Taxable Talk

Why would you want to file two individual federal tax returns for one person for one year? Unless you're amending your return, you don't do this...unless you're committing tax fraud.

And from just up the road in Huntington Beach comes the story of an individual who is alleged to have just done that. A federal grand jury indicted James David Richardson with five counts of filing false claims, and one count of obstructing the due administration of the Internal Revenue Service.

Mr. Richardson allegedly filed multiple tax returns for each year between 2000 and 2003, and made false claims asking for $852,278 in refunds he wasn't entitled to. In 2001 he apparently received refunds of $286,345 that is alleged to have come from multiple false claims.

But I do like what he was then alleged to have done. The indictment charges that Mr. Richardson filed a complaint with Congressman David Drier relating to the delay in payment of his allegedly falsely claimed refunds. He also is alleged to have sent a check for $1,990,000 to the IRS that showed amounts of withholding...except that is alleged never to have happened. Oh, the check bounced, too. Now these actions show some chutzpah.

If Mr. Richardson is convicted on all counts, he could face 53 years in prison. He also could be liable for fines and restitution.

News Story Here

...Until they got caught.

Steven and Diane Christensen admitted costing the US government between $4 and $7.5 million in tax revenues. An official of US Bank estimates that they lost $13 million. This couple cut a wide swath through the Salt Lake Valley.

But Diane was sentenced to 41 months at ClubFed and Steven received 37 months on Tuesday, so they won't be bothering Utahans anytime soon. The couple will still need to make restitution to the US government; however, that amount is still to be determined.

News Story: Salt Lake City Tribune

It may be the Jewish New Year (La Shana Tovah for those celebrating), but the tax cheats have been busy over the past few days. We have articles from the East Coast to the West Coast and from Europe.

First, from Providence, Rhode Island comes yet another untrustworthy sole. Eric Messier had been advising the gullible that by creating a "corporation sole" they can avoid taxes. There's no such thing as a corporation sole. He was collecting between $2,500 and $10,000 per soul. (Story here)

Apparently there's something in the water in the Ocean State. This story from the Providence Journal is about Edward Dacey. Mr. Dacey was convicted of not reporting $122,000 earned by marketing a "debt elimination scheme" that, like the corporation sole, isn't worth the paper it's printed on. Mr. Dacey won't have to visit Club Fed; instead, he'll serve five months of home confinement and two years probation.

Closer to home, the Los Angeles Times reported on four tax preparers from nearby Rialto who were inventive. They invented phony deductions, falsified documents for audits, and didn't report about $1.5 million in income from this fraud that impacted over 11,000 clients.

Meanwhile, we go overseas. Holger Geschwindner of Hof, Germany was a "benefactor and supporter" of NBA star Dirk Nowitzki. The German tax authorities allege that Geschwindner earned "substantial amounts" but didn't pay any taxes on that, according to this story from Deutsche Presse Agentur. Tax evasion is a crime in Deutschland, too.

An Amarillo doctor will be visiting Club Fed. Stephen Miller was sentenced this past week to 46 months and ordered to pay $970,000 in restitution for attempting to use sham LLCs and sham trusts to avoid taxes. The money was supposed to end up in the Channel Islands.

A Connecticut doctor pleaded guilty to tax evasion, structuring, and health care fraud. Steven Herman skimmed about $870,000 from his business, and then either purchased $700 money orders himself or had household employees do so. He did this over 80 times in order to avoid federal bank transaction laws (and when you do this to avoid those laws, you're guilty of the crime of "structuring," which is a felony). Adding insult to injury, he also committed health care fraud by billing elective procedures as "medically necessary." As this story notes, Mr. Herman faces up to 25 years in prison, must pay back taxes of $374,810 plus penalties and interest, forfeit $236,117 (the amount of the structuring), and reimburse the health insurance company $150,000. It would have been much cheaper to have paid the taxes in the first place. Of course, that's the case for almost everyone who commits tax evasion.

Over the weekend there were several stories about tax scofflaws. They fought the law and the law won.

First, a tax preparer in Georgia filed returns electronically. There's no problem with that. However, she filed returns for people who had not hired her to prepare their returns, using numbers made out of thin air (she also filed returns for people who gave her information, but used incorrect information). Amazingly enough, these lucky taxpayers got refunds, deposited into bank accounts of friends of the tax preparer (or the refunds were subsequently turned over to the preparer). The preparer, Lisa Lyle, has pleaded guilty to ten counts of tax fraud and will be sentenced on November 30th according to this article.

Meanwhile, in Shelby County, Michigan (suburban Detroit), Kenneth Heath was convicted of four counts of tax evasion and one count of passing a phony document. Mr. Heath believes in the views of convicted tax protestor Irwin Schiff, and didn't pay federal taxes between 1999 and 2002. That was strike one. Strike two was sending the IRS a "Registered Bill of Exchange." But there's no such thing as a Registered Bill of Exchange. Heath, 69, who faces up to 30 years in prison will be sentenced in December according to this story.

From Utah comes the story of a couple that believed in philanthropy. Both individually and through their business, they gave millions of dollars for the handicapped, an olympic center, and other charitable ventures. They also believed that giving starts at home: they were convicted of tax evasion. They didn't report overseas income of $4 million to their business. The couple, now divorced, will each spend over two years in jail and pay fines of $60,000 and $75,000. They also must pay the $14,000 cost of their jury trial and pay the back taxes of nearly $300,000 according to this story.

Finally, we have two stories from the swamplands (New Jersey). First, a bar owner harbored illegal aliens and was involved in an illegal alien smuggling ring. He forced the aliens to work off their debts in his bar. And he also didn't pay taxes on $750,000 of income from his bar. In the second story, the former president of the State Senate in New Jersey pleaded guilty to fraud and tax charges. John Lynch, who used to be involved in New Jersey's "Democratic Machine," admitted accepting a payment from a company that was attempting to build a park. Besides accepting the $25,000 payment, he failed to declare $150,000 in income. Lynch faces up to ten years in prison and a fine of up to $500,000.

All-in-all, it was a weekend to forgot for these scofflaws.

Walter Anderson, a former telecommunications executive, pleaded guilty to evading $200 million in taxes today. Anderson had apparently hid $450 million in offshore bank accounts in the Channel Islands and elsewhere.

In the not-so-brilliant category, investigators found a copy of the book, Poof! How to Disappear and Create a New Identity while searching his home. Anderson also "forgot" to file tax forms on two paintings he bought that were worth over $1 million.

Although eligible for 80 years in prison (effectively a life sentence for Anderson, who is 52), the plea agreement sets a maximum sentence at ten years. Given that Anderson still disputes some of the allegations, stating that some of the purloined funds would have been used to "privatize space" and for charity, it's no surprise that Anderson is still being held without bail. Sentencing will likely be in January.

MSNBC Story
DOJ Press Release (2005)
TaxProf Blog Story