A California man who fraudulently received stock as compensation from American Fire Retardant Corporation and subsequently sold the stock, was sentenced Monday morning to 18 months in federal prison after being convicted of conspiracy and subscribing to a false tax return.
William Manfei Woo was sentenced by U.S. District Judge Terry J. Hatter Jr., who also ordered Woo to spend 18 months in home detention.
As a part of the stock as compensation scheme, Woo received American Fire Retardant Corporation stock from Stephen Owens, the companys president and chief operating officer. During 2003 and 2004, Owens caused American Fire Retardant Corporation to issue stock to Woo directly and indirectly through two nominees. The stock issued to Woo was issued as free-trading, unrestricted stock of the type issued to employees, consultants, and advisors who provide bona fide services to the company. When he was issued the stock, Woo knew that neither he nor either of his nominees performed bona fide services that justified the amount of stock issued to them.
The income Woo failed to report on his 2004 income tax return was compensation he received in the form of stock from American Fire Retardant Corporation. In connection with the preparation of his 2004 tax return, Woo told his accountant he received the stock as compensation and reported the sale of the stock on the return. Additionally, Woo reported the cost basis of the shares he received as consulting income on his return.
However, Woo falsely deducted as a business expense amounts paid indirectly to Owens, resulting in his underreporting of taxable income on his 2004 tax return.
The stock that Woo and his nominees received was sold and Woo transferred the money to accounts he controlled. Additionally, Woo transferred most of the money he and his nominees received form the sale of American Fire Retardant Corporation stock, directly or indirectly, to Owens.
Owens previously pleaded guilty to conspiracy, securities fraud and tax charges related to this scheme. When he is sentenced, Owens faces up to 13 years in federal prison and fines totaling $500,000.
The investigation and prosecution of Woo and Owens was conducted by the IRSs Criminal Investigation Division and the Federal Bureau of Investigation in Los Angeles, in conjunction with the U.S. Attorneys Office for the Central District of California.
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