to File Tax Returns
On June 27, 2011, in Tacoma, Wash., Wayne Chih-Wei Shu, of Battleground, was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay $687,633 in restitution. Shu pleaded guilty in January 2011 to mail fraud, trafficking in counterfeit goods, trafficking in illicit labels, and two counts of willful failure to file tax returns. According to records filed in the case, Shu owned and operated various entities operating under the names Micro Sharp, Inc., Micro Sharp Technologies, Inc., Microsharp.com. Inc., and Meet Your Price, Inc. Shu offered software products for sale over the internet which were counterfeit, tampered with, or infringed on copyrights owned and held by others. Shu engaged in a practice known as “kitting;” selling software products that contained a mix of some genuine components with other components that were counterfeit or tampered with which made it difficult for customers to determine that the software was counterfeit. He also used counterfeit licenses and certificates of authenticity to fool consumers who thought they were purchasing licensed products. As part of his plea agreement, Shu admitted that he sold up to $1 million worth of counterfeit software and illicit certificates of authenticity during the course of the scheme. In addition, Shu and his wife stopped filing personal or corporate income tax returns in 2004, resulting in a combined tax loss of over $650,000 in tax years 2004, 2005, and 2006. Shu’s wife, Maynila Voravongseng, was sentenced in May 2011, to 30 days in prison. The couple has agreed to work with the IRS to determine their tax liabilities for 2004 through 2007. Under the terms of the plea agreement, the couple is forfeiting to the government a 2000 Mercedes, nearly $70,000 in cash and bank accounts, and equity in their home.
Georgia Man Sentenced for Not Filing Tax Returns
On June 22, 2011, in Atlanta, Ga., James J. Guinn, of Monroe, was sentenced to 15 months in prison, to be followed by six months of community confinement as part of one year of supervised release. Guinn was also ordered to pay a $20,000 fine and $67,513 in restitution. Guinn was a plumber who owned his own business, Bulldog Plumbing. Between 2003 and 2006, Guinn earned adjusted gross income of more than $350,984, yet he filed no federal income tax returns. Instead, Guinn adopted the unsupported, anti-tax beliefs of the group “American Rights Litigators.” Guinn was informed multiple times by representatives of the IRS that his anti-tax positions and arguments were not valid. Nevertheless, Guinn ignored the warnings and refused to file tax returns. If Guinn had filed tax returns for the years 2003 through 2006, he would have owed approximately $67,513.
Wisconsin Family Sentenced in Income Tax Fraud
On June 1, 2011, in Milwaukee, Wis., James Wierzbicki, of Kenosha, and two of his children, Eric Wierzbicki and Erin Morton, were sentenced for federal tax violations. James Wierzbicki was sentenced to 32 months in prison, to be followed by three years of supervised release, and ordered to pay $418,522 in restitution to the Internal Revenue Service (IRS). Eric Wierzbicki was sentenced to four months in jail, five years probation, and ordered to pay $300,922 in restitution to the IRS. Erin Morton was sentenced to 60 days in jail, five years probation, and ordered to pay $96,000 in restitution. James Wierzbicki pleaded guilty to conspiring to defraud the United States for the purpose of impeding the IRS. Eric pleaded guilty to two counts of failing to pay payroll taxes. Erin Morton pleaded guilty to conspiring with her family to fail to pay payroll taxes. According to court documents, the Wierzbickis were involved in one or more of a series of commercial painting and dry walling businesses operated in the Kenosha area, including Southport Remodeling and Construction, SRC Painting, and PBN, LLC. The Wierzbickis failed to file quarterly payroll tax returns, filed false payroll tax returns, and paid employees in cash to avoid payroll taxes. In addition, after accumulating substantial payroll tax liabilities, the Wierzbickis would abandon one business, transfer the business operation to a successor business, and recruit someone to act as the nominee owner for the new business. The Wierzbickis also deposited business receipts from one business into their personal accounts, as well as to accounts for successor businesses. In addition, James Wierzbicki’s other son, Edmund Wierzbicki, previously pleaded guilty to failing to file a federal income tax return for the year 2003, when he was being paid by his family’s painting businesses. Edmund was sentenced on April 27, 2011, to 14 days in jail, four years probation, and ordered to pay a $3,275 fine.
Former Fugitive Sentenced for Scheme to Sell Fraudulent Tax Avoidance Programs
On May 23, 2011, in Fresno, Calif., Robert Moser, of San Diego, formerly of Visalia, was sentenced to 15 months in prison for a tax avoidance scheme in the early 1990s. Moser was indicted in 1997 and was a fugitive until his arrest in San Diego in June 2010. According to court documents, in February 1992, Moser and co-defendants Darrel Wayne Tarrant and Louis Barrow Watson sold “tax avoidance packages” for International Tax Technology (ITT). The ITT Tax Abatement Program claimed it could permanently and legally remove individuals and businesses from any future obligation to keep records relating to tax liability, file tax returns, or pay income or employment taxes on the federal and state level. Clients were charged between $2,500 and $15,000 for ITT services. Moser, Tarrant, and Watson claimed that the program was based on the Constitution and the Internal Revenue Code. In fact, the program was fraudulent, illegal, and contrary to federal law. Co-defendant Watson was sentenced to 12 months in prison in 2003, and co-defendant Tarrant died pending trial.
