Few criminal tax cases are defended successfully, with the government boasting a conviction rate of 94 percent. So when the IRS used information from three jailed former boiler room operators to go after Boca Raton CPA John Miller, it didn’t look good for Miller.
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Nevertheless, he was cleared on all charges relating to conspiracy, obstruction of justice and filing fraudulent tax returns. Following a two-week trial in a Florida federal court, the jury took less than two hours to find Miller not guilty on all counts (see CPA Wins Fraud Trial on All Counts).
The three operated multiple boiler rooms throughout South Florida that fraudulently sold commodities and foreign currency options to the public, defrauding approximately 1,000 investors of over $47 million. They pleaded guilty to conspiracy and testified that Miller assisted them in the conspiracy by forming more than 20 corporations and preparing bogus accounting records and tax returns.
At trial, all three men, and their wives, testified against Miller, observed criminal defense attorney and CPA David Garvin, who defended Miller.
The reason for the government’s high success rate is the fact that they get to elect which cases to bring, and they have a substantial amount of resources they are willing to apply to the cases they choose to bring, according to Garvin. “The position of the government is that they enhance voluntary compliance by winning the overwhelming majority of criminal cases,” he said. “The average taxpayer faces a situation in which the cards are stacked against them when defending a case like this, particularly when the government offers plea agreements and cooperation deals to witnesses that are presently incarcerated.”
What did Miller do right that helped in his defense? “I would say that the first thing he did right is that his fees were always consistent for all his clients,” said Garvin. “There were no special fees for these people. Also, he had good records that he formed corporations for all his clients, over 600 of them, so the fact that he was helping them form corporations didn’t mean he was helping them cover up anything.”
What would he have changed if he had it to do all over again? “In hindsight he wished that he had his clients sign a form that, if they’re forming a corporation it is for legitimate business purposes and not for any illegal activity,” Garvin said.
He would include “an acknowledgement that the information they provide to him to prepare returns is complete to the best of their knowledge and will be relied on, and reasonable inquiries will be made if it appears incomplete, but the tax preparer is not an auditor and is not responsible to audit the information. The client is responsible both for the accuracy and completeness of the information provided.”
“All CPAs should take steps like these to protect themselves because Miller is not alone,” said Garvin. “Many accountants have their clients drop off paperwork, and the CPA relies on it. Then they have very little in the way of protection if the client turns around and says he knew it was false.”