They Both Begin With “E”

Here’s a good way to make some money (for a while). You create a phony vendor, and send invoices to your company for that vendor for work that was, of course, never preformed. The money from the phony vendor isn’t reported on your tax return–it’s always good when your after-tax income is the same as your before-tax income.

Now, there are some potential drawbacks to this scheme. You would be embezzling from your company. Depending on how you do that, it will be some sort of felony. Not reporting the illegal income on your tax return is tax evasion, another felony. And if you do this scheme over multiple years, that’s multiple felonies.

If your business were audited, it’s possible that the IRS might discover this (or a state tax agency). That would be problematic.

Now, you might think that no one would do this–especially that no one would do this and steal money from his own company. You would be wrong.

Michael Stover of Plymouth, Michigan did this exact scheme. Mr. Stover was president of Omni Facility Service and did this scheme with his invented subcontractor from 2004 through 2010. And we’re talking big dollars here: Per the Department of Justice press release, “Stover embezzled approximately $2,178,423 from Omni.” He also didn’t report this income on his tax returns.

Mr. Stover is looking at spending some time at ClubFed, a possible fine, and restitution. He’ll be sentenced in January.

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