MAN PLEADS GUILTY TO USING FOREIGN ACCOUNTS TO EVADE PAYING U.S. TAXES

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, September 28, 2016

New York City Resident Pleads Guilty to Using Sham Foreign Entity and Secret Foreign Accounts in Switzerland and Israel to Evade Taxes

Used Secret Foreign Accounts to Hide over $7 Million in Funds and Evade Taxes

A New York City man pleaded guilty today to a criminal information charging him with tax evasion for tax years 2003 through 2005 and 2007 through 2010, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Robert L. Capers of the Eastern District of New York.

“Mr. Hager concealed over $7.3 million in undeclared foreign accounts in Switzerland and Israel and used a sham British Virgin Island entity in order to evade over $650,000 in U.S. taxes,” said Principal Deputy Assistant Attorney General Ciraolo. “As this case demonstrates, the Department and the Internal Revenue Service (IRS), together with our global partners, are successfully working on a daily basis to locate such undeclared accounts, identify those responsible and hold them accountable.”

According to information presented in court, between 1987 through 2011, Markus Hager, 68, utilized a series of undeclared foreign financial accounts to evade his individual income taxes by concealing assets and income from the IRS in those accounts.  Between 1987 and 2008, Hager maintained several undeclared accounts at UBS, including two numbered accounts and an account held in the name of Contactus Partnership Associated S.A. (Contactus), a sham British Virgin Islands entity.  By the close of 2004, the value of Hager’s undeclared accounts at UBS exceeded $7.3 million.

Hager closed the UBS accounts in 2008 and transferred the assets to a newly opened account at Clariden Leu, which he controlled and held in the name of Contactus.  Shortly thereafter, Hager closed the Contactus account at Clariden Leu and transferred the assets to a newly opened account held in the name of the same sham entity at a different Swiss bank.  Hager caused that Swiss bank to falsely record Hager’s Belgian cousin as the owner of the assets in the Contactus account.  Approximately six months later, Hager closed the Contactus account at the Swiss bank and transferred the assets to an account at a bank in Israel that Hager caused to be opened in the name of a different Belgian cousin.

From 2005 to 2011, Hager also controlled an undeclared account at Bank Leumi in Israel, which he falsely held under the name of a relative who was not a U.S. person and who resided outside the United States.  In February 2010, after obtaining an Israeli Identity Card, Hager opened an account in his own name at Bank Leumi in Israel but falsely reported that he lived in the United Kingdom and signed a document, under the penalties of perjury, on which he falsely claimed that he was not a U.S. citizen.

According to the information filed, Hager repatriated funds from his undeclared foreign financial accounts by having an attorney draft a sham loan agreement between himself and Contactus and wiring funds from some of his undeclared foreign financial accounts into his attorney’s escrow account.

According to the information filed, Hager filed false federal and New York State income tax returns on which he failed to report the income from his foreign financial accounts and failed to pay tax on that income.  According to the information, Hager evaded approximately $652,580 in federal taxes for tax years 2003 through 2005 and 2007 through 2010.  Hager also failed to report his ownership and control of his foreign financial accounts to the Department of the Treasury on a Report of Foreign Bank and Financial Account even though an accounting firm had informed Hager of his obligation to do so and advised him of the civil and criminal penalties he could suffer for the failure to do so.

“In pleading guilty today, Markus Hager became another example of an individual who attempted to conceal the true source of his money‎ and was caught,” said Chief Richard Weber of  IRS-Criminal Investigation (IRS-CI).  “IRS-CI will continue to take every step necessary to ferret out those who attempt to avoid their reporting obligations under the law.”

Sentencing has been set for ­Jan. 4, 2017.  Hager faces a statutory maximum sentence of five years in prison, as well as a term of supervised release and monetary penalties.  According to the plea agreement, Hager agreed to pay restitution to the IRS.

Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Capers commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Assistant Chief Andrew Kameros of the Tax Division and Assistant U.S. Attorney Erik Paulsen of the Eastern District of New York, who are prosecuting this case.

MAN SENTENCED FOR TAX EVASION AND PILOTING PLANE WITHOUT A LICENSE

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 2, 2016

North Carolina Man Sentenced for Tax Evasion and Serving as a Pilot without a License

A North Carolina man was sentenced yesterday to 21 months in prison for tax evasion and four counts of serving as a pilot without an airman’s certificate, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand for the Middle District of North Carolina.

Paul Douglas Tharp, from 2012 through 2014, attempted to evade payment of an outstanding federal income tax debt by filing false documents, including false tax returns, with the Internal Revenue Service (IRS), according to court documents.  After Tharp failed to file tax returns for the years 2003 through 2006, the IRS assessed federal income taxes for those years.  In 2014, Tharp provided a false Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, signed under penalty of perjury, on which Tharp failed to report that he owned an airport and an investment firm and concealed his business bank accounts and rental income.  In 2012 and 2014, Tharp also filed tax returns for the 2011 through 2013 tax years on which he omitted significant income that he received from his airport and rental properties.

As part of his plea, Tharp also admitted that he served as a pilot without the required certification on four different occasions in 2012.  Tharp surrendered his pilot certificate on Aug. 2, 2012.  After that date, Tharp flew four flights in and out of Davidson County Airport in Lexington, North Carolina, without valid registration and while his pilot certificate was suspended.

In addition to his prison term, Tharp was ordered to pay restitution in the amount of $285,028.47 to the IRS.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Anand Ramaswamy of the Middle District of North Carolina and Trial Attorney Nathan Brooks of the Tax Division, who are prosecuting this case.

PLASTIC SURGEON SENTENCED TO PRISON FOR TAX EVASION CRIMES

FROM:  U.S.  JUSTICE DEPARTMENT 

Monday, April 4, 2016

Alaska Plastic Surgeon Sentenced to Prison for Wire Fraud and Tax Evasion

Defendant Concealed Bank Accounts in Panama and Costa Rica from the IRS

An Anchorage, Alaska, plastic surgeon was sentenced to 48 months in prison on Friday for wire fraud and tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Karen L. Loeffler of the District of Alaska.

