Taxable Talk

Plenty of fraud to digest this week, with stories that span the globe. We even have what looks like a case that we reported on two years ago where the alleged perpetrator won’t be prosecuted after all.

Let’s start in Budapest, Hungary. Many criminals have found the former Eastern Block a safe place to call home. Apparently Dennis Hunter is one of them. Mr. Hunter faces charges of tax fraud on a massive scale: He’s alleged to have defrauded the British treasury of £250 million. The fraud relates to the Value Added Tax that exists in Europe, and allegedly took place from 2001 to 2003. Agents from Spain, Hungary, and the United Kingdom found Mr. Hunter in an Irish pub in Budapest. Mr. Hunter will soon be sent back to the United Kingdom and, if convicted, faces several years in a British jail. Mr. Hunter was one of the ten most wanted criminals in the U.K.

Thomas Carbo was sentenced this past week. We reported on Mr. Carbo back in September; he paid his employees in cash and pocketed the payroll taxes. He also skimmed income from his business. That combination wasn’t a winner, and he pleaded guilty. He received 20 months at ClubFed, a $5,000 fine, and must make restitution of $158,000.

Daniel Benham sold a plan that said that you could create legal entities to shelter your taxes. (If you do create those entities, they will owe tax.) That in itself is dubious, but there’s one born every day. Mr. Benham also decided to cheat the IRS the old fashioned way: He didn’t pay his taxes from 2000 through 2003. That got him convicted of four counts of tax evasion and one count of bankruptcy fraud. He’ll have six years at ClubFed to find a new scheme.

Finally, I reported on the case of Michael Monahan in March of 2007. Mr. Monahan is alleged to have not paid payroll taxes on his temp agency’s employees. But the case has apparently run into trouble. Mr. Monahan had pleaded guilty but has now withdrawn that plea. The case against his partner was dropped last year. It’s now unclear as to whether Mr. Monahan will be prosecuted or not. The Nashua Telegraph reports that the prosecutor had last week filed a motion to allow Mr. Monahan to change his plea and to dismiss the case against him “with prejudice” but his superiors aren’t happy with that idea. They forced the prosecutor to withdraw that motion.

Well, unless you’re about to be nominated for a Cabinet post try not to cheat on your taxes. Please?

With the Super Bowl having just ended, perhaps it’s appropriate that a former NFL punter makes the tax beat this week. He’s joined by a pimp and two executives in a potpourri of tax fraud.

Let’s start in nearby Upland, California. Joseph Prokop punted for Green Bay, San Diego, the New York Jets, San Francisco, the New York Giants, and Miami from 1985 to 1992. After his professional career ended Mr. Prokop became marketing director of Oryan Management and Financial Services of Upland. The company created Tax Break 2000. Thankfully, the Internet Archive has some pages saved from http://taxbreak2000.com/. The government alleges that the scheme combined the Americans with Disabilities Act (ADA) with tax fraud. The idea of Tax Break 2000 was that you could get a tax credit for making facilities ADA compliant. However, the government alleges that Mr. Prokop and two individuals from Las Vegas conspired to defraud the US, committed tax fraud, and aided in preparing false tax returns. They’re facing a trial in Las Vegas

>From a punter to a pimp. Randall Bradley Jones had a lucrative business. It’s alleged he ran six houses of prostitution. What’s no longer just alleged is that he earned $667,000 in 2003 while he reported just $140,000. Illegal income is just as taxable as legal income, and Mr. Jones pleaded guilty to tax evasion in Houston. As a spokeswoman for the IRS said, “You should report your ill-gotten gains just like you report any legal income.” Mr. Jones will pay the IRS a $15,000 fine, will likely spend some time at ClubFed, and must make restitution of around $1 million (including penalties and interest).

We head next to Jackson, Mississippi. Gergory Courtney used to be an executive for Shell. But what Shell didn’t know was that Mr. Courtney created a shell company, Mercury Equipment Co. (MES), that supposedly sold and maintained offshore oil rigs. Mr. Gregory then used his position to approve the contract. That’s fraud, and it also became tax evasion when Mr. Gregory didn’t report the income from MES on his tax return. And it wasn’t a small amount; he admitted to $800,000 of tax evasion. Mr. Courtney pleaded guilty to both tax evasion and mail fraud; he faces up to 25 years at ClubFed when he’s sentenced in May.

Finally, Thomas Jimenez is the former CFO of GlobeTel Communications. And the scheme that brought Mr. Jimenez to a courtroom is definitely complex. GlobeTel needed some loans, and banks want collateral for loans. That didn’t appeal to Mr. Jimenez, so he created C&M Management Consulting. C&M made the loans, supposedly secured by $2.8 million in GlobeTel stock—stock that was paid to Mr. Jimenez and other corporate officers in 2004 and 2005. But then Mr. Jimenez sold the stock, and distributed the proceeds to himself and the other officers. And the stock sale wasn’t reported to the IRS, and that’s a big problem. Mr. Jimenez pleaded guilty to tax evasion; the SEC also has an active probe of Mr. Jimenez’s activities. The other corporate officers have settled with the SEC. Mr. Jimenez is looking at up to three years at ClubFed for tax evasion.

Three professions. Four individuals in trouble with the IRS. It’s a whole lot easier to just pay your taxes then it is to concoct schemes to avoid them…and get away with it.