What happens when you start paying personal expenses out of your business and call them corporate expenses rather than salary? Very bad things, and a family in Jackson, West Virginia is accused of that.
Five family members are accused of cheating Uncle Sam out of $9 million. The accused are Eddie Burl Smith, his son Edward Michael Smith, his brother, Donald Paul Smith, Donald’s wife, Judith E. Smith, and their daughter, Jaclyn E. Smith.
They are alleged to have diverted proceeds from three family businesses—Carl E. Smith Inc. (CESI), Carl E. Smith Petroleum Inc. and Carl E. Smith Real Estate Inc—and used the proceeds for personal use.
According to the indictment (which runs 33 pages), Donald Smith used $800,000 to purchase horses. Edward Michael Smith is accused of spending over $300,000 on vehicles.
The defendants are accused of filing false tax returns. Further, they allegedly embezzled pension funds and health care premiums. But we’re only getting started.
Edward Michael Smith is accused in the indictment of burning documents after they were subpoenaed. CESI went into bankruptcy in 2003 but the defendants are accused of diverting funds after the bankruptcy filing into another family business (so there are bankruptcy fraud charges, too). There are charges of money laundering, too. Needless to say, the defendants are looking at very lengthy stays at ClubFed if found guilty on all charges.
As the news report notes, “In 2003, Fayette Circuit Judge John W. Hatcher ruled that Eddie, Edward and Donald Smith illegally depleted $21 million of assets of Carl E. Smith Real Estate Inc., in a case brought by Larry D. Smith, former company treasurer and brother of Eddie and Donald, and other minority owners.”
There are far better ways for a family to stick together than to evade taxes together.