“Tax evasion knows no geographic bounds,” said Acting Assistant Attorney General Ciraolo.  “This case demonstrates that there is no longer any country where it is safe for a defendant like Dr. Brandner to hide money from the government.  The Department of Justice, along with its law enforcement partners, will continue to aggressively pursue individuals who conceal assets and income abroad in an effort to evade their responsibilities under our nation’s tax laws.”

Dr. Michael D. Brandner, 67, was convicted by a federal jury in November 2015 of four counts of wire fraud and three counts of tax evasion.  The charges arose from a scheme to conceal over $5 million of assets in secret bank accounts in Panama and Costa Rica from the Internal Revenue Service (IRS) and Dr. Brandner’s wife.  According to the indictment and evidence introduced at trial, shortly after his wife filed for divorce in late 2007, Dr. Brandner collected millions of dollars in marital assets and secretly drove from Tacoma, Washington, to Costa Rica in Central America.  In Costa Rica, he opened two bank accounts into which he deposited over $350,000 in cash and hid a thousand ounces of gold in a safe deposit box.  He then traveled to Panama where he opened an account under the name of a sham corporation and deposited $4.6 million into the account in 2008.

Dr. Brandner concealed both the existence of the bank accounts and the interest income he earned on those accounts from the court in the divorce proceedings and from the IRS.  Dr. Brandner owed the IRS $500,000 in additional taxes for the 2008 through the 2010 tax years.  In 2011, Dr. Brandner repatriated over $4.6 million once the divorce was final only to have the funds seized by U.S. Immigration and Customs Enforcement Homeland Security Investigations (ICE HSI) special agents.  He then lied to federal agents about his control of the funds.

In addition to the prison term, U.S. District Judge Sharon Gleason in Anchorage ordered Dr. Brandner to serve two years of supervised release, and pay $25,922.95 toward the costs of prosecution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Loeffler thanked special agents of IRS-Criminal Investigation and HSI, who investigated the case and Trial Attorney Ignacio Perez de la Cruz of the Tax Division and Assistant U.S. Attorney Bryan Schroder of the District of Alaska, who jointly prosecuted the case.

RESOLUTION REACHED WITH BANK EKI GENOSSENSCHAFT REGARDING DOJ'S SWISS BANK PROGRAM

FROM:   U.S. JUSTICE DEPARTMENT 

Monday, August 3, 2015

Bank EKI Genossenschaft Reaches Resolution under Justice Department's Swiss Bank Program

The Department of Justice announced today that Bank EKI Genossenschaft (Bank EKI) has reached a resolution under the department’s Swiss Bank Program.

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

Make a complete disclosure of their cross-border activities;

Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

Cooperate in treaty requests for account information;

Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;

Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreement signed today, Bank EKI agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Bank EKI for tax-related criminal offenses.

Bank EKI was founded in 1852 and has its headquarters in the tourist resort town of Interlaken, Switzerland.  It also operates small branch offices in Bönigen, Wilderswil, Grindelwald and Lauterbrunnen, Switzerland.

Bank EKI opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations.  Many of the U.S.-related accounts were transferred from other Swiss financial institutions that were closing such accounts, and Bank EKI knew or had reason to know that a portion of these accounts were likely undeclared.

Bank EKI provided traditional Swiss banking services that it knew could assist, and that did in fact assist, certain U.S. taxpayers in concealing their Bank EKI accounts from the Internal Revenue Service (IRS).  One such service was hold mail: for a fee, Bank EKI would hold all mail correspondence for a particular client at the bank.  By accepting and maintaining such accounts, Bank EKI thus ensured that documents reflecting the existence of the accounts remained outside the United States, beyond the reach of U.S. tax authorities and protected by Swiss banking secrecy laws.

Due in part to the means provided by Bank EKI and its personnel, and with the knowledge that Swiss banking secrecy laws would prevent Bank EKI from disclosing their identities to the IRS, many of the U.S. clients of Bank EKI filed false and fraudulent U.S. Individual Income Tax Returns, or IRS Forms 1040, that failed to report their respective interests in their undeclared accounts and the related income.  Moreover, many of the U.S. clients of Bank EKI also failed to file and otherwise report their undeclared accounts on Reports of Foreign Bank and Financial Accounts (FBARs).

Bank EKI did not sufficiently implement an effective system of supervisory policies, procedures or controls over its relationship managers to increase its U.S.-related clients’ tax compliance.  Moreover, Bank EKI’s relationship managers too readily accepted representations and directions from the accountholders without adequately investigating questionable information.

Since Aug. 1, 2008, Bank EKI held a total of 64 U.S.-related accounts with just over $21 million in aggregate assets.  Bank EKI will pay a penalty of $400,000.

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS, and in particular, IRS-Criminal Investigation and the IRS Large Business and International Division for their substantial assistance.  Ciraolo also thanked Dara B. Oliphant, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

MASS DENTISTS GOES TO PRISON FOR TAX EVASION

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, June 26, 2015

Massachusetts Dentist Sentenced to Prison for Tax Evasion

A Douglas, Massachusetts, dentist was sentenced today to serve 16 months in prison for tax evasion in the U.S. District Court for the District of Massachusetts, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  

George Fenzell was indicted in February 2014 by a federal grand jury sitting in Boston on multiple counts of tax evasion and one count of corruptly endeavoring to obstruct the Internal Revenue Service (IRS).  In November 2014, he pleaded guilty to one count of tax evasion.

U.S. District Court Judge Timothy S. Hillman also sentenced Fenzell to one year of supervised release and ordered him to pay $157,407 in restitution to the IRS.  In sentencing Fenzell, Judge Hillman departed downward from the recommended U.S. Sentencing Guidelines range due, in part, to Fenzell’s cooperation with the government on other matters.

