Tag Archives: Federal Bureau of Investigation

Remarks about Massive Medicare Fraud Strike Force Takedown

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Remarks by Acting Assistant Attorney General David A. O’Neil for the Medicare Fraud Strike Force Takedown

WASHINGTON ~ Tuesday, May 13, 2014
In today’s nationwide takedown, scores of defendants were arrested across the country for engaging in health care fraud – to the tune of hundreds of millions of dollars in fraudulent bills to Medicare.   Among the defendants charged today were doctors, home health care providers, doctor’s assistants, pharmacy owners and medical supply company executives.   The crimes charged represent the face of health care fraud today – doctors billing for services that were never rendered, supply companies providing motorized wheelchairs that were never needed, recruiters paying kickbacks to get Medicare billing numbers of patients.   The fraud was rampant, it was brazen, and it permeated every part of the Medicare system.

But law enforcement is striking back.   In Brooklyn, Tampa, Detroit, Houston, Los Angeles, and right here in Miami, 90 defendants were charged today with having submitted over $260 million in fraudulent claims to Medicare.   Using cutting-edge, data-driven investigative techniques to find fraud, we are bringing fraudsters to justice and saving the American taxpayers billions of dollars.   Overall, since its inception, the Department of Justice’s Medicare Strike Force has charged nearly 1,900 individuals involved in approximately $6 billion of fraud.

Today’s defendants played a variety of key roles in the schemes alleged in this takedown.   But most strikingly, at the center of this takedown are the 27 medical professionals, including 16 physicians, who we allege breached the public trust and their professional duties of care, selling out their medical licenses for the lure of easy money.

For example, in Houston, we are announcing charges against five doctors employed by a health care clinic who were paid to provide $1.4 million worth of referrals for home health treatments that were not necessary and often not even provided.

In Los Angeles, we have charged a physician with false billings for medically unnecessary home health and medical equipment orders that cost Medicare over $23 million — including hundreds of expensive power wheelchairs for people who did not need or want them.

In some of these schemes, we saw doctors going to extravagant lengths to conceal their fraud.  In Detroit, we charged a doctor who allegedly conspired with his billing company to conceal his false billings through a complex web of sham partnerships with other health care companies.

In other schemes, we seized extravagant fruits of the crimes, including bank accounts, jewelry, and luxury vehicles tied to the scheme.

The foundation for the success of the Medicare Fraud Strike Force is data.   Cold, hard data.  Medicare recently made physician billing data public for the first time, which has prompted reporters and researchers to take a close look at who is billing Medicare for what.   Our agents and prosecutors have used those numbers and other real-time data for years.   We take that data, provided to us by CMS, and we use sophisticated analytic tools to identify billing patterns that stand out compared to other health care providers in their communities.   The result?   We have identified billions of dollars in Medicare fraud, spread across the country.   This real-time data helps us pinpoint new schemes as they arise so we can stay one step ahead of the fraudsters.

But it is not just data.   We are also using traditional law enforcement techniques used in other types of investigations, like those used in corruption or organized crime cases, to develop evidence.   Undercover officers, Title III wiretaps, hidden cameras, GPS trackers. And I also want to highlight the role that Medicare beneficiaries can play in rooting out fraud.   In many of the schemes charged today, powerful evidence of fraud came from Medicare beneficiaries finding out what was billed to Medicare using their numbers and coming forward to tell law enforcement what they were seeing.

We are investigating and prosecuting all levels of these schemes – from the recruiters to the medical professionals to the owners of these clinics.   We will bring to justice those who steal from Medicare.   With an overall conviction rate of 95%, the Medicare Fraud Strike Force has sent that message to over 1,400 Medicare fraudsters who have been convicted since the Strike Force began operations in 2007.   In fact, just yesterday, a jury convicted a Dallas doctor who took cash in exchange for falsely certifying that Medicare beneficiaries qualified for home health services.

Make no mistake, together with our partners in the U.S. Attorneys’ Offices, the FBI, and the Department of Health and Human Services, the Criminal Division of the Department of Justice will continue to aggressively investigate health care fraud using every tool available to us.   We are committed to the fight against Medicare fraud.   We will bring to justice those who loot our nation’s health care funds, and we will recover what has been stolen.

Thank you.

Massive Medicare Fraud Strike Force Takedown

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Medicare Fraud Strike Force Charges 90 Individuals for Approximately $260 Million in False Billing

27 Medical Professionals, Including 16 Doctors, Charged with Health Care Fraud
Attorney General Eric Holder and Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced today that a nationwide takedown by Medicare Fraud Strike Force operations in six cities has resulted in charges against 90 individuals, including 27 doctors, nurses and other medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $260 million in false billings.

Attorney General Holder and Secretary Sebelius were joined in the announcement by Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, FBI Assistant Director Joseph Campbell, U.S. Department of Health and Human Services (HHS) Inspector General Daniel R. Levinson and Deputy Administrator and Director of the Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity Shantanu Agrawal.

This coordinated takedown is the seventh national Medicare fraud takedown in Strike Force history.   The Medicare Fraud Strike Force operations are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since their inception in March 2007, Strike Force operations in nine locations have charged almost 1,900 defendants who collectively have falsely billed the Medicare program for almost $6 billion.  In addition, CMS, working in conjunction with HHS-OIG, has suspended enrollments of high-risk providers in five Strike force locations and has removed over 17,000 providers from the Medicare program since 2011.

The joint Department of Justice and HHS Medicare Fraud Strike Force is a multi-agency team of federal, state and local investigators designed to combat Medicare fraud through the use of Medicare data analysis techniques and an increased focus on community policing.   Almost 400 law enforcement agents from the FBI, HHS-OIG, multiple Medicaid Fraud Control Units and other federal, state and local law enforcement agencies participated in the takedown.

“Medicare is a sacred compact with our nation’s seniors, and to protect it, we must remain aggressive in combating fraud,” said Attorney General Holder.   “This nationwide Medicare Strike Force takedown represents another important step forward in our ongoing fight to safeguard taxpayer resources and to ensure the integrity of essential health care programs.  Department of Justice will not tolerate these activities.  And we will continue working alongside the Department of Health and Human Services – as well as federal, state, and local partners – to use every appropriate tool and available resource to find, stop, and punish those who seek to take advantage of their fellow citizens.”

“The Affordable Care Act has given us additional tools to preserve Medicare and protect the tens of millions of Americans who rely on it each day,” said Secretary Sebelius.  “By expanding our authority to suspend Medicare payments and reimbursements when fraud is suspected, the law allows us to better preserve the system and save taxpayer dollars.  Today we’re sending a strong, clear message to anyone seeking to defraud Medicare: You will get caught and you will pay the price.  We will protect a sacred trust and an earned guarantee.”

The defendants charged are accused of various health care fraud-related crimes, including conspiracy to commit health care fraud, violations of the anti-kickback statutes and money laundering.   The charges are based on a variety of alleged fraud schemes involving various medical treatments and services, including home health care, mental health services, psychotherapy, physical and occupational therapy, durable medical equipment and pharmacy fraud.

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare for treatments that were medically unnecessary and often never provided.  In many cases, court documents allege that patient recruiters, Medicare beneficiaries and other co-conspirators were paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed.  Collectively, the doctors, nurses, licensed medical professionals, health care company owners and others charged are accused of conspiring to submit approximately $260 million in fraudulent billings.

