Archive for the ‘Tax Evasion’ Category

« Older Entries
Newer Entries »

Cash & Carry Your Way to Tax Evasion

Sunday, September 27th, 2015

Kasia’s Bakery is a very successful bakery in New Britain, Connecticut. Its owner, Marian Kobryn, emigrated from Poland to the US to escape political oppression. He opened the bakery, and it’s been a great success.

The bakery operates on a cash-only basis. Mr. Kobryn was determined to lower his tax burden. Instead of making sure all expenses were noted on his tax returns and perhaps contributing to a SEP IRA, he decided to not deposit all of the cash into his business bank account. He knew about the currency transaction reporting (CTR) rules, so he made his cash deposits just under $10,000 and deposited them into several branches of his local bank.

While neither the Department of Justice report or the news report note what caused the initial IRS investigation, it’s a virtual certainty that it was his multiple deposits of cash. Mr. Kobryn apparently didn’t know about Suspicious Activity Reports (SARs). All financial institutions in the US are required to have programs to detect evasions of CTR rules. Additionally, the IRS investigates nearly all SARs while they don’t investigate many CTRs.

Mr. Kobryn’s evasion was of $730,000 of receipts, for a tax loss of $243,000. The penalties and interest totaled an additional $192,000. Mr. Kobryn was sentenced last week to time served (he is in poor health) and to make full restitution of the tax. He has already paid back all the tax and $50,000 of the penalties and interest. It’s a whole lot easier to simply pay the tax due in the first place…but that rarely occurs when you’re developing that perfect tax evasion scheme.

Posted in Connecticut, Tax Evasion | 1 Comment »

A 0% Chance of Success Didn’t Deter Him!

Sunday, September 20th, 2015

Ronald Reagan said, “Facts are stupid things.” Well, one fact that I’ve mentioned in the past is that IRS Criminal Investigations looks at all allegations of employment tax fraud. The reason is obvious: The IRS doesn’t like the idea of people stealing from them. I’ve been saying this for the ten-plus years that I’ve been writing this blog.

Andrew Parish of Chillicothe, Ohio apparently doesn’t read this blog, and also apparently didn’t consider how his scheme would fail. Mr. Parish hired a firm to prepare his payroll and send the reports to the IRS and Ohio–all well and good so far. He then decided to issue paychecks directly. That wouldn’t have been an issue if Mr. Parish had told his payroll company. I’m sure you’re a couple steps ahead of me: He didn’t, nor did he issue his own payroll reports. But he did include the withholding on the paychecks.

The employees naturally included this withholding on their tax returns. That withholding wasn’t going to match IRS records, and sooner or later the IRS was going to investigate. When the amount missing matched the amount of those paychecks, it wasn’t going to take a genius to figure out where the error occurred.

(An interesting digression: This past April one of my clients received an IRS notice because the withholding on his return didn’t match IRS records. I looked at the W-2’s (my client had multiple employers) and they matched perfectly. It turns out that the error is exactly the amount of the withholding from one employer, and that money apparently hasn’t made it to the IRS. My client is a pack-rat, and had all of his paychecks and his W-2’s, and everything tied perfectly. The IRS requested a copy of those records; it is a near certainty that IRS Criminal Investigations is looking into this. But I digress….)

As for Mr. Parish, he pleaded guilty earlier this year to failing to account for and pay over employment taxes to the IRS. He was sentenced to 18 months at ClubFed and must make restitution of $341,336. A helpful hint to those thinking of not remitting employment taxes: This had a zero percent chance of success in 2005 and the odds haven’t improved in the last ten years.

Posted in Payroll Taxes, Tax Evasion | 1 Comment »

Defalcations Send Randolph Scott to ClubFed

Sunday, September 13th, 2015

When I hear the name Randolph Scott, I think of the late actor. He played leading men (generally heroes in Westerns) during his long and illustrious career. This Randolph Scott is anything but a hero.

Randolph Scott of Doylestown, Pennsylvania (near Philadelphia) was an estate and probate attorney. He represented an estate, one valued at more than $6 million (at date of death in 2005), so an Estate Tax Return needed to be filed. Estate tax of $520,351 should have been paid to the IRS. That didn’t happen.

Instead, Mr. Scott diverted “approximately $2,317,917.67” from the estate to his tax office. That’s theft. In 2009, the executor of the estate died. From the Department of Justice press release:

Scott failed to disclose the executor’s death so that Scott could continue to receive money intended for the estate at his law firm. Scott would then forge the deceased executor’s signature and deposit funds intended for the estate into accounts under his control. Scott had the successor executor sign a document renouncing the position of successor executor so that Scott could continue to forge the signature of the deceased executor and divert money belonging to the estate.

