A Rather Large Case of Fraud

Posted on October 4, 2007 by Russ

The bigger they come, the harder they fall. So goes the cliche, and so also go the owners of Circle Industries in Alpharetta, Georgia.

Gerald Marchelletta, Sr., and Gerald Marchelletta, Jr., own Circle Industries. They specialize in drywall construction, and worked on the Olympic Village in Atlanta and the Atlantis Hotel & Casino in the Bahamas. They and their bookkeeper, Theresa Kottwitz, decided that rules were unimportant and they would deduct personal expenses on their business tax returns.

Now, we’re not talking about a few pens and pencils here, or a couple of bags of cement. The news story states that testimony in their trial showed that the owners each built million dollar homes with this money. Other personal expenses charged to their business included clothing, landscaping at a New York home, and visits to Atlanta’s Gold Club.

Now, I don’t know if the trips to the Adult Entertainment club led to the investigation that resulted in the charges in this case. It wouldn’t surprise me, though, if that were the case. Somehow, strip clubs and tax evasion go together. But I digress….

US Attorney David Nahmias called this, “This was a case of pure greed, in which the defendants tried to defraud the United States Treasury of over $1 million.” Given federal sentencing guidelines, the trio, when sentenced early next year, will have plenty of time to reflect while at ClubFed.

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Snipes Loses Role; Passport Has Been Seized

Posted on October 4, 2007 by Russ

Poor Wesley Snipes. As you may remember, Snipes will soon be on trial for allegedly filing a false claim for an income tax refund. As Joe Kristan of Roth Tax Updates reports, Mr. Snipes lost the lead in Spike Lee’s new World War II film. His passport has been seized pending the trial.

If found guilty, Snipes will likely lose a lot more roles as he’d probably be spending some time at ClubFed.

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War Tax Proposal DOA

Posted on October 4, 2007 by Russ

Three Congressmen proposed on Monday a war surtax—a measure that would increase income tax rates from between 2% and 15% (the top tax bracket would become 50% if enacted). The move is a publicity stunt that has no chance of passage.

Even Speaker Nancy Pelosi (D-CA) is against the measure. In an election year, raising taxes is a sure way to raise your opponents’ vote totals. Democrats David R. Obey of Wisconsin, John P. Murtha of Pennsylvania and Jim McGovern of Massachusetts are very much in the anti-war section of the Democratic party, and would like to bring all the troops home immediately.

Along with Charlie Rangel’s proposals to increase taxes, measure like this will do much to help the Republicans in 2008. Don’t expect anything like this to become law until a Democrat is in the White House.

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Evade, and then Skip Out

Posted on October 4, 2007 by Russ

Karen and Charles Petersen of Nowthen, Minnesota were indicted back in 2005 for tax evasion. The government alleged that they hid their income in a trust, and then used the trust to pay personal and business expenses. After they were convicted in March 2006, the couple decided to evade the sentence by becoming fugitives.

That worked for a while, but US Marshals caught the couple in December. Yesterday, Karen Petersen found out her sentence (her husband passed away before sentencing): 15 months, restitution of $181,500 in tax (plus penalties and interest), and a $7,500 fine.

When you become a fugitive, judges tend to be quite strict when sentencing. Ms. Petersen may have had a few months extra of freedom, but she paid with a tougher sentence.

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Bozo Fraud Gets Real Jail Time

Posted on October 4, 2007 by Russ

I must admit that I laughed when I read this story. From Canton, Georgia comes the tale of Larry Black. Mr. Black decided to set up a booth at a check-cashing store in suburban Atlanta. He said he was a CPA. He then took the personal information he obtained, and filed phony tax returns where he got most of the refunds, and his clients got small amounts.

What was his take? A measly $46,000. Oh, and 15 months at ClubFed, plus likely restitution to the US Treasury. It hardly seems worthwhile….

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Dallas City Hall Scandal Features Tax Evasion

Posted on October 1, 2007 by Russ

A 166-page indictment was unsealed today in Dallas charging 16 individuals with bribery, receiving kickbacks, and tax evasion. The individuals, including State Representative Terri Hodge (D-Dallas), former Mayor Pro-Tem Donald Hill, and others face long terms at ClubFed if convicted on all counts.

The investigation, according to this report in the Dallas Morning-News, began 27 months ago when Mr. Hill’s then City Hall office was raided by federal agents. US Attorney Richard Roper described the scheme as a “complex bribery and extortion scheme.”

