Archive for the ‘Tax Evasion’ Category

A Break in my Hiatus: Poker Chips and Tax Evasion

Sunday, March 22nd, 2015

When my friend Steve Evans posted a link to a story about Chipco’s president being arrested on tax evasion, that got my attention. Chipco was a Maine-based company that made high-quality poker chips. Many of the local casino here in Las Vegas have used Chipco chips. I have a particular fondness for them; one of my poker chip sets features these chips that I got to design back in 2002.

John Kendall was the president of Chipco (formally, Chipco International). They closed a couple of years ago. Those in the poker community thought that there closing was mostly due to the end of the poker boom. Another factor was Chipco’s method of paying employees: off the books.

Perhaps this could be my Bozo Tax Tip #11: Pay your employees off the books and don’t send withholding to the government. That’s exactly what Mr. Kendall did, and the money went exactly where you’d think it would go: his mortgage, country club dues, and legal fees for his personal bankruptcy. Maine Revenue Services investigated, and they weren’t happy. Add in underreporting of his own income on his 2009 tax return and you have the makings of six guilty verdicts. That’s what happened this past week in Portland, Maine. Mr. Kendall will be sentenced later this year.

A helpful hint to anyone wanting to emulate Mr. Kendall: Just pay employees in the normal way, on the books, and send the withholding where it belongs.

I now return to my regularly scheduled hiatus.

Harassing IRS Agents Isn’t a Bright Idea

Sunday, February 8th, 2015

Speaking of ways to get in trouble with the IRS, one is to harass an IRS agent. They don’t like it (and it’s a crime). Scott Bodley of Silver City, New Mexico apparently didn’t care.

Back in 2003 Mr. Bodley threatened to file liens on an IRS agent who was auditing his taxes. (Had he done so, those liens would have been quashed.) He quit his job in 2004 to stop an IRS levy. Then he filed false paperwork with employers so he wouldn’t have taxes withheld, claimed he was a sovereign citizen, and basically tried to avoid paying his taxes. His actions did work for a few years, but his luck ran out on Friday. That’s when he was convicted of 26 charges including harassing IRS agents, filing false tax returns, and tax evasion.

Mr. Bodley will be sentenced in May, and he’ll likely have some time at ClubFed to think about the reality that it’s always easier to just pay your taxes in the first place…but that somehow doesn’t enter the Bozo mind.

Former NFL Player Alleged to Have Fumbled His Sales Tax Returns

Sunday, February 8th, 2015

I’ve said repeatedly that if you want to get in trouble with the IRS, one of the easiest ways to do so is to collect payroll taxes but not remit them. Less frequently I’ve commented about state tax agencies and mentioned that they don’t like you collecting sales taxes and not remitting them. A former NFL player is accused of that and committing wage theft against his employees.

Sam Adams played in the NFL for 14 years with Seattle, Baltimore, Oakland, Buffalo, Cincinnati, and Denver. A defensive lineman, he has 44 sacks credited to him in his career and made the Pro Bowl three times. He and his CFO, Dana Sargent, now face 21 counts of theft and tax evasion. From the Affidavit of Probable Cause:

Adams and Sargent have not only made multiple attempts to evade tax liabilities resulting in a tax bill, as of January 21, 2015, of over $446,571.38, but have failed to pay employees their deserved wages, failed to pay the medical premiums promised to employees as part of their benefit packages, failed to remit the premiums withheld from employees’ paychecks for medical insurance and failed to pay into unemployment insurance for employees, resulting in liens by the Employee Security Department on each company. During the latter part of 2013 through January 2014, Adams’s and Sargent’s illegal actions have caused employees, through no fault of their own, to have countless insufficient fund checks that they were unable to cash which resulted in employees losing their housing, being unable to pay household bills, being unable to buy Christmas gifts and accruing thousands of dollars in unpaid medical bills for themselves and their families. Numerous wage complaints have been filed against Lincoln Plaza Athletic Club, LLC, West Seattle Athletic Club, LLC, Adams and Sargent. The Department of Labor has been involved in efforts to assist employees in getting their unpaid medical, dental and vision bills paid due to Adams and Sargent either failing to pay the premiums as promised in the employees’ compensation packages and/or deducting premiums from employees’ pay checks and failing to remit them to the insurance company.