New Mexico Physician and Wife Sentenced on Tax Evasion and Conspiracy Charges
On May 17, 2011, in Albuquerque, N.M., Dr. Mark E. Hopkins, an emergency room doctor, and his wife, Sharon June Hopkins, were sentenced to 120 months and 97 months in prison, respectively. The Hopkins were also sentenced to serve three years of supervised release after their prison terms and ordered to pay $1,744.222 in restitution to the Internal Revenue Service (IRS). Upon their release, the couple will be required to make $2,000 monthly payments to the IRS and to cooperate with the IRS in paying their taxes, past and present. Finally, the Hopkins were ordered to pay $965 for the cost of a video deposition taken during the course of the prosecution. The Hopkins were convicted in September 2010 by a trial jury of seven counts of tax evasion and one count of conspiracy. Mark Hopkins was an emergency room doctor at the Carlsbad Medical Center and Sharon Hopkins was the owner of My Favorite New Mexico Foods LLC, a business that manufactured and sold traditional New Mexico foods throughout the United States. According to the allegations in the indictment and the evidence presented at trial, the Hopkins had not filed accurate personal tax returns since tax year 1997. They filed a “zero” tax return for tax year 1996, which reported no wages and requested a refund of all withholding. From January 1, 1996, through December 31, 2007, Mark Hopkins earned more than $3 million in income and paid only $21 in federal income taxes. At sentencing, the court determined the tax loss to be $2,171,018 for 1996 to 2007. At trial, the Hopkins claimed that Mark Hopkins’ income from his employer was not taxable because it was simply an “exchange” of labor for time. The evidence at trial showed that the couple used a number of “tax defier” schemes such as directing Mark Hopkins income to a purported religious entity, named Shalom Enterprises. However, the Hopkins paid a number of personal expenses such as their mortgage, credit cards and a timeshare in Mexico, out of the Shalom Enterprises bank account. The couple also titled bank accounts and their home in the names of “pure trusts.”
Illinois Contractor Sentenced to Prison on Fraud and Tax Charges
On May 9, 2011, in Rockford, Ill., John M. Volpentesta, formerly of Marengo, Illinois, was sentenced to 133 months in prison, five years of supervised release, and ordered to pay $1,378,127 in restitution to the victims of his fraud scheme. Volpentesta was convicted in July 2010 of various charges, including failure to pay over to the IRS taxes he withheld from the wages of his employees, failure to file unemployment tax returns, and failure to file personal income tax returns. According to the indictment, Volpentesta operated a residential construction business, known as Volpentesta Construction, Inc. (VCI). He defrauded his construction company customers and investors out of more than $1 million. In addition, from the second quarter of 2003 through the fourth quarter of 2005, Volpentesta collected federal income tax, Medicare, and Social Security taxes from the wages of VCI's employees but failed to pay those monies to the IRS. He also failed to file Form 940, Federal Unemployment Tax returns, on behalf of VCI for the years 2003, 2004, and 2005; and, he failed to file personal income tax returns on behalf of himself and his wife for the same years.
Michigan Couple Sentenced for Failing to File Tax Returns
On May 5, 2011, in Grand Rapids, Mich., David B. Carter and his wife, Lisa Carter, of Charlotte, Michigan, were sentenced for willfully failing to file their 2003 through 2009 federal income tax returns. David Carter was sentenced to 12 months in prison, one year of supervised release, and ordered to pay $191,085 in restitution. Lisa Carter was sentenced to one day in prison, with credit for time served, and one year of supervised release. According to court records, during the 2003 to 2009 tax years, David Carter was a self-employed attorney in Grand Ledge, Michigan, who, as part of his practice, prepared tax returns for others and provided tax-related advice. Lisa was a licensed veterinarian who practiced under her own and other various names, including Michigan Equine Dental Services. During this time, they jointly received gross income totaling over $1.2 million, but willfully failed to file federal income tax returns or pay any income tax due.
Michigan Chiropractor Sent to Prison for Tax Evasion
On May 3, 2011, in Grand Rapids, Mich., Kerry Thomas Kilpatrick was sentenced to 24 months in prison and two years of supervised release for tax evasion. Kilpatrick was also ordered to cooperate with the IRS and pay restitution of $85,014 for taxes owed in 2002. In his plea agreement, Kilpatrick admitted that he evaded paying taxes for income he earned as the self-employed owner of the Kilpatrick Chiropractic Life Center in Grand Rapids for the 2002 tax year. He also acknowledged that he did not pay federal income taxes on income earned from 1999-2007. According to court records, during 1999 through 2007, Kilpatrick paid himself through direct payments from his business credit union account without including any withholdings for state or federal payroll taxes. Kilpatrick also used the business credit union account to make direct payment on his home mortgage, along with other personal expenditures. During 2001 through 2002, Kilpatrick formed numerous holding companies, corporations, and enterprises that lacked any economic substance and were located in Nevada, Oregon, and the Republic of Panama. He used the entities to evade his income taxes, pay local property taxes on his real estate, and to hold the title on his 1999 Ford Expedition, $63,000 Tiffin Motor Home, and other property.
Former Illinois City Councilman Sentenced for Tax Evasion, Failure to File Income Tax Returns, and Election Fraud
On April 13, 2011, Fairview Heights, Ill., Michael V. Collins, of Swansea, Illinois, was sentenced to 50 months in prison, followed by three years supervised release, and ordered to pay $342,375 in restitution to the Internal Revenue Service (IRS). Collins was convicted by a trial jury in of tax evasion, failure to file federal income tax returns, and election fraud. According to evidence submitted at trial, Collins had not filed a federal tax return in 13 years at the time he became aware of the federal investigation. He attempted to conceal his income by commingling business and personal assets. Collins also failed to provide his correct social security number, operated a business under an invalid Employer’s Identification Number, and submitted false certified payrolls which falsely reflected that his employees’ federal income tax withholdings and FICA taxes were withheld and paid. He operated through the receipt and expenditure of cash, without record keeping, and failed to maintain accurate books and records. At trial, evidence showed that Collins knowingly and willfully gave false information as to his address for the purpose of establishing his eligibility to vote in a voting district in East St. Louis and during that same period of time, he was elected to be a precinct committeeman in East St. Louis when he was living in Swansea.