According to court documents, from 1999 through 2012, Fenzell engaged in conduct intended to obstruct the IRS.  For the years 1999 through 2007, he failed to file timely federal income tax returns and concealed income that he earned from his dental practice from the IRS.  Fenzell operated a dental office located in Shrewsbury, Massachusetts.  He concealed his dental business receipts by diverting the funds through nominee entities, including River Valley Dental.  He used multiple nominee bank accounts to conceal his ownership of his income and assets.  Fenzell also titled and registered a Lincoln Navigator and Ducati motorcycle with another nominee entity, Smiling Trust, and made extensive use of cash in order to conceal his fraud from the IRS.

In response to a Massachusetts Department of Revenue investigation and collection action in 2007, Fenzell filed his delinquent federal tax returns for 2000 through 2005.  In filing those returns, Fenzell admitted that he owed federal income taxes totaling $129,841.  Fenzell had not made any tax payments to the IRS for those years.  Rather than pay the federal income taxes and additional interest and penalties that were due and owing, between 2007 and 2012, Fenzell evaded IRS collection efforts by diverting his business receipts to nominee entities and using nominee bank accounts in Florida and Rhode Island to hide his income and assets.  During the same period, he falsified his 2006 and 2007 tax returns that he filed late in 2009, and also failed to file his tax returns for 2008 through 2011.

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief John N. Kane Jr. and Trial Attorney Thomas Koelbl of the Tax Division, who are prosecuting the case.  Ciraolo also thanked the U.S. Attorney’s Office of the District of Massachusetts for their substantial assistance.

ADULT ENTERTAINMENT BUSINESSMAN PLEADS GUILTY TO TAX EVASION

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, November 24, 2014

Massachusetts Businessman Involved in Adult Entertainment Industry Pleads Guilty to Tax Evasion

A Massachusetts businessman pleaded guilty to tax evasion for using nominee entities to hide ownership and control over his businesses and assets from the Internal Revenue Service (IRS), announced Acting Deputy Assistant Attorney General Larry J. Wszalek for the Justice Department’s Tax Division and U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.

According to the indictment, Richard L. Furnelli, a former resident of Holyoke and South Hadley, Massachusetts, evaded payment of his federal income taxes for 2006 through 2009, among other years, and also failed to file his federal individual income tax returns for those years.

The indictment alleges that from 2006 through 2009, Furnelli earned more than $2 million in income.  Furnelli operated or held substantial interest in Solid Gold Inc. and Gold Club-SF LLC, which owned and operated the Gold Club, an adult entertainment venue in San Francisco.  These corporations allegedly earned annual gross receipts ranging from $2.5 million to more than $10 million dollars.  During that time period, the indictment also alleges that Furnelli directed the payment of his income to a nominee entity, RLF Ventures LLC, and utilized a bank account held in a nominee name.

According to the plea documents, Furnelli has agreed to pay his outstanding federal income taxes owed to the IRS for the years 1998 through 2009.

Furnelli faces a statutory maximum sentence of five years in prison and a $250,000 fine for tax evasion at his April 29, 2015, sentencing before U.S. District Judge Michael A. Ponsor for the District of Massachusetts.

The case was investigated by special agents of IRS–Criminal Investigation of the Springfield, Massachusetts, Field Office.  Trial Attorneys Mark S. McDonald and Thomas G. Voracek of the Tax Division are prosecuting the case.

BUSINESSMAN SENTENCED TO 36 MONTHS IN PRISON FOR USING FOREIGN BANK ACCOUNT TO EVADE TAXES

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, May 7, 2014

Wyoming Businessman Sentenced to Prison for Using Concealed Caribbean Bank Account in Tax Evasion Scheme

Robert C. Sathre was sentenced today to serve 36 months in federal prison for tax evasion by U.S. District Judge Alan B. Johnson in Cheyenne, Wyoming, the Justice Department and Internal Revenue Service (IRS) announced.  Sathre was also ordered to pay $3,113,882 in restitution to the IRS and to serve three years of supervised release.  Sathre pleaded guilty on Feb. 26, 2014, to willfully evading the payment of his 1995 and 1996 tax liability.

According to court documents and proceedings, Sathre sold a Minnesota business and received installment payments in 1995 and 1996 of more than $3 million.  Sathre concealed his income by filing a 1995 tax return in which he reported only $64,928 in total income.  Sathre then purchased land and set up another business, a gas station and convenience store in Sheridan, Wyoming, known as the Rock Stop.

According to court documents and proceedings, Sathre concealed assets by opening a foreign bank account in the Caribbean island of Nevis and by using purported trusts.  In a 10 month period spanning from 2005 through 2006, Sathre sent over $500,000 to the account in Nevis to keep the funds out of reach from the IRS.  When Sathre sold the Rock Stop in 2007, he wired over $1,250,000 from the sale proceeds to the trust account of a Wyoming law firm.  He later directed the law firm to wire $900,000 from the trust account to his account at the Bank of Nevis.  Sathre also provided a false declaration and false promissory note to the Bank of Nevis to conceal the source of this transfer and obtained a debit card linked to the foreign account to access funds locally.  In addition, Sathre provided the Bank of Sheridan with an IRS form on which he falsely claimed that he was neither a citizen nor a resident of the United States.

This case was investigated by special agents of IRS – Criminal Investigation.  Trial Attorneys Ellen Quattrucci and Ignacio Perez de la Cruz of the Justice Department’s Tax Division prosecuted the case.

