Karl James is the former president of Golden West Taco, Inc., one of the largest franchises of Taco Bell (which is based here in Irvine). Back in 2000 Golden West Taco went into Chapter 11 Bankruptcy protection. Yet Taco Bells were doing quite well at the time–remember that chihuahua?
There was a reason the company (and its owner, Karl James) went into bankruptcy. Mr. James “fraudulently diverted” (for the layman, read that as “stole”) about $3 million of company funds for his personal use. He transfered assets, including residences in the upscale communities of Rancho Santa Fe and Palm Springs to his nominees, used offshore companies with off the balance sheet accounts, and otherwise obfuscated the books. I should point out that these actions are considered bankruptcy fraud.
Mr. James went a step further. In transferring the assets from his company to himself he created income. And he didn’t report that income. In total, he deprived creditors of Golden West Taco of $1,121,829. He committed tax fraud to the tune of $1,169,957 . To his credit, he pleaded guilty and has agreed to make restitution (he’s already repaid $2,014,363).
However, he won’t be eating at Taco Bell for awhile. He’ll be spending three years at ClubFed followed by three years of supervised release. It’s a pretty big price to pay for tacos.