Missouri Man Sentenced for Tax Evasion
On March 29, 2011, in St. Louis, Mo., John Freeborn was sentenced to 15 months in prison and ordered to pay $227,487 in restitution for tax evasion. According to court documents, Freeborn tried to hide his income and avoid paying taxes for tax years 2004-2007. In 2004, Freeborn had his employer file false W-4 forms claiming he was exempt from the federal tax withholding requirements. In September 2005, his employer advised him that they were going to begin withholding federal income tax from his paycheck regardless of the withholding status claimed on W-4 forms. In October 2005, Freeborn resigned his position as a W-2 wage earner to become an independent contractor so his employer would have to file Forms 1099 on his behalf to look like they had not withheld federal income taxes. Freeborn also had substantial amounts of money received converted into cash which made it more difficult to trace the income.
Tennessee Doctor Sentenced for Illegally Dispensing Oxycodone, Defrauding Tenn Care, and Tax Evasion
On March 21, 2011, in Chattanooga, Tenn., Dr. Samuel Ashby, of Fayetteville, Tenn., was sentenced to 108 months in prison, followed by three years of supervised release, and ordered to pay restitution to the Internal Revenue Service (IRS). Ashby pleaded guilty on November 3, 2010 to charges of illegally dispensing a controlled substance, Oxycodone; defrauding Tenn Care; and attempted tax evasion. According to court documents, Ashby operated a cash-only practice with no staff. Individuals could obtain powerful pain medication, such as Oxycodone, from Ashby with no medical justification. He routinely prescribed powerful controlled substances far outside the bounds of professional practice and without medical justification. By dealing in cash and cash equivalents exclusively, Ashby willfully attempted to evade paying income taxes due to the United States for calendar years 2000, 2002, and 2003 in the amounts of $2,753, $36,750, and $37,357, respectively. His cash-only practice intentionally attempted to conceal from the IRS the nature, sources, and extent of his income and assets.
Ohio Man Failed to Report Over $2 Million in Income
On March 21, 2011, in Cleveland, Ohio, Frank J. Lomanno was sentenced to 46 months in prison, to be followed by three years of supervised release, and ordered to pay $1,356,623 in restitution and a $600 special assessment. In addition, Lomanno was ordered to fully cooperate with the Internal Revenue Service (IRS) by filing all delinquent or amended returns and paying all taxes, interest, and penalties due. Lomanno pleaded guilty in January 2011 to five counts of tax evasion and one count of mail fraud. According to court documents, Lomanno was employed by First Communications and held the positions of Accounting Manager, Controller, and Chief Financial Officer. From August 2003 through December 2008, Lomanno fraudulently obtained $1,471,766 from First Communications. He converted checks payable to First Communications and other payees and deposited them into bank accounts he had established. In addition, Lomanno did not file tax returns for the years 2004 through 2008 and attempted to conceal his true and correct income through the use of nominee bank accounts, misappropriation money from his employer, and making false entries on corporate books to disguise and conceal his theft of funds. In total, he failed to report taxable income totaling $2,480,068 for the years 2004 through 2008, on which there was taxes due and owing totaling $701,610.
Former Chiropractor Sentenced on Tax Charges
On March 21, 2011, in Charlottesville, Va., Michael I. O’Daniel, of Rixeyville, Virginia, was sentenced to 12 months in prison. O'Daniel, a chiropractor who owned and operated the Warrenton Chiropractic Clinic, pleaded guilty in December 2010 to one count of obstructing and impeding administration of the internal revenue laws and one count of presenting or offering a false fictitious instrument with the intent to defraud. O’Daniel, who bought the Warrenton Chiropractic Clinic in October 2000, operated the business as a sole proprietor, earning income by receiving payments from patients and from third party payers, including health insurance providers. In tax years 2001, 2002, 2003 and 2006, the defendant employed several people to help run his business, though he failed to issue Forms W-2 or 1099 to his employees and failed to withhold income taxes from their wages. On several occasions the IRS contacted O’Daniel, advising him that he needed to pay his tax obligations. On July 21, 2005, O’Daniel sent the IRS a document entitled “Prepaid Foreign bill of exchange” in the owed amount of $50,939 to cover his tax liability. In addition, O’Daniel admitted to submitting to the IRS numerous “corrected” Form 1040s for various tax years. On those forms he falsely reported $0, $20, $149 and other false claims of total income. Attached to the forms were 15 handwritten, redacted Forms 1099, in the name of third party payers, all of which reported zero Non-employee Compensation. O’Daniel has agreed that his actions caused a total tax loss to the IRS of between $80,000 and $200,000.
Florida Man Sentenced for Immigration Fraud Scheme and Tax Evasion
On March 10, 2011, in Tampa, Fla., Richard A. Murdoch was sentenced to 30 months in prison, to be followed by three years of supervised release, and ordered to pay $189,852 in back taxes. The judge also ordered Murdoch and his co-defendants to pay $2.3 million in restitution to United Kingdom (U.K.) visa applicants who were defrauded through a Florida property development company called Royal Development. On April 7, 2010, Murdoch was indicted with Hugh Morgan, a U.K. national residing in Ontario, Canada, and Christopher A. Barrett, a U.K. national residing in Florida, on one count of conspiracy to commit immigration fraud and four counts of immigration fraud in relation to Royal Development. The indictment also charged Murdoch with three counts of tax evasion. On December 10, 2010, all three defendants pleaded guilty. On March 9, 2011, Morgan was sentenced to three months in prison and three years of supervised release. On March 10, 2011, Barrett was sentenced to one month in prison and two years of supervised release. According to court documents, from approximately June 2003 to November 2006, the defendants conspired to commit immigration fraud through Royal Development, which purportedly sold Florida-based home construction companies to foreign nationals. The conspirators represented that the purchase of a company would enable foreign nationals to qualify for and obtain either a treaty investor visa or intracompany transferee visa. Along with the sale of the companies, the conspirators generally represented that they would submit the required visa paperwork to U.S. authorities, help the foreign nationals run the company, and help the foreign nationals adjust to life in the United States. According to court documents, Murdoch admitted that he knowingly presented required applications, affidavits and other documents that contained materially false statements to U.S. immigration authorities. In addition, Murdoch admitted that from approximately June 2003 to April 2006, he received approximately $536,593 in income from Royal Development and failed to file his federal income tax returns for 2003, 2004 and 2005. The total tax due on this taxable income is $189,852. Murdoch also admitted that he used the taxable income from Royal Development for personal expenses such as hang gliding, cigars, and the purchase of a 1987 Porsche.
