Car Dealers Indicted for Tax Fraud

A federal grand jury has indicted the owner and former owner of a Hawaiian car dealership, along with their CFO, accountant and others, for tax fraud.

Hawaii residents Charles Alan Pflueger, James Henry Pflueger, Randall Ken Kurata, and Julie Ann Kam, and California resident Dennis Lawrence Duban, were indicted for conspiracy to defraud the United States for the purpose of obstructing the IRS in its collection of taxes.

Charles Alan Pflueger currently owns Pflueger Inc., and his father James Pflueger is the former owner of the dealership. They and Kam, an executive assistant to Charles Alan Pflueger, are also charged with filing false federal individual tax returns for three, two, and two years, respectively. Kurata, the company’s CFO, is charged with filing a false federal corporate tax return on behalf of the dealership.

The grand jury also indicted James Pflueger and Duban on a separate charge of conspiracy to defraud the United States for the purpose of obstructing the IRS in its collection of taxes. This charge was in connection with James Pflueger’s sale of a property in California.

Proceeds from the sale were sent to a bank account located in Switzerland. The indictment charges James Pflueger with failing to disclose to the federal government the existence of the Swiss bank account. Duban, a CPA, is also charged with two counts of aiding in the filing of false federal tax returns on behalf of Charles Alan Pflueger and one count of aiding James Pflueger in filing a false return.

In addition, the defendants have been accused of caused the personal expenses of the Pfluegers and other family members to be paid for by the company. The expenses were allegedly deducted as business expenses on Pflueger Inc. corporate tax returns signed by Kurata. Additional personal expenses were paid for by another limited liability company owned by Charles Alan Pflueger called Pacific Auto Distributors.

James Pflueger and Duban allegedly set up a Cook Islands trust called the Vista Pacifica Trust to sell California property. After creating the trust, they opened a bank account in the trust’s name in Switzerland, according to the indictment. In addition to failing to disclose the existence of the foreign bank account, prosecutors claim that a federal income tax return for 2007 filed on behalf of James Pflueger did not properly report the profit he received from the sale.

Charles Alan Pflueger’s attorney released a statement blaming the errors on his client’s tax consultants and said they were “unintentional and simply the product of human error,” according to Hawaii News Now. He predicted his client would be exonerated and would receive a refund from the IRS. James Pflueger’s attorney told the Honolulu Star Advertiser that his client was innocent and that he would vigorously defend the case. Duban’s attorney predicted his client would be acquitted by the jury once the case goes to trial.

For the conspiracy counts, the defendants face up to five years in prison and a $250,000 fine. For the false tax return counts, they face up to three years in prison and a fine of $250,000. For failure to report the foreign bank account, James Pflueger faces up to five years in prison and a $250,000 fine.

The Hawaii Reporter noted that James Pflueger is facing seven counts of manslaughter in a separate case stemming from the 2006 breach of a dam he owns on Kauai. He recently settled several wrongful death lawsuits in that case. In an earlier case, he has also been convicted of 10 felony counts and fined a record $7.5 million for illegally grading another property in Kauai that prompted 1,000 tons of mud to fall into a bay in 2001.