Taxable Talk

I’m definitely not an expert on oil and gas accounting. That’s a very specialized niche, and I only know enough to be dangerous. But one thing I do know is that you can’t inflate prices on joint ventures to allow partners to get tax credits. That’s tax fraud.

And that’s what one Ohio company and two individuals at that company are alleged to have done. The Justice Department has sued Mid-Con Petroleum of Heath, Ohio, and two principals of that firm, Daniel Weddington and James Earl.

Here’s how the scheme allegedly worked, according to the indictment (as reported by the Newark Advocate). Mid-Con would sell the interests in wells to customers using a payment plan that would ask for just a little bit down. Customers would then promise to pay the rest from profits from the well. Mid-Con would allegedly cash the payment after the customers received the tax credit on their next year’s tax return.

The DOJ news release alleges that Mid-Con inflated prices on the wells by having customers use “sham notes” to pay for most of the purchase price. The customers then allegedly used the inflated price to claim tax credits on intangible drilling costs.

But it gets better. The same intangible drilling costs were allegedly sold to multiple customers so that they could take the credit on the same drilling costs. Think of one oil well, but it got cloned into two or three or more. The DOJ suit alleges that Mid-Con has 200 customers so this is allegedly not a small-time fraud. Indeed, the DOJ believes that these alleged acts have cost the Treasury between $5.4 and $6.9 million.

The DOJ also alleges that Mid-Con has obstructed the IRS investigation into this matter. The DOJ is asking for this alleged scheme to stop. It appears that this “gusher,” if there was one somewhere in Ohio, has been capped.

As an author (my third book is due out in late January), one problem that I have faced is coming up with a title. It must be something that attracts your target audience to your book. A Norristown, Pennsylvania attorney allegedly came up with a title to describe the tax fraud he was allegedly committing—Federal Tax Fraud: The Users Guide.

Bernard Bagdis and ten other individuals were named in a 168-page indictment. Mr. Bagdis, who is accused of not filing a tax return between 1990 and 2006, faces 35 charges: one count of attempting to impede the IRS, seven conspiracy counts, 16 charges of aiding and assisting in the preparation of a false tax return, six counts of failing to file a tax return (I guess the IRS was generous with the other five years), and five counts of not filing a currency transaction report. Mr. Bagdis is facing a very lengthy stay at ClubFed if found guilty on all of these charges.

The indictment alleges that Mr. Bagdis used shell corporations, a phony foreign bank, and a waterproofing company to hide $23 million worth of income allegedly owed by the other defendants; the tax due on that amount would be $4.6 million.

I guess Mr. Bagdis’ book may not see the light of day.

News Story: Philadelphia Business Journal

Back in August, I told you the sorry tale of Gene Haas, former CEO of Haas Automation, Inc. Mr. Haas lost a court case and decided to get back at the judge by committing tax fraud. He became a two-time loser when his tax fraud scheme collapsed. In the end, he had agreed to pay the taxes, interest, penalties, and a $5 million fine (the total is about $75 million). Today he was officially sentenced to two years at ClubFed.

Had he just paid the judgment he lost (roughly $30 million) he would still be the CEO of a successful machine tool company. Instead, he’s out an additional $75 million and will serve two years at ClubFed.

Two similar cases made the news on Wednesday; two government officials involved in tax trouble because of other crimes they are alleged to have committed.

First, from Huntsville, Alabama, a former director at the Redstone Arsenal is accused of taking kickbacks and has been charged with fraud, bribery, and tax evasion. Michael Cantrell is charged with taking $1.6 million in kickbacks according to US Attorney Alice Martin. “Cantrell corrupted his leadership position by taking $1.6 million in kickbacks to allow certain contractors to perpetrate a massive procurement fraud scheme,” according to Ms. Martin.

According to the AP report, Ms. Martin has said that Mr. Cantrell is cooperating with the investigation and that further arrests are expected. Mr. Cantrell faces one count of conspiracy to commit bribery, two counts of bribery and one count of personal income tax evasion. He faces up to 40 years at ClubFed plus fines and possible disgorgement of kickback proceeds.

