Really Big Tax Evasion Leads to Really Long Sentence at ClubFed

There’s tax evasion, big tax evasion, and then we have this story of really, really big tax evasion. And we also must highlight once again that tax protester arguments have as much chance of flying as the dodo bird.

I’ve actually written about this case before. Back in 2010 Bill Melot, a farmer in New Mexico, was convicted of tax evasion, agriculture program fraud, and several related offenses. His tax liability to the IRS was estimated at $18 million. When he was sentenced in 2011 he received five years at ClubFed followed by three years of supervised release. Mr. Melot appealed his conviction; the government appealed the sentence. The DOJ thought he should receive a far longer stay at ClubFed.

Last October the 10th Circuit Court of Appeals ruled on the appeals. Suffice to say it didn’t go well for Mr. Melot. Here’s a pertinent excerpt:

The Government’s evidence demonstrated overwhelmingly that Melot engaged in behavior consistent with an individual who had actual knowledge of his obligation to file returns and pay tax. Melot paid employees in cash, advising them they could avoid reporting the cash payments as income. He attempted to pay cash for inventory for his gas stations, in an effort to avoid creating a paper trail in his bank account. He used Social Security numbers he knew were false for numerous purposes. He transferred substantial assets into a foreign bank account but failed to file the necessary disclosure forms with the IRS. He frequently made domestic bank deposits in amounts slightly below $10,000, the amount at which he knew a bank must file a currency transaction report with the Internal Revenue Service. He transferred assets to corporations and trusts and used nominees to open bank accounts, but admitted he maintained control over the assets associated with these accounts and entities. He sent letters to the Internal Revenue Service denying he was a United States citizen or claiming to be either a non-resident alien or a citizen of the “republic of New Mexico.” Nonetheless, when he applied for a passport from the State Department and agricultural farm subsidies from the Department of Agriculture, Melot declared he was a United States citizen.

Both Mr. Melot and the DOJ didn’t like the sentence. Mr. Melot thought it was too long; the DOJ though it was too short. The sentencing judge had given Mr. Melot a two-level decrease (in the federal sentencing guidelines) for acceptance of responsibility. There was a problem with this according to the Court of Appeals:

…nor did [Melot] engage in any other conduct demonstrating an acceptance of responsibility for his offenses…To the contrary, the record clearly shows Melot continued to deny that he willfully engaged in criminal conduct and unambiguously shows Melot did not voluntarily pay restitution.

The Court of Appeals ordered a new sentencing hearing, with no downward adjustment in federal sentencing guidelines. It was not Mr. Melot’s day at the Court of Appeals.

The sentencing hearing occurred last week, and Mr. Melot’s five years at ClubFed lengthened to 14 years at ClubFed. The restitution hasn’t changed: $18,469,998 to the IRS and $226,526 to the Department of Agriculture.

Mr. Melot apparently believed that tax protester arguments (see the Tax Protester FAQ for a complete dismissal of each and every one of them) work. They don’t. Mr. Melot will have plenty of time to think that through.

One Response to “Really Big Tax Evasion Leads to Really Long Sentence at ClubFed”

  1. […] Russ Fox has more at Really Big Tax Evasion Leads to Really Long Sentence at ClubFed. […]

Leave a Reply