Taxable Talk

Back in November I wrote about the Ozbay family of Schenectady, New York. They didn’t commit one piece of tax fraud. No, they committed lots of tax fraud. They didn’t pay income tax, they structured their transactions, and they didn’t pay withholding taxes to the government that they withheld from their employees.

Ziya Ozbay is the first of the four Ozbays to be sentenced. He got ten years at ClubFed and he must surrender $6.8 million of his ill-gotten gains. Ziya was found guilty along with his son-in-law, Yalcin Ozbay (he will be sentenced on April 13th). Mustafa Ozbay, Ziya’s brother, pleaded guilty along with Mustafa’s son, Birol Ozbay. Birol will be sentenced on March 28th and Mustafa on April 26th. (News story here.)

Meanwhile, in White Plains, New York, Duane Howell has probably prepared his last tax return for a client. The 72-year old Howell pleaded guilty yesterday to conspiring to obstruct the IRS, preparing false tax returns, and obstructing the IRS.

Mr. Howell falsified expenses on the partnership returns of his clients, adding phony expenses that reduced the liability for his clients. It’s not a bad way to attract clients—if you can get away with it. Personally, I don’t recommend it as the consequences can be disastrous. For Mr. Howell, he faces up to eight years at ClubFed according to this story.

I never inspired to be a football player; I’m just not big. I do enjoy watching football games, as my friends are well aware.

Joe Bowden enjoyed a nine-year career as a linebacker with Houston, Tennessee, and Dallas (he’s now a coach at Central Oklahoma). Antowain Smith was a running back for Buffalo, New England, Tennessee, and New Orleans. And these two former NFL players figure into a tax fraud case.

Anthony Quinn Welch is accused of “borrowing” Bowden and Smith’s names, and filing tax returns on their behalf from 1997 – 2002. Mr. Welch allegedly opened bank accounts in their names, created phony addresses for them, and filed tax returns…and received over $2 million in refunds. And he deposited the refunds (using phony signatures) into his bank accounts.

Most likely the scheme fell apart when the IRS saw the real tax returns for Bowden and Smith. One individual, two tax returns? Not particularly likely. Mr. Welch faces four counts of filing fraudulent tax returns, and two counts of filing false claims. He’s looking at a lengthy term at ClubFed if found guilty.

News Story: Click2Houston.com

The Seventh Circuit Court of Appeals today ruled on the appeal of Glen Murphy, a Wisconsin Chiropractor, who had earlier been convicted of seven counts of filing false tax returns and three counts of not filing tax returns. After being sentenced to 41 months at ClubFed, Mr. Murphy appealed.

Judge Easterbrook gave the unanimous opinion of the Court. Here are some excerpts:

“After being charged, he tried to game the system and drag out the proceeding as long as possible.”

“AAA, from what we can tell, offered no legitimate services; it instead specialized in international-scale tax fraud. Murphy, himself no fan of taxes, turned to AAA in 1997 in an effort to dramatically lower his past and future income tax liability. AAA obliged, helping Murphy set up a sham, zero-income partnership that took on huge, predetermined losses in sums perfectly tailored to eliminate Murphy’s present and past tax liability. AAA also served as a conduit for Murphy to direct money to offshore bank accounts under the guise of advertising expenses. As a grand finale, Murphy did not even file income tax returns from 2001-2003, despite telling his bank that he had done so (and even producing a completed 2001 form) as part of a home refinancing application.”

“During the 10 months leading up to and including his trial, he employed a pattern of delay and misdirection that would make an NFL offensive coordinator jealous.”

“Information not available to the district court at the time, but highly revealing now, is Murphy’s sudden ability to quickly secure paid private counsel within weeks of his convictions.”

If you get the idea that Mr. Murphy lost his appeal, you’re correct. The ruling by Judge Easterbrook is quite revealing of someone who tried to evade justice, but lost.

Hat Tip: Decision of the Day

Three stories today, all with a recurring theme: fraud. We’ll look at a new but not so good method to sell for less. Then we’ll take a peak at two accountants, and how they made money…for themselves.

Tommy James Hudgins owns Affordable Tires in Chattanooga, Tennessee. He found a way to make sure he beat his competitors’ prices: not remitting the sales tax he collected to the state of Tennessee. He did keep his prices down, but the Department of Revenue wasn’t happy with his methods. He’ll spend two years on probation, and must make restitution of $17,000. He may also face civil penalties, according to this story.

In Baltimore, a longtime accountant pleaded guilty to wire fraud, money laundering, and tax fraud charges. Wilkins McNair, Jr. faces up to 38 years in prison, but will likely serve a significantly shorter sentence through his plea bargain. McNair, in the indictment, was accused of avoiding paying $550,000 in taxes by delaying filing his returns and under-reporting his tax. The Baltimore Business Journal has more on this story.

Finally, a pair that were Washington state tax preparers are alleged to have found a not-so-legal method of earning a living. They made up phony tax returns using relatives’ names, and, according to this story, collected about $40,000 in refunds. The story has an interesting twist. The accused are Kandi Rose Roberts, formerly of Bellingham, Washington, and Ernest Roberts, of Everson, Washington. Ms. Roberts moved to Las Vegas and is now known as “Kandi Kroon.” She’s going to be sent to Seattle for trial, so this is one thing that happened in Las Vegas that won’t stay in Vegas….

The drug store. That place where we fill our prescriptions, buy our sundries, and maybe have a malt at the counter.

Saad Kamil Deeb owns Citizens Pharmacy in Welch, West Virginia. According to the US Department of Justice, he allegedly had a side business with his drug store. An illegal gambling business that made $1.7 million in income.

Apparently the IRS got wind of his alleged operation, and wasn’t pleased because he hadn’t included the income on his tax returns. Mr. Deeb also is accused of “structuring,” making cash deposits of less than $10,000 to avoid federal reporting requirements.

The government is beginning forfeiture proceedings against Mr. Deeb, hoping to recover $1.7 million in cash, automobiles, and land that Mr. Deeb owns. And if he’s convicted, he could face 150 years in prison, and a fine of up to $7.5 million.

Story: Charleston Daily Mail