Archive for the ‘Tax Evasion’ Category

“Just Pay the Five Dollars….”

Sunday, March 2nd, 2014

That’s one of my favorite lines from one of my favorite movies, North by Northwest. In that classic movie, Cary Grant’s character gets drunk and, well, I’ll be giving away some of the movie if I went on. In any case, his mother (in the movie) says the line, in perfect comedic tempo, “Just pay the five dollars.” Since the Oscars are being televised as I write this a movie reference seems apropos.

Similarly, most tax evaders (and tax deniers) would find their lives far, far easier if they just paid the tax in the first place. One Massachusetts dentist is accused of a long-running scheme that allegedly used many of the normal tricks to avoid paying taxes.

George Fenzell is the accused dentist. He allegedly began, in 1999, to not pay taxes; he allegedly used nominees to conceal receipts. He supposedly comingled funds with others and made some nominees own his business (which, according to the indictment, Mr. Fenzell does own).

Back in 2007 the Massachusetts Department of Revenue was investigating; the indictment alleges that this caused Mr. Fenzell to file his 2000 through 2005 tax returns. Those returns showed tax due of $129,000 which had grown to over $300,000 when you factor in interest and penalties. Meanwhile, the IRS couldn’t collect; the indictment alleges he continued to use cash and nominees to evade the IRS.

Mr. Fenzell is looking at a lengthy stay at ClubFed if found guilty.

Utopia Is Dead

Sunday, February 16th, 2014

A perfect place. That’s what comes to my mind when I hear the word “utopia.”

Vincent and Mary Giamo had a different idea; Utopia was their nightclub in Orchard Park, New York (near Buffalo). It was quite successful as they followed a formula that is illegal but helps with taxes: They kept two sets of books. One set was accurate, and showed they would owe $1.2 million in taxes to the IRS. The other set shockingly showed they didn’t owe that money. This scheme works quite well…until you’re caught.

And the Giamos were caught, tried, and convicted of tax evasion charges. Vincent received 12 months at ClubFed; his wife, Mary, received probation. They must also make restitution of another $671,840 to the IRS (they’ve already paid $550,000). They are also facing civil charges.

As usual, it’s a whole lot easier to just pay your taxes in the first place…but that though rarely occurs to the Bozo mind.

Really Big Tax Evasion Leads to Really Long Sentence at ClubFed

Sunday, February 9th, 2014

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.

Health Care Fraud Leads to Tax Charge

Sunday, December 15th, 2013

I’ve mentioned previously that if you fail to report illegal income on your tax return, you’re guilty of tax evasion. Yes, illegal income is just as taxable as legal income. This came into play with an ongoing investigation in Southern California.

It seems some medical practitioners came up with the idea of getting denizens of Skid Row into hospitals for unnecessary medical procedures. Dr. Ovid Mercene of La Mirada was one of the individuals involved in the practice. I’ll let the DOJ press release take it from here:

From 2008 and 2012, while Mercene worked at a Los Angeles-area hospital, he admitted patients, the vast majority of whom were homeless, who had been referred from a purported “care consortium.” The patients, many of whom did not require hospitalization, were admitted for the purpose of defrauding taxpayer-funded health programs such as Medicare, Mercene admitted in court today.

Mercene admitted the “patients” after watching them being transported by van from Skid Row to the hospital, where they were often kept on a special floor away from the hospital’s “regular” patients. These “patients” also were given smoking breaks while in the hospital, even though many of them supposedly suffered from respiratory diseases. After a short hospital stay where numerous unnecessary tests were typically performed, Mercene discharged the “patients” to skilled nursing facilities, even though they did not require such care.

Dr. Mercene received almost $700,000 in kickbacks. Somehow that income didn’t make it onto his tax returns. While I suspect the alleged health care fraud can be prosecuted under various statutes, the government had an easier charge (to prosecute) to make against Dr. Mercene: tax evasion. That’s what he pleaded guilty to last week. He’ll be sentenced next July.

