Busted; ‘an undercover agent or anything;’ dastardly deeds; and other highlights of recent tax cases.
Milwaukee: Health care exec Latoya N. Joseph has been sentenced to eight months in prison and six months of home confinement for tax evasion.
Joseph was owner and operator of Jannah Home Health Care, which provided personal care primarily to Medicaid recipients. She received more than $1.8 million from Jannah in 2013, 2014 and 2015 but failed to file federal income tax returns for herself or the business for these years. Joseph attempted to evade income taxes totaling some $640,000.
Joseph was also sentenced to three years of supervised release and will pay $1,124,554.24 in restitution, along with penalties.
New York: Construction exec Bilal Salaj, of Morganville, New Jersey, has pleaded guilty to a tax scheme.
He operated a construction business in Manhattan and was initially the owner of record. Around 2014, Salaj began operating the business under a new entity that, on paper, was wholly owned by a third party. Salaj continued to exercise principal control and decision-making authority over the business and its financial affairs, including being the person responsible for collecting and paying over federal payroll taxes.
Over the next five years, he schemed to evade a substantial portion of both the payroll taxes for the construction business and his personal income taxes for 2014 through 2018. Salaj cashed or had the third party cash some $3.2 million in business checks payable to the construction company at check-cashing facilities, instead of depositing them into the company’s bank account. Salaj and the third party used a portion of the money to pay cash wages to employees of the construction business and spent most of the rest on personal expenses. Salaj did not withhold or pay over to the IRS any payroll taxes on the cash wages paid to the employees and did not report to the IRS or pay any personal income taxes on the cash income he realized through the cashed checks, withholding from his accountant any records relating to the cashed business checks.
The scheme cost the IRS some $952,778.
Salaj pled guilty to one count of conspiracy to defraud the IRS, one count of tax evasion and one count of failure to pay over payroll taxes, each of which carries a maximum of five years in prison. Sentencing is March 3. He has agreed to pay $952,778 in restitution to the IRS.
Cincinnati: Police officer Quianna Campbell has pleaded guilty to submitting false returns by failing to report cash income she earned off duty.
Campbell, an 11-year veteran of the Cincinnati Police Department, worked off-duty at various businesses, including nightclubs, throughout her employment on the force. According to cited police records, she earned more than $81,000 working off duty in 2015, 2016 and 2017. She underreported her income for those years by at least $60,000 when filing her taxes.
Campbell has agreed to pay nearly $24,000 in restitution to the IRS. Willfully filing a false tax return carries a potential maximum penalty of up to three years in prison.
Missoula, Montana: CPA Daniel Brian Burke, 62, has been convicted of six counts of aiding and assisting to subscribing to a false document.
The verdict related to a scheme in which he filed false returns on a couple’s businesses by skimming cash and deducting personal expenses such as vacations, home improvements and boats as business expenses.
Prosecutors said Burke signed false returns along with co-defendants and clients Traci and Joseph Baumgardner, owners of AJB Inc., for years 2011 to 2013. The Baumgardners reported gross receipts of $5,001,374 and paid federal taxes totaling $10,066 for the time. Through AJB, the Baumgardners operated two businesses, Splash Car Wash and Pro Sweeps Plus, an industrial maintenance service. Burke owned and operated Burke and Co. PC, and prepared corporate and individual returns for the Baumgardners.
Prosecutors said an undercover IRS investigation showed evidence of two theories for the false returns. In one theory, Burke instructed the Baumgardners not to deposit cash in the bank or report it as income as required; a search by the IRS found $50,000 cash in a safe owned by the Baumgardners. In the second theory, the couple deducted personal expenses as business expenses. The deducted personal expenses included vacations, residential expenses such as utilities, remodeling and house cleaning, retail purchases, purchases such as boats, dune buggies and watercraft, and a country club membership.
Prosecutors said the Baumgardners and Burke depreciated assets at 100 percent of business use, disguised items — a boat was called a “sweeper” — and double-depreciated assets.
An undercover IRS agent met with Burke and in a recorded interview, Burke demonstrated his knowledge of skimming cash and deducting personal expenses as business expenses. At one point, Burke asked the agent, “You’re not an undercover agent from the IRS or anything?” The agent responded no, and Burke told the agent how to avoid taxes.
The Baumgardners each pleaded guilty to a conspiracy count and testified against Burke. They were each sentenced in June to three years of probation and ordered to pay $89,918 in restitution.
Burke faces a maximum of three years in prison, a $100,000 fine and three years of supervised release on each count. Sentencing is March 11.
Camden, New Jersey: Kenneth Crawford Jr. has been sentenced to 78 months in prison for conspiring to defraud the U.S., filing false claims, and obstructing internal revenue laws.
Between 2015 and 2016, Crawford and conspirators promoted and sold a “mortgage recovery” tax fraud in which they obtained fraudulent refunds from the IRS for their clients. Crawford promoted the scheme to individuals who were facing foreclosure or were behind on their mortgage payments, telling them they could extinguish their outstanding mortgage debts by filing tax forms with the IRS.
Crawford and his conspirators directed clients to file forms that fraudulently claimed that a substantial amount of taxes had already been withheld from them. These false claims caused the IRS to issue significant undeserved refunds. More than $2.5 million in fraudulent refunds were sought from the IRS, of which the IRS paid out more than $1.3 million. Crawford charged about 25 percent for each refund obtained. When the IRS discovered the fraud, Crawford gave clients false documents to send to the IRS, directed clients to conceal from the IRS his role in filing the false returns and advised clients to remove funds from bank accounts in their names.
He was also ordered to serve three years of supervised release and to pay some $1,393,511 in restitution to the U.S.
Belgrade, Montana: Chiropractor Jonathan Wilhelm and his wife have pleaded guilty to tax evasion.
Wilhelm owned and operated Pro Chiropractic Big Sky Spinal Care Center. From 2013 through 2018, the Wilhelms directed payments to cash and did not report the cash transactions on Pro Chiro’s and Big Sky’s books and records, which they provided to a preparer to prepare the businesses’ returns.
The understatement of taxable income totalled $284,691 for tax years 2013, 2014, 2015, 2017 and 2018. In total, the defendants caused a federal tax loss of $74,486.
Sentencing is March 12, when the Wilhelms each face a maximum of five years and a period of supervised release, restitution and monetary penalties.
Woodsburgh, New York: Businessman Irwin Jacobs, 68, has pleaded guilty to tax evasion.
Jacobs partially owned JK Apparel Sales Co. and SI Sales Co., which operated out of New York. He also held an ownership interest in Prestige Global Co., a Taiwanese company. Between 2006 and 2014, Jacobs received income from these businesses that he did not report to the IRS on his returns. He directed Prestige to wire more than $4.4 million to third parties to pay personal expenses for himself and his family, including travel, non-business-related legal bills, expenses associated with his personal residence and personal credit card bills. From 2010 through 2014, Jacobs also used an SI credit card to pay more than $200,000 in personal expenses.
Jacobs admitted that his failure to report this additional income caused a federal tax loss of more than $1.3 million.
Sentencing is April 7. Jacobs faces a maximum of five years in prison as well as supervised release, restitution and monetary penalties.