Indiana Businessman Sentenced For Tax Evasion
On March 9, 2011, in Indianapolis, Ind., Joseph Hinshaw was sentenced to 18 months in prison, followed by 3 years supervised release for multiple counts of income tax evasion and fraud victimizing the financial aid programs of the United States Department of Education. According to court documents, from 2003 to 2007, Hinshaw operated telemarketing companies Circ Solution and Circ Pros. As an owner of these companies, Hinshaw controlled the payment of funds to other persons and himself. The U.S. Department of Education discovered that Hinshaw submitted false financial aid forms, all of which reported little income. Several personal and business bank accounts with significant cash flow were discovered during the investigation, including one in the name of an elderly relative, who was not aware of the crime. As a result, Hinshaw fraudulently received financial assistance totaling $50,640. In addition to the financial aid fraud, Hinshaw also had not properly reported his income to the Internal Revenue Service for many years. Hinshaw was able to defeat most of his income tax liability by concealing income in the bank account of his elderly relative from May 2003 to October 2007. During this time period, Hinshaw received personal income totaling $881,180 and evaded related income taxes of $298,746.
Husband and Wife Sentenced for Selling Abusive Tax Schemes; Couple Failed to File Tax Returns on Over $1 Million in Income
On March 7, 2011, in Portland, Ore., Micaela Renee Dutson, a former attorney, and her husband, Tony Dutson, were each sentenced to 120 months in prison to be followed by five years of supervised release. The Dutsons were convicted following a jury trial of conspiring to defraud the Internal Revenue Service (IRS), obstructing the IRS, causing clients to use bogus financial instruments in an attempt to pay their taxes and commercial obligations, failing to file tax returns, and aiding and advising a client to file a false tax return. According to evidence presented at trial, Micaela Dutson was an Oregon lawyer, and the couple used her law office in Tigard, Oregon to promote and sell abusive trust arrangements to evade taxes for several years before moving to Mesa, Arizona in 2003. The Dutsons continued to sell the trust packages for years, ignoring several warning letters from the IRS. After the IRS began auditing the Dutsons’ clients, and notified them that the trusts they were using to conceal their income from the IRS were shams, the Dutsons began a campaign to obstruct the IRS’s audits and investigation, and to harass and intimidate the individual IRS employees who were auditing or investigating them. They advised their clients to obtain their “sovereignty,” and they created and presented dozens of fictitious financial instruments to the IRS purporting to pay off back taxes for themselves and a number of their clients. Even though they knew the bogus instruments had no financial value and had never been accepted by a creditor, they continued to sell them to their clients with false promises they would pay off their tax liability. The Dutsons had over 100 clients throughout the United States, but most of the clients lived in Oregon, Washington, California, Arizona, Alaska and Hawaii. The couple made over $1 million dollars from the scheme and paid no income tax.
Former City of Newark Police Sergeant Sentenced for Tax Evasion
On March 4, 2011, in Camden, N.J., Marion Reynolds, a former sergeant with the City of Newark Police Department, was sentenced to 12 months and one day in prison for tax evasion. In addition to the prison term, Reynolds was sentenced to three years of supervised release, as a condition of which Reynolds must cooperate with the IRS to pay back taxes, including interest and penalties. Reynolds pleaded guilty on September 8, 2010, to evading the assessment and payment of income tax by maintaining a fraudulent IRS W-4 form with his employer and failing to file a U.S. individual income tax return with the IRS. According to documents filed in this case and statements made in court, between 2001 and 2007, Reynolds filed three IRS W-4's with his employer, the City of Newark, falsely claiming 99 exemptions from federal income tax withholding. Reynolds admitted that he filed the fraudulent W-4 so that no federal income tax would be withheld and that he kept the form on file with the City of Newark through September 2005. Two of those W-4's were filed after the City of Newark was directed by the IRS to nullify Reynolds' false claim of 99 exemptions and to begin withholding from his paycheck.
International Computer Hacker Sentenced to 82 Months
On February 28, 2011, in Boston, Mass., Asu Pala was sentenced to 82 months in prison, followed by two years of supervised release and fined $12,500 for his role in an international computer hacking conspiracy and failure to file income tax returns. Pala was also ordered to forfeit $7.9 million and to repay $2.2 million in back taxes to the Internal Revenue Service (IRS). In April 2010, Pala pleaded guilty to one count of conspiracy to commit computer fraud and five counts of failure to file a income tax return. According to court documents, from 2003 through 2007, Pala and his co-conspirators infected German citizens’ computers with a program that would force the computers’ telephone modems to surreptitiously dial premium telephone numbers rented from German telephone companies by Pala’s co-conspirators. The premium telephone lines operated like 1-900 numbers: the telephone companies charged callers for added expenses on top of standard connection fees and sent a portion of the added expenses to those who rented the premium lines; in this case Pala’s co-conspirators. The victims were generally unaware that their computers' telephone modems were calling these numbers and charging them these expenses. Victims paid the added charges if they did not notice them on their telephone bills. The telephone companies then sent the added charges to the premium telephone line renters, who divided the proceeds among the co-conspirators, including Pala. Although Pala participated in the scheme while based in Massachusetts and elsewhere in New England, he did not target United States’ computers or computer users. Instead, Pala focused solely on computers and computer users in Germany and possibly other European countries, in order, he thought, to avoid prosecution in the United States.
