The following examples of Corporate Fraud Investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Co-Owner of Nick’s Roast Beef Sentenced for Skimming Nearly $6 Million; Wife and Son Also Sentenced
On April 26, 2017, in Boston, Massachusetts, Nicholas Koudanis, of Topsfield, was sentenced to 24 months in prison, two years of supervised release and was ordered to pay restitution of $2,042,366 to the IRS. In January 2017, Koudanis, the co-owner of Nick’s Famous Roast Beef in Beverly, pleaded guilty to one count of conspiracy to defraud the United States by obstructing the IRS and 10 counts of aiding and assisting in the filing of false tax returns. His wife, Eleni Koudanis was sentenced to one year of probation and ordered to pay the same amount of restitution. She previously pleaded guilty to five counts of aiding and assisting in the filing of false tax returns. The restitution amount consists of the approximately $992,821 in taxes the Koudanises avoided paying, plus interest and penalties. Their son, Steven Koudanis, was sentenced to one year of probation to be served in home confinement and ordered to pay restitution of $151,240 to the IRS. He pleaded guilty to one count of endeavoring to obstruct and impede the due administration of the Internal Revenue Laws. According to court documents, Koudanis, skimmed nearly $6 million in cash receipts from the business over a six-year period and failed to report that cash income on his business or personal tax returns. From 2008 to 2013, the co-owners of Nick’s Roast Beef, Nicholas Koudanis and Nicholas Markos, skimmed more than $1 million in cash receipts each year, which they failed to report on either the corporate tax returns or their personal tax returns, thereby avoiding the payment of nearly $1 million each in personal income taxes during that same period. Each week, Koudanis and Markos personally divided the cash receipts, determining how much to deposit to the business’s bank account and report on their tax returns, how much to use to pay suppliers and employees, and how much to keep for themselves. Eleni Koudanis had primary responsibility for the bookkeeping functions of the restaurant and provided some of the false income information to the tax preparer. Their son, Steven Koudanis, created false cash register receipts that were used in connection with an IRS tax audit of the business. By December 2014, Nicholas and Eleni Koudanis amassed more than $1.6 million in cash, which they kept in a safe in their home. In January 2017, Nicholas Markos pleaded guilty and is scheduled to be sentenced.
Energy Investor Sentenced for Evading Over $45 Million of Income and Other Taxes
On March 21, 2017, in Manhattan, New York, Morris Zukerman was sentenced to 70 months in prison, three years of supervised release and ordered to pay a $37,547,951 in restitution to the IRS and the New York State Department of Taxation and Finance. Zukerman was also fined $10 million. Zukerman pleaded guilty on June 3, 2016. According to court documents, Zukerman was the principal of M.E. Zukerman & Co. (“MEZCO”), an investment firm. Zukerman schemed to evade taxes based on income received from the sale of a petroleum products company he co-owned (through a MEZCO subsidiary) with a public company. Zukerman evaded reporting to the IRS the sale of the oil company (for $130 million), as well as the payment of over $33 million in corporate income taxes. Zukerman also schemed to evade personal income taxes and to obstruct the IRS by causing tax return preparers to prepare income tax forms for himself and his wife, and other family members that claimed, in the aggregate, millions of dollars of false and fraudulent deductions and expenses. Zukerman also directed corporate funds to pay for domestic employees. Zukerman fraudulently claimed charitable contribution deductions totaling $1 million for the 2009 and 2011 tax years from a real estate transaction in 2009 and 2010, pursuant to which Zukerman purchased approximately 240 acres of property on a small island located off the coast of Maine. While Zukerman was enlisted to purchase the property for conservation purposes, he instead, purchased the land for the benefit of himself and his family but falsely told his tax return preparer that payment should be declared on his personal income tax returns as a charitable contribution. Finally, Zukerman sought to defraud the IRS during three separate audits by providing false documents and false information.
Illinois Gas Station Owner Sentenced for Fraud, Tax Evasion
On March 20, 2017, in Peoria, Illinois, Adnan Rashid, of New Jersey, was sentenced to 21 months in prison and ordered to pay $1.5 million for underreporting sales on federal corporate and Illinois sales tax returns and for later failing to file corporate returns. Rashid was also ordered to pay $1.28 million in restitution to the State of Illinois and $206,573 to the IRS. On December 1, 2016, Rashid pleaded guilty to mail fraud and tax evasion. According to court documents, Rashid was the sole owner of two gas stations and a 50 percent owner of two additional stations. Rashid grossly underreported or failed to report sales at the four stations on federal corporate tax returns and the Illinois sales and use tax returns. Rashid altered the stations’ gross receipt data before he provided it to his accountant. Rashid had over $41 million in unreported gross receipts for the gas stations and $1 million in unreported personal income.