Another Nominee for Tax Offender of the Year

Sunday, December 15th, 2013

It’s getting to be that time of the year: Nominations are due for the Tax Offender of the Year. Remember, to be considered for this award the offender must do more than just cheat on his taxes. It has to be special; it really needs to be a Bozo-like action or actions.

Via Joe Kristan comes a clear “winner” of a nominee: Phillip Ballard of Fort Worth, Texas was convicted of attempted murder for hire. Mr. Ballard, who is 72, is looking at 20 years at ClubFed. It’s why Mr. Ballard committed this crime that gets him his nomination:

While awaiting trial for tax evasion, Ballard approached a fellow inmate in September 2012, according to the criminal complaint.

Ballard said he believed U.S. District Judge John McBryde would sentence him to more than 20 years in prison; he wanted the judge killed so the case would be transferred to another judge.

And it only took the jury less than an hour to convict him.

Mr. Ballard’s tax preparation career ended in 2008; he followed the Irwin Schiff method of tax preparation (returns with all zeroes). At least one individual who followed Mr. Ballard’s advice is probably wishing he hadn’t. Richard Tilford was sentenced in 2012 to one year at ClubFed and had to make restitution of over $453,000 to the IRS. Mr. Tilford filed returns noting he had income but zeroed all that income out on his returns. As noted in the DOJ press release,

Each of the tax returns, according to the factual resume, was accompanied by a letter acknowledging that Tilford earned money during the relevant year, but denying that the earnings were income in the “constitutional sense.”

A hint for anyone who wants to try this at home: The only thing it will garner you is a nomination for Tax Offender of the Year. As for Mr. Ballard, he’s yet another worthy nominee for the 2013 Tax Offender of the Year award.

Nifty Scheme Lands Five at ClubFed

Sunday, November 24th, 2013

Last year I reported on the inventive scheme used by the owners of Nifty Fifty’s, a Philadelphia area restaurant chain. Back in 1986, the restaurant was founded. The chain is themed on the 1950s; the owners apparently longed for the 1850s when there wasn’t an income tax.

What did the five owners do? From the DOJ press release:

The restaurant owners paid employees a portion of their wages with unreported cash in order to evade payroll taxes; paid suppliers with unreported cash; and had false tax returns prepared that under-reported income and falsely inflated expenses and deductions. Just between the years 2006 and 2010, the defendants deliberately failed to properly account for $15.6 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes. In the course of their conspiracy, Mattei, McGlynn, Donnelly, and Welsh committed bank fraud by submitting to the bank bogus income tax returns in order to secure several business loans.

The five owners of Nifty Fifty’s pleaded guilty to the various charges and agreed to full restitution. The IRS has received over $4.5 million in restitution to date. The five owners all received time at ClubFed, ranging from 12 months and a day to 36 months.

Bubba Paris Sacked, Pleads Guilty to Not Filing a Tax Return

Thursday, October 31st, 2013

Former San Francisco 49er William H Paris, Jr. (aka Bubba Paris) is now a motivational speaker. He’ll have a new topic to talk about: Why You Should Pay Your Taxes.

Back in February Mr. Paris was indicted on three misdemeanor counts of failing to file a tax return. He was alleged to have earned between $41,700 and $83,800 annually from 2006 to 2008. He pleaded guilty on Wednesday to one count of not filing a tax return in a plea deal. Mr. Paris agreed to make restitution of $126,530; he’ll be sentenced next February. He faces up to one year at ClubFed and a possible fine of up to $100,000.

That’s the second former football player who has not had a good week. Former Philadelphia Eagle Freddie Mitchell was sentenced to 37 months at ClubFed earlier this week. Mr. Paris, though, is not facing as lengthy a sentence. At most he faces one year in prison; given that he has promised to make restitution it’s likely he’ll get probation.

A hint to celebrities: You’re a perfect target for IRS Criminal Investigations when you don’t file and pay your taxes. If you are convicted, it will be covered in the news. Consider that Bubba Paris didn’t report tax on $182,743 and is paying restitution of $126,530 (which include penalties and interest)–That’s a tax rate of 69%! He’ll also have to pay California, too. It’s a lot easier to just pay your taxes in the first place.

