Taxable Talk

That’s probably one of the thoughts going through Timothy Heffner’s mind right now. Mr. Heffner, of Pittsburgh, pleaded guilty to fraud, conspiracy and tax evasion charges on Tuesday.

Mr. Heffner, according to the story in the Pittsburgh Post-Gazette, “entertained on a private yacht [and] arrived at parties in a personal helicopter.” The Pittsburgh Tribune-Review noted, “Heffner long has been a mainstay at gala events for Pittsburgh’s social elite.”

So what did Mr. Heffner do? He started his own chemical supply company, BioTechnology Corporation of America. Their website looks formidable, with divisions in synthetic organic chemistry, custom synthesis, etc. (five total divisions). However, the company was run out of Mr. Heffner’s basement (according to the Tribune-Review). Still, being an entrepreneur is admirable.

But Mr. Heffner listed himself as a medical doctor (which he isn’t). Still, lots of Americans embellish their resumes. He also claimed (at one point) he had a Ph.D. (which he doesn’t). He tried to get his local township to approve a helipad because he was part of the University of Pittsburgh’s transplant team (which obviously he wasn’t). And the public record shows that Mr. Heffner had his boating license suspended for one year in 2006 because of his refusal to submit to chemical testing.

How did he afford his nice house in the upscale community of Pine, Pennsylvania, his boat, his helicopter, and his partying lifestyle? His business had something to do with that. He bought rare chemicals from Sigma-Aldrich on the cheap. Very cheap. You see, he had an “in” at Sigma-Aldrich—Robert Wandler, head of Sigma-Aldrich’s rare chemical laboratory. Mr. Wandler “sold” the rare chemicals to Mr. Heffner at artificially low prices (as low as nothing) and Mr. Heffner sold them back to Sigma-Aldrich at high prices. The total fraud to Sigma-Aldrich is, according to prosecutors, more than $2.1 million. Mr. Wandler, by the way, appears to be working on his own plea deal.

But one fraud wasn’t enough for Mr. Heffner. He decided that tax evasion was a good sideline business. His $2,000 veterinary bill ended up being $2,000 in veterinary research, and a deductible business expense. (Hint—don’t do that at home.) Other “business” expenses included an associate’s season tickets for the Steelers, his girlfriend’s cellphone bill, and many similar expenses. The total of his tax evasion is a cool $1.2 million.

The Post-Gazette quoted a former business partner of his, Tommy Kehoe, as saying, “All I can say is the guy’s a fraud. It’s that simple. He lied to me about everything for 10 years…By God, he should get 10 years in prison.” Based on federal sentencing guidelines, he will likely receive 3 to 4 years at ClubFed for just the tax charges, so Mr. Kehoe may get his wish.

Finally, I’ll answer Mr. Heffner’s burning question: the party scene just isn’t that good at ClubFed.

Now that it’s summer, you may be considering a trip to the pool. Swimming is a great summer activity, but you do have to be careful when you dive into a pool. One diving coach jumped into some hot water last week.

Michael Finneran was the head woman’s diving coach at North Carolina State University in Raleigh, North Carolina. But Mr. Finneran didn’t consider himself an employee of N.C. State. On his North Carolina tax returns, he allegedly included phony W-2 forms showing no state income. That’s a problem, especially when you’re listed in the Athletic Department’s web page.

As reported here, Mr. Finneran was convicted of evading state income tax and was sentenced to 25 to 30 months in prison. According to the news story, he plans on appealing the conviction.

I’m not a big drinker. The former President and co-owner of Domecq Importers will have 10 years at ClubFed of being a teetotaler after pleading guilty to fraud and tax fraud charges. Domecq Importers was a large liquor importer based in Connecticut.

Michael Domecq had a not-so-good idea. Have some outside vendors (primarily advertising agencies) send in invoices for work that was never done. Then have his company pay the vendors. That’s fraud against his own company.

But Mr. Domecq went a step further. He had the vendors then issue checks to shell corporations controlled by him and his accomplices: Chief Financial Officer Alfredo Valdes, Vice President of Marketing Gabriel Sagaz, and Vice President of Sales Thomas Kaminsky. Those three individuals had already pleaded guilty to various charges.

Did I mention those shell corporations used offshore bank accounts? And that the shell corporations didn’t pay any income tax? That’s tax fraud.

This isn’t Mr. Domecq’s first trouble with the law. He was convicted in the United Kingdom in 2006 of possessing a false Spanish passport and of illegally getting a U.K. drivers license.

Mr. Domecq, as part of his plea agreement, will submit corrected tax returns for 1989 through 2006, and will pay all of the taxes, penalties, and interest. Given that the unreported income is over $7.6 million, Mr. Domecq will be writing out some big checks to the United States Treasury.

It would have been much simpler to just pay the tax in the first place…but somehow that thought never enters the mind of the tax evader.