Another Survey, Another “F” for California

Posted on May 10, 2012 by Russ

While Governor Brown and others in the Bronze Golden State continue to debate how to increase taxes, perhaps they’ll look at yet another survey which shows that California is at the bottom for business (among US states). With thanks to the TaxProfBlog for noting this, Thumbtack.com, in partnership with the Ewing Marion Kauffman Foundation released a survey of small business owners of which states were the best for business.

Receiving “A+” grades were Idaho, Oklahoma, Texas, and Utah; receiving “F” grades were California, Hawaii, Rhode Island, and Vermont. The three worst performing cities were all in California: Los Angeles, Sacramento, and San Diego. The top three cities were Oklahoma City, Dallas/Fort Worth, and San Antonio. Nevada received a “B+” while Maryland received a “C-“. Las Vegas ranked 10th of the 40 cities surveyed.

The interactive map is available here while the full survey can be found here. A press release on the results is also available.

Posted in California, Nevada, Texas | 2 Comments

Hint: If You’re in Politics, Skimming Money Isn’t a Good Idea

Posted on May 10, 2012 by Russ

Politicians and anyone else in the public eye are far more likely than others to find themselves audited than others. Take Richard Rober and his wife Averill.

Mrs. Rober owned Gator Water and Wastewater Management, Inc. The business was sold, and payments came in. The Robers skimmed money off of each payment and kept it for personal expenses. They neglected to tell their accountant about the skim. Did I mention that Mr. Richey was the mayor of Port Richey, Florida?

All might have been well except that the company that bought Gator Water alleged that the Robers were skimming. The IRS launched an investigation and found out the allegation was true. Today, the Robers pleaded guilty to one count each of tax evasion.

As usual, it’s a whole lot easier to just pay the tax you owe in the first place…especially if you’re in the public eye.

Posted in Tax Evasion | Tagged | Comments Off on Hint: If You’re in Politics, Skimming Money Isn’t a Good Idea

Ex-Eagle Sues Co-Defendants

Posted on May 10, 2012 by Russ

It seems we’re stuck in the football motif. Freddie Mitchell played for the Philadelphia Eagles and is most remembered for this play:

Earlier this year, he found himself indicted for tax fraud along with two others, Jamie Russ-Walls and Richard Walls. The alleged scheme involved phony tax refunds; Mr. Mitchell is alleged to have recruited individuals to receive the fraudulent refunds.

Well, Mr. Mitchell doesn’t think much of his co-defendants. He filed a lawsuit against them today alleging fraud, breach of contract and infliction of emotional distress. Mr. Mitchell’s attorney, Richard F. Klineburger III, told the Philadelphia Inquirer, “In the end, Freddie’s taxes are still a mess, his friends got ripped off by these con artists and his reputation is tarnished…I truly believe that he will be vindicated in the end.”

Posted in Pennsylvania, Tax Fraud | Tagged , | Comments Off on Ex-Eagle Sues Co-Defendants

Vikings Score Late TD; New Stadium Appears Certain

Posted on May 10, 2012 by Russ

Pity the poor football fans in Los Angeles. They’re stuck watching the NFL on television, or watching USC at the L.A. Coliseum. The latest team that was looking at possibly heading west was the Minnesota Vikings. Earlier today, the Minnesota State Senate approved the Vikings new stadium; Governor Mark Dayton has promised to sign the measure. The Minneapolis City Council must also approve the measure within the next 30 days, but that approval is expected.

The Vikings didn’t get everything they wanted. The Vikings will have to contribute about $50 million more than they wanted to ($477 million in total) for the $975 million facility. But the Vikings overall share of the cost (49%) tells you that the citizens of Minnesota will be paying for this in one way or another.

The state’s share ($348 million) will come through an expansion of charitable gambling. Gambling may be a “sin” in the view of many but when it comes time to raise money it’s always one of the first things looked at. Minneapolis must also contribute to the stadium ($150 million); that will mainly come from sales tax. Of course, as the Wall Street Journal points out, new stadiums rarely pay for themselves.

The Vikings currently play in the Metrodome, an aging facility whose roof collapsed a couple of years ago. The new stadium (to be build on the site of the Metrodome) is expected to open in 2016. It’s likely the Vikings will play for three seasons at the University of Minnesota’s TCF Bank Stadium.

News Stories: Star-Tribune, Wall Street Journal

Posted in Minnesota | Tagged | 1 Comment

What Does Weaving Have to do With Taxes?