“Today, across the nation, scores of defendants were arrested for engaging in hundreds of millions of dollars in health care fraud,” said Acting Assistant Attorney General O’Neil.  “Among the defendants charged were 27 medical professionals, including 16 doctors.   The crimes charged represent the face of health care fraud today – doctors billing for services that were never rendered, supply companies providing motorized wheelchairs that were never needed, recruiters paying kickbacks to get Medicare billing numbers of patients.  The fraud was rampant, it was brazen, and it permeated every part of the Medicare system.  But law enforcement continues to strike back.  Using cutting-edge, data-driven investigative techniques, we are bringing fraudsters to justice and saving the American taxpayers billions of dollars.  Overall, since its inception, the Department of Justice’s Medicare Fraud Strike Force has charged nearly 1,900 individuals involved in approximately $6 billion of fraud.  We are committed to using every tool at our disposal to prevent, deter, and prosecute health care fraud.”

“We all feel the effects of health care fraud,” said FBI Assistant Director Campbell.  “It leads to higher health care costs and makes it harder for seniors and those who are ill to get the care they need.  The FBI and our law enforcement partners are committed to preventing and prosecuting health care fraud at all levels.  But we need the public’s help.  Take the time to be aware of fraud and call law enforcement if you see anything suspicious included in the billings to your insurance, Medicare, or Medicaid or have any unusual encounters with health care providers.  We can work together to ensure your hard-earned dollars are used to care for the sick and not to line the pockets of criminals.”

“ Today’s arrests demonstrate the effectiveness of our Strike Forces in combating Medicare and Medicaid fraud,” said HHS Inspector General Levinson.  “Through seamless teamwork, our agents and law enforcement partners bring lawbreakers to justice, protect beneficiaries and recover stolen taxpayer funds.”

“ Fraud can inflict real harm on Medicare beneficiaries and CMS is committed to working with our law enforcement partners to get criminals behind bars and out of the Medicare program as swiftly as possible,” said CMS Program Integrity Deputy Administrator Agrawal.  “Today’s actions represent further consequences for bad actors, many of whom CMS had already stopped paying, or even kicked out of the program. Fundamentally, this is about protecting the well-being of our beneficiaries and the investment of taxpayer dollars.”

In Miami, a total of 50 defendants were charged today and yesterday for their alleged participation in various fraud schemes involving approximately $65.5 million in false billings for home health care and mental health services, and pharmacy fraud.   In one case, two defendants were charged in connection with a $23 million pharmacy kickback and laundering scheme.   Court documents allege that the defendants solicited kickbacks from a pharmacy owner for Medicare beneficiary information, which was used to bill for drugs that were never dispensed.   The kickbacks were concealed as bi-weekly payments under a sham services contract and were laundered through shell entities owned by the defendants.

Eleven individuals were charged by the Houston Medicare Strike Force.   Five Houston-area physicians were charged with conspiring to bill Medicare for medically unnecessary home health services.   According to court documents, the defendant doctors were paid by two co-conspirators to sign off on home health care services that were not necessary and often never provided.

Eight defendants were charged in Los Angeles for their roles in schemes to defraud Medicare of approximately $32 million.   In one case, a doctor was charged for causing almost $24 million in losses to Medicare through his own fraudulent billing and referrals for durable medical equipment, including over 1,000 expensive power wheelchairs, and home health services that were not medically necessary and frequently not provided.

In Detroit, seven defendants were charged for their roles in fraud schemes involving approximately $30 million in false claims for medically unnecessary services, including home health services, psychotherapy and infusion therapy.   In one case, four individuals, including a doctor, were charged in a sophisticated $28 million fraud scheme, where the physician billed for expensive tests, physical therapy and injections that were not necessary and not provided.  Court documents allege that when the physician’s billings raised red flags, he was put on payment review by Medicare.   He was allegedly able to continue his scheme and evade detection by continuing to bill using the billing information of other Medicare providers, sometimes without their knowledge.

In Tampa, Florida, seven individuals were charged in a variety of schemes, ranging from fraudulent physical therapy billings to a scheme involving millions of dollars in physician services and tests that never occurred .  In one case, five individuals were charged for their alleged roles in a $12 million health care fraud and money laundering scheme that involved billing Medicare using names of beneficiaries from Miami-Dade County for services purportedly provided in Tampa area clinics, 280 miles away.  The defendants then allegedly laundered the proceeds through a number of transactions involving several shell entities.

In Brooklyn, New York, the Strike Force announced an indictment against Syed Imran Ahmed, M.D., in connection with his alleged $85 million scheme involving billings for surgeries that never occurred; Dr. Ahmed had been arrested last month and charged by complaint.   Dr. Ahmed has charged with health care fraud and making false statements.   In addition, the Brooklyn Strike Force charged six other individuals, including a physician and two billers who allegedly concocted a $14.4 million scheme in which they recruited elderly Medicare beneficiaries and billed Medicare for medically unnecessary vitamin infusions, diagnostic tests and physical and occupational therapy supposedly provided to these patients.

The cases announced today are being prosecuted and investigated by Medicare Fraud Strike Force teams comprised of attorneys from the Fraud Section of the Justice Department’s Criminal Division and from the U.S. Attorney’s Offices for the Southern District of Florida, the Eastern District of Michigan, the Eastern District of New York, the Southern District of Texas, the Central District of California, the Middle District of Louisiana, the Northern District of Illinois and the Middle District of Florida; and agents from the FBI, HHS-OIG and state Medicaid Fraud Control Units.

A complaint or indictment is merely an accusation, and defendants are presumed innocent unless and until proven guilty.

Three Former Broker-dealer Employees Plead Guilty in Manhattan Federal Court to Bribery of Foreign Officials, Money Laundering and Conspiracy to Obstruct Justice

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Three employees of a New York-based U.S. broker-dealer have pleaded guilty for their roles in bribery schemes involving two state economic development banks in Venezuela.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

Ernesto Lujan, Jose Alejandro Hurtado and Tomas Alberto Clarke Bethancourt pleaded guilty in New York federal court to conspiring to violate the Foreign Corrupt Practices Act (FCPA), to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.  These charges relate to a scheme to bribe a foreign official named Maria de los Angeles Gonzalez de Hernandez at Banco de Desarrollo Económico y Social de Venezuela (BANDES), a state economic development bank in Venezuela, in exchange for receiving trading business from BANDES.  Lujan, Hurtado and Clarke each also pleaded guilty to an additional charge of conspiring to violate the FCPA in connection with a similar scheme to bribe a foreign official employed by Banfoandes (the “Banfoandes Foreign Official”), another state economic development bank in Venezuela, and to conspiring to obstruct an examination by the U.S. Securities and Exchange Commission (SEC) of the New York-based broker-dealer (the “Broker-Dealer”) where all three defendants had worked, to conceal the true facts of the Broker-Dealer’s relationship with BANDES.

Lujan, 50, and Clarke, 43, entered their guilty pleas yesterday before U.S. Magistrate Judge James C. Francis IV, and Hurtado, 38, pleaded guilty today, also before Judge Francis. The men each pleaded guilty to the same six offenses and face a maximum penalty of five years in prison on each count except money laundering, which carries a maximum penalty of 20 years in prison.  Sentencing for Lujan and Clarke is scheduled for Feb. 11, 2014, before U.S. District Judge Paul G. Gardephe.  Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer Jr. on March 6, 2014.

According to the informations filed against Lujan, Hurtado and Clarke this week, the criminal complaints previously filed, and statements made during the plea proceedings, Lujan, Clarke and Hurtado worked or were associated with the Broker-Dealer, principally through its Miami offices.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Lujan, Clarke and Hurtado, and which offered fixed income trading services to institutional clients.

One of the Broker-Dealer’s clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance.  The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding.  Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.  At her direction, BANDES conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed-income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

The Broker-Dealer also conducted business with Banfoandes, another state development bank in Venezuela that, along with its 2009 successor Banco Bicentenario, operated under the direction of the Venezuelan Ministry of Finance.  Banfoandes acted as a financial agent of the Venezuelan government in order to promote economic and social development by, among other things, offering credit to low-income Venezuelans.  The Banfoandes Foreign Official was responsible for some of Banfoandes’s foreign investments.

