Taxable Talk

Another domino fell in the government's fight against Naftali Tzi Weiss, the Grand Rabbi of Spinka. He's charged with tax fraud. Allegedly he concocted a scheme where individuals could donate funds to his organization as charitable donations but would receive up to 95% of them back.

And now one of those who donated has voluntarily come forward. Uri Mandelbaum has agreed to plead guilty to two tax evasion charges, and will make restitution of about $1.5 million. According to the Los Angeles Times,Mr. Mandelbaum donated $900,000 in 2005 and 2006 but got almost all of the money returned back to him.

The Times story notes that the government is looking for 100 other donators to Spinka. Meanwhile, for Rabbie Weiss things are not looking up. The government has at least one witness who can verify exactly how the scheme worked.

Sometimes you read a story and wonder how in the world it can be true. How can people be so gullible and how can someone do such a stupid scheme and expect to get away with it.

Robert Doyle of Oakland had an interesting means of making a living. He would ask random individuals he'd meet on the street if he could prepare their tax returns. He'd then do so, making up a phony return and then pocketing a goodly portion of the refund. (You didn't he'd make up a return with a large balance due, did you?). The "Tax Man" (yes, that was really his nickname) pleaded guilty to one count of filing a false tax return and will be sentenced this Fall to spend some time at ClubFed. Mr. Doyle practiced his trade from 2000 - 2005, so it's likely that the loss to the government was quite substantial.

Meanwhile, Fatai Onevai of Pittsburg, California told his clientele that he could fix any and all IRS problems. And he did by a similar method—in total, he bilked the government out of $1.3 million. He pleaded guilty to one count of filing a false tax return and was sentenced in late June to 18 months at ClubFed.

As usual, if it sounds too good to be true it probably is.

Last year we covered the trial of Wisconsin dentist Frederick Kriemelmeyer. Dr. Kriemelmeyer argued at trial that the indictment was faulty because it was in English; that the American flag should not be in the courtroom; and that as long as some additional punctuation was added to a tax return the tax magically vanished. Unfortunately for Dr. Kriemelmeyer, the jury found that not reporting all of his income was what you and I would think it was—tax fraud&mdashand the judge thought he was greedy and sentenced him to 36 months at ClubFed to take remedial English.

Dr. Kriemelmeyer appealed the verdict, and Joe Kristan reported this morning on the appeal. Joe quotes from the opinion:

[In 2002], his mother began frequently cashing checks made payable to cash at a local bank. Bank employees became suspicious of these deposits and notified the IRS, which investigated and in December 2004 executed a search warrant at his dental office. In March 2007 a grand jury returned an indictment charging that Kriemelmeyer's 2000, 2002, 2003, and 2004 returns reported gross receipts substantially below his income. The IRS determined that he underreported his gross receipts by $392,023 in total for those four years, thus underpaying his taxes by $135,337.

As Joe also notes, the judge during the trial suggested that an attorney might be a good idea instead of someone who doesn't like English; Dr. Kriemelmeyer declined.

There is actually a somewhat serious lesson to be learned from this case. Dr. Kriemelmeyer got caught because of a Suspicious Activity Report (SAR). The IRS regularly investigates these, and even small banks will send them to the IRS. If you have a choice between making several deposits of $3,000 or one larger deposit of (say) $12,000, it's usually better to make the larger deposit and wait the 30 or so minutes while a Currency Transaction Report (CTR) is filed. Some of those are investigated, but not nearly as many CTRs are investigated as SARs.

Of course, it's even better to not commit tax fraud. And if you do end up in a trial, get a competent attorney who understands that English is the language used in the United States—not some weird pseudo-English dialect.