Taxable Talk

You're a successful business owner, but you're running a little short of cash. Do you cut back a bit on your expenditures? Of course not. Do you set up a trust, and write checks to cash, and pocket the money? Well, this is an entry on tax evasion, so I'm sure you know how this turned out.

Here's the scheme, as the IRS figured it out: The business owner creates a trust. Nothing illegal so far. He stops paying himself wages, and writes checks to cash. He purchases cashier's checks payable to the trust with the cash. Still nothing illegal, as long as the trust reports the deposits.

But the cashier's checks are not deposited into the trust. They're swapped for other cashier's checks deposited into his bank account or used to pay his expenses. Well, we have a problem, especially if he doesn't declare these checks as income. He didn't. Even worse, the checks were listed as "subcontractor fees" and "loans to stockholders" on the corporate tax return. That's falsifying a corporate tax return, another offense.

The business owner, Brian Troy Aberle, accepted a plea agreement and pleaded guilty to one count of tax evasion and one count of filing a false tax return. He faces up to eight years at ClubFed, though he'll likely receive two years or so.

Pity "psychic" David Guardino. We've written about Mr. Guardino of Cary, North Carolina twice before: when he threw some punches at his wife and when he was one of our nominees for the 2005 tax offender of the year. He was sentenced yesterday after being convicted of evading taxes on $1 million that he earned from his readings.

If he was psychic, shouldn't he have known he would be convicted? But I digress....

As Joe Kristan noted in his lengthier report, Mr. Guardino attempted to influence the judge by showing the judge his legs. The legs of a 364 pound man. It didn't work; he was sentenced to 21 months. But shouldn't he have known that the legs wouldn't work?

Two famous electronics companies. In fact, I used to work for Westinghouse ("You can be sure if it's Westinghouse"). But that's not the story here. Instead, it's the usual tax evasion, with a twist.

From the Pittsburgh Post-Gazette comes the story of Soviet nuclear reactors, theft of over $9 million in aid money from many countries, and tax evasion.

Mark Kaushansky is a former Soviet refugee, having emigrated from the Ukraine in 1979. He landed in Monroeville, Pennsylvania and went to work for Westinghouse. In the 1990s he met up with renowned Russian atomic scientist Dr. Evginey Adamov. Dr. Adamov was arrested in Bern, Switzerland at the bequest of the US Department of Justice, but was extradited to Russia. According to Kommersant, Dr. Adamov hasn't admitted guilt in his trial for "...grand fraud of the organized criminal group and with the office abuse that led to enormous offenses."

Mr. Kaushansky, though, has pleaded guilty to nine counts of tax evasion. The government alleges that he's bilked the IRS out of $5 million. Defense attorney Fred Theiman is quoted by the Post-Gazette as saying, "A lot of assumptions made by the government are perfectly rational, perfectly logical and perfectly wrong." The IRS says that the pair used shell companies that never filed tax returns to hide money. A judge will have to decide how much Mr. Kaushansky's companies didn't pay. I'll let you know more when Mr. Kaushansky is sentenced.

Meanwhile, a Sylvania, Ohio attorney was sentenced after being found guilty of evading $321,000 in taxes. Joseph Weisberg will have five months at ClubFed to think about the errors of his ways. Mr. Weisberg used his client trust account to hide his income, and that's not a good idea at all.

I've written about the Kanter case before (here , here, and here). In that case, the Tax Court reversed the finding of the trial court judge, and didn't release the findings of the trial court judge. The case made its way to the Supreme Court. The Supreme Court remanded the case, with an order that the trial court judge's findings be made public. The trial court judge found that there was no tax evasion; however, the tax court ruled that there was. After an intermediate stop at the 11th Circuit Court of Appeals (which ordered the Tax Court to make a ruling by February 2nd), the Tax Court came out with its ruling.

Now, given my cynical view of the world, how do you think the Tax Court would rule the second time around? Would it come out with a ruling in line with the trial court judge or a ruling similar to its own ruling? Yes, the Tax Court ruled that there was tax evasion, and that the lawyer (Burton Kanter, now deceased) accepted kickbacks from the Pritzker family, and evaded taxes on those kickbacks. The Pritzkers own the Hyatt Hotel chain.

The New York Times reports that attorneys for the three plan on appealing the decision. Given the history of the case, expect a return trip to the Supreme Court in 2008 or so.