One year, perhaps, there won’t be so many nominees for my annual Tax Offender of the Year award…but this isn’t the year. We even have a repeat nominee (and I strongly considered giving that nominee the award). As a reminder, to win this award you have to do more than just cheat on your taxes; it needs to be big-time cheating or a series of Bozo actions.
First, we have some dishonorable mentions:
- The Train to Nowhere, California’s high-speed rail project, that voters were told in 2008 would cost just $9.95 billion and would create 450,000 jobs, won our 2018 award. Well, the cost keeps growing (at least $130 billion, maybe more) and there’s no opening in sight. Yes, it’s a California project but it’s receiving federal funds (for now; I suspect that might change on January 21, 2025).
- Joseph Schwartz of Suffern, New York, owned nursing homes and withheld payroll taxes but didn’t remit them. If you want to commit a crime that has a long-term 0% chance of success and will always be investigated, employment tax fraud is the place to go! Employees will file their W-2s, the IRS won’t see the money, and it just never works. And this case involved $38 million in tax fraud.
- Michael Meyer of Davie, Florida, an attorney from Davie, Florida, used his legal knowledge to create “The Ultimate Tax Plan.” And what a plan it was! High-income individuals could donate expensive property to charities, keep the assets for their own use through tax-free loans, and then buyback the assets at a discount! Hmm, to donate something to charity you must actually give it to that charity (you can’t keep it or buy it back at a discount). Did I mention that the charities were bogus? If someone ever approaches you with a scheme like this to save money on your taxes, run (don’t walk) in the other direction! Mr. Meyer is enjoying 8 years at ClubFed and will have to make restitution.
- Our final dishonorable mention is local (to me). Raul Gil owned three Casa Don Juan restaurants here in Las Vegas. He practiced “cash and carry” for his books: he carried away the cash and gave instructions to his bookkeeper to leave it off his financial statements (which were subsequently used for preparing his tax returns). He also instructed his accountant to provide a Profit & Loss statement that matched the falsified records, and he lied to both the IRS Revenue Agent conducting an audit and IRS Criminal Investigation. This being Las Vegas, we’re talking millions in cash ($5.1 million) with a tax loss of $1.6 million. Mr. Gil is spending 37 months at ClubFed and must make restitution.
From San Antonio we learn of our third place finisher, Janet Yamanaka Mello. Ms. Mello was a financial program manager for the US Army at Fort Sam Houston. She formed a business called “Child Health and Youth Lifelong Development” (CHYLD). The problem was that CHYLD did only one thing: fraudulently obtain grant funds from the 4-H Military Partnership Grant Program. Ms. Mello obtained over $108 million over six years. As is typical, the money didn’t go toward children’s development; rather, it went for clothing, cars, real estate, and other personal items. Of course, the $108 million didn’t make it to her tax returns. She is spending 15 years at ClubFed.
Jack Fisher, a CPA, and James Sinnott, an attorney, finished in second place for their roles in fraudulent syndicated conservation easements. “Using inflated appraisals, backdated documents and other sham actions, these conspirators generated more than $1.3 billion in fraudulent syndicated conservation easement tax deductions, causing hundreds of millions of dollars in losses to the U.S. Treasury,” said Stuart Goldberg, the Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division. And what a program it was! For the cost of the program, you got 4.5 times the tax write-off! It sounds too good to be true (and it was)! They each were sentenced to over 20 years at ClubFed and must make restitution of over $400 million each.
Back in 2022, I highlighted a scheme that (at that time) had no tax impacts:
Before I get to the winner, I want to highlight a case that unfortunately has no tax charges. Had it had any such charges, this would be tops on my list for 2022. Instead, this is a pure fraud case. Karl S Greenwood pled guilty to wire fraud and money laundering related to “OneCoin” earlier this month. Mr. Greenwood allegedly earned €2.735 billion in fraudulent profits from this scheme. He, and alleged co-conspirator Ruja Ignatova (aka “the Cryptoqueen”) did not have a high opinion of their victims:
“In an August 9, 2014, email between Greenwood and Ignatova, Ignatova described her thoughts on the ‘exit strategy’ for OneCoin. The first option that Ignatova listed was, ‘Take the money and run and blame someone else for this . . . .’ And in a September 11, 2016, exchange with Ignatova’s brother, Konstantin Ignatov, Greenwood referred to OneCoin investors stating, ‘These ppl are idiots,’ to which Ignatov responded, ‘as you told me, the network would not work with intelligent people ;)'”
If you haven’t figured it out, OneCoin never had any value and was deliberately designed as a worthless cryptocurrency. Well, that same scheme has now gotten tax-related charges for a participant. Mark Scott was an attorney for a well-known international law firm. Mr. Scott had boasted of earning “50 by 50”–that’s $50 million by the time he turned 50. And he did!
Back in 2015, he was introduced to Ms. Ignatova. It would be one thing to get Ms. Ignatova and OneCoin as clients and provide legitimate legal advice. It’s quite another to create fake private equity investment funds in the British Virgin Islands, disguise transfers of $400 million into those funds, and then launder the funds both in the Cayman Islands and Ireland. Mr. Scott did earn more than $50 million for his money laundering; he spent some of the funds on a Ferrari, several Porsches, and seaside homes on Cape Cod.
Unfortunately for Mr. Scott, the IRS found out about this. He was convicted in 2019, and just sentenced to 10 years at ClubFed, a “money judgement” of over $392 million, and forfeiture of other personal items. Yet another worthy winner of our “Tax Offender of the Year” award!
With that, I wish you and yours a Happy, Healthy, and Prosperous New Year! We’ll see you in 2025!