Jury convicts Missoula CPA of filing false tax returns

 

Date: November 6, 2020
Contact: newsroom@ci.irs.gov

Missoula – A federal jury found a Missoula accountant guilty of crimes in a scheme in which he filed false tax returns on a couple's businesses by skimming cash and deducting personal expenses like vacations, home improvements and water craft as business expenses.

“Last night’s conviction of CPA Daniel Burke for helping his clients file false federal tax returns is a victory for all taxpayers,” said IRS-CI Special Agent in Charge Andy Tsui. “The public should expect all tax and accounting professionals to guide their clients to legal and honest financial outcomes. Instead, Mr. Burke used his position as a CPA to break the law, and he will now face the consequences of his actions.”

After a four-day trial that began on Nov. 2, the jury convicted Daniel Brian Burke, of six counts of aiding and assisting to subscribing to a false document.

Burke faces a maximum of three years in prison, a $100,000 fine and three years of supervised release on each count.

U.S. District Judge Dana L. Christensen presided and set sentencing for March 11, 2021. Burke remains on release pending further proceedings.

"Our system depends on all of us paying our fair share of taxes. Accountants and other tax preparers have a particular responsibility to their clients and to our country to advise their clients to follow the law. When someone abuses that trust and helps clients cheat on their taxes, they will be investigated and prosecuted. I want to thank Assistant U.S. Attorneys Ryan Weldon and Karla Painter for prosecuting the case and the IRS Criminal Investigation Division for its investigation," U.S. Attorney Alme said.

In evidence presented at trial, the prosecutors said Burke signed false tax returns along with co-defendants and clients, Traci and Joseph Baumgardner, owners of AJB, Inc., for years 2011 to 2013. In total, the Baumgardners reported gross receipts of $5,001,374 and paid federal taxes totaling $10,066 for the time. Traci and Joseph Baumgardner each pleaded guilty to a conspiracy count and testified against Burke. The Baumgardners were each sentenced in June to three years of probation and ordered to pay $89,918 restitution.

Through AJB, the Baumgardners operated two businesses, Splash Car Wash, in Missoula and Hamilton, and Pro Sweeps Plus, an industrial maintenance service. Burke, a certified public accountant, owned and operated Burke and Company, P.C., and prepared corporate and individual tax returns for the Baumgardners.

Prosecutors said an undercover investigation by the IRS showed evidence of two theories for the false returns.  In one theory, Burke instructed the Baumgardners not to deposit cash in the bank or report it as income as required.  A search conducted by the IRS found $50,000 cash in a safe owned by the Baumgardners.

In the second theory, the Baumgardners deducted personal expenses as business expenses. The deducted personal expenses included vacations to Florida, Hawaii, Las Vegas, the Bahamas and Dallas; residential expenses like utilities, remodeling and house cleaning; retail purchases at various stores; recreational purchases like boats, dune buggies and water craft; and a country club membership.

Prosecutors further presented evidence that the Baumgardners and Burke depreciated assets at 100 percent of business use, disguised items, like a boat as a “sweeper,” and double depreciated assets.  Entertainment items, like boats and dune buggies, are not deductible.

An undercover IRS agent met with Burke and in a recorded interview, Burke demonstrated his knowledge of skimming cash and deducting personal expenses as business expenses.  At one point, Burke asked the agent, “You're not an undercover agent from the IRS or anything?” The agent responded no.  Burke told the agent how to avoid taxes.

Assistant U.S. Attorneys Ryan Weldon and Karla Painter prosecuted the case, which was investigated by the IRS Criminal Investigation.