With Thanksgiving coming this week many look forward to a short work-week. We do need to remember all the things that we should be thankful for—our families, our friends, our health, and our country. Here are some stories about individuals who have a little less to be thankful for.
Remember Aegis Trusts? They were the Palos Hills, Illinois purveyor of sham foreign trusts to shield income from the IRS. The trusts weren’t worth the paper they were printed on, and eventually the IRS caught on. Six individuals, including Michael Dowd of Glenview, Illinois, were convicted of various tax and fraud charges. Mr. Dowd was sentenced this past week to ten years at ClubFed.
Stanley Tollman used to be an executive at Tollman-Hundley Hotels. That entity managed Days Inns in the United States. Mr. Tollman allegedly had an interesting way to save for his retirement: He funneled income into foreign entities, but didn’t pay tax on that. He managed to avoid trial—he was indicted in 2002 but had just left the United States. On Friday he pleaded guilty on a videoconference link (he was in London, England) to a court in Manhattan. He’ll serve a single day of probation. However, Mr. Tollman will be paying $25 million immediately and will make annual payments of $16,018,728 plus interest for each of the next five years for the tax, penalties, and interest he owes. The government has dropped the indictment of Mrs. Tollman who had also been accused of tax fraud.
Seven individuals were sentenced in Valdosta, Georgia for a fuel tax credit fraud scheme. These individuals were involved in claiming that they used diesel fuel off of the highways (in a logging company)…but they didn’t. The logging businesses apparently never existed. The seven pleaded guilty, and with $3.2 million involved in the fraud some were lucky to escape ClubFed. Sentences ranged from home confinement to three years at ClubFed. The two alleged ringleaders, Clinton Basil Hughes and Pamela Hughes, have also pleaded guilty to $5.2 million of fraud. They have yet to be sentenced.
A scheme that’s been tried many times works just fine as long as the government doesn’t find out. Take a little bit of the revenue (preferably cash) and keep it off the company books and just somehow get it into your personal account. Unfortunately, once the government finds out that you’ve committed tax evasion problems do occur. Peter Lebsock, the former manager of Dos Gringos Trailer Park—a suburban Phoenix chan of Mexican restaurant—pleaded guilty to one count of tax evasion. He didn’t report $600,000 of income on his corporate tax returns from 2002 through 2005, and he left off $47,000 in tax on his personal returns for three years. He’ll be sentenced next February and could be spending some time at ClubFed.
Finally, American Boiler, Inc. of Stratford, Connecticut does what you think it would do. They service boilers. Industrial Property Management does what you’d expect, too. James McCarthy is a principal in both. Stavros Ganias is the owner of Taxes International in Wallingford, Connecticut. He prepared the books for Industrial Property Management. Allegedly they decided to divert $1,612,841.20 in money that American Boiler had received in work done for Industrial Property Management and used it for themselves and their families. And that income allegedly didn’t make it on their tax returns (it was supposedly reported as “loans paid”). That’s tax fraud, if proved, and that’s what the government is accusing Mr. McCarthy and Mr. Ganias of (along with two counts each of tax evasion). Given the amount of fraud allegedly involved, Mr. McCarthy and Mr. Ganias are looking at lengthy terms at ClubFed if they are convicted.
Do remember that if you think you’ve discovered a brand new way of evading taxes it’s likely that it’s anything but new, and the government has seen it before. It’s usually a whole lot easier to just pay your taxes now then to get in deep trouble later.
[…] written about Aegis Corporation, a former promoter of these trusts, on several occasions (here’s one example). Many of the owners and other lead individuals at Aegis have found their way to […]