Tag Archives: tax evasion

Federal Government Contractor Pleads Guilty to Accepting Kickbacks and Tax Evasion

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An Enterprise, Alabama, resident pleaded guilty today in U.S. District Court for the Southern District of Florida to accepting unlawful kickbacks and tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to court documents and statements made in open court, Victor Villalobos, 47, worked for a federal prime contractor at Fort Rucker in Alabama.  In 2009, Villalobos approached a subcontractor for this company and solicited illegal kickbacks on the federal subcontracts the subcontractor held in connection with the federal prime contractor.  Villalobos agreed that in exchange for kickback payments he would refrain from conduct that would unfavorably affect the subcontractor’s business relationship with the federal prime contractor and help ensure that the subcontractor obtained additional business.

As part of his plea, Villalobos admitted that from June 2009 to December 2014, he received approximately 57 separate wire transfers totaling more than $1.9 million in kickback payments from various foreign and domestic bank accounts controlled by the subcontractor.  At two separate meetings in 2015, Villalobos met with the subcontractor and accepted an envelope containing $5,000 in cash and a bag containing $55,000 in cash as kickback payments.  Between June 2009 and February 2015, Villalobos attempted to conceal his receipt of the kickbacks by incorporating nominee entities and opening nominee bank accounts.  Villalobos also admitted that he attempted to evade income taxes on the kickback payments by causing false federal income tax returns to be filed.

Villalobos faces a statutory maximum sentence of 10 years in prison for accepting the kickbacks and a statutory maximum sentence of five years in prison for tax evasion.  He could also be fined up to $500,000 or twice the gain from his crimes.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, the U.S. Air Force’s Office of Special Investigations and the Department of Defense’s Office of the Inspector General, who investigated this case, and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who are prosecuting this case.  Ciraolo also thanked the U.S. Attorney’s Office of the Southern District of Florida for their substantial assistance.

After Nearly 20 Years, International Fugitive in Multi-Million Dollar Fraud Scheme Apprehended in Greece and Extradited to United States to Serve Prison Sentence

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WASHINGTON – A former New York businessman, who disappeared the same day a federal jury sitting in the U.S. District Court in Newark, New Jersey, began deliberating in his tax evasion and fraud trial, was caught while in Greece more than 18 years after his conviction, and appeared in federal court in the District of New Jersey on Friday, July 17, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Gideon Misulovin, 58, whose last known address was in New York City, was extradited from Greece to the United States to serve his 10-year prison sentence.  He has been incarcerated in the United States since his return on July 16.

On March 7, 1996, a jury convicted Misulovin of conspiracy to impede and impair the Internal Revenue Service (IRS) in the ascertainment and collection of more than $6.5 million in federal motor fuel excise taxes, wire fraud and money laundering stemming from a scheme to conceal the unpaid diesel fuel excise taxes from state and federal tax authorities.

During trial, Misulovin was free on $500,000 bail and attended each day of the trial.  He failed to appear in court March 4, 1996, for the parties’ closing arguments.  U.S. Senior District Judge Dickinson R. Debevoise of the District of New Jersey in Newark issued a warrant for his arrest.  On June 25, 1997, Judge Debevoise sentenced Misulovin in absentia to serve 10 years in prison and a three-year term of supervised release, and to pay a $150,000 fine.  The court also ordered Misulovin to pay restitution in the amount of $200,000 to the United States and $100,000 to the state of New Jersey.

The evidence at trial established that from 1988 through Jan. 31, 1993, Misulovin and his co-conspirators sold untaxed diesel fuel in a series of paper transactions using wholesale companies.  Some of the companies were shams and called “burn” or “butterfly” companies.  As part of the scheme, the sham company would assume the federal and state tax liability and then vanish, allowing the conspirators to keep the excise taxes they collected from truck stops and service stations.

The case, part of a then-nationwide motor fuel excise tax enforcement effort, was investigated jointly by the Motor Fuel Task Force and the U.S. Attorney’s Office of the District of New Jersey.  In an effort to infiltrate the bootleg gasoline industry, task force agents set up an undercover business called RLJ Management that competed directly with the defendants’ operation.

At the conclusion of the undercover operation, in November 1992, federal agents seized Misulovin’s assets, including approximately $70,000 in cash from his residence and $277,000 from his business bank account.

Misulovin’s co-defendant and co-conspirator, Arnold Zeidenfeld, of Brooklyn, New York, pleaded guilty prior to trial and testified for the government.  Gurmit Singh and Manbir Singh, of Matawan, New Jersey, who operated truck stops in southern New Jersey, also pleaded guilty for their roles in the scheme.