Rhode Island Investment Advisor Sentenced for Orchestrating a $21M Ponzi Scheme, Misusing Client Funds and Failure to Pay Federal Income Taxes
On March 16, 2017, in Providence, Rhode Island, Patrick E. Churchville, owner and president of ClearPath Wealth Management, LLC, was sentenced to 84 months in prison and three years of supervised release. Churchville pleaded guilty on August 4, 2016, to five counts of wire fraud and one count of tax fraud. According to court documents, from the spring of 2008 through October 2011, Churchville and ClearPath, on behalf of their client investors, invested approximately $18 million dollars in JER Receivables, an entity incorporated in Maryland. In June 2010, Churchville became aware that the investments with JER were no longer producing returns and that ClearPath had been subjected to fraudulent and misleading representations by the principals of JER. Churchville failed to notify his client investors that he had lost millions of dollars of invested funds and in order to hide the fact that he had lost the funds, he misappropriated approximately $21 million dollars of investment money. He used this money to pay back the JER investors and told them, falsely, that the money was the return on their investments. Churchville induced new investments to carry out the schemes, he lied and told investors that ClearPath’s previous investments with JER Receivables had been successful and produced high rates of return. Additionally, in 2011, Churchville created a scheme to obtain $2.5 million dollars, using investors’ funds as collateral without their knowledge, to purchase a personal residence. Churchville failed to report the $2.5 million dollars as income on his personal tax returns, resulting in a loss to the IRS of $820,528.
Former Construction Company Project Manager Sentenced In Fraud Scheme
On March 15, 2017, in Indianapolis, Indiana, Troy L. Sissom, Greenwood, Indiana, was sentenced to 41 months in prison and two years of supervised release. Sissom was also ordered to make full restitution to Wilhelm Construction and pay the entire tax liability to the government. According to court documents, Sissom was employed by the F.A. Wilhelm Construction Company (WCC) as a project manager. His responsibilities included creating estimates for jobs, overseeing the financial aspects of construction projects, and approving material purchases for his projects. In 2003, Sissom created a corporation named LTEE Source and rented a commercial UPS mailbox under that name. Between 2003 and 2015, Sissom created 185 false invoices in the name of LTEE and submitted them to the accounting department at WCC for payment. WCC would then mail the checks for payment of the fraudulent invoices to Sissom’s UPS mailbox. Sissom would then deposit the checks into an account he opened under the LTEE name and used the money for his own purposes. The estimated loss to WCC was over $2.7 million. Tax loss to the IRS was over $381,000.
Nevada Liquor Store Owner Sentenced for Conspiring to Defraud the United States and Tax Evasion
On March 6, 2017 in Washington, District of Columbia, Jeffrey Nowak, of Las Vegas, Nevada was sentenced to 41 months in prison, three years of supervised release and ordered to pay restitution to the IRS. According to court documents, Nowak and Ramzi Suliman jointly owned and operated liquor stores in Las Vegas. At their first liquor store, Super Liquor Store South Strip, Nowak and Suliman skimmed cash receipts and maintained a double set of books in order to underreport income to the IRS. One set of books accurately reflected the store’s sales, while a second set of books fraudulently omitted nearly $4 million in cash receipts that had been actually received by the business. Nowak and Suliman provided the phony set of books to their accountant, causing him to create corporate tax returns that did not fully report the liquor store’s gross receipts and taxable income. Nowak and Suliman also caused their true personal income to be concealed on their individual income tax returns. Suliman was sentenced on January 18, 2017, to 12 months in prison, three years of supervised release and was ordered to pay $428,003 in restitution to the IRS.