Court records state that from early 2009 through 2012, Lujan, Clarke and Hurtado participated in a bribery scheme in which Gonzalez allegedly directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer, including Lujan, Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez allegedly received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades.  Specifically, Gonzalez allegedly received kickbacks and payments from Broker-Dealer agents and employees that were frequently in six-figure amounts.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places.  For instance, Lujan, Clarke and Hurtado used accounts they controlled in Switzerland to transfer funds to an account Gonzalez allegedly controlled in Switzerland.  Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account allegedly held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland.  Hurtado also sought and allegedly received reimbursement from Gonzalez for the U.S. income taxes he had paid on money that he used to make kickback payments to Gonzalez.  Lujan and Clarke also derived substantial profit from their roles in the bribery scheme.

According to court records, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011 the SEC’s examination staff made several visits to the Broker-Dealer’s offices in Manhattan.  In early 2011, Lujan, Clarke and Hurtado discussed their concern that the SEC was examining the Broker-Dealer’s relationship with BANDES and asking questions regarding certain emails and other information that the SEC examination staff had discovered.  Lujan, Clarke and Hurtado agreed that they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including deleting emails.  Lujan, Clarke and Hurtado then, in fact, deleted emails.  Additionally as part of this effort to obstruct the SEC examination, Clarke lied to SEC examination staff in response to an interview question about his relationship to an individual who had received purported foreign associate payments relating to BANDES.

In a related scheme, from 2008 through mid-2009, Lujan, Clarke and Hurtado paid bribes to the Banfoandes Foreign Official, who, in exchange, directed Banfoandes trading business to the Broker-Dealer.

Gonzalez was charged in a criminal complaint and arrested on May 3, 2013, in connection with the BANDES bribery scheme.  The charges against Gonzalez are merely accusations, and she is presumed innocent unless and until proven guilty.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs.

Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant U.S. Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

“Upstart Start-Up” GeyerGorey LLP Opens Dallas Office

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“Rocketing from two to eleven attorneys in eight months, GeyerGorey LLP sports over 200 years of cross-disciplinary prosecutorial experience involving a host of domestic and international industries where each of its attorneys has worked on internal investigations and high stakes cases for an average of more than 20 years.”

For more, click the link below:

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Owner of New York Construction Company Indicted for Tax Fraud

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The Justice Department and Internal Revenue Service (IRS) announced that Tomas Olazabal, of Fresh Meadows, N.Y., was arrested today following his indictment in the U.S. District Court for the Eastern District of New York on Aug. 8, 2013, on multiple tax crimes.

According to the indictment, Olazabal owned Tupac Construction Corp., a construction company in Fresh Meadows.  As alleged in the indictment, Olazabal used check cashing services to cash a substantial number of checks paid to his construction company for services between 2007 and 2008.  He concealed his check cashing activities from his tax return preparers.  Accordingly, the gross receipts represented by the checks negotiated at the check cashers were not included as gross receipts on the company’s tax returns.

The indictment alleges that Olazabal filed false 2007 and 2008 corporate income tax returns for Tupac. Olazabal faces a potential maximum sentence of six years in prison and a potential fine of up to $500,000.

A trial date has not been scheduled.  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 was investigated by IRS – Criminal Investigation and is being prosecuted by Trial Attorneys Mark Kotila and Steve Descano of the Justice Department’s Tax Division.

Law360: GeyerGorey Opens In Dallas With Former DOJ Antitrust Ace

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Law360: GeyerGorey Opens In Dallas With Former DOJ Antitrust Ace

By Alex Lawson

Law360, New York (August 07, 2013, 3:34 PM ET) — GeyerGorey LLP established its presence in Texas with a splash this week, securing the services of a former U.S. Department of Justice antitrust prosecutor to open its Dallas office, the firm announced Tuesday.
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Marshall added that the firm has a strong Foreign Corrupt Practices Act compliance program that she hopes to be heavily involved in.

While Marshall carries experience across a wide variety of industry sectors, senior partner Hays Gorey Jr. said her work in the energy sector will be of critical importance to the firm’s Texas operations.

“We are thrilled that Joan has decided to join us,” Gorey said. “She adds deep experience with numerous enforcement agencies and complements our experience in key industries like oil and gas exploration, not to mention the fraud piece.”

At DOJ, Marshall gained notoriety for her work in the wake of Hurricane Katrina, when she led the Antitrust Division’s bribery prosecutions centering on the construction of the levees surrounding New Orleans. She also served on the agency’s Hurricane Katrina Fraud Task Force, which was eventually rolled into the broader-reaching Disaster Fraud Task Force.

Firm co-founder Brad Geyer said Marshall’s work in the disaster fraud arena would dovetail nicely with the firm’s existing portfolio.

“We are very involved in servicing the government contractor and the nonprofit and nongovernmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings,” Geyer said. “It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds.”

Marshall received her law degree from Southern Methodist University and a Bachelor of Business Administration from the University of North Texas.

–Editing by Katherine Rautenberg.

MainJustice.Com “Former Prosecutor from Shuttered Antitrust Division Office Joins White Collar Firm”

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Former Prosecutor from Shuttered Antitrust Division Office Joins White Collar Firm

Noted Antitrust and Disaster Fraud Prosecutor Joan E. Marshall Joins GeyerGorey LLP

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Joan Marshall who prosecuted the worldwide vitamins cartel and brought a series of fraud cases in the aftermath of Hurricane Katrina, has joined the firm as a partner. Previously, Ms. Marshall was with the US DOJ Antitrust Division in the Dallas Field Office. She is the tenth former DOJ prosecutor to join the new boutique law firm in less than a year.Joan Marshall_4small

FOR IMMEDIATE RELEASE

 

PRLog (Press Release) – Aug. 6, 2013 – WASHINGTON, D.C. — GeyerGorey LLP is pleased to announce that Joan E. Marshall, a former Department of Justice prosecutor, has joined the firm as partner. Ms. Marshall will open a new office for the firm, in Dallas, where she will be resident.

Ms. Marshall comes to GeyerGorey from the Antitrust Division of the Department of Justice, where she also served as a prosecutor on the Department’s Disaster Fraud Task Force and its predecessor, the Hurricane Katrina Fraud Task Force. While with the Department of Justice, Ms. Marshall supervised numerous multi-agency investigations of bid rigging, price fixing, mail fraud, wire fraud, bank fraud, bribery, perjury and obstruction of justice.

Ms. Marshall had the distinction of breaking the Dallas Field Office’s acclaimed vitamins cartel case and helped to devise, structure and carry out what became one of the most comprehensive international investigations and prosecutions of all time, resulting in more than $1 billion in collected criminal fines. She led the Antitrust Division’s bribery prosecutions involving construction of the levees surrounding New Orleans after the devastation of Hurricane Katrina. Her experience spans investigations and prosecutions involving numerous industries including wholesale groceries, milk, seafood, medical equipment, oilfield supplies, military moving and storage, road and building construction, and municipal finance.

“We are thrilled that Joan has decided to join us,” said Hays Gorey. “She adds deep experience with numerous enforcement agencies and compliments our experience in key industries like oil and gas exploration, not to mention the fraud piece. Our corporate compliance and competition expertise is a perfect fit in the Dallas-Ft. Worth market, which has the largest concentration of corporate headquarters in the United States.”

Ms. Marshall is a frequent speaker on antitrust enforcement and fraud prevention and detection and has developed numerous training programs. She is a recipient of the United States Department of Justice, Assistant Attorney General’s Award and certificates of appreciation from the United States Department of Homeland Security, Office of Inspector General, and the United States Army Criminal Investigation Command, Major Procurement Fraud Unit.