ATTORNEY SENTENCED IN SCHEME TO HIDE MILLIONS IN SWISS ACCOUNTS

FROM:  U.S. JUSTICE DEPARTMENT SWISS ACCOUNTS 
Tuesday, March 18, 2014
California Attorney Sentenced to Prison in Scheme to Hide Millions in Secret Swiss Accounts at UBS AG and Pictet & Cie

California attorney Christopher M. Rusch was sentenced to serve 10 months in prison for helping his clients Stephen M. Kerr and Michael Quiel, both businessmen from Phoenix, hide millions of dollars in secret offshore bank accounts at UBS AG and Pictet & Cie in Switzerland, the Justice Department and the Internal Revenue Service (IRS) announced today.   U.S. District Judge James A. Teilborg also ordered Rusch to serve three years of supervised release following his prison sentence.   On Feb. 6, 2013, Rusch pleaded guilty to conspiracy to defraud the government and failing to file a Report of Foreign Bank and Financial Accounts (FBAR).   Kerr and Quiel were sentenced in September 2013 to each serve 10 months in prison after both were tried and convicted of filing false income tax returns for 2007 and 2008.   The jury also convicted Kerr of failing to file FBARs for 2007 and 2008.

According to the evidence presented at trial, Kerr and Quiel, with the assistance of Rusch and others, including Swiss nationals, established nominee foreign entities and corresponding bank accounts in Switzerland to conceal Kerr and Quiel’s ownership and control of stock and income they deposited in these accounts.   Rusch testified at trial, admitting that he and others caused the sale of the shares of stock through the undeclared accounts.   Rusch further testified that, at Kerr and Quiel’s direction, he transferred some of the money in the secret accounts back to the United States through Rusch’s Interest on Lawyer’s Trust Account before dispersing the money for Kerr and Quiel’s benefit, including the purchase of a multi-million dollar golf course in Erie, Colo.   According to court documents and evidence presented at trial, with Rusch’s assistance, Kerr and Quiel each failed to report more than $ 4,600,000 and $2,000,000 of income, respectively, during 2007 and 2008 which they hid in the undeclared accounts with Rusch’s assistance.

“We are getting more and more information all the time about offshore banking activities,” said Assistant Attorney General Kathryn Keneally for the Tax Division.   “We are committed to investigating and prosecuting those who continue to evade taxes and reporting requirements.   As these sentences show, those who fail to come into compliance risk high penalties and jail.”

“This prosecution serves notice that the Department of Justice will not tolerate fraudulent activity designed to undermine the integrity of our income tax system,” said U.S. Attorney John S. Leonardo for the District of Arizona.

“Today, Mr. Rusch has been held accountable for his actions in assisting wealthy individuals hide millions of dollars in secret offshore bank accounts and dodge the tax system,” said Chief of IRS-Criminal Investigation Richard Weber.   "In addition, Mr. Rusch used his attorney trust account to funnel money from the secret offshore accounts back to Mr. Kerr and Mr. Quiel for their personal benefit, including the purchase of a multi-million dollar golf course.   As the investigation into offshore tax evasion continues, Criminal Investigation will leave no financial stone unturned as we continue to vigorously pursue new leads."

The case was investigated by special agents of IRS-Criminal Investigation, and was prosecuted by Trial Attorney Timothy J. Stockwell for the Tax Division and Assistant U.S. Attorney Monica Edelstein for the District of Arizona.

 Additional information about the Justice Department’s Tax Division and its enforcement efforts is available at the website.

DENTIST CHARGED WITH TRYING TO PULL TAX EVASION SCHEME

FROM:  JUSTICE DEPARTMENT 
Friday, February 28, 2014
Massachusetts Dentist Charged with Tax Evasion

A federal grand jury in Boston has indicted George Fenzell for tax evasion and corruptly endeavoring to obstruct the Internal Revenue Service (IRS), the Justice Department and the IRS announced today following the unsealing of the indictment.  Fenzell, of Douglas, Mass., is a practicing dentist with offices in Shrewsbury, Mass., and Brookline, N.H.

According to the indictment, from 1999 through 2012, Fenzell engaged in conduct intended to obstruct the IRS from computing, assessing and collecting his income taxes.  He stopped filing timely tax returns and allegedly tried to conceal his dental practice income in a variety of ways.  The indictment alleges that Fenzell used nominee entities, including River Valley Dental and Brookline Dental Associates Trust, to conceal his dental practice receipts.  The indictment also alleges that he used multiple bank accounts in three separate states, including commingled accounts maintained by third parties, to conceal his ownership of funds.

 According to the indictment, Fenzell used nominees as trustees to make it appear as though other individuals owned and controlled his assets and income.  Finally, Fenzell allegedly falsified his delinquent 2006 and 2007 tax returns and made extensive use of cash in order to conceal his fraud.

The indictment further alleges that in 2007, Fenzell, prompted in part by a Massachusetts Department of Revenue investigation, filed delinquent federal tax returns for tax years 2000 through 2005.  Those returns allegedly reported that he owed approximately $129,000 in federal income taxes for these years, which resulted in a total of more than $300,000 including interest and penalties.
 According to the indictment, between 2007 and 2012, Fenzell allegedly sought to evade IRS collection by making his business receipts payable to nominee entities and by using nominee bank accounts in Florida and Rhode Island to divert and hide collectible income and assets.  The indictment also alleges that Fenzell failed to file his 2008 through 2011 tax returns at that time required by law, and used nominee entities and accounts in an effort to evade his taxes.

An indictment merely alleges that crimes have been committed, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.  If convicted, Fenzell faces a statutory maximum potential sentence of five years in prison for each count of tax evasion and a statutory maximum potential sentence of three years in prison for the count of corruptly endeavoring to obstruct the IRS.

This case was investigated by IRS-Criminal Investigation Special Agents.  It is being prosecuted by Assistant Chief John N. Kane Jr. and Trial Attorney Robert Kennedy of the Tax Division.          

WHOLESALE SPORTSWEAR DISTRIBUTOR SENTENCED FOR TAX EVASION

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, December 6, 2013

Owner of New York Sportswear Distribution Business Sentenced for Tax Fraud
Harry Neuhoff, a resident of Brooklyn, N.Y., was sentenced to serve  12 months and one day in prison and three years supervised release for tax evasion, the Justice Department and Internal Revenue Service (IRS) announced today.

