Dennis Duban, a Los Angeles-based accountant and tax return preparer, has pleaded guilty to conspiracy to defraud the IRS and assisting in the filing of a false federal income tax return.
Duban faces maximum penalties of up to five years’ imprisonment for the conspiracy charge and up to three years’ imprisonment for the false return count, along with fines of up to $250,000 on each count. Sentencing is scheduled for April 18, 2013.
Duban, a CPA who ran the accounting firm Duban Sattler and Associates LLP (formerly Duban Accountancy LLP), in Los Angeles, provided accounting and tax planning services to Hawaii residents Charles Alan Pflueger, James Pflueger and some of the Hawaii-based entities they controlled, including Pflueger Inc. and Pflueger Properties.
As early as 2003, according to the Department of Justice, Duban knew that personal expenses of Pflueger Inc. owner Charles Alan Pflueger were being paid for by Pflueger Inc. and illegally deducted on corporate income tax returns as business expenses. Duban also knew that some personal expenses of another co-defendant were being paid for and illegally deducted by Pflueger Inc.
In preparing returns for Charles Alan Pflueger and another co-defendant from at least 2003 to 2006, Duban did not include as additional items of income all personal expenses which he was aware were paid for by Pflueger Inc. and constituted income to the taxpayers.
In connection with the 2007 sale of Hacienda, a San Diego investment property owned by Pflueger Properties, Duban agreed with another co-defendant to file a false Pflueger Properties 2007 partnership income tax return, as well as a false individual income tax return that falsely reported the gain on the sale of the property, which sold for $27.5 million. In particular, Duban reported the basis of Hacienda as approximately $7 million higher than its actual basis.
Prior to the sale of Hacienda, Duban and others assisted the same co-defendant in creating a nominee Cook Islands trust and opening a bank account at Wegelin Bank in Switzerland in the name “Southpac Trustee International, Inc., as Trustee of the Vista Pacifica Trust.” Proceeds of the Hacienda sale, more than $14 million, were sent to the Wegelin account. Duban and a New York-based firm served as investment managers for the account. Duban and the co-defendant did not timely report the co-defendant’s beneficial interest in the Swiss account on Schedule B of a 1040 return or by filing a Report of Foreign Bank Account.
Duban had an interest in other foreign bank accounts that he failed to properly report to the government. For at least 2006 and 2007, he failed to report his interest in at least one New Zealand account, held in the name of Lookout Point Limited, on Schedule B of his individual income tax returns or by filing an FBAR.
As part of the plea agreement, Duban admitted that the tax loss associated with his criminal conduct is at least $1 million and he agreed to pay a 50 percent penalty for the one year with the highest balance in his undisclosed New Zealand accounts in order to resolve his civil liability for failing to file FBARs, Forms TD F 90-22.1.
Last May, Charles Alan Pflueger, Randall Kurata and Julie Kam, charged in the same indictment, pleaded guilty to filing false returns regarding improper payments of personal expenses by Pflueger Inc. and another entity. The remaining defendant charged in the indictment, James Pflueger, is set for trial on February 12, 2013.