Steel steal; unwise moves; fare trial; and other highlights of recent tax cases.
Covington, Louisiana: Denis Joachim, 53, and Donna Joachim, 52, have pleaded guilty for their roles in a scheme to create, market and operate a medical reimbursement program that defrauded the IRS and participants out of more than $48 million.
Denis Joachim pleaded guilty to one count of conspiracy to commit money laundering, Donna Joachim pleaded guilty to one count of conspiracy to defraud the U.S., and The Total Financial Group pleaded guilty to one count of conspiracy to make false statements and representations.
TTFG and its owners created and marketed a medical reimbursement account program called “Classic 105,” which operated from about 2012 until January 2017. It was marketed to employers as a supplemental benefits plan for their employees to reimburse for medical expenses.
Classic 105 claimed to be comprised of several components: a tax-exempt contribution of between $1,000 and $1,600 per month made by an employee; a loan from a financial institution back to the employee to make up for the contribution; and an insurance policy payable to the lender at the employee’s death to repay the loan and fees paid by the employee and the employer. TTFG told prospective employer-clients that participants would never have to make out-of-pocket payments to repay the loan and that as a result of the tax savings, most participants would receive an increase in their net take-home pay. TTFG also claimed the contributions would be stored in an account for each participant and that any money not used by the end of each calendar year would revert to TTFG. TTFG charged employee-participants $150 to $250 per month and the employer 5 percent of each employee’s contribution amount.
TTFG never obtained a single loan or insurance policy for the program and participants never made any actual contributions. TTFG arranged for the contribution, loan and insurance policy to appear as a series of “paper transactions” that did nothing more than reduce participants’ taxable wages and employers’ FICA payments improperly without their knowledge.
TTFG and the Joachims admitted to underpaying at least $23,343,442.70 in FICA taxes, as well as the underreporting and underpayment of personal federal income taxes, federal unemployment taxes and state unemployment taxes.
Sentencings are Sept. 5. The defendants have agreed to forfeit assets with a value of approximately $6.3 million, acknowledged a potential loss to the victims totaling more than $48 million and agreed to pay restitution.
Northborough, Massachusetts: Chiropractor Richard Rogers has pleaded guilty to tax evasion.
Rogers was charged with evading taxes from 2012 through 2016 by concealing his income from the IRS through a variety of methods. He encouraged clients to pay in cash, used a nominee bank account to negotiate check payments when he was not paid in cash, paid creditors using postal money orders and used credit card accounts opened with a fictitious Social Security number. Rogers also concealed the ownership of his residence by titling the property in the name of a trust. He did not file federal returns from at least 2008 through 2016.
Sentencing is Sept. 10, when Rogers faces a maximum of five years in prison, three years of supervised release and monetary penalties.
Northport, New York: Construction exec Edward Hansen has pleaded guilty to failing to pay over federal employment taxes.
Hansen owned and operated steel erection businesses, and from 2008 to 2011 the IRS assessed more than $480,000 in penalties against him for failure to pay over employment taxes on behalf of several of these businesses. After the last IRS assessment in 2011, Hansen changed the name of his business to BR-Teck Enterprises and nominally transferred ownership to another individual. Hansen, however, continued to operate the business and continued to fail to pay over employment taxes.
From January 2012 through June 2017, he failed to pay over more than $950,000 in payroll taxes withheld from the wages of BR-Teck’s employees.
Hansen faces a maximum of five years in prison, supervised release, restitution and monetary penalties.
Menomonee Falls, Wisconsin: Former resident John Miller Ragland, 71, has pleaded guilty to attempting to evade his federal income taxes.
From 2007 through 2013 Ragland operated business ventures through which he acted as an independent sales representative in the U.S. and elsewhere, including Hong Kong. As the result of his efforts for a Chinese manufacturer, Ragland received more than $3 million in commissions. Ragland deposited these commissions into a bank account he maintained in Hong Kong but failed to report any of this income on his federal income tax returns and failed to disclose the foreign bank account in Hong Kong.
He underreported and underpaid his federal income taxes by more than $1 million.
Ragland faces up to five years in prison, a fine of up to $250,000 or both. He has agreed to make restitution to the IRS for the taxes he attempted to evade, as well as interest. Sentencing is Dec. 18.
Omaha, Nebraska: Preparer Opal Harris, 38, has been ordered to repay $31,404 and serve five years of probation for filing false returns, according to published reports.
Harris had worked at Wise Tax Solutions, news outlets said, which she owned with her husband. Prosecutors reported said Harris falsified returns between 2012 and 2015 to help clients qualify for the Earned Income Tax Credit, which led to improper refunds.
West Haven, Connecticut: Taxi company owner William Scalzi, 62, has been sentenced to three years of probation, the first six months of which he must serve in home confinement, for filing returns.
Scalzi, owner of Transportation General, understated his taxable income by running personal expenses through his company. He used his company’s credit cards to pay for numerous personal expenses, which were deducted as business expenses on Transportation General’s corporate returns. He also did not include these personal expenses as income on his personal tax returns for the 2007 through 2010 tax years.
Scalzi, who pleaded guilty in February, was also ordered to pay a $2,500 fine. He has paid $297,319.31 in restitution to the IRS, which satisfied his criminal and civil tax liabilities for the 2007 through 2010 tax years.
Boise, Idaho: Preparer David Lee Brannum, 56, now of Washougal, Washington, has been sentenced to a year and a day in prison for preparing false income tax returns.
In January, Brannum pleaded guilty to one count of assisting, advising and counseling clients to submit materially false federal income tax returns. From 2003 through 2015, he operated Dave’s Tax Service in Idaho and Nevada and submitted hundreds of federal returns, often claiming false itemized deductions for clients.
Brannum was also ordered to pay $101,550 in restitution to the IRS and to serve a year of supervised release.
Syracuse, New York: Arkmallah Hilliard, 38, of Baltimore, has been sentenced to five years in prison, to be followed by three years of supervised release, and been ordered to pay $943,597 in restitution to the IRS after pleading guilty to conspiring to defraud the U.S.
Hilliard previously pled guilty to conspiring to defraud the IRS by filing fraudulent income tax returns in the names of various individuals and obtaining refunds to which they were not entitled. Hilliard used his own bank accounts and others he controlled that were opened by co-conspirators to receive the refunds, after which Hilliard and others withdrew, spent and transferred the money.
The conspiracy netted Hilliard and others more than $900,000 in federal refunds based on their filing of more than 400 fraudulent returns.