Owners of Arizona Substance Abuse Treatment Center Sentenced on Tax Charges
On February 17, 2011, in Phoenix, Ariz., William Steiniger, a doctor, was sentenced to 42 months in prison; his wife, Diane Steiniger, was sentenced to 8 months in prison followed by 6 months of home confinement. The Steinigers were convicted at trial in December 2009 of four counts of tax evasion and one count of conspiracy to impede and impair the Internal Revenue Service (IRS). According to court documents, William and Diane Steiniger operated the Desert Canyon Treatment Center, a substance abuse treatment facility in Sedona, from 1998 to December 2008. Evidence presented at trial showed the Steinigers channeled their Desert Canyon incomes into sham entities they created. William Steiniger’s earnings went to a phony trust called National Career & Life Institute. Diane Steiniger’s income was directed to Flair International, Ltd., a company she established in the nation of Belize. Testimony at trial revealed the two defendant’s evaded assessment and payment of more than $390,000 in federal income tax from 2002 to 2005. In addition, neither defendant paid any federal income tax from at least 1997 through 2005.
Former Certified Public Accountant Sentenced for Tax Evasion
On February 7, 2011, in Boston, Mass., Gary P. Mallows, a former certified public accountant, was sentenced to 46 months in prison, followed by three years of supervised release and ordered to pay $249,759 in restitution to the Internal Revenue Service (IRS). Evidence presented at trial proved that from 2001 to 2007, Mallows diverted over $700,000 in income and assets into nominee companies and trusts to evade paying an $86,000 tax assessment filed against him by the IRS in 2001. Mallows created an entity called Innovative Package Design, Inc. (IPD), which he used to conceal income and assets, such as his personal boat. To further conceal his tax fraud, Mallows incorporated IPD in his wife’s name. In addition, Mallows, acting as an accountant for the Estate of Charles Stroh, wrote more than $450,000 in checks to IPD for his accounting services. As part of his scheme to evade paying the tax assessment, Mallows failed to file income tax returns for 2002, 2003 and 2004, even though he earned over $200,000 in each of those years.
Maine Man Sentenced for Harboring and Transporting Illegal Aliens and Tax Fraud
On February 3, 2011, in Bangor, Maine, Benjamin J. Guiliani, Sr. was sentenced to 19 months in prison, followed by three years supervised release, and was ordered to pay $230,592 in restitution. Guiliani pleaded guilty in May 2010 to tax evasion, failure to file income tax return, harboring/transporting known illegal aliens, Social Security fraud and Student Assistance fraud. Court records reveal that Guiliani was the president, founder and sole shareholder in Azteca Consulting Associates, Inc., which provided labor to businesses in Maine, New Hampshire and Vermont. Guiliani provided his clients with scores of workers that he knew were illegal aliens. Guiliani provided fraudulent work documents and a Social Security card for at least one of the illegal aliens. Guiliani charged his client companies for finder’s fees, transportation and other expenses associated with the workers. From 2002 to 2005, Guiliani had personal income totaling almost $500,000, and he never filed personal income tax returns. Azteca did not file corporate returns despite gross receipts of over $400,000 for the same period. Guiliani pleaded guilty to tax evasion and failure to file taxes on behalf of Azteca. The total outstanding tax obligation for that period is over $95,000.
San Francisco Restaurant Operator Sentenced for Tax Fraud
On February 3, 2011, in San Francisco, Calif., Suriya Srithong was sentenced to six months in federal prison, followed by six months of home confinement, for filing false federal income tax returns. Srithong pleaded guilty on October 6, 2010, to filing false federal income tax returns, admitting that he knowingly failed to report earnings from that restaurant on his 2005 and 2006 federal income tax returns. According to court documents, Srithong filed U.S. Individual Income Tax Returns that reported no gross receipts, expenses, net income or taxes related to the restaurant for 2005 and 2006.
North Carolina Man Sentenced to 56 Months in Prison in Connection With Speedway Luxury Condo Project
On February 2, 2011, in Charlotte, N.C., Stevie Perkale Lee, aka Steven P. Lee, of Weddington, North Carolina, was sentenced to 56 months in prison. According to court documents, Lee was President of “VP Companies USA,” and “Arcadian Residence & Resort." From about June 2007 through about January 2009, Lee fraudulently solicited over $1.5 million from investors and buyers for a luxury condominium project known as “Arcadian Residence & Resort” (Arcadian). Arcadian was to have been built in Concord, North Carolina next to the Lowe’s Motor Speedway. Court documents state that Lee never developed Arcadian and instead used investors’ money to fund his own lavish lifestyle. Lee also failed to file tax returns during the years he collected the investor funds.
Florida Man Sentenced to 10 Years in Tax Fraud Scheme
On January 28, 2011, in Fort Lauderdale, Fla., Michael D. Beiter, Jr., of Broward County, Florida, was sentenced to 120 months in prison and five years of supervised release. On November 12, 2010, a jury found Beiter guilty of corruptly impeding the Internal Revenue Service (IRS), sending fictitious financial instruments to creditors, and helping one of his clients evade federal income tax. According to court documents and testimony during the trial, Beiter marketed a debt elimination and abusive tax scheme. The scheme was premised on the idea that individuals are sovereigns who can declare their independence from ordinary obligations, such as paying creditors and federal income taxes. Beiter promoted the sale of abusive tax packages involving purportedly non-taxable pure trusts. Beiter sold at least 100 of these packages. According to evidence presented at trial, the defendant filed tax returns with the IRS for tax years 2004, 2005, and 2006 reporting zero income and taxes, despite the fact that he had net taxable income in excess of $1,800,000. Beiter also opened a number of bank and stock trading accounts with bogus taxpayer identification numbers. The evidence at trial also established that Beiter attempted to intimidate IRS employees by contacting them at their homes.
