Taxable Talk

Back in February I reported on Mark Kaushansky, the Soviet emigre who admitted evading taxes. At the time, Fred Theiman, Mr. Kaushansky's attorney, noted, "A lot of assumptions made by the government are perfectly rational, perfectly logical and perfectly wrong." The IRS said otherwise, and it was up to the judge to decide.

In this case, Mr. Theiman was correct. At least Judge Maurice Cohill determined that the tax evasion was a lot less than the $5 million he had been accused of. The total ended up as $63,000. Mr. Kaushansky also admitted that he was guilty, telling AP, "I was given an opportunity to help hundreds of Russian scientists and their families in dire need...I think I did a lot of good, but in the process I made some mistakes. I admit to those mistakes. I am guilty." Mr. Kaushansky will also have to pay a $20,000 fine.

Also accused in the scheme was Yevgeny Adamov. Mr. Adamov is the former Russian Energy Minister. Mr. Adamov was arrested in Switzerland in 2005. Although the US requested that he be extradited here, the Swiss government extradited Mr. Adamov to Russia. He's accused in Russia of abuse of power and fraud. Judge Cohill believes he'll never be back in the United States to answer those charges.

AP Story: Pravda, Houston Chronicle

The LA Weekly has a great article on the Stephen Yagman case. As I wrote earlier, Mr. Yagman was found guilty on 19 counts of tax evasion, money laundering, and bankruptcy fraud last week.

If you read the Los Angeles Times article on the case, you might have gotten the impression that Yagman was prosecuted because of his past actions against the government. The LA Weekly article ends that myth.

You can read the LA Weekly article here.

Besides Mr. Yagman, several other individuals found their tax evading days ended. We also have a story detailing potential tax problems for a Los Angeles politician's wife.

We have two from the high tech world. From suburban Pittsburgh comes Pradeep Kumar Walia. Mr. Walia is the former CEO of Atlas Software. Back in 1999, he reported $231,000 of income and paid $65,500 in tax. The problem? His actual tax was about $10,000 more. Oops. Mr. Walia pleaded guilty and will receive probation plus will have to make restitution.

Last year I reported on the saga of the CEO of VaporTech. John Frances Griffin pleaded guilty to two counts of tax evasion last week, and has agreed to forfeit $75,000 worth of personal items. He's facing a term at ClubFed for his evading tax on $1.1 million of income, plus a likely fine.

From Providence, Rhode Island, comes the story of an entrepreneur who outdid Mr. Griffin. Neil Stierhoff ran a mail-order electronics business. It was apparently doing quite well, especially as his net after taxes was close to his net before taxes. Of course, that was due to Mr. Stierhoff not paying taxes on $1.2 million of income through allegedly using aliases and cash. He was found guilty last week, and based on federal sentencing guidelines, is looking at about four years at ClubFed.

Moving to Enid, Oklahoma, we get the story of a bookkeeper who created her own W-2 form. That might be all right, if it was accurate, but she missed just a bit of her income. Actually, it might be more appropriate to say that her W-2 recorded just a bit of her income. She, too, pleaded guilty, and Margaret Renee Schram is looking at five years at ClubFed plus restitution of $270,000 to her ex-employer and restitution to the IRS.

Finally, this last story highlights the perils of public office. Rocky Delgadillo is the Los Angeles City Attorney. Recently, his wife has been accused of driving Mr. Delgadillo's city-provided SUV. Adding an insult to the alleged injury, the Los Angeles Times reported yesterday that Mrs. Delgadillo failed to file California income tax returns for her business and didn't obtain a Los
Angeles city business license. She has also been accused of having city employees baby-sit her sons during normal business hours. As a hint to any aspiring politicians, I strongly suggest you pay all of your taxes and ensure that all of your businesses have all appropriate licenses. You can be sure that your opponents will check public records in these days of public records being on the Internet.

So a little evasion resulted in probation, but some substantial evasion got time at ClubFed. It's a lot easier not to evade in the first place, but that temptation is just hard to resist for some.

Civil rights attorney Stephen Yagman was found guilty on 19 counts of tax evasion, money laundering, and bankruptcy fraud on Friday in Los Angeles. Yagman will be sentenced on September 24th.

Yagman was a considered combative civil rights attorney, and fought many battles with the Los Angeles Police Department and other agencies. Yagman claimed during his trial that he was "targeted" because of his history of fighting US law enforcement agencies. However, it may have been his non-payment of taxes that caused him to be targeted. Yagman, after filing for bankruptcy, had a lavish dinner and bought expensive shoes. That didn't sit well with the jury.

Yagman is looking at spending a few years at ClubFed.

News Story: Los Angeles Times

Prior coverage: Here and Here

I'm often asked by clients about what they can put down on a tax return. I tell them that the US works on a voluntary-based income tax system. You can put down anything on a tax return. Of course, you swear under penalty of perjury (which the government takes seriously) that everything on the return is accurate, to the best of your knowledge. I strongly believe in having my clients pay the least amount of tax legally for their returns. Of course, some don't share my scruples.

Take the case of Beaulieu Group, of Dalton, Georgia. The third largest carpet manufacturer in the United States, Beaulieu boasts sales of $1.1 billion. That's a lot of carpet.

But like all companies Beaulieu must look out for its bottom line. So back in the 1990s the company bought millions of dollars of machines from Europe. That's not a problem. They apparently put those machines on their books at a value millions over what they bought them for, so that they could take extra depreciation. As long as they weren't caught, there's no problem...but of course, you know since you're reading this here, they were caught.