In August 2014, based on an Interpol Red Notice, Misulovin was detained in a Greek airport using an alias and traveling with an Israeli passport.  He was subsequently arrested pursuant to a U.S. request for a provisional arrest, and after contested extradition proceedings, was found extraditable in 2015.

The task force included attorneys from the Tax Division and agents from the IRS Criminal Investigation and Examination Divisions, the FBI, the U.S. Department of Transportation and the New Jersey State Department of Taxation and Finance.  Seth D. Uram, formerly a Trial Attorney in the Tax Division and now an Assistant U.S. Attorney in Portland, Oregon, and Trial Attorney Charles A. O’Reilly of the Tax Division prosecuted the case.

Acting Assistant Attorney General Ciraolo thanked the Department of Justice’s Office of International Affairs, the FBI’s New Jersey Field Office and the Greek Ministry of Justice for their assistance in apprehending and extraditing Misulovin.  Ciraolo also thanked the U.S. Attorney’s Office of the District of New Jersey for their substantial assistance.

Hawaii Businessman Convicted of Federal Tax Crimes for Failing to Report Millions of Dollars in Income Disguised as Company Expenses

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A Hawaii businessman was convicted yesterday following an 11-day jury trial in Honolulu of one count of corruptly endeavoring to obstruct the administration of the Internal Revenue Code and six counts of filing false individual income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Florence T. Nakakuni of the District of Hawaii.

The jury convicted Albert S.N. Hee, 61, of Kailua, Hawaii, of filing false income tax returns for tax years 2007 through 2012, and of obstructing the Internal Revenue Service (IRS) from 2002 through 2012.  According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu.  Over the course of a decade, Hee directed Waimana to pay millions of dollars in personal expenses on his behalf.  He falsely deducted the payments from his corporate tax returns as if they were legitimate business expenses, and failed to report the payments as income on his individual returns.

“The jury’s verdict reflects the department’s unwavering commitment to U.S. taxpayers to aggressively pursue and prosecute individuals like Mr. Hee, who cheat the government to line their own pockets and finance their extravagant lifestyles,” said Acting Assistant Attorney General Ciraolo.

Hee’s lavish spending included paying more than $96,000 for personal massages; paying his wife and children full-time salaries with benefits packages, even though they performed little to no work for the company; and paying more than $736,900 in college tuition and housing for his three children.  Hee also directed Waimana to pay various expenses on his personal credit card, including family trips to Walt Disney World, Tahiti, France, Switzerland, and a four-day vacation at the Mauna Lani resort on the Big Island of Hawaii, which Hee falsely characterized as a “stockholder’s meeting” and deducted as a business expense on the company’s tax return.

In 2008, Hee used company funds to purchase a home in Santa Clara, California, valued at $1.3 million.  Hee told his accountants that the property would be used as an employee retreat in an attempt to disguise it as a legitimate business expense.  However, Hee’s children testified at trial that from 2008 through 2012, they lived in the home while attending college in Santa Clara and did not pay rent to Waimana for their use of the property.  Hee’s son testified that the house was walking distance from the college campus, and that he and his sister rented other rooms of the house to their college friends, but kept the rent that they collected from their roommates and did not give it to their father’s company.

At Hee’s scheduled Oct. 26 sentencing, he faces a statutory maximum sentence of three years in prison for each charge, a fine of up to $250,000 and restitution to the IRS.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Nakakuni commended the special agents of IRS–Criminal Investigation, who investigated the case, and Trial Attorney Quinn P. Harrington of the Tax Division and Assistant U.S. Attorneys Les Osborne and Larry Tong of the District of Hawaii, who are prosecuting the case.

Former President of Townsend Controls Inc. Sentenced to Prison for Failing to Pay Over $3.3 Million in Federal Employment Taxes and Interest

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A Burbank, Washington, businesswoman was sentenced yesterday to serve more than three years in prison following her February 2015 conviction of 10 counts of failing to pay over federal employment taxes to the Internal Revenue Service (IRS) after a five-day jury trial in U.S. District Court for the Eastern District of Washington, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Michael C. Ormsby of the Eastern District of Washington.

Maria Elizabeth Townsend, 39, was sentenced by U.S. District Court Judge Thomas O. Rice to serve 40 months in prison to be followed by three years of supervised release, and ordered to pay $3,327,124.49 in restitution to the IRS for employment taxes due and owing plus interest for her 10 counts that she was convicted of in the indictment, a $1,000 special assessment and $8,048.49 in prosecution costs.  At the conclusion of yesterday’s sentencing hearing, Judge Rice remanded Townsend to the custody of the U.S. Marshals Service.