Hawaii Man Sentenced to 32 Years in Prison
On January 24, 2011, in Honolulu, Hawaii, Noshir S. Gowadia was sentenced to 384 months in prison for communicating classified national defense information to the People’s Republic of China (PRC), illegally exporting military technical data, as well as money laundering, filing false tax returns and other offenses. According to court documents, from July 2003 to June 2005, Gowadia took six trips to the PRC to provide defense services in the form of design, test support and test data analysis of technologies for the purpose of assisting the PRC with a cruise missile system by developing a stealthy exhaust nozzle. At the time of his arrest, Gowadia had been paid at least $110,000 by the PRC. Evidence presented at trial showed Gowadia used three foreign entities he established and controlled to launder and disguise the income he received from foreign countries. Gowadia admitted at trial that he had not paid any income tax since from at least 1997 until 2005 when he was arrested.
Florida Man Sentenced on Conspiracy and Tax Charges
On January 5, 2011, in Orlando, Fla., Robert Fischetti was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay $183,402,531 in restitution and a $175 special assessment. In addition, Fischetti was ordered to cooperate with the Internal Revenue Service (IRS) regarding all outstanding taxes, interest, and penalties. Fischetti pleaded guilty in June 2010 to charges of conspiracy and failure to file tax returns. According to his plea agreement, Fischetti served as an officer of Transcontinental Airlines (TCA) which offered an opportunity to invest in a program titled, Employee Investment Savings Account (EISA). In his position, Fischetti balanced TCA's various bank accounts and mailed quarterly statements to investors which falsely represented that their money was earning interest. Fischetti knew EISA investment money was being deposited into general TCA accounts and not being invested. In another scheme, Fischetti conspired with others to sell stock shares in Transcontinental Airways Travel Service, Inc. (TCA Travel), a Delaware corporation which had no tangible assets and ceased to exist in March 1999. Despite these facts, TCA Travel stocks were sold until 2006 and investors were sent false account statements. Court documents indicate that over 1,500 victims invested over $200 million in the EISA program and over 300 victims invested over $55 million to purchase TCA Travel stock. According to court documents, Fischetti used investors' funds to pay his personal expenses. Fischetti failed to file tax returns for tax years 2003, 2004, and 2005. During those years, Fischetti received $978,974 in compensation from TCA.
Government Contractor Sentenced for Failing to File Tax Returns for Four Years
On December 20, 2010, in Baltimore, Md., Joseph Van Gieson, of Annapolis, was sentenced to 12 months in prison, of which six months is to be served in home detention, followed by one year of supervised release and ordered to pay a $4,000 fine. According to court documents, since 2003, Van Gieson worked as a self-employed consultant for the United States Department of Justice and the Environmental Protection Agency. From 2003 through 2006, Van Gieson and his wife received gross income of $851,747, and incurred a tax liability of $214,794. Van Gieson requested, and was granted, extensions for filing his federal tax returns for years 2003 through 2005, but he did not file a tax return for any of those years, nor did he file a tax return for 2006.
Utah Man Sentenced on Tax Evasion Charges
On December 14, 2010, in Salt Lake City, Utah, John Gauruder, of Tremonton, was sentenced to 42 months in prison, followed by three years of supervised release as a result of his conviction for tax evasion. Evidence presented by federal prosecutors showed the tax loss in Gauruder’s case exceeded $1.2 million. Gauruder was indicted in September 2008 along with Rulon DeYoung and Jana Gauruder. According to court documents, Gauruder instructed his wife, Jana Gauruder, to transfer his family home to The Order of Tranquility, purportedly a religious organization operated by Rulon DeYoung. Gauruder also opened a bank account in the name of The Order of Tranquility to pay household expenses after the home was transferred. The government argued that Gauruder's transfer of the property and use of the bank account was intended to conceal and protect his assets from the Internal Revenue Service (IRS). The evidence presented to the jury demonstrated that John Gauruder owed approximately $212,000 in taxes for the years 1995 through 2001, not including penalties and interest. Jana Gauruder pleaded guilty to a one count Information charging her with aiding and abetting willful failure to pay tax for 2002. She was sentenced to 36 months of probation. DeYoung was previously sentenced to 36 months in prison for four counts of tax evasion and one count of corrupt interference with the due administration of the internal revenue laws.
Delaware Massage Center Operator Sentenced for Tax Fraud
On December 6, 2010, in Wilmington, Del., Anne Marie Connor, of Bethany Beach, was sentenced to 27 months in prison and ordered to pay $117,446 in restitution to the United States. According to court documents and evidence stated at trial, Connor was the owner and operator of Bethany Massage and Healing Arts Center, located in Bethany Beach, from the 1990s through 2009. Between 1993 and 2003, she was the co-owner and operator of Wholesome Habits Health Food Store. Over a 6-year period beginning in 1998, Connor used sham “trusts” to hide income from the IRS. Under the scheme, Connor installed the “trusts” as the named members of the limited liability companies through which she operated her businesses. Connor directed all income from the business into the “trust” bank accounts. She also placed the deed to her Bethany residence into one of the “trusts.” Connor retained complete control over and used the income from her businesses and her residence throughout the five-year period charged in the indictment. Between 2000 and 2004, Connor earned over $527,000 in income on which she evaded over $117,000 in federal income taxes.