Robert Zastrow, who was Verizon’s Assistant General Counsel for 15 years before co-founding the firm in October 2012, added, “Joan’s extensive background and expertise nicely complements our firm’s unique philosophy and enriches our solid bench in the White Collar world.” Co-founder, Brad Geyer added: “We are very involved in servicing the government contractor and the non-profit and non-governmental organization community and we are excited to roll in Joan’s disaster fraud experience into our overall product offerings. It is also unusual to have career prosecutors in one firm that worked on the highest profile matters on both the criminal and civil worlds. Joan will give us a strategic presence in the Dallas market, which is home to companies in the airline, technology, energy, banking, medical and defense contracting sectors.”

Headquartered in Washington, D.C., GeyerGorey LLP specializes in white collar criminal defense, particularly investigations and cases involving allegations of economic crimes, such as violations of the federal antitrust laws (price fixing, bid rigging, territorial and customer allocation agreements), procurement fraud, securities fraud, foreign bribery (Foreign Corrupt Practices Act) and qui tam (False Claims Act) and other whistleblower actions. The firm also conducts internal investigations of possible criminal conduct and provides advice regarding compliance with U.S. antitrust, anti-bribery and other laws.

 

 

 

 

 

   

DLA Piper’s Robert Connolly pens MLEX article regarding “The DOJ Antitrust Division’s policy on independent compliance monitors: is it misguided?”

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Friend of the Firm, Robert Connolly, former Chief of the Philadelphia Field Office of the Antitrust Division of the US Department of Justice, now resident in DLA Piper’s Philadelphia Office last week penned an important contribution for MLEX regarding DOJ’s evolving policy regarding compliance monitors:  “The DOJ Antitrust Divsion’s policy on independent compliance monitors: is it misguided?”

 

IRS Criminal Cases Filed

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Examples of Employment Tax Investigations – Fiscal Year 2013

The following examples of employment tax investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Pennsylvania Businessman Sentenced for Tax Evasion
On July 24, 2013, in Pittsburgh, Pa., Richard D. Edwards, of Monroeville, Pa., was sentenced to 18 months in prison and three years of supervised release.  Edwards pleaded guilty to three counts of failure to pay over tax.  According to court documents, Edwards was the sole owner of the home improvement company Custom Patio Rooms.  In 2006, 2007, and 2008, Edwards failed to pay over to the IRS the federal income taxes withheld from his employees and the Federal Insurance Contributions Act taxes due and owing.

Former Owner of Employee Leasing Company Sentenced for Failing to Pay Payroll Taxes to the IRS
On July 18, 2013, Salt Lake City, Utah, Richard R. Whatley, a former owner of Alliance Staffing Management Inc. (ASM), was sentenced to 51 months in prison and ordered to pay $541,513 in restitution to the IRS. Whatley pleaded guilty in January 2013 to willfully failing to account for and pay over employment taxes. In January 2010, a federal grand jury charged Whatley with five counts of willfully failing to account for and pay over employment taxes, relating to three different employee leasing companies that he allegedly operated and controlled between the years 2001 and 2006.  The tax loss associated with Whatley’s criminal conduct during these years totaled more than $2.3 million. According to the plea agreement, during the 2002 through 2004 tax years, Whatley held an ownership interest in and had the ability to control the finances of ASM, an employee leasing company. Whatley’s control included determining the amount of employment taxes that had to be paid over to the IRS and the authority to decide which bills would be paid and which bills would not be paid. As charged in the superseding indictment, in the fourth tax quarter of 2003, Whatley caused the collection of employment taxes from ASM’s employees’ wages and then willfully failed to pay over $541,513 for the employees’ portion of employment taxes to the IRS.

Pennsylvania Man Sentenced for Theft from Employee Benefit Plan and Tax Fraud
On July 17, 2013, in Scranton, Pa., Charles Yaskulski, of Nicholson, Pa., was sentenced to 17 months in prison, two years of supervised release, and ordered to pay $548,768 in restitution. Yaskulski was convicted of theft from an employee benefit plan and failure to file an income tax return.  According to court documents, Yaskulski was the former president and majority shareholder of Eagle Warranty Corporation which marketed and sold used car warranty policies to customers in twelve states nationwide. Eagle Warranty also established a profit sharing plan, whereby company employees could make payroll-funded contributions to a company-sponsored 401(k) retirement plan. Yaskulski previously admitted to the theft of approximately $16,000 from the retirement plan in 2008 and 2009. Yaskulski also failed to file employer’s quarterly federal tax returns for Eagle Warranty for each tax quarter in 2009.

Arkansas Businessman Sentenced for Failing to Pay Federal Income Taxes
On July 1, 2013, in Fort Smith, Ark., George Avlos was sentenced to 30 months in prison, three years of supervised release and ordered to pay $291,760 in restitution to the IRS. Avlos pleaded guilty on February 27, 2013 to failing to file a federal tax return and failing to pay employment taxes. According to court documents, Avlos was the sole owner and president of LinLex Inc., a company that provided consulting services concerning Department of Transportation regulations.  Avlos was responsible for collecting, accounting for, and paying over LinLex’s payroll taxes. During 2007 and 2008, LinLex withheld payroll taxes from its employees’ paychecks but failed to make payments to the IRS. LinLex failed to account for and pay over a total of approximately $109,543 in payroll taxes. In addition, Avlos failed to file a personal income tax return for 2006, a year in which he had an income of approximately $199,489.

South Carolina Man Sentenced for Tax Evasion and Employing Illegal Aliens
On June 24, 2013 in Columbia, S.C., Ji Duan Fang, of Hanahan, S.C., was sentenced to 12 months in prison, six months in a community corrections center, and three years of supervised release for failure to pay employment taxes and harboring illegal aliens. According to court documents, Fang owned and operated Jade China Buffet, a restaurant in North Charleston, and he knowingly hired at least 14 illegal aliens to work at the restaurant.  From 2008 through 2011, Fang paid the illegal alien employees in cash and did not collect or pay employment taxes for these employees. Fang’s failure to collect and pay the employment taxes for the illegal alien employees resulted in $212,225 in unpaid taxes.

California Resident Sentenced for Employment Tax Evasion Scheme
On June 24, 2013, in Los Angeles, Calif., Jason M. Harvey, formerly of Yorba Linda, Calif., was sentenced to 24 months in prison, three years of supervised release and ordered to pay $11,738,000 in restitution for aiding in the evasion of payment of federal payroll taxes.  According to his plea agreement, Harvey, was identified as the legal owner of several payroll processing companies including Advanced Business Payroll, Inc., Global Business Outsource Solutions, Inc., and Global Consulting, Inc.  He was responsible for filing correct payroll tax returns, collecting payroll tax and remitting payroll tax withheld from employees of the client’s businesses to the IRS and State of California. During the period January 1, 2004 through December 31, 2006, Harvey failed to pay over $10 million in payroll taxes that were actually due by the Global companies for the wages paid to employees, and failed to file some of the payroll tax returns required to be filed with the IRS. On February 4, 2013 Michael Harvey, Jason Harvey’s father, was sentenced to 30 months in prison, three years of supervised release and ordered to pay $15,177,106 in restitution. Michael Harvey, pleaded guilty to evading payment of over $15 million to the IRS, admitting that he caused the companies to not honor the levies, and aided Jason Harvey to cause those companies to not honor the IRS levies.  Another co-defendant Denise Browning was sentenced to 42 months in prison and one year of supervised release after being found guilty of two counts of aiding and assisting in the preparation of false payroll tax returns.