Former CEO of Hollywood Payroll Company Sentenced for Purloining Company Funds
On March 6, 2017, in Riverside, California, John Visconti, of Beverly Hills, was sentenced to 24 months in prison and ordered to pay $1.75 million in restitution to the IRS. Visconti was convicted in October 2016 of tax evasion, conspiracy to defraud the IRS, and filing a false tax return. Visconti was the former CEO of Axium International, Inc., a leading Hollywood payroll services company until it collapsed in 2008 due to gross mismanagement and tax delinquencies exceeding $100 million. These tax delinquencies resulted in the IRS assessing a $15 million recovery penalty against Visconti. According to court documents, Visconti and Axium’s former chief operating officer, Ronald Garber, used a variety of elaborate mechanisms to divert approximately $5.1 million from Axium. Additionally, Visconti took $1.9 million in corporate loans that he did not repay. As part of the scheme, Visconti diverted tax refund checks payable to Axium and its subsidiaries into secret bank accounts the he and Garber controlled. These diverted funds were not shown on corporate books and records, and they were not disclosed to the Axium accounting department. Garber and Visconti also diverted approximately $570,000 from Axium by paying invoices submitted by a sham construction company that they controlled. The two men also conspired to have thousands of dollars in cash from Axium delivered to them on a weekly basis. Visconti and Garber caused millions of dollars to be diverted from Axium, and Visconti reported none of the funds pocketed by him on his federal income tax returns. Ronald Garber previously pleaded guilty to two counts of subscribing to a false tax return and is scheduled to be sentenced later this year.
New York Business Owner Sentenced for Diverting Over $1.6 Million From His Companies and Evading Taxes
On March 3, 2017, in Manhattan, New York, Joseph Ciccarella, of Glen Head, New York, was sentenced to 18 months in prison, three years of supervised release and ordered to pay a $100,000 fine. Ciccarella had previously paid the $284,000 in restitution that was due the IRS. According to court documents, Ciccarella was the owner of two New York companies involved in the heating, ventilation, and air conditioning business – BSI Consulting (“BSI”) and KMS Mechanical (“KMS”).During the period 2009-2012, Cicaarella drew numerous checks on the bank accounts of BSI and KMS and made them payable to third party corporate entities, even though those third party companies performed no services for, and provided no goods to, Ciccarella’s companies. Instead, Ciccarella had entered into a corrupt arrangement with the owners of the payee companies that the checks he drew on the accounts of BSI and KMS would be cashed at check cashers in the New York metropolitan area and the cash returned to Ciccarella, less a fee Ciccarella paid to the third parties for cashing the checks. Between 2009 and 2012, Ciccarella siphoned over $1.6 million from BSI and KMS which he falsely listed on the books and tax returns as “cost of goods sold.” Through the scheme, Ciccarella evaded over $280,000 in personal income taxes owed to the IRS.
Former NFL Player and Former Bank Executive Sentenced for Ponzi Scheme and Money Laundering
On March 1, 2017, in Boston, Massachusetts, Will D. Allen, of Davie, Florida, and Susan Daub, of Carol Spring, Florida, were each sentenced to 72 months in prison, three years of supervised release and ordered to pay restitution of approximately $16.8 million. In November 2016, Allen, a former New England Patriots player, and Daub, a former bank vice president, each pleaded guilty to two counts of wire fraud, one count of conspiracy and one count of money laundering. According to court documents, between 2012 and April 2015, Allen and Daub defrauded investors out of millions of dollars by claiming that the funds would be used to back high-interest, short-term loans to professional athletes through Capital Financial Partners (CFP), Allen and Daub’s Massachusetts-based company. While CFP did make some loans to athletes, Allen and Daub also diverted millions of investor dollars to themselves and other business ventures. In total, Allen and Daub took in over $35 million in investments. To date, they have repaid less than $22 million.
Former Bookkeeper Sentenced for Embezzling Over $7 Million
On February 23, 2017, in Oklahoma City, Oklahoma, Rodney Alan Hager, of Norman, was sentenced to 48 months in prison, three years of supervised release and ordered to pay $7,138,804 in restitution to his victim. From 2007 through March 2014 Hager worked as the bookkeeper of J&B Pipe Supply Co. (“J&B”), an oil field pipeline supply company. Among Hager’s responsibilities was paying bills drawn on J&B’s corporate bank account and recording those payments in the company’s accounting software. During much of the same time period, Hager owned Mall Concepts of Oklahoma, Inc., which operated mall kiosks in Oklahoma, Texas, Florida, Georgia, and elsewhere. Hager embezzled funds from J&B by wiring funds into accounts under his control and disguising the transfers; opening credit cards in the name of a J&B principle and using blank J&B checks signed by J&B principles for the purpose of purchasing official business expenses.