Meanwhile, from Madison, Wisconsin comes the story of former Overture Center Director Robert D’Angelo. Mr. D’Angelo is accused of 15 charges of mail fraud, 15 charges of wire fraud, four charges of money laundering, and four charges of tax fraud. Trial has been set for February.

Mr. D’Angelo ran two side businesses while heading the Overture Center for the City of Madison. He allegedly ran the side businesses out of city offices (which would violate city policies), and allegedly ordered city employees to help him with his businesses. Additionally, he allegedly used the city’s telecommunications equipment in his businesses, and allegedly had city employees send emails and faxes for his side businesses.

Adding potential insult to injury, Mr. D’Angelo also allegedly didn’t report any of the income from his side businesses on his tax return (which would be tax fraud, if proven). Needless to say, he’s looking at a lengthy stay at ClubFed if he’s found guilty.

Here in Orange County we have our own fraud/kickback case making news. Sheriff Mike Carona has been accused of taking bribes and allegedly intimidating witnesses. No tax charges, though…at least for now.

In partnership with committed adult volunteers, girls develop qualities that will serve them all their lives, like leadership, strong values, social conscience, and conviction about their own potential and self-worth.

That’s straight from the website of the Girl Scouts of the USA, and there’s one former adult volunteer who will likely indeed be committed…to ClubFed.

Holly Barnes of Pace, Florida decided to commit tax fraud and claim some false tax refunds from the IRS. She needed some identities, and chose girls in her Girl Scout troop. She had them sign false medical release statements (which had a place for their social security numbers), and she had all she needed.

So she went on her Bozo scheme, and received $87,000 in tax refunds from the IRS. She continued to file false refund claims even after she was under investigation. Even being charged with 15 counts of identity theft and 19 counts of tax fraud didn’t stop her from trying to cash a check two days before her original hearing date! And shoplifting at the local Navy Exchange. That’s hubris, stupidity, or both.

Wednesday, Ms. Barnes pleaded guilty to all counts in a Pensacola, Florida courtroom. She asked to be released for a couple of days, but the judge had other ideas. “You received the benefit of the court’s trust with the understanding that you would not violate the law,” Judge Casey Rodgers told her. “It’s unfathomable to me … that what [the Assistant US Attorney] has represented to the court might have taken place.”

Assistant US Attorney Stephen Preisser told the Pensacola News-Journal “The long and short of it is Miss Barnes has violated the conditions of her release.” She also pleaded guilty to a new felony theft charge for shoplifting merchandise from the local Navy Exchange.

Ms. Barnes will be held until her sentencing in January. She faces up to 230 years at ClubFed.

News Stories: Pensacola News-Journal, Emerald Coast.com

If you’ve ever tried for a government contract, you know that there’s plenty of paperwork involved. For example, you have to disclose any past fraud convictions. If you don’t, you could find yourself facing even more problems.

That’s allegedly what Richard Hudec, Jr. of Naples, Florida did. Back in 2001 he was released from prison after serving time for bank fraud, mail fraud and aiding and abetting. He was also facing civil judgments from New Jersey, the IRS, and various companies that he had allegedly defrauded.

Now, if you’ve been convicted of fraud, and you’ve even served time at ClubFed, you know that disclosing that on your paperwork might negatively impact your chances of getting a government contract. And what government contract was Mr. Hudec attempting to get? His wife purchased Holiday International Security, Inc., and changed the name to USProtect. USProtect apparently got some government contracts as the company provided security at 120 federal installations through a GSA (General Services Administration) contract.

How did USProtect get the contracts? Well, one method that they allegedly used was bribery. The former owner, Michael Holiday, pleaded guilty to bribery and tax evasion. Mr. Holiday used bribes to a former GSA official to secure contracts in California and Maryland.

Indeed, Dessie Nelson of Oakland, California has been charged with receiving over $100,000 in bribes and a cruise from Mr. Holiday. And tax evasion for not declaring the income from the bribes.

As for Mr. Hudec, he’s been charged with concealing material information and tax evasion. He allegedly did not report over $500,000 of income from USProtect that he received on his 2002 tax return.

News Story: Naples Daily News