DETROIT-AREA BUSINESSMEN PLEAD GUILTY IN CASE INVOLVING FAILURE TO REPORT INCOME

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, March 23, 2015

Detroit-Area Business Owners Plead Guilty to Filing a False Tax Return

Two West Bloomfield, Michigan, residents and Detroit-area business owners pleaded guilty today in the U.S. District Court for the Eastern District of Michigan in Detroit to one count of filing a false federal income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to the court filings, Todd and Stephen Schlussel each filed a false 2008 tax return that failed to report a significant amount of income.  The unreported income was from several Detroit-area businesses that they operated and controlled, including Phoenix Real Estate Company, Phoenix Preferred Properties LLC, Phoenix Office Plaza-II LLC, the Lumber Company and FS Investments LLC.

U.S. District Judge Arthur J. Tarnow scheduled sentencing for Sept. 28.  Both face a statutory maximum sentence of three years in prison and a fine of up to $250,000.

Acting Assistant Attorney General Ciraolo commended special agents of IRS–Criminal Investigation, who investigated the case, and Trial Attorneys Mark McDonald and Christopher O’Donnell of the Tax Division, who are prosecuting the case.  Ciraolo also thanked the U.S. Attorney’s Office for the Eastern District of Michigan for their assistance on the case.

MAN FROM N.H. PLEADS GUILTY TO FILING FALSE FEDERAL INCOME TAX RETURN

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, October 20, 2014

New Hampshire Man Pleads Guilty to Filing False Tax Return

A Hampton, New Hampshire, man pleaded guilty in the U.S. District Court for the District of New Hampshire to filing a false federal income tax return for tax year 2009, the Justice Department and Internal Revenue Service (IRS) announced.

According to court documents, Menashe Cohen, an oriental carpet dealer, and his sister maintained an undeclared bank account at UBS in Switzerland that had a balance of approximately $1.3 million.  Cohen also maintained bank accounts in Israel and in Jersey, a British Crown dependency located in the Channel Islands off the coast of Normandy, France.  Although Cohen’s return for tax year 2009 reported that he had a financial interest in a bank account in Jersey, the return failed to report that he had financial interests in the accounts located in Switzerland and Israel.  In addition, Cohen’s return only reported $350 in interest income, when in fact he had received approximately $66,500 in interest income during 2009.

In total, for tax years 2006 through 2009, Cohen failed to report approximately $170,000 in income earned from offshore bank accounts.  In addition, Cohen filed a false and fraudulent Report of Foreign Bank and Financial Accounts (FBAR) for 2009, wherein Cohen reported he had bank accounts in Israel and Jersey on the FBAR, but failed to report his financial interest in the UBS account in Switzerland.

According to the law, U.S. citizens and residents who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III, of their individual income tax returns (Forms 1040).  Additionally, U.S. citizens and residents must file a FBAR with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest or signature or other authority.

Cohen faces a statutory potential maximum sentence of three years in prison and a maximum fine of $250,000 at his Jan. 26, 2015, sentencing.  In addition, Cohen has agreed to resolve his civil liability for failing to report his financial interest in the UBS account on a FBAR by paying a 50 percent civil penalty to the IRS based on the high balance of his one-half interest in the account.

This case was investigated by special agents of IRS-Criminal Investigation and is being prosecuted by Senior Litigation Counsel John E. Sullivan of the department’s Tax Division and Assistant U.S. Attorney Robert M. Kinsella for the District of New Hampshire.

INSULATION SERVICES COMPANY OWNER PLEADS GUILTY TO BID-RIGGING

FROM: U.S. DEPARTMENT OF JUSTICE
WASHINGTON — The owner of a former New York City insulation service company pleaded guilty today to a three-count indictment charging him with conspiring to rig bids on contracts for re-insulation services to New York Presbyterian Hospital (NYPH), conspiring to defraud the Internal Revenue Service (IRS) and filing a false tax return, the Department of Justice announced.

David Porath pleaded guilty in the U.S. District Court in Manhattan to charges originally filed under seal on Feb. 18, 2010. At the time of the indictment, Porath was living in Israel. He was extradited and returned to the United States on Feb. 16, 2012. According to the indictment, between early 2000 and March 2005, Porath and his co-conspirators engaged in a bid-rigging conspiracy whereby they created the illusion of a competitive bidding process at NYPH by preparing and submitting fictitious, intentionally high bids so that Porath’s company would be awarded the contracts for re-insulation services for having the "low" bid.

"By submitting intentionally high, non-competitive bids, the co-conspirators deceived NYPH and distorted the competitive market," said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division. "The division will continue to apprehend and bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a truly competitive bidding process."

The indictment further charged that between October 2000 and February 2005, Porath conspired with Andrzej Gosek, the owner of a Pennsylvania-based asbestos abatement company, and others, to defraud the IRS and to subscribe to false tax returns. Porath gave Gosek checks made out to companies in Brooklyn, purportedly for work done at NYPH by the Brooklyn companies as sub-contractors to Porath’s company. However, the companies had not performed the work. The checks totaled approximately $229,100 in 2000; $1.19 million in 2001; $760,000 in 2002; $50,000 in 2003; and $125,000 in 2004.

The Brooklyn companies cashed the checks and Gosek delivered the cash, less approximately five percent, back to Porath. Based upon these checks to the Brooklyn companies, Porath took false deductions on his company’s and his personal federal tax returns, allowing Porath to fraudulently reduce his taxable income. The indictment also charged Porath with filing a false federal tax return on or about Feb. 17, 2005, which substantially understated his income.

The bid-rigging charge carries a maximum penalty of 10 years in prison and a $1 million fine. The tax fraud conspiracy charge carries a maximum penalty of five years in prison and a $250,000 fine. The false subscription charge carries a maximum penalty of three years in prison and a $100,000 fine. The maximum fine for each of these charges may be increased to twice the gain derived from the crimes or twice the loss suffered by the victims of the crimes, if either of those amounts is greater than the statutory maximum fine.

Including Porath and Gosek, who pleaded guilty in November 2010, 15 individuals and six companies have been convicted of or pleaded guilty to charges arising out of this federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to the award of contracts by the facilities operations department of NYPH.

DEFENDANT PLEADS GUILTY IN STOLEN IDENTITY TAX FRAUD CASE

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, July 5, 2012
Alabama Woman Pleads Guilty in Stolen Identity Tax Refund Fraud Case
Jacqueline Slaton pleaded guilty today in the Middle District of Alabama to one count of filing a false tax return and one count of aggravated identity theft, the Department of Justice and the Internal Revenue Service (IRS) announced.   Slaton was indicted in April 2012.

According to her plea agreement, between December 2011 and March 2012, Slaton filed at least 102 fraudulent federal and state income tax returns using stolen identities, claiming a total of $154,904 in fraudulent income tax refunds. Slaton had the tax refunds directed to prepaid debit cards and had the cards mailed to various addresses on a U.S. carrier’s route. A postal employee agreed to collect the prepaid debit cards for a fee.

Sentencing has not yet been scheduled. Slaton faces a mandatory minimum of two years in prison, and a maximum potential sentence of seven years in prison, up to three years of supervised release, mandatory restitution and a fine of up to $500,000 or twice the loss caused by her offenses.

Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, thanked special agents of IRS - Criminal Investigation, who investigated the case, and Tax Division Trial Attorneys Jason H. Poole and Michael Boteler and Assistant United States Attorney Jared Morris, who prosecuted the case.