Posted on May 6, 2012 by Russ

I can’t answer the question I just posed: As far as I know they have nothing to do with each other. Of course, I’m often wrong, and this is one of those times.

Here, the connection is that the owner of B & B Weaving Shop in Montgomery, Alabama has a daughter who owns B & B Tax Service (conveniently in the same building). Barbara Murry, the mother, and Yolanda Moses, the daughter, have something else in common: They are among nine family members charges with tax fraud and theft of public funds. They’re accused of preparing false tax returns via identity theft and having over $1.3 million deposited in their bank accounts.

And that’s not the only case of identity theft and tax fraud out of Montgomery from last week. Chiquita Smith pleaded guilty to one count of conspiring with at least two other people to defraud the United States by obtaining and aiding to obtain the payment and allowance of false, fictitious, and fraudulent claims. Ms. Smith also pleaded guilty to identity theft. The press release doesn’t state the amount of tax loss, but it appears she may be heading to ClubFed.

Posted in Tax Evasion, Tax Fraud | 1 Comment

Damiani Turns on Wirth

Posted on May 6, 2012 by Russ

Holly Damiani was married to real estate developer Jeffrey Wirth. They were divorced and then the roof fell in: Mr. Wirth, Ms. Damiani and their accountant, Michale Murry, are accused of various tax evasion charges. Ms. Damiani pleaded guilty in a plea bargain on Friday. According to the Minneapolis Star-Tribune:

[She] admitted that from “at least” 2003 through October 2006, she conspired with Wirth and their tax return preparer Michael James Murry to defraud the Internal Revenue Service by failing to report and pay their true income and tax obligations.

I’d say Mr. Wirth’s defense just became a lot more difficult: Ms. Damiani is working with the US Department of Justice. The trial of Mr. Wirth and Mr. Murry is scheduled for May 29th.

Posted in Minnesota, Tax Evasion | Tagged | 1 Comment

It Only Works Until You Get Caught

Posted on May 3, 2012 by Russ

One of the recurring themes of this blog is that a business owner must pay his payroll taxes. The government considers Trust Fund taxes to be their money and they will always investigate payroll tax crimes.

Similarly, workers compensation is sometimes run through government and pseudo-government agencies. In California, there is the State Compensation Insurance Fund. The State Fund is a non-profit public-enterprise fund run like a mutual insurance company. However, it was created by the state of California. That makes it a pseudo-government agency. It’s a very bad idea to commit fraud against the government; it’s even worse to get caught.

George Osumi II has a construction business in Irvine. He apparently has his workers compensation insurance through State Fund. Mr. Osumi allegedly had a unique and, if proven, quite illegal method of lowering his insurance costs: He reported on his workers compensation report $3.5 million less in payroll than his actual payroll. That did allegedly save him several hundred thousand dollars in insurance costs. It’s also a felony. And since Mr. Osumi is alleged to have done underreported his wages 18 times, that’s 18 felony counts.

Adding to Mr. Osumi’s problems is that he is also alleged to have withheld state taxes and not remitted them. State tax agencies are just as certain to go after business owners as the IRS if you don’t remit withheld taxes. In total, Mr. Osumi faces 71 felony counts including perjury (he’s alleged to have lied to the State Contractor’s Board in stating that his business did not require workers compensation insurance), identity theft, and a host of state tax charges. Mr. Osumi is looking at up to 63 years in prison if found guilty on all the charges.

News Reports: OC Register, Daily Pilot

Posted in Payroll Taxes, Tax Fraud | 2 Comments

Texas #1, California #50 in Business Location Survey

Posted on May 3, 2012 by Russ

Another week, another survey of which state is best for business. For the eighth straight year, Chief Executive magazine ranked Texas as the best state in the union as to where to conduct business. Unsurprisingly, California is at the bottom. My state, Nevada, is at #12; Aaron’s home of Maryland is #40. Here are the top ten and bottom ten states:

1. Texas
2. Florida
3. North Carolina
4. Tennessee
5. Indiana
6. Virginia
7. South Carolina
8. Georgia
9. Utah
10. Arizona

41. Hawaii
42. Oregon
43. Pennsylvania
44. Connecticut
45. New Jersey
46. Michigan
47. Massachusetts
48. Illinois
49. New York
50. California

The two states that made the biggest moves were Oregon and Louisiana. Oregon fell nine spots in the ranking, likely due to their income tax increase that passed last year. On the other end of the spectrum is Louisiana, which was ranked 47th in 2006 but is now ranked 13th (up 27 spots from 2011).