And catching something like this isn't easy. Indeed, the government spent over $800,000 proving the case (which Beaulieu has agreed to repay to the government). The tax savings that Beaulieu received from the over-depreciation was $7 million. They'll be paying back taxes (including interest) of $22.7 million, $7.7 million in penalties, and a criminal fine of $2.2 million. And as part of the plea bargain, the two owners of the company will no longer be involved in the day-to-day business of the firm.

So over nine years Beaulieu saved something over $7 million in taxes. Now, seven years after their last savings Beaulieu must pay out $33.4 million. No wonder Beaulieu's Vice President and General Counsel, Peter Farley, said, "...[T]he Company has taken steps to strengthen its tax practices and compliance programs."

News Story Here

Anabolic steroids are a controlled substance (generally illegal) in the United States. If you sell/distribute/traffic steroids, you can be arrested. One Houston, Texas dealer of steroids got lucky—or so he thought. He didn't get arrested for distributing steroids. Instead, he got charged with tax evasion.

Remember Al Capone? The Chicago mobster committed lots of murders. But in the end the government couldn't prove he committed any of them. However, it could and did prove he didn't pay income tax on his ill-gotten gains, and Al Capone spent the last few years of his life at Alcatraz and similar ClubFed vacation spots.

Vernon Albert Richardson III admitted importing and selling steroids from 2000 - 2003 in his plea agreement. Mr. Richardson forgot one thing that would have been useful: pay the income tax on your illegal income. Yes, illegal income is just as taxable as legal income.

When Mr. Richardson is sentence later this year, he'll probably receive a little under two years at ClubFed (based on Federal Sentencing Guidelines)

I'll have quite a few posts over the next few days, but something came across the wire tonight that deserves reporting (even in my tired state). The ultimate shoe collector, Imelda Marcos, was acquitted of tax evasion.

Ms. Marcos, the wife of the late Philippine leader Ferdinand Marcos, was charged with evading taxes in 1986, and on two later dates. There was just one problem with that—the Marcoses left the Philippines in 1986 after Ferdinand Marcos ' rule ended (they went into exile in Hawaii).

Ms. Marcos' attorneys also noted that when Mr. Marcos died there were newspaper stories globally and the Philippine's Internal Revenue Bureau would have to have been deaf, dumb, and blind to have missed the news (these relate to the later two tax charges).

In any case, the judge in Quezon City noted that the prosecution had failed to show criminal intent. Indeed, Ms. Marcos was husbanding her shoe collection in Hawaii at the time.

So in this case, Ms. Marcos gets to wear shoes from her collection rather than prison loafers.

News Story: Manila Standard Today

As I head for another week on the road (with limited posting--I'll be at the CSEA SuperSeminar Monday through Wednesday and in Chicago next weekend), there's more than enough fraud for an uber-post.

We'll start in Washington where it was announced that the probe of Jackson-Hewitt, the second largest national tax preparation firm, has grown. I previously reported on the chain's problems. In a regulatory filing, Jackson Hewitt disclosed that more of its stores, including company-owned stores, are being investigated. The initial probe centered on one franchisee; the IRS is seeking to close the 125 stores owned by that franchisee. You can read about this here and here.

Let's head across the country to Renton, Washington. I've said before that multi-level marketing programs are legal. But you do need to pay taxes based on your income from those programs, and not divert the income into a sham trust. It's even worse if the IRS finds out about it, as Frederick and Denise Vance have discovered. They pleaded guilty to evading about $320,000 in taxes. It appears they've made restitution. But they'll be sentenced in September and are looking at possible short stays at ClubFed.

Yet another bozo tax preparer is in trouble. Al Morton, Jr. was convicted in Birmingham, Alabama of 14 counts of filing false tax returns, 13 counts of bank fraud, and one count of conspiracy. Five others pleaded guilty earlier to similar charges in the scheme which involved filing 121 false refund anticipation loan claims totaling over $700,000. Mr. Morton is looking at a lengthy stay in ClubFed when he's sentenced later this year.

Heading further south to West Palm Beach, James Exline was sentenced to ten months at ClubFed. Exline, a former City Commissioner in West Palm Beach, had earlier pleaded guilty to filing a false tax return as part of a land development investigation. He'll also have to pay a $3000 fine and serve a year of supervised release.

The Abramoff scandal claimed a tax evasion victim. Italia Federici pleaded guilty to tax evasion and obstruction of Congress on Friday. Federici admitted lying to a Senate Indian Affairs Committee and not paying taxes from 2001 to 2003. Given that she owes "tens of thousands of dollars" in back taxes, she's looking at a visit to ClubFed.

I chose five stories out of about 30 that came across the wires over the last couple of days. There are a lot of people trying for that dishonest buck...and they usually find that crime doesn't pay.

The former mayor of Atlanta, Bill Campbell, appealed his conviction and sentence at the 11th Circuit Court of Appeals. Campbell, who is now enjoying a stay at ClubFed's Miami facility, didn't make the trip to Atlanta for the appeal.

The defense claimed that Campbell didn't get the lawyer of his choosing at the trial. However, that attorney happened to have a law partner who represented one of the accusers in the case. Additionally, the defense claimed the sentence was too strict.

A decision will be made in the next few months. Until then, Campbell will continue to enjoy Miami.

Previous Chain of Stories on Bill Campbell