Taxable Talk

Following in your father's footsteps can be a very good thing. However, when you're following your father into (potentially) prison for tax evasion, that's not a good thing at all.

Let's first talk about the father, David Pflum. The elder Mr. Pflum thought he found two very useful books, "The Great Income Tax Hoax" and "How Anyone Can Stop Paying Income Taxes." Then the IRS got involved. They issued summonses and subpoenas, seeking records showing that Mr. Pflum earned an income and owed income tax. Mr. Pflum was indicted for not filing a federal income tax return (three counts) and not paying federal employment taxes (eight counts). He admitted in court that he didn't file the taxes. He was found guilty on all 11 counts. He appealed, and lost. Oh, Did I mention that Mr. Pflum followed the advice of Irwin Schiff, who (like Mr. Pflum) is now residing at ClubFed? And, yes, the tax evasion involved the usual suspects—trusts set up specifically to avoid taxes. (Hint: They don't work.)

We now turn to the son, Gregory Pflum. Mr. Pflum the younger was indicted last year. He was warned by the IRS that not paying taxes doesn't work. Unfortunately for him, from 1998 through 2003, he didn't pay taxes. He had the opportunity to file those returns (albeit late, with penalties and interest). Instead, when he was contacted by the IRS he gave the agents tax protester materials.

Mr. Gregory Pflum pleaded guilty to one count of attempting to evade taxes by not filing a return. Though he faces up to five years at ClubFed, he will probably receive a shorter term.

Sometimes, you shouldn't follow your father's advice.

Barry Bonds is moving towards career home run #756, which would exceed Hank Aaron's career mark of 755. Bonds did not play in today's game at Milwaukee. He currently has 753 homers, and will face Atlanta in San Francisco Monday evening.

Unfortunately for Bonds, the grand jury that has been investigating possible tax evasion and/or perjury charges against the Giants' slugger has been extended for another six months, according to this story in the New York Daily News. A source told the Daily News, "They seem to feel they [the US Attorney's Office] have a strong case." Since the grand jury will not reconvene until September, Bonds will likely break the record long before then. Bonds told the Los Angeles Times, when asked if he was concerned about the possible indictment, "No."

It should be an interesting September, both at the ballparks and in the corridors of the Federal Courthouse in New York.

Yeah, right. I'm a native of the Windy City and am anything but shocked. A former Alderman (city councilperson) is now facing 13 federal charges, including tax evasion.

Arenda Troutman is accused of using a political committee to hide money that was raised for projects she supported in her political district. Ms. Troutman is accused of starting the "20th Ward Women's Auxiliary" and using it to hide money and disguise payments. Additionally, the Auxiliary didn't file for non-profit status and never filed Illinois or federal tax returns.

Troutman had earlier been accused of bribery (she pleaded not guilty last month to that charge); she now has an additional 12 charges of bribery, extortion, mail fraud, and tax evasion to face. Two former staff member's of Troutman's office also face charges.

News Story: FoxChicago

Quite a bit of tax evasion to report on tonight. We have fuel for the fire (literally), embezzlement, and even a connection to one of my favorites: Wesley Snipes.

Starting in Houston, three men decided to make money the third oldest way: cheating on taxes. They allegedly bought kerosene from Calcasieu Refining Co. in Lake Charles, Louisiana, stating that they would export the kerosene. If you export kerosene, you don't have to pay the fuel excise tax on it. You're already a couple steps ahead of me, right? The kerosene didn't make it across the border. Instead, the kerosene was mixed with other petroleum byproducts and sold at service stations in the Houston area. Adding just a bit more fraud, the three alleged culprits ordered their staff to prepare false backdated invoices. The three face both federal tax evasion charges and state charges according to this story in the Houston Chronicle.

In Brighton, Michigan, an electrician found out the hard way that Eddie Kahn's methods of avoiding taxes are not guaranteed to succeed. Mr. Kahn used to have a company called American Rights Litigators; he transformed the business into "Guiding Light of God Ministries." Unfortunately for Kahn, the IRS didn't take to the name change. He's been indicted on tax fraud charges; the business was raided in 2004. Kahn is facing more charges in the Wesley Snipes case.

Oh, our electrician, Brent Gross, in Michigan who followed Mr. Kahn's strategy of claiming he had zero income while earning around $80,000 a year for several years? It didn't work. He's been convicted of three counts of tax evasion, three counts of filing a false tax return, and one count of presenting a fictitious financial instrument. He's looking at a stay at ClubFed.

From Anderson, South Carolina comes the story of a couple who filed 86 tax returns seeking refunds of about $500,000. Just a few problems: the returns were false, and they got the information from prison inmates. Randall Pardue, and his wife, Kelly, each received a stay at Club: Randall got a little over 4 years while Kelly received 2. They'll also have to make restitution of $102,000. It will be a while before Randall visits ClubFed, though—he's currently enjoying a stay at one of South Carolina's facilities for burglary (unrelated to the current crime) and won't be out of that prison until 2011.

Finally, from Clarksville, Tennessee comes the story of a bookkeeper who I hope you never hired. Mary Barber pleaded guilty to bank fraud and tax evasion charges. Ms. Barber admitted embezzling $63,667 from clients using a phony company with checks made payable to phony payees. The checks were then deposited into her accounts or accounts of relatives. She also admitted committing bank fraud totaling $224,947. That resulted in a tax loss to the U.S. of about $64,000—thus, the tax evasion charges. She'll be spending some time at ClubFed.

