Examples of General Tax Fraud Investigations - Fiscal Year 2017
The following examples of General Tax Fraud Investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Owner of Real Estate Investment Firm Sentenced for $17 Million Securities Fraud
On October 28, 2016, in Manhattan, New York, Carlton P. Cabot, of Stamford, Connecticut, was sentenced to 120 months in prison, three years of supervised release and ordered to pay $17 million in restitution and forfeiture. On May 31, 2016, Cabot, the former owner and chief executive officer of Cabot Investment Properties LLC (“CIP”), pleaded guilty to one count of securities fraud in connection with defrauding hundreds of elderly investors in numerous CIP-sponsored real estate investments. According to court documents, from 2003 through 2012, CIP, which was controlled by Cabot, sponsored and oversaw approximately 18 so-called tenants-in-common (“TIC”) securities offerings to investors located all over the United States. A TIC investment is a real estate investment in which investors collectively own a piece of commercial real estate and are entitled to receive a portion of the rental income from the property. From 2008 through 2012, Cabot misappropriated funds belonging to the investments and concealed his misappropriations by knowingly providing false and misleading financial reports and other information to investors.
Former Pennsylvania Attorney Sentenced on Tax Evasion Charge
On October 25, 2016, in Harrisburg, Pennsylvania, Karl E. Rominger, of Carlisle, was sentenced to 20 months in prison and was ordered to pay restitution $317,803. On July 7, 2016, Rominger, a former attorney practicing in Carlisle, pleaded guilty to tax evasion and failure to file a tax return. According to court documents, in 2012, Rominger attempted to evade federal income taxes due and owing for the calendar years 2006, 2007, 2008, 2009 and 2010, all years in which Rominger received taxable income. Rominger made false statements to agents of the IRS concerning the location of his business operating accounts, with the intent to evade and defeat the actions of the IRS. Rominger also failed to file a federal income tax return for the calendar year 2012.
Flagstaff Anesthesiologist Sentenced for Tax Evasion
On October 25, 2016, in Phoenix, Arizona, Dr. Gary Christensen was sentenced to 42 months in prison, three years supervised release, and ordered to pay $1,603,533 in restitution to the United States government. Christensen was an anesthesiologist and a founding member of Forest Country Anesthesia, an anesthesiology practice in Flagstaff. Christensen was indicted in 2014 for concealing approximately $2,100,163 in income from the Internal Revenue Service and failing to pay approximately $562,083 in federal income taxes. In May, a jury in Phoenix convicted him on seven counts of willful evasion of tax assessment for 2004 through 2010, as well as two counts of willful failure to file a tax return for 2009 and 2010.
Oregon Strip Club Operators Sentenced to Prison for Conspiring To Defraud the IRS
On Oct. 25, 2016, in Portland, Oregon, David Kiraz, of Happy Valley, Oregon, was sentenced to 36 months in prison; George Kiraz, of Portland, was sentenced to 36 months in prison and Daniel Kiraz, of Portland, was sentenced to 12 months and one day in prison, for hiding $1.5 million in income from the IRS and evading more than $650,000 in income taxes. In addition to the prison terms imposed, George and David Kiraz were also ordered to serve three years of supervised release and to pay more than $650,000 in restitution to the IRS and the Oregon Department of Revenue. Daniel Kiraz was ordered to pay more than $125,000 in restitution. In May, David Kiraz, his father George D. Kiraz and David’s brother Daniel Kiraz were convicted of conspiracy to defraud the IRS and charges related to filing false tax returns. The Kirazes operated two strip clubs in the Portland area. From 2007 through mid-2011, the Kirazes’ strip clubs collected more than $1.5 million in cash door charges and dancer stage fees. The Kirazes maintained a double set of books, tracking these charges and fees in one set of books, and omitting the receipts in a second set of books that the Kirazes provided to their return preparers, intentionally causing them to prepare and file false income tax returns for David Kiraz that failed to report between $330,000 and $460,000 in door and stage fees each year. The defendants evaded more than $650,000 in federal and state income taxes for tax years 2007 through 2010.
Bank Loan Officer Who Demanded Kickbacks as Part of Multi-Million Dollar Mortgage Fraud Scheme Sentenced
On Oct. 24, 2016, in Los Angeles, California, Paul Ryan, of Torrance, was sentenced to 18 months in prison and ordered to pay $353,925 in restitution to Broadway Federal Bank. Ryan a former loan officer at Broadway Federal Bank took more than $350,000 in kickbacks in exchange for considering mortgage applications submitted by churches in relation to a fraud scheme that resulted in losses of at least $4.2 million. Ryan pleaded guilty in 2014 to one count of receiving bribes and rewards as a bank employee. Ryan worked with brokers and provided a template for presenting financial information for the churches that ensured the loan applications would be approved. Based on the false information concerning the financial status of the churches, Broadway Federal Bank issued loans to the churches. One of the brokers who paid kickbacks, Chester Peggese, was sentenced in February to 12 months and one day in federal prison and was ordered to pay $4.2 million in restitution to Broadway Federal Bank. Peggese acted as a “consultant” meeting with representatives of churches and obtained financial information required for the loan applications, worked with others in the scheme who altered the financial information to make it appear the churches were more financially sound than they actually were, and caused these false loan applications to be submitted to Broadway Federal Bank.