According to documents filed with the court, Neuhoff was the president and an owner of EVA TEES Inc., a wholesale distributor of sportswear.  EVA TEES was formerly located in Long Island City, N.Y., and is presently located in Piscataway, N.J.  From approximately 2006 to 2008, Neuhoff manipulated EVA TEES accounts through his accounting software program to delete cash sales from the general ledger accounts maintained on the computer accounting system.  As a result, Neuhoff caused false corporate tax returns to be filed with the IRS that underreported the company’s gross receipts.  During those years, Neuhoff’s behavior also resulted in his filing false personal income tax returns with the IRS.  According to documents filed with the court, Neuhoff underreported the gross receipts of EVA TEES by at least $1.5 million using computer manipulation.

The case was investigated by IRS-Criminal Investigation.  Trial Attorneys Mark Kotila and Karen E. Kelly of the Justice Department’s Tax Division prosecuted this case.

MAN CHARGED WITH OBSTRUCTING IRS ABILITY TO IDENTIFY HIS INCOME

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, August 14, 2013

Kentucky Resident Charged with Tax Evasion and Other Tax Fraud Charges
Kathryn Keneally, Assistant Attorney General of the Justice Department’s Tax Division, and Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, jointly announced today that James S. Faller II, of Russell Springs, Ky., was indicted by a federal grand jury in Bowling Green, Ky.  Faller, a consultant and private investigator, is charged in an eleven count indictment with obstructing the internal revenue laws, evading his individual income taxes, making and subscribing to a false form that he filed with the Internal Revenue Service (IRS) and failing to file his individual income tax returns.

The indictment alleges that Faller obstructed the IRS’s ability to collect payment of a substantial penalty he owed to the government and the IRS’s ability to identify his income from 2006 through 2009.  According to the indictment, Faller evaded the payment of a $216,000 penalty related to unpaid employment taxes of Call Center Communications Inc., of which Faller was the president.  In addition, Faller was charged with evading his individual income taxes from 2006 through 2009.  He allegedly failed to report more than $960,000 of income during this four-year period and committed various affirmative acts of evasion.

Faller faces a maximum punishment of three years in prison for the charge of obstructing the internal revenue laws; five years for each count of evading his individual income taxes; three years for making and subscribing to a false form that he filed with the IRS; and one year for each count of failing to file his individual income tax returns.  He faces a maximum fine of $100,000 on each count of failing to file his income tax returns and $250,000 for each of the other counts.  An indictment merely alleges that a crime has been committed, and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.
The case resulted from an investigation by special agents of the IRS - Criminal Investigation.  Tax Division Trial Attorney Thomas Voracek and Assistant U.S. Attorney Lee Gentry are prosecuting the case.

OWNER OF SPORTSWEAR DISTRIBUTION BUSINESS PLEADS GUILTY TO TAX EVASION

FROM:  U.S. JUSTICE DEPARTMENT 
Thursday, July 18, 2013
Brooklyn Owner of Sportswear Distribution Business Pleads Guilty to Tax Evasion

The Justice Department and Internal Revenue Service (IRS) announced today that Harry Neuhoff, a resident of Brooklyn, N.Y., has pleaded guilty to tax evasion.

According to documents filed with the court, Neuhoff was president and an owner of EVA TEES Inc., formerly of Long Island City, N.Y. and presently located in Piscataway, N.J. From approximately 2006 to 2008, Neuhoff manipulated EVA TEES accounts through an accounting software program to delete cash sales from the general ledger accounts maintained on the computer accounting system. As a result, Neuhoff filed  false corporate tax returns on behalf of EVA-TEES with the IRS that underreported the gross receipts of EVA TEES.  Neuhoff’s conduct also correspondingly resulted in his filing of false personal income tax returns with the IRS for those years.  According to the documents filed with the court, Neuhoff underreported the gross receipts of EVA TEES through computer manipulations by at least $1.5 million. Sentencing is scheduled for Nov. 8, 2013 before U.S. District Court Judge Edward Korman.

Neuhoff faces a maximum sentence of five years in prison, three years of supervised release, a $250,000 fine and a $100 special assessment. He has agreed to pay restitution to the IRS.

 The case was investigated by IRS-Criminal Investigation. Trial Attorneys Mark Kotila and Karen E. Kelly of the Justice Department’s Tax Division prosecuted this case.

MAN GETS PRISON SENTENCED FOR UNDER-REPORTING BUSINESS INCOME

FROM: U.S. DEPARTMENT OF JUSTICE

Monday, November 19, 2012
San Diego Used Car Wholesaler Sentenced on Tax Evasion
Mohammad Jafar Nikbakht, aka Freydoon Nikbakht, was sentenced Friday to 15 months in prison for evading his individual income taxes, the Justice Department and Internal Revenue Service (IRS) announced. According to the indictment and other documents filed with the court, Nikbakht ran a series of lucrative auto dealerships in the greater San Diego area and significantly under-reported income earned through these businesses. John A. Houston, U.S. District Court Judge for the Southern District of California, who presided over the sentencing hearing, found that Nikbakht caused over $200,000 in tax loss. Judge Houston ordered Nikbakht to make restitution payments to the IRS for $124,454 of this amount.

Nikbakht had pleaded guilty to tax evasion on March 30, 2011. At his plea hearing, he admitted that during 2007 he earned income through auto dealership operations, including through a dealership called Southern California Car Exchange. Nikbakht further admitted that he willfully failed to file his personal tax return and pay his taxes for 2007, and that he engaged in various acts to conceal income from the IRS. For example, Nikbakht admitted that he operated under another dealer’s license and that he instructed the other dealer to write his income payment checks to the order of a third-party or to "cash".

Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, commended special agents of IRS - Criminal Investigation, who prosecuted the case, and Tax Division Trial Attorneys Thomas W. Flynn and Joseph A. Rillotta, who prosecuted the case.