“Holding business owners accountable who willfully evade their employment tax obligations to line their own pockets is among the Tax Division’s highest priorities,” said Acting Assistant Attorney General Ciraolo.  “These offenders, who not only steal from the United States, but also take advantage of honest competitors, will be prosecuted to the fullest extent of the law, and like Ms. Townsend, will face incarceration and substantial financial penalties.”

“The sentence imposed in this case reflects the seriousness of ‘white collar’ crime and that those accused of failing to pay over payroll taxes deducted from their employee’s pay checks to the IRS will be fairly and justly held accountable for their criminal conduct,” said U.S. Attorney Ormsby.  “This case is yet another example of the commitment of the U.S. Attorney’s Office to prosecute aggressively fraud cases in the Eastern District of Washington.  IRS-Criminal Investigation is commended for its tireless efforts in thoroughly investigating this case.”

“Employers who do not withhold employment taxes are not only cheating the government, they are cheating their own employees and creating financial problems for them,” said Chief Richard Weber of IRS-Criminal Investigation.  “Ms. Townsend chose to ignore her duty to timely file and pay employment taxes and now has to pay the consequences.  Investigating employment tax crimes remains one of IRS-CI’s highest priorities, keeping the playing field level for all businesses in the United States who obey the law and pay their taxes.”

According to information disclosed in court documents and at trial, Townsend was the president and majority shareholder of Townsend Controls Inc. (TCI), a Pascoelectrical contractor.  Over time, TCI grew from a small company of 15 employees to more than 150 employees by 2008.  The majority of TCI’s employees were members of Local 112 of the International Brotherhood of Electrical Workers Union (Local Union 112).  Townsend was responsible for TCI’s operations and finances, and was required to file the Employer’s Quarterly Federal Tax Returns (IRS Forms 941) and pay over to the IRS the company’s federal income, social security and Medicare taxes, known as Federal Insurance Contribution Act (FICA) taxes, that were withheld from the wages of TCI’s employees.  For 16 tax quarters, between Oct. 1, 2005, and Sept. 30, 2009, Townsend withheld $3,361,246 in federal employment taxes from the wages of Local Union 112 TCI employees, as well as TCI’s non-union employees, and failed to pay over those taxes due and owing to the IRS.  In addition to failing to pay over the taxes due and owing, Townsend also did not file any Forms W-2 for her employees for 2007 and 2008 with the Social Security Administration.

Between April 2007 and September 2009, rather than pay the accumulating employment taxes due to the IRS, Townsend authorized the disbursement of more than $31 million in TCI funds to pay vendors and other business and personal expenses.  Specifically, using TCI’s funds, Townsend paid TCI’s vendors and employees; paid a dividend of approximately $200,000 to one of her partners who co-signed a business loan; disbursed $300,000 towards the payment of her joint personal income tax obligations; disbursed more than $260,000 in funds to family members; and spent $22,000 to construct a pool at her residence, $30,000 to purchase a boat, $30,000 to purchase a Cadillac Escalade, $42,982 to purchase a Jeep Commander, $14,850 to purchase a timeshare at Walt Disney World and to fund various physical improvements to TCI’s headquarters.

During court proceedings, a psychiatrist for Townsend testified that she was suffering from multiple psychiatric disorders that paralyzed her when it came to being able to pay over the quarterly employment taxes to the IRS, despite receiving quarterly notices from the IRS that taxes were due and owing.  At sentencing, Judge Rice credited the testimony of the psychiatrist who testified for the government and commented that in every other aspect of her life, Townsend was functioning, which included paying the company’s state tax obligations.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Ormsby commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney George J.C. Jacobs III of the Eastern the District of Washington and Trial Attorney Lisa L. Bellamy of the Tax Division, who are prosecuting the case.

Alabama Woman Pleads Guilty for Involvement in Stolen Identity Refund Fraud Ring

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A Phenix City, Alabama, resident pleaded guilty today in the Middle District of Alabama for her role in a stolen identity refund fraud (SIRF) scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.

According to court documents, between March 2011 and May 2014, Teresa Floyd conspired with her daughter, Lasondra Miles Davis, and others to defraud the United States by filing false federal income tax returns using stolen identities.  Miles Davis obtained the means of identification of individuals without their authorization and provided the stolen identities to Floyd.  Floyd and her co-conspirators obtained Electronic Filing Identification Numbers (EFINs) from the Internal Revenue Service (IRS) in the names of tax preparation businesses, which Floyd then used to file false tax returns with the stolen identities.  All of the false returns included fraudulent claims for tax refunds.  Floyd, Miles Davis and others cashed the refund checks at several companies in Alabama and Georgia, and Floyd deposited refund checks into her bank account.

