In Maryland, a certified accountant was arrested on tax fraud charges. Allegedly, he inflated deductions, and inflated his tax preparation charges. He apparently used some of the $300,000 his scheme raised to buy property.
Story: Baltimore Sun
Archive for the ‘Tax Fraud’ Category
Shades of Western Tax Service
Tuesday, March 7th, 2006Crime Log: Nursing Homes Pay Well…
Saturday, February 11th, 2006…when you withhold taxes from employees and keep them.
Crime does pay, as long until you get caught. Take nursing home owner Jack Easterday, formerly of Alameda, CA, and soon to be residing in a federal penitentiary. Mr. Easterday was convicted on Friday of failing to pay over $3 million in payroll taxes. Evidence indicated that the scheme netted over $18 million.
It took the jury two days to find Easterday guilty of 47 counts; the maximum penalty on each count is five years and a $10,000 fine.
News Story: North County Gazette
The Saga of Western Tax Service Draws to a Close
Thursday, February 9th, 2006Samuel Joseph DeAngelo headed Western Tax Service. It attracted tax clients quickly as it averaged $2,500 refunds for each customer.
It’s techniques were certainly interesting, and come from the Richard Hatch School of Tax Preparers:
– Making up false deductions for employee business expenses;
– Making up false charitable deductions (typically 10% of AGI);
– Phony depreciation deductions;
– Phony tax payment deductions; etc.
The IRS audited a taxpayer who used Western Tax Service and discovered the fraud. Most of the tax clients had no idea that Western was doing anything wrong. The IRS expanded their review of returns prepared by Western (Western prepared about 8,000 returns in 2001). Yes, Western charged large fees but they got large refunds; what could be the problem? (Hint: If it sounds too good to be true…)
The axe fell in 2004. Now, the story reaches its conclusion. Last Friday DeAngelo pled guilty to defrauding the IRS and helping people file false tax returns. He also pled guilty to using others to engage in currency transactions to avoid the $10,000 reporting requirement: he sent employees to the bank to make multiple $9,990 deposits (don’t try this at home!). DeAngelo faces a maximum of 24 years in jail.
I had a couple Western refugees come in to my office for help. They were rudely surprised that you do have to pay tax on your income….
Press Release: US Dept. of Justice
News Story: Orange County Register
The 2005 Tax Offender of the Year
Saturday, December 31st, 2005Boy, what a year. And what choices we have in naming our 2005 Offender of the Year. The nominees include,
– Richard Hatch, who had over 300 million witnesses to winning $1 million on Survivor, but didn’t include the winnings on his tax return (among other alleged problems);
– John Ashton Wray, Jr., and Judge Michael Luttig of the 4th Circuit Court of Appeals. Judge Luttig wrote an opinion that says that Wray’s failure to file income tax returns, “is not a serious crime.” (Hat Tip: TaxProf Blog);
– David Guardino, of Caryville, TN (hat tip, Roth Tax Updates). Mr. Guardino is a self-proclaimed psychic accused of tax evasion. Didn’t he know this was coming?
– Willy Witzel (courtesy of Roth Tax Updates). Mr. Witzel’s son, Roy, prepared his tax return. When Roy explained his tax return to Willy, Roy got angry and attacked Willy with a sword. Both were martial arts experts. Roy, in self-defense, had to kill his father. (Read the whole story from the link above.)
– All of the taxpayers who claimed that there is no income tax in front of the Tax Court.
And our winner is…
Sharon Lee Caulder, formerly of Oakland and now from New Orleans, our voodoo priestess who wrote a book and was convicted of tax evasion. She did not include the $1.7 million she earned between 1998 and 2002 (mainly from sales of her book, Mark of Voodoo, on her tax returns. As I wrote when she was convicted, “Voodoo is more profitable than I realized, especially if your net income after taxes is the same as your net income before taxes (until Uncle Sam catches you).” Ms. Caulder will be sentenced in February, and faces up to 15 years in prison and fines of up to $1 million.
Thanks to all of our lucky participants and I’m sure we’ll have just as good a bunch of players in 2006.
Money Machine Undone
Sunday, December 4th, 2005Wade Cook, author of books such as Wall Street Money Machine was indicted on eight counts of tax fraud, obstruction of justice and conspiracy. Cook, and his wife (who was also charged), created a phony tax exempt entity but allegedly concealed $8.9 million in income and used some of it on pianos, horses and other investments.
In 2002, Wade Cook Financial was hit with an FTC civil contempt order for not complying with a 2000 court order. Cook still conducts his seminars.
Cook faces three to fifteen years in prison for each count if convicted plus fines of up to $1 million per count. Cook, in a Seattle Times story, denies the charges, stating, “If I’m guilty of anything, it’s loving my job and loving my church…What’s wrong with that?”