Mr. Scott pleaded guilty back in March to mail fraud, tax evasion, attempting to interfere with administration of internal revenue laws, and three counts of failure to file income tax returns. He was sentenced on Thursday to four years at ClubFed and must make of the $2.3 million he stole. Unlike a Randolph Scott movie, the only happiness with this ending is that this Randolph Scott won’t be doing this to anyone else.

Posted in Estate Tax, Tax Evasion, Tax Fraud | 2 Comments »

The Hospital’s Closing; Who Will Notice the Missing Charity Money?

Monday, August 31st, 2015

Irvine, California used to have Irvine Regional Hospital. The hospital closed back in 2009 (but has since reopened as Hoag Hospital Irvine). When I lived in Irvine one of my doctors has his office in the medical building that’s attached to the hospital. I imagine he’s a bit perturbed over the following story.

Dr. Bruce Hagadorn was chief of staff at the hospital and was on the board of the hospital’s charity committee. As the hospital neared closing the committee had to decide what to do with the $250,000 in the charity fund. They decided to the Hoag Hospital Foundation.

The money didn’t end up there. Instead, it allegedly went into Dr. Hagadorn’s personal medical practice. I can’t say he embezzled the money as Dr. Hagadorn didn’t plead guilty to that. Instead, he pleaded guilty to eight tax evasion charges related to not reporting the money as income on his tax returns. Dr. Hagadorn will get to spend a year at ClubCal thinking that decision over. He has already made restitution of the funds and paid his state income tax debt of $103,865.

As readers of this blog definitely know, embezzled money–oops, money that’s income that comes into your possession–is taxable. Yes, illegal income is just as taxable as legal income. I don’t know if Dr. Hagadorn would be $147,000 wealthier if he had paid tax on the $250,000, but he might be. It also goes to show that the doctors at Irvine Regional Hospital did notice where the money didn’t go to.

Posted in Irvine, Tax Evasion | 1 Comment »

The Last Roundup at Nifty Fifty’s

Monday, August 10th, 2015

Last Thursday William Frio was sentenced to five years at ClubFed. Mr. Frio was the accountant for Nifty Fifty’s, the Philadelphia-area restaurant chain with food themed from the 1950s and a tax strategy from the 1850s. Beginning in 1986, Frio and the five founders of Nifty Fifty’s skimmed cash, paid employees in cash, and generally committed tax evasion to the tune of $15 million.

That wasn’t enough for Mr. Frio. An active participant in the evasion scheme at Nifty Fifty’s, he decided to embezzle from the chain; after all, one good crime deserves another. He saw no reason to pay tax on the evaded funds, structured his deposits of those funds, and lied on a loan application. Earlier this year he pled guilty to these charges; besides the five years at ClubFed he must make restitution of $1.7 million.

Tags:
Posted in Tax Evasion | Comments Closed

Not Remitting Employment Taxes Doesn’t Work in Japan Either

Sunday, August 9th, 2015

In the United States, one of the quickest ways of getting in tax trouble is by withholding employment taxes and not remitting those taxes to the IRS. The rate of investigation is as close to 100% as you can get–and it’s normally a criminal investigation. It appears the same holds true in Japan. This story has a second component: There’s something about strip clubs–err, adult entertainment facilities, that make them hotbeds for tax evasion.

From Osaka, Japan comes the story of Naoko Hayashi. The 52-year-old former manager of the Jumeirah hostess club has been indicted and charged with not remitting 57.7 million yen ($464,000) out of 83.2 million yen ($669,000) withheld from pay of the hostesses working in the club. The article in the Tokyo Reporter notes that it costs a minimum of 50,000 yen ($402) to enter the club.

Among the problems with not remitting withholding tax is that it’s a crime that’s fairly trivial to prove. The payroll records will show the withholding, and the National Tax Agency and the Osaka Regional Taxation Bureau won’t show the withholding. It’s also a crime that is guaranteed to show up: When the hostesses file their tax returns and claim the withholding the tax agency won’t see it. But it appears the Bozo tax contingent is equally active in Japan as in the United States.

Tags:
Posted in International, Tax Evasion | Comments Closed

They’ll Know It in Dubuque

Sunday, July 19th, 2015

Perhaps someone will understand the reference in the title (it’s to one of my favorite novels). But this is a tale from Dubuque, Iowa about a scheme gone bad.

James Spaulding was the director of the Clarke University Bookstore; he and Thomas DeFelice came up with the perfect crime. Well, since you’re reading about it here it at least started off that way….