NURSING HOME COMPANY EMPLOYEE SENTENCED FOR KICKBACKS AND TAX EVASION

FROM:  U.S. DEPARTMENT OF JUSTICE

Thursday, July 19, 2012

Former Employee of Nursing Home Company Operating in North Carolina and Virginia Sentenced to Serve 63 Months in Prison for Kickback Schemes and Tax Evasion

 

 

WASHINGTON – The former director of corporate maintenance and renovations at Medical Facilities of America Inc. (MFA) was today sentenced to serve 63 months in prison for accepting kickbacks from contractors and evading federal income taxes, the Department of Justice announced. MFA operates health care and nursing home facilities throughout Virginia and North Carolina.

John D. Henderson, of Colonial Heights, Va., was sentenced in U.S. District Court in Roanoke, Va., by Judge Samuel G. Wilson. In addition to his prison sentence, Henderson was ordered to pay a total of $698,088 in restitution and additional taxes, penalties and interest to the Internal Revenue Service for his participation in two separate conspiracies. The conspiracies involved steering contracts for the repair, maintenance and renovation at MFA health care and nursing home facilities. One of the conspiracies took place from about June 1998 until at least December 2006, and the other conspiracy took place from about July 2005 until at least December 2006. Henderson pleaded guilty on March 14, 2012, to two counts of conspiracy to commit mail and honest services fraud for the kickback schemes and to two counts for failing to include the kickbacks and other income he received on his federal income tax returns for years 2005 and 2006.

According to the four-count felony charge, Henderson oversaw the bidding process for repair, maintenance and renovation contracts at MFA facilities. To facilitate the conspiracies, Henderson steered contracts to several venders in return for kickbacks; created fictitious competitor bids that were higher than the quotes submitted by the venders who paid him, in order to create the appearance of competition; and directed subordinates to solicit quotes only from vendors who paid him. Henderson received more than $560,000 in kickbacks and had at least $101,000 more paid to a co-conspirator, and in return steered MFA contracts totaling more than $5 million. 

 

“Through this kickback scheme, Henderson and his co-conspirators deprived MFA of competitive pricing to its financial detriment,” said Acting Assistant Attorney General Joseph Wayland in charge of the Antitrust Division. “Today’s sentencing demonstrates the division’s commitment to holding executives accountable for disrupting the competitive bidding process for service contracts.”

Henderson is the fifth individual to plead guilty in the department's fraud investigation into the award of repair, maintenance and renovation contracts at facilities owned by MFA. On Oct. 18, 2011, both Donald R. Holland and Larry R. Sumpter pleaded guilty in U.S. District Court in Roanoke to participating in the scheme. On Jan. 31, 2012, Holland and Sumpter were each sentenced by Judge Samuel G. Wilson to serve two years of probation and were fined $50,000 and $15,000, respectively. On April 4, 2011, Edward T. Fodrey pleaded guilty in U.S. District Court in Norfolk, Va., and was sentenced by Judge Mark S. Davis on Jan. 31, 2012, to serve 37 months in prison and was ordered to pay $326,799 in restitution. Gary L. Johns pleaded guilty on Dec. 12, 2011, in U.S. District Court in Roanoke and was sentenced by Judge Wilson on March 14, 2012 to serve three years of probation and to pay $169,341 in restitution.

MINNESOTA BUSINESS OWNER PLEADS GUILTY TO TAX CRIMES

FROM:  U.S. JUSTICE DEPARTMENT
Monday, June 11, 2012
Minnesota Business Owner Pleads Guilty to Federal Excise Tax Crimes and Tax Fraud
Jason W. Leas, a resident of Crookston, Minn., and co-founder of Best Used Trucks of Minnesota Inc., pleaded guilty today to one count of failing to pay federal excise taxes, one count of failing to file a federal excise tax return and one count of filing a false individual federal income tax return for tax year 2007, the Justice Department and Internal Revenue Service (IRS) announced. Leas was charged by information filed on May 29, 2012.  He entered his plea of guilty before U.S. District Court Senior Judge Richard H. Kyle in Duluth, Minn.

As alleged in the plea agreement, from 2004 through 2007, Best Used Trucks, which is located in Crookston, was a farm truck dealership that bought and sold used trucks, new trailers, new grain boxes and other heavy farm equipment, primarily to farmers throughout the Red River Valley of Minnesota and North Dakota.  Beginning in 2004 and continuing through 2007, Leas and Best Used Trucks purchased and imported new end dump trailers, grain boxes, and gravel boxes from a Canadian manufacturer, which subjected the company to federal excise taxes upon selling them afterward.   Leas admitted that he knew of his responsibility for paying the 12 percent federal excise tax on the sale of these trailers and related equipment, and his responsibility to file federal excise tax returns.  Leas pleaded guilty to failing to file an IRS Form 720, Quarterly Federal Excise Tax Return for the third quarter of 2005, and failing to pay federal excise taxes of $9,636 for the first quarter of 2006.  Leas admitted that he failed to pay over at least $80,088 in total federal excise taxes for ten quarters from 2004 through 2006.

Leas also pleaded guilty to willfully filing a false individual federal income tax return for the tax year 2007, which failed to report at least $120,151 in additional income with an additional tax due and owing of at least $36,872.  The plea agreement alleged that from 2004 to 2007 Leas controlled two checking accounts in the name of Best Used Trucks of Minnesota. Leas used one of these accounts to both divert corporate receipts from Best Used Trucks, and to buy and sell equipment that was not part of Best Used Trucks’s ordinary business sales.   Leas failed to report this income on his personal tax returns for four years, resulting in a total tax loss of at least $73,361.

“To build faith in our nation’s tax system, honest taxpayers need to be reassured that everyone is paying their fair share of taxes, whether it is in the form of income taxes or excise taxes,” said Kelly R. Jackson, Special Agent in Charge of the IRS Criminal Investigation Division, St. Paul Field Office.  “The IRS-Criminal Investigation Division, together with the Department of Justice, will continue to investigate and prosecute those who violate our tax system.”