News Story: Seattle Times
Lingerie Madam Gets Year for Tax Fraud
Saturday, October 22nd, 2005The alleged Palos Park Madam (of suburban Chicago) successfully dodged prostitution charges. But she was less successful in avoiding tax fraud charges and will soon spend a year in jail.
Dawn Hansel had been accused in the past of everything from cocaine sales, attacking her mother-in-law, and running an upscale prostitution ring. She managed to beat all those charges. This week, though, she was sentenced to a year in prison and three years of probation for not paying $250,000 in taxes to the IRS. Ms. Hansel plead guilty to not reporting the income from cash sales in her lingerie business, “Vogue Fashions.” Well, Ms. Hansel said it’s a lingerie business but state prosecutors allege it’s a prostitution ring.
The judge put it best, “To say Miss Hansel has an unusual background understates all the characteristics she comes with.”
Coverage: Chicago Sun-Times, Daily Southtown.
Bowling for Dollars
Wednesday, October 5th, 2005I remember watching the television show Bowling for Dollars. Chick Hearn, the late Los Angeles Lakers broadcaster, was the host. Contestants bowled a couple of frames and got paid small cash prizes based on how well they did.
Charles Lanza, of Wolcott, CT, had a better Bowling for Dollars idea. Mr. Lanza owns three bowling alleys in Connecticut and told his employees to fill bags with cash proceeds from his lanes (from everything from bowling, the arcade, and shoe rentals); bags were labeled “O” if they held $500 or “X” if they had $1000. (“O” stands for a split in bowling while “X” stands for a strike. I guess “/”, the symbol for a spare, wasn’t needed.) The cash was then delivered to him and not included on his books.
What a wonderful scheme. And no taxes to be paid on the $2 million skimmed from his business.
And then the IRS showed up.
Mr. Lanza faces sentencing in December on felony tax evasion and conspiracy charges. He’s expected to have to serve 30 to 37 months in prison (the maximum is ten years) and to pay a fine of $350,000 plus make full restitution.
Offshore Shenanigans
Friday, September 30th, 2005A company called Derivium Capital LLC is under investigation by the IRS and the Franchise Tax Board for making loans that allegedly weren’t loans, according to Forbes.
The scheme aided taxpayers who were sitting on large stock gains. According to Forbes, “The Derivium deal called for the customer to get a loan equal to 90% of the value of his shares. If the stock went up, he could get it back by repaying the loan, with interest. If the stock went down, he could walk away and owe nothing. And, supposedly, the initial loan was not a sale and thus not taxable.”
But the IRS and the FTB think otherwise, and Derivium sits in bankruptcy. The California Corporations Commission filed suit in 2002 to stop the loans (see this link); it appears Derivium stopped its activity in California soon thereafter. Derivium’s bankruptcy filing is noted in this article in the Times-Record of Middletown, NY. The firm either used “unique and proprietary business model for marketing and administering sophisticated loan transactions” or was “a giant Ponzi scheme.”
Arbitrators so far have ruled that Derivium owes ex-clients $80 million, with many more claims filed. Of course, the bankruptcy filing may forestall those complaints, along with the problems of Derivium’s lender, Bancroft Ventures of the Isle of Man. Forbes reports that Bancroft’s directors have quit, and that Bancroft moved to Cyprus and the new directors are from Beirut.
My usual advice applies to “loans” like these: If it sounds too good to be true, it probably is. So now Derivium’s clients are looking at both tax troubles and possible loss of their loan capital.
You Too Can Live Tax Free…
Tuesday, June 7th, 2005…in jail.
After having been gone for just under a week, I must thank Roth Tax Updates for the first of a few gems. It seems that Lynne Meredith received 121 months (10 years and a month) for conspiring to defraud the IRS. The Los Angeles Times details the story here (one-time registration required). In her book, How to Cook a Vulture, she stated that she could show people how to get the IRS to write you a letter that you didn’t have to pay taxes.
It didn’t work.
But Ms. Meredith won’t have to pay taxes in upcoming years. She’ll be making sub-minimum wage in a Federal penitentiary.
“I Haven’t Done Any Drugs or Alcohol in Eight Months.”
Wednesday, June 1st, 2005Ok, what does that have to do with tax?
That’s what I was thinking when I read this article (one-time registration required). Restaurateur Neil Stein plead guilty yesterday to federal tax fraud charges and will likely receive a term of 12 to 30 months in prison.
Mr. Stein apparently skimmed upwards of $450,000 from his restaurants (including Rouge and Bleu) while reporting just over $100,000 in salary. Unfortunately, spending $65,000 on his daughter’s wedding while earning just over $100,000 made his conspicuous consumption just a bit too visible.
As to the quote, that’s right from the article. While Mr. Stein may now be clean from drugs and alcohol, he’ll apparently have some free time on his hands to contemplate the past.