When They Can’t Get You for the Real Crime, There’s Always Tax Evasion

Thursday, October 17th, 2013

One of my clients a few days ago asked me jokingly–she’s been a client for years, so I know when she’s joking, “If I had a stream of illegal cash income, do I have to declare it on my tax return?” Of course you do–illegal income is just as taxable as legal income. From as far back as Al Capone to others more recently, such as Johnny Ray Taylor, the government has found that crooks who make illegal income tend to also not report that income; sometimes its easier to get the crook for tax evasion than the underlying offense.

Everyone’s heard of Al Capone, but who is Johnny Ray Taylor? Well, Mr. Taylor is a resident of nearby Henderson whose main source of income appears to have been pimping. Indeed, he’s apparently going to soon plead guilty state felony charges of pandering and living off of prostitution. Back in May, Mr. Taylor pled guilty to one count of tax evasion. On Wednesday he was sentenced to 25 months at ClubFed, must make restitution of $117,559 to the IRS (what he earned as a pimp), and will then have three years of supervised release. It is likely that Mr. Taylor will be able to serve his state charges concurrently with his time at ClubFed.

Attorney Found Guilty of 28 Tax Charges, but Does Get Nomination for Tax Offender of the Year

Sunday, September 29th, 2013

Donald Wanland, Jr. is described as a “financially successful” attorney. A resident of El Dorado Hills, California (a Sacramento suburb), Mr. Wanland practices in real estate, business litigation, and construction litigation. Perhaps I should change that to practiced because a trip to ClubFed appears to be in his future.

Mr. Wanland may have earned lots of money–his tax returns from 2000 through 2003 showed income of more than $1.5 million–but he didn’t like paying taxes. Now, most of us don’t like paying taxes but we do so anyway as the consequences of not doing so can be problematic (especially for an attorney). Mr. Wanland, though, had other ideas. At least he filed those tax returns (showing tax due of $448,451); he just didn’t pay those taxes. The DOJ press release notes that Mr. Wanland didn’t pay all of his taxes in the 1990s either.

Well, what did Mr. Wanland do after 2003? He didn’t file returns (though he earned over $1 million from 2004 – 2007). When the IRS issued a levy in 2005, Mr. Wanland decided that a good strategy was to hide all of his income through nominee accounts. (Here’s a helpful hint to others considering such a strategy: Don’t do this!) Meanwhile, Mr. Wanland continued to spend money on vacations, two new cars (a Mercedes Benz and a Cadillac Escalade), gambling at Las Vegas casinos (well, as a Las Vegas resident I’m not as upset with this), and a pool at his home. These were not good ideas when he owed significant tax to the IRS. Oh, I should mention he also made false statements to the IRS.

These are felonies, something an attorney should be knowledgeable about (and want to avoid). A jury on Thursday found that Mr. Wanland was guilty of 28 tax-related charges. Given that the amount of tax involved, I suspect Mr. Wanland is looking at four years at ClubFed. There’s also a likely fine, and restitution.

Mr. Wanland does have one thing to look forward to: He did receive a nomination for my Tax Offender of the Year Award.

Thigh Injury the Least of Messi’s Problems

Sunday, September 29th, 2013

Football Soccer star Lionel Messi injured his thigh in yesterday’s game against Almeria (a game his team won, 2-0). Messi will miss two to three weeks with the injury.

Meanwhile, Lionel Messi and his father are accused of something more familiar to readers of this blog: cheating on their taxes. Messi is alleged to have created shell companies in Uruguay, Belize, Switzerland, and the United Kingdom to hide income (his image rights) from Spain and the Spanish income tax agency, Agencia Tributaria, from 2006 through 2009. The UK Telegraph reports that Messi and his father have made a five million euro “corrective payment.”

A judge will rule on whether to dismiss the charges or impose a fine. If found guilty, the maximum fine he could face is €24 Million (just over $31 million at today’s exchange rates) and potentially five years in prison.

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