Two Cincinnati Dentists Sentenced on Conspiracy and Tax Evasion Charges
On November 22, 2010, in Cincinnati, Ohio, Bradley C. Brennecke, a resident of Pleasant Plain, Ohio, and Bruce A. Mrusek, a resident of Maineville, Ohio, were each sentenced to 12 months in prison, to be followed by three years of supervised release. Mrusek and Brennecke, who are both dentists, pleaded guilty in January 2010 to conspiracy and tax evasion charges. According to court documents and testimony, Brennecke operated Goshen Family Dentistry Ltd. in Goshen, Ohio, and failed to pay taxes for 1998, 2002, 2003 and 2004. Additionally, Brennecke transferred title of his house to his wife to conceal it from the IRS, sent the government bogus documents that purported to pay his tax liabilities, and filed false tax returns. According to court documents and testimony, Mrusek operated Wilmington Dental Management Services in Wilmington, Ohio, and evaded his 2002, 2003 and 2004 taxes. Mrusek transferred his assets to his wife’s name, sent bogus documents to the IRS that purported to pay his tax liabilities, used a trust to pay personal expenses, and filed false personal tax returns. Additionally, Mrusek filed false tax returns for Wilmington Dental Management Services by reporting deductions that the business did not incur. Brennecke and Mrusek conspired to defraud the IRS beginning around the time that the IRS began civil audits of each of them. They assisted each other in the mailing of various fraudulent documents to the IRS and U.S. Treasury Department. Brennecke assisted Mrusek in the transfer of assets out of Mrusek’s name. The judge found that the total attempted tax harm associated with each defendants’ conduct was over $1 million. In addition, Brennecke and Mrusek submitted fictitious obligations labeled “Secured Promissory Notes” to the U.S. Department of the Treasury as payment of their tax debts. Each of these documents purported to be in the amount of $4.8 billion.
Colorado Man Sentenced to 27 Months in Prison for Failing to File Tax Returns
On November 18, 2010, in Denver, Colo., Darrell Stoffels, of Larkspur, was sentenced to 27 months in federal prison for failing to file tax returns. Stoffels was also ordered to pay $48,317 in restitution and a $6,106 fine. On June 22, 2010, a jury found Stoffels guilty on three counts of failing to file tax returns. According to the Information as well as evidence presented at the trial, Stoffels operated Life Enhancement Resources Health Ministry since the early 1990s which sold nutritional supplements. As part of his business, Stoffels advertised, had a business website, and gave hour-long presentations about nutrition at seminars that were attended by some of his customers. In credit applications that Stoffels filled out to buy and lease vehicles in 2004 and 2006, Stoffels stated that his gross monthly income was $25,000, which would be $300,000 annually. During the calendar years 2003, 2004, and 2005 Stoffels had a gross income of approximately $241,585. Stoffels failed to file income tax returns with the IRS for those years and according to evidence, had failed to file tax returns continuously from 1980 through 2009.
Husband and Wife Tax Evaders Go To Prison
On November 17, 2010, in Spokane, Wash., Scott D. Haynes and his wife Kristin W. Haynes, formerly from Colbert, were sentenced to prison after each pleaded guilty to five counts of failing to file tax returns for the years 1999 through 2003. Scott Haynes was ordered to serve 40 months in prison and Kristin Haynes was ordered to serve 24 months in prison. Each will be under one year of court supervision after they are released from prison and both were ordered to pay $833,751 to the IRS for their unpaid taxes. Kristin Haynes is an artist who is known internationally for her creation of the Dreamsicles line of figurines cast in porcelain and sold as collectibles. Scott Haynes was a 50 percent shareholder with his wife in a corporation that managed the figurine business and collected royalties. During the five years the Haynes refused to file tax returns, their income was $2,722,098.
Ohio Real Estate Agent Sentenced for Mortgage and Tax Fraud
On November 10, 2010, in Columbus, Ohio, Todd M. Gongwer, a licensed real estate agent, was sentenced to 24 months in prison and ordered to forfeit $250,000. In addition, he was ordered to pay restitution to the Internal Revenue Service (IRS) and the financial institutions he defrauded in amounts to be determined by the court. Gongwer pleaded guilty in May 2009 to conspiracy to commit bank fraud and tax evasion charges. According to court documents, during 2005 through 2007, Gongwer and others negotiated and participated in five real estate deals in which Gongwer, a nominee, or another buyer would purchase a luxury home for a falsely-inflated purchase price and receive a kick-back. In each transaction, the buyer, or Gongwer on the buyer’s behalf, would misrepresent his or her income and assets in order to obtain financing for approximately 90 percent of the inflated purchase price. The inflated purchase prices were justified by creating false work-change orders and addenda that created the appearance that the inflated prices represented additional, substantial work to be completed on the homes. The object of each transaction was to use the loan proceeds in excess of the actual purchase price to fund hundreds of thousands of dollars in kick-back payments to the buyers. The buyers have been unable to maintain the mortgage payments on the luxury homes and have all defaulted on the loans. During tax year 2004, Gongwer worked for ReMax Affiliates Inc. and was paid approximately $158,333 in gross income. Gongwer deposited that income into nominee accounts to conceal his receipt of that income from the IRS. Gongwer failed to file income tax returns for tax years 2000 through 2005.