Floyd faces a mandatory statutory sentence of two years in prison for the aggravated identity theft count and an additional statutory maximum sentence of 10 years in prison for the conspiracy count.  Both counts include a statutory maximum fine of $250,000.  Miles Davis pleaded guilty on April 10 to one count of aggravated identity theft and is scheduled to be sentenced on Aug. 12.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Michael C. Boteler and Michael P. Hatzimichalis of the Tax Division and Assistant U.S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Las Vegas Attorney Pleads Guilty for Role in Multimillion-Dollar Fraud

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A Las Vegas attorney pleaded guilty today for his role in multiple schemes to defraud his clients, to defraud the IRS and to fraudulently gain control of condominium homeowners’ associations (HOAs) in the Las Vegas area to ensure that the HOAs would steer business to a certain law firm and a certain construction company.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Special Agent in Charge Laura Bucheit of the FBI’s Las Vegas Field Office, Sheriff Doug Gillespie of the Las Vegas Metropolitan Police Department and Acting Special Agent in Charge Shea Jones of the Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.
Barry Levinson, 47, pleaded guilty before U.S. District Judge James C. Mahan in the District of Nevada to one count of conspiracy to commit mail and wire fraud.   Levinson is the 30th person to plead guilty in connection with the scheme to defraud HOAs in the Las Vegas area.   Levinson simultaneously pleaded guilty to one count of tax evasion and one count of wire fraud, with the latter charge relating to his embezzlement of his legal clients’ funds.
Levinson admitted that from approximately August 2003 through February 2009, he participated in a scheme to control various HOA boards of directors so that the HOA boards would award the handling of construction-related lawsuits and remedial construction contracts to his law firm and construction company designated by Levinson’s co-conspirators.   This scheme was carried out in part by straw buyers who purchased properties in their names that were in reality paid for and controlled by other co-conspirators.   According to plea documents, Levinson’s co-conspirators managed and operated the payments associated with maintaining straw properties by running a so-called “Bill Pay Program,” by which co-conspirators funded the properties through several limited liability companies at the direction of a co-conspirator.   Many of the payments were wired from California to Nevada.
Levinson admitted that he was hired to represent the Park Avenue condominium complex, but he treated a co-conspirator as his client rather than the HOA itself.   Levinson also admitted that several of his co-conspirators rigged an HOA board election at Park Avenue.   Levinson admitted that, after a lawsuit was filed by the homeowners and a special election master was designated for the make-up election, he attempted to bribe the special election master.
Similarly, Levinson admitted that after a rigged election at the Pebble Creek HOA, the homeowners filed a recall petition.   Levinson was hired as the HOA general counsel at the direction of a co-conspirator and took several steps to deter the recall election, including firing the property management company and filing a lawsuit to stop the recall election.
Related to the tax evasion charge, Levinson admitted that he failed to file taxes for the 2005 to 2010 tax years and filed a false 2011 tax return.   Levinson also admitted that he took affirmative steps to evade taxes for the tax years 2009, 2010 and 2011, including concealing cash earnings from the IRS and telling the IRS that his business was no longer operating.
Finally, related to the wire fraud charge, Levinson admitted that between March 2010 and September 2011, he embezzled nearly $180,000 from at least nine different minor personal injury clients. Levinson also admitted that he stole another $65,000 from an individual for whom he was serving as an escrow agent.
As part of the plea agreement, Levinson has agreed to be disbarred by the State Bar of Nevada.
Levinson’s sentencing is scheduled for May 5, 2014.   The maximum sentence for conspiracy to commit mail fraud and wire fraud is 30 years in prison.   The maximum sentence for attempting to evade or defeat federal taxes is five years in prison.   The maximum penalty for wire fraud is 20 years in prison.
The case is being investigated by the FBI, IRS-CI and the Las Vegas Metropolitan Police Department, Criminal Intelligence Section.
The case is being prosecuted by Deputy Chief Charles La Bella, Senior Deputy Chief for Litigation Kathleen McGovern and Trial Attorneys Thomas B.W. Hall and Alison Anderson of the Criminal Division’s Fraud Section.   The Department also thanks former Trial Attorneys Mary Ann McCarthy and Nicole Sprinzen for their efforts in prosecuting the case.

 

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.