Taxable Talk

Alan Fabian seemed to have everything. He was an entrepreneur, a political fundraiser, had numerous "successful businesses"—in short, he appeared to have everything.

But it was a fraud. Actually, multiple frauds.

Mr. Fabian may have, at one time, actually been a successful enterepreneur. However, in 2001 he began a Ponzi scheme, defrauding investors in his businesses while paying himself a salary of $800,000 a year. He filed tax returns with fictional deductions. One of his shell companies went into bankruptcy in 2004; this may have led to the government investigation.

In 2007, while Mr. Fabian knew that he was soon to be indicted, he accepted another $500,000 loan (which was supposed to go to a non-profit he started). Instead, some of the proceeds were used on a family vacation to the Middle East...a vacation that began with a private plane trip to Israel.

Earlier this year Mr. Fabian pleaded guilty to two counts (one each of mail and tax fraud) out of the 26 he was charged with. On Friday he was sentenced to nine years at ClubFed. Judge Catherine Blake noted when sentencing Mr. Fabian that he had a, "...consistent, repeated, sophisticated pattern of fraud...[with] at least six [years] of grossly illegal and deceptive conduct...."

He will begin serving his sentence just before the New Year.

Irwin Schiff has about twelve more years left on his sentence. He's 79, so the chance of him promoting his illegal tax reduction schemes was slight. It's now zero.

From Las Vegas comes the news that a federal court has issued a permanent injunction against Mr. Schiff and Cynthia Neun, a former associate. Mr. Schiff and Ms. Neun have been barred from ever preparing tax returns as a professional and from promoting "...tax-fraud schemes from within prison or when they are released from prison."

I think we have now finally heard the end of Irwin Schiff.

The tax evaders were out in force this week. I could have filled several posts with their escapades. Here are the lowlights.

Let's start with a Bozo tax preparer. First, from Upper Darby, Pennsylvania comes the story of Nyon Geleh-Saylee. Mr. Geleh-Saylee truly wanted to help his tax preparation clients. He did this by inflating the deductions on their returns costing the federal government over $89,000. He was convicted back in June for filing false tax returns. He avoided ClubFed and will spend six months in home confinement.

Todd Newman is a CPA in Yonkers, New York. Mr. Newman was arraigned on Friday on charges of grand larceny and failure to file a state income tax return. Mr. Newman allegedly stole $1.6 million from one of his clients. He was supposed to send the money to New York state for payroll taxes withheld; instead, he allegedly wrote checks to himself. He's looking at a lengthy term in state prison if convicted.

Here's a scheme that sounds intriguing. Let's start a banking system to cater to the tax protester movement. We'll hide their money, give them access so they can print money orders when the need to, and we'll ignore those pesky banking and tax laws. Other than violating a few federal statutes (and possibly some state laws) it's sounds kosher, right? Well, the man who thought up this idea will likely get some time to consider it at ClubFed. Wayne Hicks, Sr. of Berryville, Arkansas pleaded guilty to one count of tax fraud conspiracy this past week. Mr. Hicks also admitted that he's neglected to file his own tax return for the last sixteen years.

Finally, a follow-up on the story of Kevin Morse of Austin, Minnesota. Mr. Morse was sentenced this past week to 30 months at ClubFed. Mr. Morse was told by his accountant that he owed about $100,000 in back taxes but chose to use a tax protester argument to avoid the taxes. The good news is that the promoters of the scheme that Mr. Morse used are awaiting trial in Oregon.

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