New Jersey Plastic Surgeon Sentenced for Evading Taxes on More Than $5 Million in Income
On February 16, 2017, in Newark, New Jersey, David Evdokimow, of Harding Township, was sentenced to 36 months in prison, one year of supervised release and fined $96,000. He previously paid the taxes owed. Evdokimow, a plastic surgeon with a practice in Basking Ridge, New Jersey, was previously convicted of one count of conspiring to defraud the United States, four counts of personal income tax evasion and three counts of corporate tax evasion. According to court documents, Evdokimow ran his medical practice through a corporation called De’Omilia Plastic Surgery P.C. (De’Omilia). Evdokimow and other conspirators funneled millions of dollars in De’Omilia income into the bank accounts of the shell corporations and falsely claimed that these transfers were legitimate business expenses. Evdokimow used the shell corporation and De’Omilia bank accounts to pay for more than $5.8 million in personal expenses, all of which he falsely claimed as business expenses. Evdokimow also opened accounts at several banks in order to cash checks received directly from patients. Between 2009 and 2011, Evdokimow cashed more than $360,000 in checks from patients, which he failed to report on his federal income tax returns. Evdokimow concealed more than $5.8 million in income evading almost $3 million in taxes from tax years 2006 to 2010.
Architect of Offshore Fraud Haven and Orchestrator of More Than 40 Pump and Dump Schemes Sentenced for Executing a $250 Million Money Laundering Scheme
On February 6, 2017, in Brooklyn, New York, Robert Bandfield, a U.S. citizen and resident of Belize, and Gregg R. Mulholland, a dual U.S. and Canadian citizen, were sentenced to 72 and 144 months in prison, respectively. In May 2016, Bandfield pleaded guilty to money laundering conspiracy for setting up an elaborate and fraudulent structure of shell companies and brokerage firms in Belize and the West Indies that enabled his clients to fraudulently manipulate the stocks of dozens of U.S. publicly-traded companies. Also in May 2016, Mulholland, the secret owner of Legacy Global Markets S.A. (Legacy), an offshore broker-dealer and investment management company based in Panama City, Panama and Belize City, Belize, pleaded guilty to money laundering conspiracy for fraudulently manipulating the stocks of more than 40 U.S. publicly-traded companies and then laundering more than $250 million in fraudulent proceeds through at least five offshore law firms. As part of the sentences, Bandfield was ordered to forfeit, among other things, $1 million and all his rights and interests in three corporate entities -- IPC Management Services LLC, IPC Corporate Services Inc. and IPC Corporate Services LLC (collectively, “IPC Corp”) -- that he founded and controlled in Belize, whereas Mulholland was ordered to forfeit, among other things, a Dassault-Breguet Falcon 50 aircraft, a Range Rover Defender vehicle, two real estate properties in British Columbia, and funds and securities on deposit at more than 25 bank and brokerage accounts.
Construction Contractor Sentenced for Money Laundering, Wire Fraud
On February 2, 2017, in Minneapolis, Minnesota, Gerard Leonard Roy, was sentenced to 82 months in prison and three years of supervised release. Restitution will be determined at a later date. According to court documents, between 2010 and February 2015, Roy owned and operated at least seven construction companies. Roy used these companies to fraudulently obtain construction contracts from public and private entities, through the submission of fraudulent construction bonds, asserting that the projects were insured against failure to complete the contracts or to pay subcontractors. However, Roy had no such insurance and was ineligible to bid on the projects. Roy fraudulently obtained at least $3 million in construction contracts, at least $1.8 million in payments on those contracts, and caused losses to clients, subcontractors and others of approximately $800,000. Roy forged signatures to create phony bond documents, including bid bonds, performance bonds and payment bonds, purportedly issued by a surety on behalf of Roy or one of his companies. Roy used a significant portion of funds he stole on personal purchases. At least two companies he controlled filed for bankruptcy during the period covered by the indictment, with total outstanding liabilities in excess of $1 million.