There’s plenty more in the affidavit, including West Seattle Athletic Club closing and the next day a “new” business opening (West Seattle Club) opening. That club paid its first three sales tax returns and then decided not to. That’s a good way to get on a tax agency’s naughty list. Mr. Adams operates six athletic clubs in Oregon and Washington. After reading the indictment, I think it’s possible he won’t be operating any soon.

This Never Works…

Sunday, February 1st, 2015

If you want to go to prison for tax evasion, there’s an easy method: Withhold payroll taxes and don’t remit them to the IRS or your state tax agency. The government investigates all such actions (or should I say inactions). One New York businessman will likely have some time to think that over.

Patrick White is the owner of R & L Construction in Yonkers, New York. He liked his home and he liked to gamble. There’s nothing wrong with that. He took payroll taxes withheld from his business and used that money for his homes and for gambling. There’s a lot wrong with that, especially when it totals $3,758,000. Mr. White pleaded guilty to one count of failing to pay over payroll taxes to the government. He’ll be sentenced in May.

This is a good time to point out that if you are a business owner, you should check to make sure your payroll taxes are being sent to the IRS. You can do so by using EFTPS. You’re personally liable for those taxes, so it’s worth verifying the money makes its way where it belongs. If you use employee leasing (a PEO), you can’t verify this by EFTPS so you will need to find a different method of doing so.

Golf or Sentencing?

Sunday, February 1st, 2015

It’s a gorgeous day here in Las Vegas today, a perfect day for a round at one of the many golf courses in town. It apparently was just as nice Wednesday in Colorado when three individuals chose to a play 18 holes rather than get sentenced for 18 counts of tax fraud. They got in front of the judge Thursday. As Joe Kristan reported, they’ll likely have plenty of time to ponder their life when their sentenced in a couple of weeks.

One Good Crime Deserved Another

Tuesday, January 27th, 2015

Let’s say you’re involved in a 20-year scheme that has successfully evaded millions of dollars in payroll and income taxes for your largest client. However, you’ve only had minor profits from the scheme. So why not embezzle millions of dollars from that client? Given that the owners of the client are knee deep (or more) in the tax evasion scheme, they’re not likely to say anything.

Yes, this happened.

William Frio was the accountant who prepared tax returns and provided accounting services to Nifty Fifty’s, the nostalgia themed restaurant change in Philadelphia. The owners of Nifty Fifty’s along with Frio began in 1986 to underreport their income, pay employees in cash, skim cash from the business, and basically ignore the law. The scheme worked for nearly 25 years and led to the chain evading over $2.8 million in taxes.

Mr. Frio not only was actively involved in the scheme, he decided to embezzle from the chain to the tune of $4 million. He didn’t report that income on his taxes; yes, illegal income is just as taxable as legal income. To assist with his embezzlement, he structured transactions–another felony. He also lied on loan applications; that’s another felony. He pleaded guilty to all this on Monday; he’ll be sentenced later this year.

When I first reported on Mr. Frio I used one of my favorite lines from J.R.R. Tolkien’s Lord of the Rings: “Oft evil will shall evil mar.” Mr. Frio will likely have plenty of time at ClubFed to read Tolkien: He faces up to 57 years plus restitution to the IRS plus a fine of up to $2.75 million along with criminal forfeiture.