Mr. Hill told the Morning-News that he, and the others, are innocent. “We’re not guilt of any of the things alleged here…We’re just going to prepare for the fight.”

The tax charges are listed in counts . Mr. Hill is accused of not timely filing tax returns from 2001-2004, and failing to file in 2005 & 2006. His evasion allegedly totals over $200,000. Darren Reagan is accused of evading over $100,000 in taxes. (The more serious charges are the bribery, extortion, and fraud charges.)

All-in-all, the Dallas political scene received a jolt today. It will be interesting to see what comes of this.

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Michigan: Jobs Leave, Taxes Rise

Posted on October 1, 2007 by Russ

When an economy is having problems and jobs are leaving your state, the normal thing to do is to help businesses. Michigan has other ideas.

The Detroit Free Press’ headline screams, “Chaos averted with deal to raise income tax, add tax to services.” What does that mean for residents of Michigan?

Directly, your state income tax rate has just increased from 3.9% to 4.35%. Additionally, services will now be subject to the 6% state sales tax.

Indirectly, Michigan has just become an even less competitive state for businesses. Why would anyone in their right mind locate a business in the state where the only sure thing is big government?

“Chaos” may have been averted, but the people of Michigan will be long-term losers because of this budget. Interestingly (but not surprisingly), all but one of the Democrats in Michigan’s state senate voted for the tax increase, and all but three Republicans voted against it.

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Unaccountable Business Services?

Posted on October 1, 2007 by Russ

Another alleged bozo tax preparation firm has apparently been put out of business. From Gilbert, Arizona (suburban Phoenix) come the story of Accountable Business Services.

If you’ve read this blog before, and have noted the tale of Western Tax Service, this may look familiar. Accountable Business Services prepared tax returns and appeared to have a good business; the firm prepared somewhere between 5,000 and 7,000 returns annually according to news reports. The firm allegedly got most of its business through referrals; clients noted that they allegedly received large refunds and elimination of tax debt.

Sound too good to be true? The Arizona Department of Revenue and the Arizona Attorney General think it was.

They’ve charged eight individuals with fraud and forgery and allege that the firm bilked Arizona out of $10 million in taxes. The owners, Alfred and Cheryl Decker, face up to 46 1/2 years in prison if convicted on all the counts that they each face.

Meanwhile, if you happen to have been a customer of Accountable Business Services, you can expect to receive a friendly letter from the Arizona Department of Revenue. Yes, if your tax returns were wrong, you will owe the tax and interest. And as Arizona shares information with the IRS, expect a similar ‘Dear Valued Taxpayer’ letter from the IRS, too.

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Traylor Gets Probation

Posted on October 1, 2007 by Russ

Earlier this year I noted the sad tale of Robert “Tractor” Traylor, the former NBA player with Milwaukee, Cleveland, Charlotte, and New Orleans. On Friday, Traylor was sentenced to three years probation for aiding and assisting in the preparation of a false tax return.

Traylor could have received up to 14 months at ClubFed. Traylor does have to submit any untiled tax returns to the IRS within 90 days. Traylor now plays professionally in Puerto Rico.

News Story Here

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Another Bozo Tax Preparer Out of a Job

Posted on September 27, 2007 by Russ

Having had to deal with a few refugees from Western Tax Service, I’ve seen the damage that a bozo tax preparer can do. But this story is, well, ridiculous.

>From Oronogo, Missouri, comes the story of Carrie Shafer. Ms. Shafer owned her own tax service, TC’s Taxes, from her home in Oronogo. She prepared 1,475 tax returns between 2002 and 2004. There was just one major problem here: Almost all of the returns were false or fraudulent.

Like Western Tax Service, Ms. Shafer never saw a deduction she wouldn’t take for her customers, even if they didn’t have that deduction. Medical, dental, charitable, and business expense deductions were just some of her favorites. And after she was told she was under investigation she continued to prepare returns that had false deductions, and provided false information at audits! That’s either chutzpah or stupidity…or both.

Ms. Shafer pleaded guilty to 40 counts of tax fraud earlier this year. She received three years at Club Fed, and she has already been barred from preparing tax returns in the future. Her customers have already likely received “Dear Valued Taxpayer” letters from the IRS; they’ll have to pay the true amounts owed with interest. Remember, if it sounds too good to be true, it probably is.

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