Owner of Electrical Contracting Firms Sentenced for Tax Fraud
On February 1, 2017, in Philadelphia, Pennsylvania, Joseph White, of Newtown, was sentenced to 24 months in prison and ordered to pay $1.2 million in restitution. White previously pleaded guilty to willfully attempting to evade the payment of taxes. According to court documents, White was the owner of PCE Electric Corporation and Thomas Edison Electric Corporation, located in Southampton, from 2000 through 2011. White diverted funds from his two corporations which he used for personal consumption without accounting, for tax purposes, for the income that he had diverted from his two corporations. Additionally, White registered the title to multiple vehicles that he purchased in the name of HAPPE, a partnership that he formed and registered with the Nevada Secretary of State.
Former Manager at HBO Sentenced For Embezzling over $1 Million from the Cable Network
On January 12, 2017, in Los Angeles, California, Jennifer Choi, formerly a manager in HBO’s Talent Relations Department, was sentenced to 30 Months in prison and ordered Choi to pay $1,285,742 in restitution. Choi pleaded guilty last year to two counts of wire fraud and one count of tax evasion for failing to report the ill-gotten gains to the IRS. According to court documents, as part of her job, Choi was responsible for scheduling services – such as hairstyling, wardrobe and make-up – for actors associated with HBO. Choi set up a company called Shine Glossy, LLP, which she used to submit bogus invoices to HBO for style and make-up services supposedly provided to actors. Through Shine Glossy, Choi submitted nearly 300 fraudulent invoices that led HBO to pay approximately $940,000. Choi also used a car service for herself, her family and her friends and provided HBO’s account information, which led the car service to bill HBO for approximately $63,000 in unauthorized rides. Choi failed to file federal income tax returns for 2011, 2013 and 2014, even though she earned hundreds of thousands of dollars during those years. She also significantly under-reported her income when she did file tax returns for the years 2010 and 2012.
Texas Businessman Sentenced for Tax and Wire Fraud Scheme
On November 17, 2016, in San Antonio, Texas, Robert Warren Scully, former owner of San Antonio-based Gourmet Express, LLC, was sentenced to 180 months in prison, three years of supervised release and ordered to pay $1,206,539 restitution to the IRS, plus a $5,000 fine for his role in an estimated $5.3 million tax and wire fraud scheme. According to court documents, from April 2001 until July 2009, Scully and others conspired to defraud the IRS by hiding earned taxable income generated by his frozen food business. Scully and others used intermediary companies in Thailand to provide shrimp and other ingredients at an inflated cost to Gourmet Express, thereby also defrauding his co-owners. Scully and others used the proceeds generated as a result of the inflated costs for personal expenses and failed to disclose that income to the IRS.
Texas Businessman Sentenced for False Tax Returns, Fraud and Money Laundering
On October 25, 2016, in Austin, Texas, Sean James Hager was sentenced to 42 months in prison, three years of supervised release and ordered to to pay restitution of $1,164,161 to Velocity Electronics and restitution of $368,611 to the IRS. According to court documents, during 2008-2011, Hager was employed by Austin-based Velocity Electronics, where he was responsible for purchasing computer parts for resale to Dell. Unbeknownst to Velocity, Hager also operated Echt Electronics, a company through which Hager acquired computer parts and sold them to Velocity at a significant mark up. Hager earned more than $1 million in profits from Echt during 2008-2011; however Hager failed to disclose to his tax return preparer the profit he earned through Echt. As a result, Hager’s income tax returns substantially understated his income and the amount of income tax he owed.
Illinois Man Sentenced On Fraud and Money Laundering Charges
On October 25, 2016, in St. Louis, Missouri, Adam Bernaix, of Edwardsville, was sentenced to 37 months in prison and ordered to pay $427,713 in restitution to the victim of his crime. According to court documents, Bernaix earned approximately $350,000 through Trident Management Solutions, a company he created solely to bill companies doing business with his employer. Bernaix submitted invoices for “services rendered” to companies doing business with his employer, Albert Arno, an HVAC contractor in St. Louis. Bernaix, as a project manager for Albert Arno, was able to mark up the invoices of Trident’s clients to Albert Arno so that his employer provided the extra money needed for Trident’s clients to pay their Trident bills. Bernaix employed his father-in-law at one point to perform occasional jobs but even after Trident’s sole employee left the company and Trident did absolutely nothing for its clients, Bernaix still sent Trident clients bills and marked up the client’s Albert Arno bills sufficiently to keep the money flowing to Trident.