Semenza Gets 18 Months

Friday, January 16th, 2015

Last year I wrote about Lawrence Semenza. Mr. Semenza with the US Attorney for Nevada back in the 1970s. He was the youngest US Attorney at that time and has had a long and successful career since as a defense attorney. Unfortunately, he forgot about the law requiring a tax return to be filed; he didn’t file his corporate or individual returns from 2006 to 2010. He pleaded guilty last year, and was sentenced this week to 18 months at ClubFed. He has already made restitution.

If You Do Government Work, It Pays to Treat the Government Well

Thursday, January 15th, 2015

Your salary is taxable, of course. What about your bonus? Of course, that’s taxable. One business owner in Texas thought that wasn’t the case.

Robert Earl Carter is the owner and Chief Executive Officer of Enterprise Advisory Services Inc. From their website, it’s clear they specialize in government work, including contracts at NASA.

When you work with the government, you have to open your books to them. Apparently Mr. Carter forgot about that portion of dealing with the government. It also appears that the NASA Inspector General saw something on the books of EASI.

Back in 2009 Mr. Carter received a bonus check at year-end for $195,000. There’s nothing wrong with that, but there’s a lot wrong with calling it a “reimbursement.” It’s likely that caught the Inspector General’s eye, and that caused a referral to the IRS Criminal Investigation (CI) unit. And when CI discover another $309,821 of bonuses were paid to a company controlled by a family member who returned $286,821 to him one month later an indictment followed. Mr. Carter pleaded guilty two months later.

With a plea deal, you can hope for a sentence less than the maximum. That wasn’t the case yesterday.

It seems that Mr. Carter donated $500,000 of art to Texas Southern University. Mr. Carter claimed that deduction on his 2005 tax return, with carryover deductions extending to 2010. There was one minor problem: Texas Southern hadn’t received any art. Yes, to make a charitable donation you do have to actually donate something. Oops.

Judge Keith Ellison wasn’t amused by this faux pas. He found that Mr. Carter had not accepted responsibility for his criminal conduct and that his sworn testimony regarding the art wasn’t credible; he was sentenced to the maximum three years (36 months). He also was ordered to pay a $75,000 fine.

As always, it’s easier to just pay your taxes in the first place…but that usually doesn’t register with the Bozo tax contingent.

Tuition for Children Is Not a Business Expense

Friday, January 9th, 2015

But we already knew that, right? Nor are home improvements are your home itself. A Florida doctor learned that the hard way.

Dr. Krishna Tripuraneni pleaded guilty this week to evading tax on $18,128,066 million of income. Dr. Tripuraneni provided his tax professional with profit and loss statements used to prepare his returns for his businesses (he has a professional corporation and a partnership) and his personal return. The P&L’s had inflated expenses and, thus, understated his income from 2004-2008.

Not stated in the DOJ press release is that Dr. Tripuraneni has made restitution on about $10.2 million of the $11.8 million in tax and penalties he owes.

A helpful hint to potential fraudsters out there: Conspicuous consumption is not a good idea. Even better, skip the tax fraud. As I’ve said many times before (and will say many times in the future), it’s always a lot easier to just pay your taxes in the first place.

Varagiannis Gets 15 Months for Tax Evasion

Tuesday, January 6th, 2015

Manny Varagiannis received 15 months at ClubFed for tax evasion. Mr. Varagiannis was arrested back in 2012 on a count of structuring, but pleaded guilty in April to not paying $230,651 in taxes. He must also make restitution.

The charges relate to Midnight Entertainers, an escort service here in Las Vegas. Mr. Varagiannis supposedly sold the business, but back from 2009 – 2011 he didn’t report all of his income from it…and got caught.

According to the Las Vegas Review Journal,
the US Attorney and the Las Vegas police believe that Mr. Varagiannis is offering kickbacks to cab drivers and others. It was also alleged that Mr. Varagiannis remains the real owner of Midnight, Inc. (the legal name of Midnight Entertainers) and the current owners are just fronting him. It’s definitely possible that Mr. Varagiannis may face more charges over these allegations.

In any case, Mr. Varagiannis will be reporting to ClubFed in April.