Payroll Company Owner Sentenced in Tax Case
On June 21, 2013, in Cincinnati, Ohio, Robert Sacco was sentenced to 78 months in prison, three years of supervised release and ordered to pay $26,729,098 in restitution jointly with another defendant. Sacco pleaded guilty on October 26, 2012 to one count each of conspiracy to defraud the United States by impeding the IRS, money laundering and tax evasion.  According to court documents, Sacco was the owner and chairman of the board of Paysource, a Dayton-based professional employer organization which provided services that enabled business owners to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation and other strategic services. Sacco and others conspired to avoid the payment of federal employment taxes owed by Paysource for 2007 through 2009 and concealed from the IRS the legitimate tax liabilities the company owed. Sacco directed co-conspirators to prepare fraudulent IRS forms claiming that the wages paid by the company and the resulting tax liabilities were significantly lower than the wages the company actually paid.

Former Toy Company Owner Sentenced for Failure to Pay Employment Taxes
On June 12, 2013, in St. Paul, Minn., Kim Robert Calkins, of Eden Prairie, Minn., was sentenced to 12 months and one day in prison for failure to pay federal employment taxes. Calkins pleaded guilty on September 26, 2012. In his plea agreement, Calkins admitted that from the third quarter of 2008 to the final quarter of 2010, he failed to pay to the IRS the employment taxes withheld from employees of Princess Soft Toys. Despite receiving regular notices that the employment taxes were still due, Calkins neglected to pay the amount owed. The total tax loss in this case is $852,361.

Tennessee Man Sentenced on Tax Evasion Charges
On June 3, 2013, in Greeneville, Tenn., Paul Adams, of Kingsport, Tenn., was sentenced to 36 months in prison, three years of supervised release and ordered to pay $2,535,745 in restitution. According to court documents, Adams formed a professional employer organization, employing 500 employees for 23 client companies. Adams performed clerical services for the 23 companies, including withholding federal payroll taxes and filing federal payroll tax returns. During a 17-month period, Adams calculated and collected the correct amount of withholding and payroll taxes, but reported and paid a much smaller number to the Internal Revenue Service and the Social Security Administration. Adams pocketed more than $2.5 million paid by his client companies and the employees.

Former Owner of Oklahoma Pool Company Sentenced for Tax Fraud
On May 28, 2013, in Oklahoma City, Okla., Theodore Michael Zachritz, of Nichols Hills, Okla., was sentenced to 18 months in prison, three years of supervised release and ordered to pay $461,363 in restitution to the IRS. Zachritz pleaded guilty in January 2013 to one count of willfully failing to collect and pay over to the IRS federal income taxes.  According to court documents, Zachritz and his wife owned and operated Lifestyle Pools, LLC in Oklahoma City. As owner of the company, Zachritz deducted and withheld more than $290,000 in federal income taxes, Social Security taxes, and Medicare taxes from the wages of Lifestyle Pools employees. Zachritz failed to pay those taxes to the IRS.

Oklahoma Bookkeeper Sentenced for Embezzlement and Tax Evasion
On May 6, 2013, in Oklahoma City, Okla., Carolyn Dawson was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1,843,674 in restitution for embezzlement and evading federal payroll taxes. According to court documents, Dawson worked as a bookkeeper for a wholesaler of greenhouse supplies where she maintained payroll, prepared payroll tax returns, and paid withheld taxes to the IRS. From January 2007 through November 2011, Dawson defrauded the business by paying personal credit card expenses from the business bank account. Dawson also evaded federal payroll taxes by failing to file a 2010 payroll tax return for the company, failing to make payroll withholding payments to the IRS, and altering the books and records of the company to conceal her failure to make withholding payments.

Comptroller of New York Payroll Services Company Sentenced for $20 Million Fraud
On April 12, 2013, in Sacramento, Calif., Kerry Seaman, of Lake Ronkonkoma, N.Y., was sentenced to 44 months in prison and ordered to pay $19,141,618 in restitution. Seaman pleaded guilty on November 19, 2010 to wire fraud. According to court documents, Seaman was the comptroller for Ingentra HR Services Inc., a payroll services corporation in Hauppauge, N.Y.  Ingentra, then known as Humanic Solutions Inc, was hired by Sacramento County in late 2004 to process the payrolls for Sacramento County’s Special Districts. As part of the payroll services, Ingentra calculated the tax payments for the clients and the clients’ employees and then transmitted the payments to the state and federal tax authorities. Ingentra was responsible for paying the income tax withholdings to the IRS and to file the Employer’s Quarterly Federal Tax Form (Form 941) with the IRS on behalf of the clients. From 2005 until April 2010, Seaman and co-defendant Albert Cipoletti defrauded the County of Sacramento Special Districts and two other companies of the tax withholdings intended to be paid to the IRS. Ingentra collected the correct amount from the clients but underreported to the IRS the amount owed, and diverted the difference to Ingentra’s operating account for Ingentra’s own use. Cipoletti and Seaman sent funding letters to the clients that correctly calculated payroll and federal tax withholdings for the clients’ employees, and the clients wire transferred funds to Ingentra to pay both the payroll and taxes. Cipoletti and Seaman then filed false Forms 941 with the IRS, understating the true employee tax withholdings for these clients. Cipoletti and Seaman wrongfully diverted in excess of $20 million in tax withholdings from the clients that should have been remitted to the IRS on behalf of the clients and the clients’ employees. Cipoletti was sentenced in May 2011 to 78 months in prison and ordered to pay $19,141,618 in restitution.

Kentucky Man Sentenced for Attempting to Evade Paying Taxes and Wire Fraud
On April 12, 2013, in Lexington, Ky., David Byron was sentenced to 41 months in prison and ordered to pay $688,530 in restitution for wire fraud and attempting to evade paying taxes. According to court documents, Byron admitted that from 2006 through April 2010 he devised a scheme to defraud at least seven clients of his bookkeeping business. Byron told the clients he would facilitate payment of their taxes owed to the IRS and other state and federal government agencies. In reality, Byron wired money from their bank accounts to his bank account and used the money to supplement his lifestyle.

Missouri Business Owner Sentenced for Failing to Pay Taxes
On April 11, 2013, in Springfield, Mo., Paul Ray Rose Jr., of Highlandville, Mo., was sentenced to 27 months in prison and ordered to pay $586,739 in restitution to the IRS. On November 26, 2012, Rose pleaded guilty to two counts of failing to pay taxes. Rose owned and operated Highlandville-based Newby Enterprises, dba J.B. Enterprises, Inc. According to court documents, from 2006 to 2009, Rose withheld a total of $37,521 in employment taxes from his employees’ paychecks, but willfully failed to pay over the taxes to the IRS. Rose also failed to file individual income tax returns from 2006 to 2009, thereby failing to report income earned from his business. Based on more than $3.2 million in gross revenues and more than $1.7 million in gross profit for the years 2006 through 2009, Rose owed the IRS $375,631 in unpaid income tax.

North Carolina Couple Sentenced for Tax Fraud Conspiracy and Health Care Fraud 
On April 10, 2013, in Greenville, N.C., John Curtis Alspaugh was sentenced to 40 months in prison, three years of supervised release and ordered to pay $1,614,003 in restitution. Helen Blue Alspaugh was sentenced to 18 months in prison, three years of supervised release and ordered to pay $1,392,115 in restitution. On January 8, 2013, the Alspaughs pleaded guilty to one count of tax fraud conspiracy and John Alspaugh also pleaded guilty to one count of health care fraud. According to court documents, John and Helen Alspaugh formed Basic Home Health Care, Inc., a home health care business located in Dunn, N.C. Basic Home Health Care, Inc. provided personal care services to people who were homebound and needed assistance with their activities of daily living and instrumental activities of daily living.  The Alspaughs collected employment taxes from employees and failed to pay over the taxes to the IRS, resulting in a tax liability in excess of one million dollars for the tax periods beginning in March 2003 and ending in December 2010.