Leas is facing a potential maximum penalty of five years in prison for all three charges; three years for willfully filing a false income tax return, and one year each for the failure to file and failure to pay charges.

Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, thanked Special Agents and Revenue Agents of IRS – Criminal Investigation, who investigated the case, and Tax Division Trial Attorneys Thomas W. Flynn and Dennis R. Kihm, who prosecuted the case.

TRYING TO HIDE WIFE'S INCOME NETS "BISHOP" 53 MONTHS IN PRISON

FROM:  U.S. JUSTICE DEPARTMENT
Friday, June 8, 2012
Former Alabama Resident Sentenced to 53 Months in Prison for Tax EvasionTried to Hide Wife’s Income from Irs as Phony Loans

William Paul, a self-described “bishop,” was sentenced yesterday to 53 months in federal prison for tax evasion, the Justice Department and Internal Revenue Service (IRS) announced. Paul was convicted on Dec. 1, 2011, after a four-day jury trial, of four counts of evasion of his wife’s 2004 through 2007 individual income taxes and of one count of failing to file a tax return. On Nov. 16, 2011, his wife, Donna Paul, a board-certified physician, pleaded guilty to one count of tax evasion and one count of filing a false individual income tax return. She was also sentenced yesterday to three years of probation, including six months of home confinement and 200 hours of community service. U.S. District Judge Mark E. Fuller also ordered the Pauls to pay $85,396 in restitution to the IRS. Both William Paul and Donna Paul are former residents of Montgomery, Ala.

According to evidence introduced at trial and documents filed with Donna Paul’s plea agreement, Donna and William Paul owned and operated a medical practice in Montgomery, which was registered as a non-profit organization. The Pauls attempted to evade the assessment and payment of Donna Paul’s income by falsely characterizing her income as loans, by making false statements to IRS employees, and by deliberately causing the non-profit organizations to not file tax returns.

Evidence at trial further showed that Donna Paul did not timely file federal individual income tax returns for the years 2004 through 2007. On April 5, 2011, the day special agents from IRS-Criminal Investigation arrested her, Donna Paul filed four false individual income tax returns for tax years 2004 through 2007. She testified at trial that none of these tax returns included money she earned from her medical practice.

Based on testimony at trial, William Paul had not filed a federal income tax return since the 1980s. Donna Paul also testified that William Paul ran the business side of the medical practice, initially called “Rheumatology Specialists of Central Alabama,” then “Rheumatology Specialists Arthritis and Osteoporosis Center,” then “Children and Adult Arthritis and Osteoporosis Center.”

Kathryn Keneally, Assistant Attorney General of the Justice Department’s Tax Division, thanked special agents of IRS-Criminal Investigation, who investigated the case, Tax Division Trial Attorneys Justin Gelfand and Michael Boteler, who prosecuted the case, and George L. Beck Jr., U.S. Attorney for the Middle District of Alabama, and his entire office for their assistance in the prosecution.

INSURANCE SALESMAN FOUND GUILTY OF TAX CHARGES

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 22, 2012
Ohio Insurance Salesman Guilty of Tax Charges Mansfield Area Man Detained Following Jury Verdict
A jury convicted William A. Herder of Richland County, Ohio, yesterday on federal tax charges, the Justice Department and Internal Revenue Service (IRS) announced.  Trial began on May 11, 2012, before U.S. District Judge Sara Lioi, sitting in Akron, Ohio.  Herder was charged with corruptly endeavoring to impair and impede the due administration of the Internal Revenue laws, tax evasion and five counts of failure to file tax returns.  He was convicted of all counts.

According to the evidence at trial, Herder sold insurance for Aflac Inc, a nationwide supplemental insurance provider, from an office in Mansfield, Ohio.  Herder had not filed a timely or valid tax return in more than a decade.  For the 2000 tax year, Herder filed a tax return on which he falsely claimed that he had not earned any income.  Subsequently, Herder failed to file any tax returns for the 2001-2009 tax years, despite earning income and receiving numerous warnings and notices from the IRS.  The evidence at trial showed that, to prevent the IRS from collecting his unpaid taxes, Herder attempted to conceal his assets and income.  In 2003, Herder transferred title to his house to a bogus foundation he established in Utah called the “Mentor Foundation.”  Herder also cashed out an Individual Retirement Account and a life insurance policy, converted large amounts of cash to silver coins, and paid expenses with cash and money orders, all in an effort to prevent the IRS from collecting his unpaid taxes.

In addition to failing to file valid tax returns and hiding his assets from the IRS, trial evidence showed Herder submitted numerous obstructive letters and documents to the IRS and the insurance companies he represented in an effort to prevent the IRS from assessing and collecting his taxes.  In these letters, Herder falsely claimed, among other things, that the tax laws were not applicable to him.  The evidence at trial showed that Herder obtained some of these materials from Joseph Flickinger, who was previously convicted and sentenced for a tax fraud conspiracy and later enjoined from preparing tax returns for others.

Following the jury verdict, Herder was taken into custody. Sentencing is scheduled for Aug. 23, 2012.

Assistant Attorney General Kathryn Keneally of the Justice Department’s Tax Division thanked special agents of IRS - Criminal Investigation, who provided valuable assistance in conducting the investigation, Tax Division Trial Attorneys Melissa S. Siskind and Jeffrey McLellan, who prosecuted the case, and Tax Division Trial Attorney Sean R. Delaney, currently on detail to a U.S. Attorney’s office, who assisted with the investigation.