They created a phony book company; that company then invoiced the Clarke bookstore for books that hadn’t been sold to them (but that were approved by Mr. Spaulding). The fraud was over $300,000. Compounding Mr. Spaulding’s troubles he lied to a federal grand jury.

They both pleaded guilty: Mr. Spaulding of two counts of filing false tax returns and one of mail fraud while Mr. DeFelice pled to one count of filing false tax returns. Mr. Spaulding earlier received 57 months at ClubFed; Mr. DeFelice received 12 months at ClubFed.

As to the reference, it’s to the Pulitzer Prize winning novel Advise and Consent. If you haven’t read this novel of Washington politics, I highly recommend it. As to why “They’ll Know It in Dubuque” is a reference to Advise and Consent, you will just have to read the novel to find out.

Posted in Iowa, Tax Evasion | Comments Closed

You Can Pay Employees in Cash, But…

Sunday, June 28th, 2015

…you’d better withhold payroll taxes. One Milwaukee restaurant owner is alleged to have forgotten that minor detail. He also allegedly didn’t include all of his cash receipts on his tax returns.

Paul Bouraxis operates three Milwaukee-area restaurants. Judging from his tax returns, the restaurants weren’t doing that well. The Department of Justice believes that a better way of judging is the $3.7 million in cash and silver in banks in the United States and Greece. ($1.7 million in gold, silver, and cash was seized.) Mr. Bouraxis, his wife, son, and son-in-law are all alleged to have skimmed cash from the business, filed phony tax returns (both personal and payroll taxes). A part-owner of one of the restaurants, Gus Koutromanos, also allegedly participated in the scheme.

The DOJ found that the accountant for the businesses participated in the scheme, too. Scott Sherman of Sheboygan will plead guilty to one count of filing a false tax return; he’ll likely testify (if need be) against the Bouraxis family if the case goes to trial.

The family is all facing extended stays at ClubFed if found guilty.

Posted in Tax Evasion, Wisconsin | Comments Closed

Arbitrage Is Legal, But You Better Pay the Taxes

Sunday, June 21st, 2015

Let’s say you are 100% certain that the price of a certain article will increase from $0.20 to $0.62 in a few weeks. Can you purchase a stock of that at $0.20 each and then sell them later at $0.62? If there are no laws against it, certainly. Of course, the $0.42 profit is taxable. That last line allegedly was forgotten by a Tennessee legislator.

Joseph (Joe) Armstrong is a member of the Tennessee legislature. He wanted to increase the state’s tobacco tax from $0.20 to $0.60 (per pack of cigarettes). Was he interested in the health of the residents of the Volunteer State? Perhaps. According to the indictment handed down last week, he was really interested in the health of his bank balance.

The Justice Department alleges that he entered into a conspiracy to profit from the increase in the cost of a tobacco stamp. Buy low, sell high is great, but as a legislator you’re not supposed to profit off of it. (Though Mr. Armstrong wanted a tripling of the price, the tax increase ended up being $0.42 per pack to a tax of $0.62.) Mr. Armstrong got a loan, bought lots of tax stamps at the old rate, and then sold them at the high rate. He used a nominee business (through his accountant) to hide the profits. His accountant got 15% of the profits.

(The accountant made a plea deal in July 2014 that was unsealed earlier this year. Charles Stivers, a CPA, was Mr. Armstrong’s accountant. As a reminder to the IRS, a license doesn’t make a person immune to deficiencies in ethics.)

The Justice Department alleges that Mr. Armstrong wanted to both have his after-tax income equal his pre-tax income from the scheme (always a good, albeit, illegal option) and he wanted to hide this from his wife. He is also being charged with lying to the IRS about his activities.

Mr. Armstrong pleaded not guilty to all charges on Friday. If found guilty, Mr. Armstrong will likely be residing at ClubFed.

Posted in Tax Evasion, Tennessee | 1 Comment »

Neymar Wins Championship but Faces Tax Evasion Investigation

Sunday, June 7th, 2015

On Saturday Barcelona beat Juventus 3-1 in Berlin, Germany to win the Champions League Final in soccer (or football as it’s known everywhere but here). Neymar, from Brazil, is one of Barcelona’s star players.

Neymar might have enjoyed the game (and results) but the news out of Brazil might put a tarnish on everything: Neymar is under investigation for tax evasion. First reported by the Brazilian Epoca magazine, the alleged evasion took place form 2011-2014 and involves the money for the transfer of Neymar from Brazil to Barcelona. What was once €17.1 million became €57 million, with some of this supposedly ending up with Neymar.

Tags:
Posted in Tax Evasion | 1 Comment »

« Older Entries
Newer Entries »