Six Sentenced for Defrauding Investors of $17 Million
On October 20, 2016, in Cleveland, Ohio, six people were sentenced for their roles in a conspiracy to defraud approximately $17 million from about 70 investors.
- Kenneth Grant, of Copley, was sentenced to 92 months in prison.
- Thomas Abdallah, of Brunswick, was sentenced to 82 months in prison.
- Jerry Cicolani, formerly of Richfield, was sentenced to 57 months in prison.
- Jeffrey Grant, of Copley, was sentenced to 52 months in prison.
- Mark George, of Independence, was sentenced to 21 months in prison.
- Kelly Hood, formerly of Richfield, was sentenced to one year of home confinement followed by probation.
Collectively, the defendants were also ordered to repay more than $17 million in restitution. All six previously pleaded guilty. According to court documents, Abdallah and Kenneth Grant owned and operated KGTA Petroleum, Ltd. They and others marketed KGTA as a company that earned profits from buying and selling crude oil and refined fuel products. KGTA issued investment agreements and promissory notes which offered guaranteed monthly payments up to five percent per month or annual payments of approximately 60 percent per year. Together, they obtained approximately $31 million from about 70 investors between 2010 and 2014 through false and fraudulent pretenses. They knew KGTA did not have agreements in place to sell oil and fuel. Instead, the defendants used investor money for personal expenditures and luxury items. The defendants defrauded the investors out of approximately $17 million as a result of the conspiracy.
Kansas Aesthetics Business Owner Sentenced for Tax Evasion
On October 18, 2016, in Kansas City, Kansas, Kathleen M. Stegman, a Leawood business owner was sentenced to 51 months in prison and ordered to pay $68,733 in restitution to the IRS and a $100,000 fine. Stegman was convicted of tax evasion following a five-week jury trial in April. According to the evidence at trial, Stegman, owned and operated Midwest Medical Aesthetics (Midwest). During the years 2006 through 2010, Stegman concealed cash receipts, diverted hundreds of thousands of dollars from Midwest for her personal use, created and used an entity to falsify business expenses and hide Midwest customer checks and falsely claimed as personal expenses as business expenses to fund a lavish lifestyle. The evidence presented also showed that Stegman caused an employee to destroy business records during a civil tax audit, provided the Internal Revenue Service (IRS) with false and altered documents and attempted to tamper with a witness’s statement to criminal investigators.
Massachusetts Men Sentenced for Tobacco Tax Fraud and Money Laundering
On October 17, 2016, in Boston, Massachusetts, Muhammad Saleem Iqbal, of Sharon, was sentenced to 42 months in prison, two years of supervised release and ordered to pay restitution of $28,027,946. On October 18, 2016, Iqbal’s partner, Kaleem Ahmad, was sentenced to 24 months in prison, one year of supervised release. Ahmad’s restitution order will be determined at a later time. Both were also ordered to pay forfeiture of hundreds of thousands of dollars in tobacco products, over $288,000 belonging to Iqbal, Ahmad and the tax-evading wholesale tobacco business in which they were engaged. According to court documents, Iqbal and Ahmad operated a wholesale business under the name “Pick N Dip,” that sold tobacco and non-tobacco products to retail businesses. In order to evade tobacco taxes, beginning around 2010, Iqbal and Ahmad repeatedly purchased tens of thousands of dollars at a time worth of smokeless tobacco and cigars in Pennsylvania where no taxes are imposed and then arranged to have these products covertly transported to Massachusetts for resale, without filing the required records or paying excise taxes. At their directions, their employees repeatedly engaged in large cash transactions to conceal and disguise the nature, location, source, ownership and control of the proceeds of their illegal tobacco business and to avoid transaction reporting requirements.
Former President of San Fernando Valley Brokerage Firm Sentenced to Prison for Wire Fraud and Tax Convictions for Misappropriating Investor Funds
On October 3, 2016, in Los Angeles, California, David Williams, of Studio City, was sentenced to 15 years in prison for federal wire and tax fraud charges stemming from an investment scam in which he misappropriated nearly $6 million from more than 100 investors. The court also ordered him to pay restitution in the amount of $5,125,137 to victims of the fraud scheme, $777,881 to the IRS, and $258,940 to the California Franchise Tax Board. In May 2015, in the midst of a jury trial, Williams pleaded guilty to three counts of wire fraud and two counts of tax evasion. As part of his plea agreement, Williams admitted that he directed Morgan Peabody representatives to sell securities in a fund that Williams personally had created, purportedly to invest in real estate. The Sherwood Secured Investment Fund, LLC, a Studio City business that Williams owned, offered a 9 percent annual return on investments. Williams used the majority of the $3.75 million investors put in the Sherwood Fund to pay for personal expenses, including lavish vacations and a $50,000/month lease on a $6 million residence in Toluca Lake. The defendant was also held responsible for misappropriated funds from two other securities offerings that he created, for a total of almost $6 million in investor funds that he bilked from the three offerings. Williams was also found to have obstructed justice by lying to the Securities & Exchange Commission in its investigation of the offerings, and lying to the Judge and the Probation Office in seeking to withdraw his guilty plea.