FORMER ARIZONA STATE REPRESENTATIVE PLEADS GUILTY TO FRAUD AND TAX EVASION

The following excerpt is from the Department of Justice website:
Wednesday, March 14, 2012
Former Arizona State Representative Pleads Guilty to Wire Fraud and Tax Evasion Related to the Misuse of More Than $140,000 in Charity Funds
WASHINGTON – Richard David Miranda, a former Arizona state representative, pleaded guilty today in the U.S. District Court for the District of Arizona to a two-count information charging him with defrauding a charity of more than $140,000 and evading income tax related to those unlawfully obtained funds.

The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; Special Agent in Charge James L. Turgal of the FBI’s Phoenix Field Office; and Special Agent in Charge Dawn Mertz of the Internal Revenue Service-Criminal Investigation (IRS-CI) Phoenix office.

“Mr. Miranda, a former member of the Arizona legislature and executive director of a non-profit organization, pleaded guilty today to using over $140,000 of the charity’s funds for his personal expenses, and then failing to disclose the extra income on his tax return,” said Assistant Attorney General Breuer.   “Having admitted this illegal conduct, Miranda will now face the consequences of his actions.   This Justice Department will continue to hold elected officials, just like ordinary citizens, accountable for their crimes.”

“The Federal Bureau of Investigation, the Internal Revenue Service and the Department of Justice remain steadfast in our efforts to combat public corruption at all levels of government by investigating and prosecuting those who deliberately abuse the public’s trust by using their office for personal gain stated,” said FBI Special Agent in Charge James L. Turgal Jr.   “The FBI and our law enforcement partners are committed to holding our elected officials accountable from intentionally engaging in schemes to profit from fraudulent activity and exploiting the faith placed in them by the American public.”  

“It is an embarrassment to the state and its people when a state representative deceives those he was elected to represent,” said IRS Special Agent in Charge Mertz.   “Former Representative Miranda selfishly defrauded a charity that was established to assist disadvantaged members of the community and used the profits for his own benefit.   Those in public office should be held to a higher standard and are not exempt from criminal prosecution.”

Miranda, 55, of Tolleson, Ariz., served as a member of the Arizona House of Representatives for the 13th District from 2011 until his resignation, effective Feb. 20, 2012.   Miranda previously served as a member of the Arizona State Senate from 2002 until 2011, and the Arizona House of Representatives from 1999 until 2002.   According to court documents, since July 2002, Miranda also served as executive director of Centro Adelante Campesino Inc. (Centro), a non-profit charitable organization that provided food, clothing and educational assistance to persons in need, including migrant farm workers, in and around Maricopa County, Ariz.

According to court documents, in May 2005, Miranda initiated a scheme to wind down Centro, sell Centro’s sole remaining asset (a building), and use the proceeds of the sale for personal expenses.   To do so, Miranda removed the charity’s longstanding volunteer accountant as an authorized signer on the charity’s bank and credit union accounts, and assumed sole control of the charity’s accounts and financial records.   He also told the volunteer accountant that the proceeds of the sale would be used to fund scholarships.   In March 2007, the building was sold for $250,000, and on March 7, 2007, a significant portion of the profits of that sale – $144,576 – were wired across state lines into Centro’s credit union account.

According to court documents, within one week of the wire transfer, Miranda began to withdraw the proceeds from Centro’s credit union account without the authorization or knowledge of Centro’s board of directors.   For example, Miranda obtained two checks payable to himself totaling $37,000, and paid off personal credit card debts totaling more than $60,000.   By Dec. 31, 2007, Miranda had withdrawn the remaining proceeds (approximately $46,836) using checks, withdrawals and electronic funds transfers, and used the funds to pay off additional personal debts and make numerous purchases for personal travel, services, clothing, food and household items.   Miranda also failed to report the proceeds of the sale as income on his IRS Form 1040 for calendar year 2007.

The charge of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or twice the amount gained or lost in the scheme.   The charge of attempt to evade or defeat tax carries a maximum penalty of five years in prison and a $100,000 fine.   Sentencing has been scheduled for June 5, 2012.

The case is being prosecuted by Trial Attorneys Edward T. Kang, Monique T. Abrishami and Brian A. Lichter of the Criminal Division’s Public Integrity Section, and Assistant U.S. Attorney Frederick A. Battista of the District of Arizona.   The case is being investigated by agents from the FBI Phoenix Field Office and IRS-CI Phoenix Office.

CPA LANDS IN PRISON FOR MAIL FRAUD AND TAX EVASION

The following is an excerpt from the Department of Justice website:

Thursday, September 8, 2011
WASHINGTON – Murphy Hubbard, a Springfield, Mo., CPA, was sentenced on Sept. 7, 2011, to 42 months in prison for his mail fraud and tax evasion convictions, the Justice Department and Internal Revenue Service (IRS) announced today. Sentence was imposed by District Court Judge Ortrie D. Smith in the Western District of Missouri and follows a plea of guilty to two counts of mail fraud and one count of tax evasion previously entered by the defendant. Hubbard was remanded into custody immediately following the sentencing.
According to court documents, Hubbard owned and operated an accounting and tax business known as The Hubbard Group PC. Hubbard embezzled more than $400,000 from two trusts placed under his control by local families between 1998 and 2009. The first of these trusts, created by Ms. Hazel Beatrice S. Hirst of Springfield designated four local charities as the beneficiaries of her life’s savings. The second trust, established by the heirs of Mr. Noel C. Rummens of Rogersville, Mo., was created for the express purpose of funding educational expenses for Mr. Rummens’s surviving heirs and relatives.
Rather than fulfilling the wishes of these families by faithfully executing their trust agreements, Hubbard instead took the vast majority of this money for himself, using it to pay personal expenses, to buy items such as automobiles and farm equipment and for travel. Virtually all of the money taken from these trusts went unreported to the IRS, resulting in a tax loss of approximately $79,434.
In addition to the 42 month prison term, Judge Smith also ordered Hubbard to pay full restitution to the victims in this case, including $389,221 to the lawful representatives of the estate of Ms. Hirst and the Noel C. Rummens Educational Trust and $79,434 to the IRS.”