Meanwhile, Chief Executive describes California as having slipped deeper into the ninth circle of business hell. Perhaps this section of the report will enlighten Sacramento:

The following is a representative sample of comments from participating CEOs:

  • California is the worst! They are doing everything possible to drive a business out of their state. If it were not for the climate, they would have lost half their population.
  • California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable. If you aren’t an elitist, no room here for the middle or working classes.
  • California treats business owners like criminals. California has different overtime policies for its own employees vs. private sector.
  • California’s labor regulation is a job killer. We will be moving our business out of the state, which will lose hundreds of jobs simply due to the poor regulatory environment.
  • California should secede from the union—it is like doing business in a foreign country, it has its own exchange rate, and its regulation is crazy.

Meanwhile, the budget deficit in California grows (the Legislative Analyst says it’s at $3 billion and will grow from that number). Perhaps the idea of cutting regulations and spending just what the state takes in might garner some support in Sacramento. Well, one can always dream….

Posted in California, Louisiana, Oregon, Texas | Comments Off on Texas #1, California #50 in Business Location Survey

Eight Sacked, Including Two from the NFL

Posted on May 1, 2012 by Russ

The storefront in North Miami cashed checks. There’s nothing that unusual in that. However, there were two major differences between the storefront in Miami and most check cashing locations: The store charged very high fees (35%-45%) but didn’t ask questions about the checks that were cashed and it was operated as a sting operation by the FBI. Eight individuals, including two former NFL players, were arrested today on mostly tax related and identity theft charges.

From the DOJ Press release:

More specifically, [seven of] the defendants are charged with forgery of U.S. Treasury checks, in violation of Title 18, United States Code, Section 510, theft of government money, in violation of Title 18, United States Code, Section 641, and use of five or more identification documents with unlawful intent, in violation of Title 18, Untied States Code, Section 1028(a)(3).

The two former NFL players are William Joseph, who started his career with the New York Giants and ended his career in Oakland with the Raiders and Michael Bennett, who started his career with the Minnesota Vikings and also ended his career with the Raiders. Mr. Bennett, though, was sacked on different charges.

Mr. Bennett went to the storefront and asked for a loan, showing what purported to be $9 million of collateral in a bank account with UBS. The trouble was the balance in the account was $9 million less than what Mr. Bennett showed at the store (the account allegedly had no funds in it). Oops. Mr. Bennett has been charged with wire fraud.

Most of the defendants are accused of cashing between 11 and 35 fraudulently obtained tax refund checks. I am seeing and hearing more examples of identity theft; as noted in the DOJ press release,

U.S. Attorney Wifredo A. Ferrer stated, “Not only is identity theft America’s fastest-growing crime, it’s also a consumer’s worst nightmare. Most recently, identity theft has become a taxpayer’s worst nightmare also. As this three month undercover operation illustrates, identity thieves are using stolen identities to commit steal tax refunds from legitimate taxpayers. Identity theft, when combined with tax refund schemes, threatens the financial security of our citizens. It is time for tax refund scammers to realize that we will not allow them to steal others’ identities and line their pockets through fraud.”

As John V. Gillies, Special Agent in Charge of the FBI’s Miami Division, stated, “Without proper safeguards, identity theft tax fraud has become a growing epidemic.” Hopefully, these arrests are not the end of the FBI and DOJ actions against identity theft criminals.

News Story (Miami Herald)

Posted in Florida, IRS | Tagged | 3 Comments

Franchise Tax Board v. Hyatt to be Argued on May 7th

Posted on April 29, 2012 by Russ

The oral arguments in the appeal by California’s Franchise tax Board in Gilbert Hyatt’s lawsuit against the Board will be heard on May 7th in Carson City by the Nevada Supreme Court. The FTB is appealing the nearly $500 million judgment that was levied against them in February 2009. The case itself was filed in 1998, but took a circuitous path to trial in Las Vegas: It first went to the US Supreme Court as the Franchise Tax Board argued it was immune from being sued. The FTB lost that argument unanimously in 2003, and then lost the case in 2009.

The good news is that a decision in the case will likely come this summer or fall. The bad news is the oral arguments will be heard in Carson City so I can’t attend. Hopefully there will be news stories on the hearing (I’ll pass those on).

Posted in California | Tagged | 1 Comment