Taxable Talk

It’s only my third day back from vacation. Some of the individuals mentioned below will be counting the days at ClubFed very soon.

Let’s start in Stillwater, Minnesota. Randy Haugen owned an automobile repair business, and it was apparently quite successful. One of his methods of improving his bottom line was allegedly not remitting sales tax to Minnesota and not filing income tax returns. Those methods really do help the bottom line…until you’re caught. The Minnesota Department of Revenue said that Mr. Haugen, “knew this day was going to come and he dreaded it.” As a helpful hint, if you find yourself in that situation get an attorney and make a payment plan rather than postponing the inevitable discovery of the tax evasion.

Staying in the Twin Cities, a former co-owner of a roofing business is accused of conspiracy, mail fraud, tax evasion, and filing false tax returns. Amit Sela of Minnetonka, Minnesota, allegedly embezzled over $600,000 from Sela Roofing, and then allegedly filed false tax returns to cover up the theft. On the other hand, Mr. Sela’s attorney, Eric Brever, told the Minneapolis Star-Tribune, “We believe a jury will find Mr. Sela innocent of all the charges…[A]ll of the taxes were paid prior to the IRS criminal investigation.” That’s a big difference of opinion and we won’t know the answer until the case comes to trial.

Finally, from Grand Rapids, Michigan, we learn that two former executives of U.S. Signal, a telecommunications firm serving the Great Lakes region, are pleading guilty to tax and mail fraud charges. The two, Barry Raternik, the former president of U.S. Signal, and Tim Hall, who used to be the company’s director of operations, teamed with a supplier, Douglas Lautenbach (who also pleaded guilty) to overcharge the company for fiber optics. The three pocketed the difference and used the ill-gotten gains to fund lavish homes, sports cars, RVs, and other expensive items. They also allegedly sold other equipment on the secondary market. Instead of enjoying the luxury items they’ll likely get to spend a few years enjoying the not so luxurious insides of various ClubFed facilities.

In the end, most of these “perfect crimes” end up with the same result—the participants enjoying ClubFed and making restitution to the government. Crime just rarely pays.

It was a busy week for bozo taxpayers. There’s one less bozo tax preparer to harm my profession, while two under-the-table business owners found out that cash income is just as taxable as checks.

First, we’ll head to Dartmouth, Massachusetts. Daniel McElroy owned Daily A. King, a temporary agency that had lots of advantages. Their rates were better than their competitors…but for all the wrong reasons. It seems that Mr. McElroy used two shell companies so that he didn’t have to pay the full amount of payroll taxes to the government. He also underreported his payroll to his workers compensation carrier. All told, that’s a lot of fraud, and Mr. McElroy was sentenced to nine years at ClubFed.

Let’s now head to Camden, New Jersey where Neyembo Mikanda had a thriving tax preparation business, and with good reason. He falsified the tax returns for his clients, and for his own businesses. He was found guilty last week on all 26 counts, and will be sentenced later this year.

Finally, we head to beautiful La Jolla where Marjan Poustan ran a cosmetic surgery business with her husband. She pleaded guilty to attempted tax evasion. Her not so brilliant idea was to, in 2005, go from post office to post office and purchase money orders for just under $3,000 from cash receipts and use those to pay the bills for her business. Since legitimate business expenses are deductions, her scheme really appears to be one of the most bozo we’ve encountered. More likely, the brief story left out one detail—Ms. Poustan pocketed some of the money orders and was going to not report that income. In any case, she’ll be sentenced in October.

Another domino fell in the government’s fight against Naftali Tzi Weiss, the Grand Rabbi of Spinka. He’s charged with tax fraud. Allegedly he concocted a scheme where individuals could donate funds to his organization as charitable donations but would receive up to 95% of them back.

And now one of those who donated has voluntarily come forward. Uri Mandelbaum has agreed to plead guilty to two tax evasion charges, and will make restitution of about $1.5 million. According to the Los Angeles Times,Mr. Mandelbaum donated $900,000 in 2005 and 2006 but got almost all of the money returned back to him.

The Times story notes that the government is looking for 100 other donators to Spinka. Meanwhile, for Rabbie Weiss things are not looking up. The government has at least one witness who can verify exactly how the scheme worked.