Businessman Sentenced for Failure to Pay Payroll Taxes and Bank Fraud
On April 4, 2013, in Columbus, Ohio, Robert Jeffrey Johnson was sentenced to 15 months in prison, three years of supervised release and ordered to pay $1,334,052 in restitution to the IRS and $252,500 in restitution to the victim financial institution. Johnson pleaded guilty on September 27, 2012 to failure to pay employee payroll taxes, bank fraud and concealing documents in a bankruptcy proceeding. According to court documents, Johnson, president of Smith & Johnson Construction Company, borrowed $20 million from lenders in 2004 and 2005 to fund company operations. However, during 2004 and 2005, Johnson used his position at Smith & Johnson to have about $7 million transferred to him and to business entities controlled by him. Part of Johnson’s scheme included securing a line of credit to pay off any outstanding accounts and the end of the fiscal year to make it appear that he, or business entities he controlled, owed no money to Smith & Johnson. Johnson also purchased vehicles with funds provided by Smith & Johnson, then sold the vehicles and had the proceeds sent to himself or his representative. When the construction company filed for bankruptcy in 2006, Johnson filed false documents, failed to submit all financial records and hid assets from the bankruptcy trustee. In addition, Johnson defrauded the IRS in the amount of $156,008 in the first quarter of 2006 by withholding funds from employees’ paychecks for taxes and failing to pay the funds to the IRS.

Ohio Business Owner Sentenced for Employment Tax Fraud
On April 3, 2013, in Columbus, Ohio, Charles E. Watts Jr., of Jeffersonville, Ohio, was sentenced to 12 months and one day in prison, three years of supervised release and ordered to pay $1,443,048 in restitution to the IRS. Watts pleaded guilty on November 2, 2011 to attempting to evade and defeat the payment of employment taxes. According to court documents, from 1998 through 2008, Watts was the owner and operator of Dimensional Construction, T&R Electric Works, Watts Electric Co., and Watts Electric Company of Ohio, LLC. Beginning in the fourth quarter of 2004, Watts evaded $1,443,048 in employment taxes for 12 tax periods. Watts used a substantial portion of the funds to purchase numerous assets and pay other personal expenses. During 2004, Watts evaded paying employment taxes by establishing a business name, operating under that name, incurring employment tax obligations, then terminating the business only to establish another one under a different name and Employer Identification Number. Watts opened several business bank accounts utilizing these various business names, and used those accounts to funnel employees’ withholdings from account to account in order to elude IRS Collections’ efforts. In addition, Watts established a shell company, Valley Construction & Property, Inc., and used the company bank account to pay personal living expenses and to purchase major assets. Watts placed multiple assets in the name of Valley Construction & Property, Inc. in order to disguise the fact that he was the true owner of these assets. Watts also recruited several individuals who helped him conceal various assets from the IRS by placing them in their own name. These assets included real estate, luxury vehicles, and a pleasure boat.

Husband and Wife Sentenced for Various Tax Crimes
On March 25, 2013, in Houston, Texas, James R. Dixon was sentenced to 33 months in prison, three years of supervised release and ordered to pay $1,397,511 in restitution. On February 27, 2013, Sharon C. Dixon was sentenced to 11 months in prison and ordered to pay $183,801 in restitution. The Dixons both pleaded guilty in October 2012. James Dixon pleaded guilty to one count of tax evasion. Sharon Dixon pleaded guilty to two counts of willfully failing to file tax returns. According to court documents, the Dixons owe $890,000 in individual income taxes from their 2005 through 2008 income tax years, plus more than $700,000 in unpaid employment taxes of a company for which James Dixon had the duty to pay over to the IRS.

New York Tax Preparer Sentenced for Tax Evasion and Bank Fraud
On February 13, 2013, in Buffalo, N.Y, Vincent P. Mangione, of North Tonawanda, N.Y., was sentenced to 30 months in prison and three years of supervised release for tax evasion and bank fraud. He was also ordered to pay more than $800,000 in restitution. According to court documents, Mangione operated MTS Payroll and Mil-Sher Tax Services, Inc. The companies provided payroll services and bookkeeping and tax preparation for individuals and businesses. Between December 2002 and April 2007, Mangione, without the knowledge of the businesses he represented, filed fraudulent quarterly federal tax returns. In order to avoid detection, the defendant obtained the actual amount of withholding tax the businesses owed to the IRS. Mangione then filed a false quarterly tax return that under-represented the amount owed to the IRS and kept the difference for his own benefit.

Owner of Japanese Restaurant Sentenced for Tax Crimes
On January 30, 2013, in San Francisco, Calif., Michael Chen, the owner of Fune Ya Japanese Restaurant, was sentenced to 33 months in prison, three years of supervised release and ordered to pay $459,105 in restitution. Chen was convicted by a jury on March 27, 2012, on filing false tax returns, failure to file tax returns, and mail fraud. A federal jury found that Chen filed a false 2004 U.S. income tax return for an S Corporation (Form 1120S) for his restaurant, failed to file corporate income tax returns for the restaurant for 2005 and 2006 and filed nine false employer’s quarterly federal tax returns (Forms 941) with the IRS. He used the U.S. mail to file nine false quarterly sales and use tax returns with the California Board of Equalization. Evidence at trial showed that Chen maintained detailed records of Fune Ya’s daily receipts in twenty-six boxes marked “Seasoned Octopus.”  The boxes were stored in a crawl space beneath the restaurant floor. The cash sales shown on Fune Ya’s receipts were not reported to the IRS. The evidence also showed that Chen maintained an encrypted Excel spreadsheet documenting $1,910,803 in sales, while he reported $450,165 in sales to the California Board of Equalization, and $65,738 in sales to the IRS. Chen also paid Fune Ya employees cash wages totaling $548,919 for the 2004 through 2006 tax years. Employees received cash wages in white envelopes each payday. Chen failed to include these cash wages on the quarterly payroll tax returns (Forms 941) filed with the IRS.

Owner of Maryland Business Sentenced for Failing to Pay Employment Taxes
On January 23, 2013, in Greenbelt, Md., Alphonso Tillman, of Fort Washington, Maryland, was sentenced to 24 months in prison and three years of supervised release, for failing to account for and pay over employment taxes. Tillman was also ordered to pay restitution of $2,205,991. According to his plea agreement, Tillman was the president and sole owner of Remote Surveillance Technology Solutions, Inc. (RSTS), and its successor, Remote Surveillance Technology Services, LLC, (RSTServ). The companies were headquartered in Landover, Maryland, and provided security guards to protect commercial and residential properties in Maryland, Virginia, Pennsylvania and the District of Columbia. RSTS and RSTServ withheld taxes from their employees’ paychecks, which the companies were required to pay over to the IRS on a periodic basis. Tillman failed to file the required forms or pay the payroll taxes due for RSTS and RSTServ, with the exception of payments made by RSTS to the IRS because of IRS collection efforts.  The total amount of tax loss resulting from Tillman’s failure to pay taxes owed by RSTS and RSTServ is $2,205,991.

