Taxable Talk

In January I reported on Bozo tax protesters Tony & Micaela Dutson. Back then it was alleged that the Dutsons “tried to obstruct the IRS by filing baseless liens against four IRS workers.” Additionally, the Dutsons allegedly filed a lawsuit that the government characterizes as “frivolous” against one of the IRS investigators and allegedly lied about making payments in the millions to the individuals investigating them. The original indictment claimed that they were allegedly marketing an illegal tax avoidance program. They were barred back in 2006 from selling the program.

Well, we can change alleged to convicted on nine counts. Via the TaxProfBlog:

A married couple was convicted of running an elaborate tax shelter scheme for over a decade in which they marketed tax trusts to clients, filed lawsuits against IRS employees, and prepared a $108 million tax lien against former Treasury Secretary John Snow.

Oregon attorney Micaela Renee Dutson, 48, and her husband Tony Dutson, 53, were convicted of nine counts for various criminal tax violations, defrauding the U.S. government out of approximately $7 million. The couple were convicted of conspiring to defraud the IRS, obstructing the IRS, causing clients to use bogus financial instruments in an attempt to pay their taxes, failing to file tax returns, and aiding and advising a client to file a false tax return.

I also need to mention that the Dutson filed a lien against then Treasury Secretary John Snow for $108 million.

Well, the Dutsons won’t be getting that $108 million or the $1 trillion from IRS employees in California. However, they will likely get a lengthy stay at ClubFed where they’ll earn roughly $1.00 an hour.

I was at the annual SuperSeminar a couple of weeks ago. Bob McKenzie, one of the presenters, mentioned that the IRS has found that sending undercover agents to businesses that are for sale has been a very useful strategy. Mr. McKenzie told the story of the sale of a Chicago pub, where the owner maintained two sets of books. The pub owner told a prospective buyer not to worry that the pub had only been slightly profitable; the true books showed the real profits. That prospective buyer happened to be an undercover officer from the IRS criminal investigations unit. Oops….

I found the idea of this to be somewhat hard to believe. After all, would individuals be that foolish? Well, I should never underestimate the Bozo contingent.

Let’s head to Palo Alto, in the Bay Area. AJ’s Green Dry Cleaners and Laundromat was up for sale. An undercover IRS agent approached the manager of the business, Sung Ho Choi. Mr. Choi showed the undercover agent the computerized records that showed the true sales in the business. Unfortunately, Mr. Choi only provided his parents (who owned the business) and their accountant the bank statements. The IRS agent compared the computer records to the tax returns, and there was a $194,973 difference in the gross income. That’s a big oops, and Mr. Choi pleaded guilty to four counts of aiding or assisting in the preparation of a false tax return.

If you sell a business, one set of books is enough. The individual looking at your business might just be from the IRS.

When I was an undergraduate in college, I did research at the Lawrence Berkeley Laboratory on the catalyzed production of methane from graphite. I don’t believe that research led to commercial production of natural gas (which is methane, CH₄.

The government likes the idea of obtaining methane from unconventional sources. There’s a tax credit available for recovering methane from landfills. Some enterprising individuals had the not-so-brilliant idea of just reporting that they recovered the methane from landfills without actually recovering any. They helped their clients obtain more than $30 million in phony tax credits.

Well, the government found out about 32 individuals. Twelve of them were permanently barred last week (23 of the 32 have now been barred). Additionally, four individuals pleaded guilty last year in a related criminal case.

If you were one of the lucky investors who bought some of the non-existent methane credits, you’re likely looking at a “Dear Valued Taxpayer” letter in your future. And if you knowingly participated in the scheme, it’s time to find an attorney. For if you’re going to take a tax credit based on methane, that methane has to be real.

Nicholas Blase was the mayor of Niles, Illinois for nearly 50 years. Niles is a suburb just northwest of Chicago. Growing up, I was in Niles Township; had my parents remained in the Chicagoland area, I would have attended Niles West High School. And Mr. Blase was the mayor of Niles while I lived in nearby Lincolnwood.

Mr. Blase, “a longtime suburban Democratic Party powerbroker,” according to the Chicago Sun-Times, acting like many Chicago area politicians. He told business owners to pay up or get out. And pay they did to a friend’s business firm. Mr. Blase got 25% as a commission. Somehow, the illegally gotten gains managed to avoid his tax returns.

Mr. Blase was charged in 2006 with mail and tax fraud. He pleaded guilty last year. He was sentenced on Friday to a year and a day at ClubFed.

Meanwhile, another political scandal is ending in Philadelphia. Howard Cain was the top political aide to Democratic State Senator Vincent Fumo. Mr. Fumo was found guilty last year on 137 corruption counts. (The government is currently appealing Mr. Fumo’s 55 month sentence as too lenient.) A key witness in Mr. Fumo’s trial was Mr. Cain. Mr. Cain, though, had his own tax troubles. He admitted that he didn’t report $400,000 in tax (on $1.6 million of income) to the IRS. Mr. Cain was sentenced to ten months at ClubFed. He must also make restitution of $1,021,499.

Sometimes you just don’t need to embellish a story. The former Education Dean of the University of Louisville pleaded guilty last Friday to nine charges of embezzlement and tax fraud. Robert Felner embezzled $1.7 million from the University of Rhode Island, and followed that up by embezzling $570,000 from the University of Louisville. He tried to embezzle another $270,000 from Louisville, too. He did manage to pilfer $88,000 from the Rock Island, Illinois County Counsel on Addiction.

Adding to his problems, he forgot to pay $490,000 to the IRS. Scott Cox, Mr. Felner’s attorney, noted, “They had a very strong tax case against him.”

Mark Hebert, a spokesman for the University of Louisville, told the Associated Press, “I don’t think there are a whole lot of tears being shed on the University of Louisville campus today. He blew it.”

Mr. Felner’s plea bargain calls for him to serve 63 months at ClubFed, and make restitution of $2.2 million to the Universities and County Counsel.