That's a bunch of winners—well, they sure make writing these articles easier.

That's probably one of the thoughts going through Timothy Heffner's mind right now. Mr. Heffner, of Pittsburgh, pleaded guilty to fraud, conspiracy and tax evasion charges on Tuesday.

Mr. Heffner, according to the story in the Pittsburgh Post-Gazette, "entertained on a private yacht [and] arrived at parties in a personal helicopter." The Pittsburgh Tribune-Review noted, "Heffner long has been a mainstay at gala events for Pittsburgh's social elite."

So what did Mr. Heffner do? He started his own chemical supply company, BioTechnology Corporation of America. Their website looks formidable, with divisions in synthetic organic chemistry, custom synthesis, etc. (five total divisions). However, the company was run out of Mr. Heffner's basement (according to the Tribune-Review). Still, being an entrepreneur is admirable.

But Mr. Heffner listed himself as a medical doctor (which he isn't). Still, lots of Americans embellish their resumes. He also claimed (at one point) he had a Ph.D. (which he doesn't). He tried to get his local township to approve a helipad because he was part of the University of Pittsburgh's transplant team (which obviously he wasn't). And the public record shows that Mr. Heffner had his boating license suspended for one year in 2006 because of his refusal to submit to chemical testing.

How did he afford his nice house in the upscale community of Pine, Pennsylvania, his boat, his helicopter, and his partying lifestyle? His business had something to do with that. He bought rare chemicals from Sigma-Aldrich on the cheap. Very cheap. You see, he had an "in" at Sigma-Aldrich—Robert Wandler, head of Sigma-Aldrich's rare chemical laboratory. Mr. Wandler "sold" the rare chemicals to Mr. Heffner at artificially low prices (as low as nothing) and Mr. Heffner sold them back to Sigma-Aldrich at high prices. The total fraud to Sigma-Aldrich is, according to prosecutors, more than $2.1 million. Mr. Wandler, by the way, appears to be working on his own plea deal.

But one fraud wasn't enough for Mr. Heffner. He decided that tax evasion was a good sideline business. His $2,000 veterinary bill ended up being $2,000 in veterinary research, and a deductible business expense. (Hint—don't do that at home.) Other "business" expenses included an associate's season tickets for the Steelers, his girlfriend's cellphone bill, and many similar expenses. The total of his tax evasion is a cool $1.2 million.

The Post-Gazette quoted a former business partner of his, Tommy Kehoe, as saying, "All I can say is the guy's a fraud. It's that simple. He lied to me about everything for 10 years...By God, he should get 10 years in prison." Based on federal sentencing guidelines, he will likely receive 3 to 4 years at ClubFed for just the tax charges, so Mr. Kehoe may get his wish.

Finally, I'll answer Mr. Heffner's burning question: the party scene just isn't that good at ClubFed.

Now that it's summer, you may be considering a trip to the pool. Swimming is a great summer activity, but you do have to be careful when you dive into a pool. One diving coach jumped into some hot water last week.

Michael Finneran was the head woman's diving coach at North Carolina State University in Raleigh, North Carolina. But Mr. Finneran didn't consider himself an employee of N.C. State. On his North Carolina tax returns, he allegedly included phony W-2 forms showing no state income. That's a problem, especially when you're listed in the Athletic Department's web page.

As reported here, Mr. Finneran was convicted of evading state income tax and was sentenced to 25 to 30 months in prison. According to the news story, he plans on appealing the conviction.

I've reported several times about strip club owners evading taxes (and getting caught). I guess there are a lot of temptations out there...and if you're going to offer one, you get to thinking about another.

In any case, yet another ex-strip club owner has been convicted of tax evasion. From Jackson, Mississippi comes the story of Jon Adams. Adams used to own the Stardust Cabaret. Back in 1999 Adams attempted to get the zoning changed for his club. And the (then) Jackson City Council President, Louis Armstrong, found his way to prison for accepting a $25,000 bribe.

Adams' troubles related to understating his income on his tax returns. The government alleged that Adams earned over $500,000 in 1999 and $466,000 in 2000 but that he reported $344,000 less. Oops. And allegedly making a $75,000 down-payment on some property while in bankruptcy didn't sit well with the jury either.

While Adams faces six years at ClubFed and a maximum of $200,000 in fines, his stay will likely be significantly less. His sentencing is scheduled for October 9th.

Jo Hovind fared much better than her husband when she was sentenced last week for 45 tax related charges. Her husband, Kent Hovind, received ten years in prison. Mrs. Hovind was sentenced to one year and a day, and will begin serving her sentence on August 31st. Mrs. Hovind will likely appeal both the convictions and the sentence.

The government got some other items as part of the conviction. Judge Casey Rodgers ordered that the property owned by the Hovinds was forfeited to the government. That includes the now defunct Dinosaur Adventure Land. Will the government reopen it? Will it join other intriguing government owned properties such as the Mustang Ranch and the Bicycle Casino? (For the record, the government sold off the buildings and other physical assets of the Mustang Ranch. The Bicycle Casino was owned by the government for a few years but was sold to private owners.)

Judge Rodgers delivered the moral of the story: "No one can violate the law and then say that they were doing so for the will of God."