CEO and CFO of Assisted Living Facility Chain Sentenced for Tax Fraud
On January 16, 2013, in Wilmington, N.C., Ronald E. Burrell, former chief executive officer (CEO) of Caremerica Inc., and Michael R. Elliott, former chief financial officer (CFO) of Caremerica Inc., were each sentenced to 60 months in prison and ordered to pay over $4.8 million in restitution. Burrell, of Wilmington, N.C., pleaded guilty to conspiracy to defraud the IRS on January 3, 2012.  Elliott, of Loris, S.C., pleaded guilty to conspiracy to defraud the IRS on July 18, 2012. According to court documents, Burrell and Elliott co-owned and operated a chain of assisted living facilities in North and South Carolina. Burrell and Elliott were the corporate officers responsible for ensuring that the Caremerica companies collected, reported and paid over federal employment taxes to the IRS. The Caremerica companies accrued more than $4.5 million in employment tax liabilities between approximately 2003 and 2006. Burrell and Elliott filed, or caused to be filed, false IRS forms that reported full payment of the employment taxes due, when in fact only a small fraction of the taxes, or none at all, were paid. Additionally, Burrell and Elliott took active steps to conceal information from the IRS, specifically, the sale proceeds of a company in which they owned a majority interest. As a result of his concealment efforts, Burrell deceived the IRS into accepting a $29,000 settlement on a $300,000 personal tax liability and opened another assisted living facility with the proceeds. Burrell and Elliott then filed false 2005 federal income tax returns that failed to report the proceeds. Elliott and Burrell also obstructed justice by making false statements under oath in bankruptcy proceedings and in IRS disclosure forms.

Former Owner of Xpress Flex, Inc. and Payroll America, Inc. Sentenced for Fraud and Filing a False Tax Return
On January 9, 2013, in Boise, Idaho, Michael Wayne Davis, II, of Raleigh, North Carolina, formerly of Eagle, Idaho, was sentenced to 51 months in prison, three years of supervised release and ordered to pay $954,640 in restitution to Xpress Flex victims and $45,290 to the IRS for the tax loss. Davis pleaded guilty on September 10, 2012 to wire fraud and filing a false tax return. According to court documents, in 2009 and 2010, Davis owned and operated Xpress Flex, Inc., a Boise, Idaho, company that administered, on behalf of employer-clients, flexible benefits plans for tax-free, qualified benefits, such as health care and dependent care. Xpress Flex received monetary contributions from its employer-clients of pre-tax withholdings from their employees’ paychecks. According to court documents, Davis misappropriated $954,640 of Xpress Flex client funds and used them to pay personal credit card charges and the business expenses of his other company, Payroll America, Inc. Court documents also showed that from 1994 through 2009, Davis owned and operated Payroll America in Boise, Idaho. Payroll America provided payroll administration and payroll tax filing services to its employer-clients. Pursuant to contract documents, employer-clients would deposit sufficient funds with Payroll America to meet their payroll and payroll tax obligations, which Payroll America would pay when they came due. According to court documents, in March and April 2007, Davis misappropriated $2 million of Payroll America employer-client funds, wired them into his E*Trade brokerage account, and then invested the funds in the stock market. Davis’ E*Trade investments generated approximately $192,436 in capital gains income. According to court documents, Davis wired this money into his and his wife’s personal checking account. The wire transfer was annotated “E-Trade Gains.” However, Davis intentionally failed to report capital gains income from E*Trade investments on his 2007 or 2008 tax returns, causing a tax loss of $45,290.

Wisconsin Woman Sentenced for Failure to Pay Federal Payroll Taxes
On January 4, 2013, Lisa Bartz Vanden Elzen, of DePere, Wis., was sentenced to 12 months and one day in prison for failing to pay federal payroll taxes over to the Internal Revenue Service. According to court records, during the period from July 2005 through December 2010, Bartz Vanden Elzen failed to pay more than $193,000 in payroll taxes withheld from the wages of employees of Dairy Transport and also failed to pay to the IRS the employer’s matching share of these payroll taxes, which totaled $81,000. Bartz Vanden Elzen is required to make full restitution to the IRS in the amount of approximately $274,000.

Operator of Payroll Companies Sentenced for Fraud and Money Laundering Crimes 
On January 3, 2013, in Greensboro, N.C., Arthur S. Weiss, of Winston-Salem, N.C., was sentenced to 185 months in prison for employment tax fraud and other crimes.  Weiss was also ordered to pay more than $7 million in restitution to numerous victims, including the IRS, the North Carolina Department of Revenue, and former clients. Weiss pleaded guilty to charges of wire fraud, bank fraud, money laundering, and tax obstruction on October 5, 2012. According to court documents, Weiss operated professional employer organizations, which provided payroll-related services to client companies. For his client companies, Weiss agreed to pay the employees, withhold and remit federal and state taxes, prepare and file the federal and state employment tax returns, and provide workers compensation insurance (WCI). Weiss did pay the employees and withheld the employment taxes, but he failed to remit the employment taxes, keeping them for his personal use. From 2004 to 2012, Weiss failed to file employment tax returns and failed to pay over to the IRS employment taxes in excess of $4 million. According to court documents, Weiss used a portion of his fraud proceeds to purchase expensive jewelry and cars.

World Health Alternatives CEO Sentenced for $41 Million Fraud Scheme
On December 4, 2012, in Pittsburgh, Pa., Richard E. McDonald was sentenced to 130 months in prison and three years of supervised release. McDonald pleaded guilty in April 2012 to charges of wire fraud, securities fraud, willful certification of false statements to SEC, failure to pay over payroll taxes, and income tax evasion. According to information presented to the court, in 2003, McDonald became the President, Principal Financial Officer, Principal Accounting Officer and Chairman of the Board of Directors of World Health Alternatives, Inc. (WHA). Around June 2004, McDonald also became the Chief Executive Officer (CEO) of WHA. Between February 2003 through August 15, 2005, McDonald defrauded WHA and its investors. He transferred funds from WHA to his personal bank account and other accounts under his control. McDonald also manipulated the financial records and statements of WHA by understating the amount of unpaid payroll taxes of WHA and its subsidiaries, and by overstating the amount of loans purportedly made by him to WHA. In addition, McDonald stole money from WHA by directing purchasers of newly issued shares to transfer the funds for the shares to accounts under McDonald’s control. McDonald stole approximately $6 million, and then spent the money on himself. In his capacity as CEO of WHA, in WHA’s financial statements, McDonald understated the actual number of outstanding WHA shares.  This was a false representation to the SEC, WHA shareholders, and prospective purchasers of WHA stock. The fraudulent understatements of the number of outstanding WHA shares falsely overstated WHA’s earnings per share, and thereby inflated the apparent market value of WHA stock. As a result of McDonald’s fraudulent conduct, WHA shareholders lost $41 million. McDonald also failed to report the funds he had fraudulently obtained from WHA and its shareholders on his personal tax returns. Finally, McDonald failed to pay over to the IRS the payroll taxes which WHA had withheld from its employees.

Ohio Businessman Sentenced for Employment Tax Fraud
On November 30, 2012, in Cincinnati, Ohio, Charles C. Painter, of Dayton, Ohio, was sentenced to 15 months in prison and ordered to pay $11,802,748 in restitution.  On February 17, 2012, Painter pleaded guilty to tax fraud. According to court documents, Painter was employed as the Chief Executive Officer and President of Paysource, Inc., a payroll company. Painter willfully aided and assisted in the preparation and filing of a false corporate income tax return with the IRS for the third quarter of 2007. The tax return fraudulently stated that the total wages Paysource II, Inc. paid to employees was $2,441,566 and as a result, Paysource II, Inc. incurred an employment tax liability of $603,532. Paysource II, Inc. actually paid $6,630,667 in total wages to its employees and incurred an actual employment tax liability of $1,710,688.

Owner of Washington Roofing Company Sentenced for Employment Tax Evasion
On November 29, 2012, in Seattle, Wash., Bruce H. Sprague, owner of Bruce’s Roofing in Enumclaw, Washington, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1,179,761 to the IRS.  In July 2012, Sprague pleaded guilty to paying a portion of his employees’ wages in cash from 2005 through 2008 and to not collecting employment taxes including Social Security, Medicare and income tax withholding from the cash wages. According to his plea agreement, Sprague informed his employees in early 2005 that they would receive a portion of their wages in cash. The cash payroll was about fifty percent of each employee’s pay. No payroll taxes were collected on the cash portion of the employees’ pay. By paying in cash and not reporting the wages, Sprague avoided approximately $1,179,761 in employment taxes for 2006 through 2008. Even as he was failing to collect and pay over the employment taxes, Sprague was taking more than $3.9 million in wages and profits from the business for 2005 through 2008.

