Taxable Talk

Last year I wrote about Naftali Tzi Weisz. Mr. Weisz is the Grand Rabbi of Spinka. He’ll also be standing trial in September charged with tax fraud. He’s accused of soliciting charitable donations but promising to refund most of the money—a scheme that’s definitely not kosher.

On Friday two alleged co-conspirators pleaded guilty. Joseph Roth, a Tel Aviv-based banker with United Mizrahi Bank pleaded guilty to conspiracy. And Rabbi Moshe Zigelman will plead guilty on Tuesday. Mr. Roth admitted that he established secret bank accounts overseas and helped repatriate the money to the United States. Rabbi Zigelman’s attorney told the Los Angeles Times “his client was ‘atoning for his own wrongdoing’ and would not testify against the other defendants.

Given the alleged size of the tax fraud—millions of dollars—Grand Rabbi Weisz is looking at a very lengthy term at ClubFed if convicted this Fall.

Suckers are born every day, and so are the people out to fleece them. I’ve reported in the past on Aegis Corporation, a now defunct Chicago-based vendor of offshore trusts. The former owner of Aegis is spending 30 months at ClubFed.

But that’s not to say that Aegis wasn’t successful marketing their trusts. They were, though many of the purchasers wish that weren’t the case. Four men from South Dakota purchased an Aegis trust, and then used the trust to shelter income away from the prying eyes of the IRS…for a while.

Eventually, though, the IRS found the trust and saw that it was as phony as a $3 bill. One of the men is a pastor, Jon Bowers of Junction City, South Dakota; the other three are his brothers, Kurt, James, and Kent. All four have been sentenced to terms at ClubFed ranging from ten to 36 months. Jon and James have repaid the IRS the $1.2 million in tax, penalties, and interest that they owe; Kent has repaid $297,000 but still owes $450,000; and Kurt has repaid $317,000 but owes $1.6 million additional in tax, penalties, and interest. Kent, James, and Jon also were fined between $10,000 and $50,000.

As a reminder, if it sounds too good to be true it probably is. If someone tells you that there’s a legal way to hide money from the IRS in an offshore trust, do yourself a favor and run, don’t walk, anywhere else.

Last year I reported on Circle Industries, the Alpharetta, Georgia based international construction company. The father and son owners conspired with their bookkeeper to deduct personal expenses on their business return, including things like visits to Atlanta’s Gold Club, an adult entertainment facility.

Well, this past week the owners found out their fate. Gerald Marchelletta Sr. received 27 months at ClubFed, his son Gerald Marchelletta Jr. received 36 months, and their bookkeeper, Theresa Kottwitz, got 24 months. Additionally, the firm, which has already made “substantial restitution” according to this news report must fully pay back the IRS. Finally, each of the Marchallettas must pay a $50,000 fine.

As a published author I know that finding the right title for a book can be a difficult task. My writing partner and I struggled with the title for our first book while for our second book we chose the title and then wrote the book.

Last November I detailed the indictment handed down to Bernard Bagdis and ten other individuals. Mr. Bagdis had allegedly boasted to IRS criminal investigators that he was going to write a new book called Federal Tax Fraud: The Users Guide. Mr. Bagdis may have a lot of time to work on his book—he faces 35 felony charges.

On Wednesday another individual was arrested allegedly because of this scheme. Wayne Bozeman, a West Chester, Pennsylvania attorney was charged with conspiracy to defraud the IRS and other related charges. The government alleges that Mr. Bozeman took money from a company he ran, deposited it into the account of another company he controlled, and then used the funds for personal expenses. The government alleges that Mr. Bozeman evaded $157,000 in tax on $830,000 of income.

Meanwhile, Mr. Bagdis and his alleged co-conspirators were also indicted on new charges yesterday. Mr. Bagdis is now alleged to have also prepared a false tax return for Mr. Bozeman.

Seven of the original ten co-conspirators have pleaded guilty and are cooperating with the government according to this story in the Philadelphia Daily News. Peter Scuderi, Mr. Bagdis’ attorney, told the Daily News “My client’s position is he’s done nothing wrong. There’s a defense to everything.” Only time will tell what kind of an ending is written to Mr. Bagdis’ book.