Iowa Man Sentenced to 30 Months Imprisonment for Tax Evasion
On October 29, 2010, in Des Moines, Iowa, Donald Miller was sentenced to 30 months in prison for tax evasion. According to court documents, Miller pled guilty to committing tax evasion in 2003 and 2004, but his misdeeds were much more extensive, and date back to the 1990s. Miller engaged in numerous acts of tax evasion. First, he placed his bank account and assets, including his home, commercial rental property, and farm land, in names other than his own, such as “white oaks trust,” “emerald trust,” “golden rod trust,” and “covenant management services trust,” to make it appear as if he had no income-generating assets, or taxable assets. Second, he directed his employer and others who owned him taxable income to make checks payable to him in names other than his own, so it would seem as if he had no taxable income. Third, he failed to file any federal income tax returns in his own name, or in the name of the fraudulent trusts, since 1992. Fourth, he similarly failed to file state income tax returns and pay state income taxes for several years. Additionally, in 2008, Miller sent the IRS four fraudulent $10 million “bonds,” which he essentially requested be offset against any tax liability he owed. In the same set of documents, Miller, who was born in Seward County, Nebraska and has lived in Wayland since 1967, denied being a citizen of the United States.
New Hampshire Chiropractor Sentenced on Tax Charges
On October 26, 2010, in Concord, N.H., Paul J. Loch, a chiropractor from Exeter, was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $240,000 in restitution to the Internal Revenue Service (IRS). Loch was charged in April 2010 with evading the payment of his individual income taxes for calendar years 1996 and 1997. The Superseding Information charged that Loch evaded the payment of taxes, by, among other things: filing false amended returns; concealing and attempting to conceal from the IRS the nature and extent of his assets; making false statements to agents of the IRS; placing funds and property in the names of nominees; and paying creditors instead of the government. According to his plea agreement, Loch is required to file accurate amended returns for tax years 1996 and 1997, and to file accurate returns for all tax years between 1998 and 2008, as well as to pay all taxes, interest and penalties.
Third Defendant Sentenced in $20 Million Scam that Sold Fake Art Via TV Auctions
On October 25, 2010, in Los Angeles, Calif., James Mobley, a Woodland Hills man who sold fake art through a rigged televised art auction, was sentenced to 60 months in prison. Mobley, who was an on-air auctioneer for sales conducted through Fine Art Treasures Gallery, pleaded guilty to conspiracy to commit wire fraud, mail fraud, and interstate transportation of stolen property and willful failure to file a tax return. According to court documents, Fine Art Treasures Gallery operated an art auction television show. The company sold art to more than 10,000 customers around the United States, bringing in more than $20 million. Earlier this year, the husband-and-wife team at the center of the Fine Art Treasures Gallery scam was sentenced to prison. Gerald Sullivan was sentenced to 48 months in prison. Sullivan’s wife, Kristine Eubanks, was sentenced to 84 months in prison. Eubanks and Sullivan ran the scheme from 2002 through 2006. Mobley participated in the scheme from 2002 through 2005. Fine Art Treasures Gallery and its representatives, including Mobley, claimed to be selling art that had been found at “estate liquidations all over the world.” In reality, Fine Art Treasures Gallery sold fake and forged art that had been purchased from suppliers, as well as forgeries Eubanks and others themselves had printed and signed on behalf of the artists.
North Carolina Doctor Sentenced on Tax Charges; Used Fake "Bills of Exchange" to Pay Taxes
On October 19, 2010, in Winston-Salem, N.C., Rodney K. Justin, a medical doctor from Woodleaf, N.C., was sentenced to 36 months in prison and ordered to pay over $600,000 in restitution to the Internal Revenue Service (IRS) for obstructing the internal revenue laws and for failing to file tax returns for several years. In 2009, a federal jury convicted Justin of four counts of corruptly obstructing the administration of the internal revenue laws by sending fake financial instruments called “Bills of Exchange” to the Secretary of the Treasury in purported payment of over $350,000 in taxes. The jury also convicted Justin of willful failure to file tax returns for the tax years 2001 through 2004. According to the indictment and evidence presented at trial, Justin had not filed a valid tax return since 1997. However, he earned in excess of $200,000 each year from 2001 through 2004. Justin sent letters and bogus returns to the IRS advancing false and frivolous claims stating reasons why he was not required to pay taxes. The IRS repeatedly warned Justin that his positions were frivolous and advised him of his legal duty to file returns and pay taxes. Evidence presented at trial showed that from 1998 through early 2004, Justin was a client at Guiding Light of God Ministries, also known as American Rights Litigators (ARL), formerly of Mount Dora, Fla. Justin purchased four fictitious “Bills of Exchange” from ARL which he submitted in purported payment of income taxes.
Florida Man Sentenced to Ten Years for Promoting Tax Fraud Scheme
On October 15, 2010, in Tampa, Fla. Joseph Nelson Sweet, of Bradenton, was sentenced to 120 months in prison for conspiring to impair and impede the Internal Revenue Service (IRS) by promoting an unlawful tax avoidance scheme. Sweet was found guilty by a jury on March 10, 2010 of four charges related to the tax scheme, including two counts of contempt. According to court documents and testimony at trial, Sweet began marketing and selling tax-defier materials in the mid-1990's. He and co-conspirator Jack Lee Malone joined forces in 1999 to sell and promote a scheme by which they claimed that purchasers could legally avoid the payment of federal income taxes by, among other things, placing income and assets in 'sham' trusts called Unincorporated Business Trust Organizations (UBTOs). They sold these trusts and other materials through two of their own UBTOs, "The JoY Foundation" and "EDM Enterprises." Further, Sweet and Malone instructed their clients that income generally is not taxable and that filing a federal income tax return is a strictly voluntary act. The evidence also established that Sweet and Malone instructed clients to submit obstructive paperwork or otherwise deceive the IRS and to illegally conceal their income and assets. At trial, records of The JoY Foundation showed that Sweet and Malone had recruited more than 1,300 members across the nation. At the sentencing hearing, Sweet was found responsible for a tax loss to the United States of more than $3.8 million. Malone was sentenced on June 15, 2010, to 60 months in prison.