Former CEO Pennsylvania Business Sentenced on Tax Charges
On November 27, 2012, in Erie, Pa., Frederick Zurn was sentenced to 54 months in prison and ordered to pay $278,323 in restitution to the IRS on his conviction of conspiracy to commit wire fraud and violations of federal income tax laws. According to information presented in court, Zurn was the CEO and President of Erie Copy Products, an office equipment company based in Erie, Pennsylvania. He conspired with the Vice President of Finance and others to submit forged lease documents to banks and financing companies which listed new copy equipment. They would then either deliver used copy equipment to the customer, no equipment at all or deliver equipment that the customer never agreed to lease. The conspiracy resulted in victim losses of more than $2.5 million. In addition, from 2008 through 2011, Zurn failed to make payroll tax payments to the Internal Revenue Service on behalf of his employees at Erie Copy Products.

Maryland Contractor Sentenced for Tax Evasion
On November 27, 2012, in Baltimore, Md.. Randy Benjamin Wells, of Reisterstown, Maryland, was sentenced to 13 months in prison and three years of supervised release for tax evasion. Wells was also ordered to pay restitution of $349,588. Wells paid $74,404 to the IRS prior to sentencing. According to his guilty plea, from 2005 through 2009, Wells operated Wells Contracting and Demolition Company, Inc., Triple R Contractors, Inc., and Gryphon Contracting, Inc. Although Wells hired a tax preparer to prepare his individual tax returns for 2005 through 2009, Wells failed to file the income tax return with the IRS resulting in approximately $196,200 in taxes owed. Wells used several methods in an effort to conceal his income such as purchasing personal items using funds held in a company account.  During this same time, Wells failed to pay employment taxes for the employees working for his companies. The tax loss as a result of Wells’ actions resulted in a total of $227,792 in employment taxes owed.

Massachusetts Businessman Sentenced for Tax Evasion and Conspiracy to Obstruct and Impede the IRS
On October 17, 2012, in Boston, Mass., Gary Alcock, of Westborough, Mass., was sentenced to 14 months in prison and ordered to pay $515,518 in restitution. Alcock pleaded guilty on December 9, 2011, to charges of tax evasion, conspiring to defraud the United States and willfully failing to file tax returns. On April 2, 2012, Charles Adams, Catherine Floyd and William Scott Dion were convicted by a jury of conspiracy to defraud the IRS by promoting an “under the table” payroll scheme doing business as Contract America. Dion and Floyd were also convicted for conspiracy to defraud the IRS through the use of an “underground warehouse banking” scheme designed to conceal subscriber income and assets from the IRS. According to information presented in court, Alcock owned and operated a trash hauling business called G&K Trucking, as well as a landscaping business called Bark, Mulch and Loam. Between 2001 and 2004, Alcock set up a nominee company called “Alex Management” to divert and hide business receipts and help his businesses fraudulently “disappear” on paper to evade IRS assessments and collection activity. Alcock also used Contract America to pay his employees “under the table” without withholding or paying Social Security, Medicare and income taxes. Dion was previously sentenced to 84 months in prison, Floyd to 60 months in prison, and Adams to 48 months.

Former Owner of Paving Business Sentenced for Failure to Pay Payroll Taxes
On October 12, 2012, in Boston, Mass., William E. Belleville, of Groton, was sentenced to 18 months in prison, one year of supervised release and ordered to pay $460,000 in restitution for failing to pay payroll taxes collected from his employees. On April 10, 2012, Belleville pleaded guilty to conspiracy and tax evasion charges. According to court documents, Belleville was the former owner of a paving and plowing company, Mass. Paving. From 1993 to 2006, he withheld payroll and income taxes from his employees’ wages, but failed to remit those sums, totaling approximately $460,000, to the Internal Revenue Service.

Former Owner of Sewing Company Sentenced for Payroll Tax Violations
On October 12, 2012, in New York, N.Y., Dong Sun Mun, the former owner and operator of Match Fashions Inc., was sentenced to 36 months in prison and three years of supervised release for his role in a scheme to evade payroll taxes and for jumping bail. Mun was also ordered to pay more than $304,000 in restitution to the IRS. According to the court documents, Mun owned and operated Match Fashions, a Manhattan company that did sewing work for couture companies. From 2004 through 2006, Mun cashed many of the checks he received from customers at check-cashing establishments rather that depositing them into bank accounts. Mun used the cash to pay Match Fashions’ employees off the books to evade IRS reporting requirements. He also did not withhold or remit to the IRS payroll taxes for his employees. Mun paid nearly $2 million in cash wages and did not pay over $304,000 in payroll taxes. Mun was originally scheduled to be sentenced on the tax charges in January 2011. Shortly before that sentencing date, Mun fled to Vietnam and Korea. He was subsequently arrested when he attempted to enter Canada.

Father and Son Sentenced on Tax Charges
On October 3, 2012, in Columbus, Ohio, Eric J. McEvoy was sentenced to three years probation and ordered to pay $16,677 in restitution to the IRS. Robert McEvoy was sentenced on September 27, 2012, to 18 months in prison, three years of supervised release and ordered to pay $702,429 in restitution to the IRS. On June 13, 2012, Eric McEvoy pleaded guilty to three counts of income tax evasion and Robert McEvoy pleaded guilty to one count of conspiracy to impede and impair the lawful functions of the IRS. According to court documents, Robert McEvoy, an un-enrolled tax preparer, owned and operated Capital City Accounting, a payroll servicing company. As a payroll company, Capital City Accounting issued payroll checks, prepared payroll tax returns and made federal tax deposits on behalf of its clients.  Beginning in 2006, Eric McEvoy was employed by Capital City Accounting and assisted his father with the payroll process. Capital City Accounting billed its clients for the gross amount of their payroll, payroll taxes and fees. When clients made payments to Capital City Accounting, the payments were deposited into a Capital City Accounting bank account. Robert and Eric McEvoy failed to forward all employment taxes received from clients to the IRS. They diverted funds from the payroll account and used those funds to pay Capital City business expenses, Eric McEvoy’s personal living expenses, and for cash withdrawals. The McEvoys then either prepared and filed false Employer’s Quarterly Federal Tax Returns (IRS Forms 941) or failed to file the forms on behalf of its clients. Eric McEvoy intentionally failed to report over $66,000 income on his federal income tax returns for the 2006, 2007 and 2008 tax years.

Florida Lawn Service Owner Sentenced for Employment Tax Fraud and Filing a False Tax Return
On October 2, 2012, in Miami, Fla., Michael J. Cioffi, of Loxahatchee, Florida, was sentenced to 24 months in prison, three years of supervised release and ordered to pay $537,809 in restitution to the IRS. According to the criminal information and plea documents, Cioffi was the sole owner and operator of Mike Cioffi Lawn Service, in Loxahatchee.  Cioffi’s business specialized in large commercial contracts and employed approximately thirty employees per quarter between January 2005 and December 2006. Documents filed with the court show that for each quarter during 2005 and 2006, Cioffi paid wages to his employees by check, but knowingly failed to collect and truthfully account for or pay to the IRS any FICA or income taxes due and owing to the United States on these wages. Cioffi also did not file any of the required Employer Quarterly Tax Returns, Forms 941, for this period with the IRS. Additionally, for tax year 2006, Cioffi willfully filed a United States Individual Income Tax Return, Form 1040, on behalf of himself and his spouse which falsely reported that the gross receipts for Mike Cioffi’s Lawn Service were $782,437, when Cioffi knew that gross receipts were actually more than $2 million.