Taxable Talk

Two business executives. Two men with tax troubles. Is ClubFed in their futures?

Joseph Smith was the former treasurer and CFO of the Catholic diocese of Cleveland, Ohio. He supplemented his earnings by engaging in a kickback scheme. He funneled work to a co-conspirator and in return received kickbacks of over $784,000. And those kickbacks were disguised as compensation for consulting and legal services. He was found guilty of six tax charges and will be sentenced this October.

Lyle Larson was a not-so-successful computer entrepreneur in Edmonds, Washington. His tax return showed that he only made $38,000 of business income. That is, when he bothered to file a tax return (he “forgot” in 2004, 2005, and 2007). I did leave some things out. Like his luxury yacht. His cars. His $2.8 million in earnings. Mr. Larson left those out from his tax returns between 2000 and 2003. He’ll have 18 months at ClubFed to think over those omissions, and he must make restitution of over $879,000 to the IRS.

If you get lucky in business or otherwise do yourself a favor. Set aside some of your earnings to pay your taxes. You can pay now, or pay later, but it’s a whole lot easier to pay now.

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.