Tax Fraud Blotter: Hard to trust

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A Panama sentencing; ‘subcontractor’ mess; fun with funds; and other highlights of recent tax cases.

New York: Harald Joachim von der Goltz (a.k.a. H.J. von der Goltz, Johan von der Goltz, Jochen von der Goltz, “Tica” and “Tika”), of Needham, Massachusetts, and Key Biscayne, Florida, has been sentenced to four years in prison for wire fraud, tax fraud, money laundering, false statements and other charges.

The case was in connection with a decades-long scheme by Mossack Fonseca & Co., a Panamanian-based law firm that is commonly referred to as “the Panama Papers.”

From at least 2000 through 2017, von der Goltz, who pleaded guilty, conspired with others to conceal his assets and investments and the income they generated from the IRS through shell companies and bank accounts. These companies and accounts made investments totaling tens of millions of dollars.

He was assisted in this scheme by Mossack Fonseca and Richard Gaffey, a partner at a U.S.-based accounting firm. Mossack Fonseca helped von der Goltz create a sham foundation and shell companies formed under the laws of Panama and the British Virgin Islands. It was also falsely claimed that von der Goltz’s elderly mother was the sole owner of the shell companies and bank accounts at issue; she was a Guatemalan citizen and resident and, unlike von der Goltz, not a U.S. taxpayer.

In addition to the prison term, von der Goltz was ordered to serve three years of supervised release, to pay forfeiture in the amount of $5,373,609 and restitution of $3,448,848 and to pay a fine of $30,000.

Gaffey previously pled guilty and was scheduled to be sentenced late this month.

Orlando, Florida: A federal court has permanently enjoined Advanced Tax Services and Genson Financial Group from preparing federal returns.

The businesses were also ordered to disgorge $710,191.55 for gains for the preparation of returns. The court also entered permanent injunctions and disgorgement judgments against Lenorris Lamoute and Dosuld Pierre.

The pair prepared returns making false or fraudulent claims for the Earned Income Tax Credit, often based on fabricated business income and expenses, bogus or improperly claimed dependents and false filing status. They also prepared returns reporting non-existent Schedule A businesses, false itemized deductions, false or fraudulent fuel tax credits and bogus education expenses.

Previously, in related judgments, the court entered permanent injunctions against Marcgenson Marc, the owner of Advanced Tax Services and Genson Financial Group, as well as Tiana Character and Character’s business, Character Financial Solutions, and Shirleen Thales, and ordered Marc to disgorge $710,191.55.

Hinsdale, Illinois: Former accountant Sultan Issa, 47, has been sentenced to 200 months in prison for stealing more than $77 million from individuals and financial institutions.

Issa, a CPA, was also the CFO of a group of partnerships, corporations and trusts owned by a Chicago-area family. From 2010 to 2017, he embezzled at least $45 million of the family’s assets, including money from a trust account that was set up to pay medical expenses for a family member with an incapacitating illness. Issa also stole at least another $5.1 million from individuals in his personal capacity, claiming he would invest their money in legitimate opportunities. He used the money to instead cover personal expenses and to secure fraudulent loans from financial institutions totaling at least $83 million, to acquire, among other things, 25 residential properties in Illinois, Montana, Michigan and Mexico, two private aircraft, four yachts, firearms, watches, jewelry and memorabilia.

Issa tried to conceal the scheme by providing financial institutions with fraudulent loan documents and forging authorizations to gain control of funds belonging to the family-owned group. He also created false account statements and made Ponzi-type payments to individual investors.

Issa, who pleaded guilty earlier this year, was also ordered to pay more than $72 million in restitution to the victims.

Wallingford, Connecticut: Donald Cariati Jr., of Meriden, Connecticut, has been sentenced to a year and a day of imprisonment to be followed by a year of supervised release for obstructing the IRS.

Cariati owns and operates Cariati Developers, or CDI, a snowplow and hauling business. Between 2013 and 2017, he paid several employees with company checks asserting that they were independent contractors or subcontractors to evade withholding and paying over taxes to the IRS. Cariati and his company failed to issue 1099s to these “subcontractors” for some years. Cariati also informed certain individuals that they were being paid off the books.

In late 2015, the IRS began an audit of CDI, during which Cariati caused fraudulent invoices to be made available to an IRS revenue agent. The invoices were purported to have been created in 2013 and purportedly substantiated that individuals were appropriately considered subcontractors.

Investigation also revealed that in 2014 CDI paid an invoice related to products for Cariati’s cigarette boat. During the audit, Cariati caused his accountant to provide to the IRS a false invoice to make it appear that the purchase was a business and not a personal expense.

Cariati, who pleaded guilty in February, was also ordered to pay $1,077,048.99 in restitution. He has paid $1 million toward his tax obligation.

Sacramento, California: Local couple William Bennett, 42, and Christina Bennett, 38, have pleaded guilty to conspiring to defraud the U.S. by submitting false claims for federal income tax refunds.

For some three years beginning in 2012, a conspirator provided William Bennett with others’ personal ID information; he filed returns for those people claiming false, inflated refunds based on false statements. The returns usually fell into similar categories and contained similar false claims for employment, income, withholding and dependency exemptions. Some of the returns also sought credits to which the individuals on the returns were not entitled, such as the American Opportunity Credit.

The fraudulent refunds were often deposited in bank accounts that the Bennetts or their conspirator controlled. The co-conspirators divided the money, sometimes providing the filer with a small portion of the refund.

Chicago: Former Illinois state senator Terrance P. Link has pleaded guilty to a federal tax charge and admitted willfully underreporting his income for several years.

Link admitted that he underreported his income for calendar years 2012 through 2016, causing total losses to the IRS of at least $71,133 and to the Illinois Department of Revenue of at least $11,527.

For 2016, Link admitted that he underreported approximately $93,859, approximately $73,159 of which was money from a campaign fund that Link spent on personal expenses.

Link pleaded guilty to one count of filing a false return, a charge punishable by up to three years in prison. He agreed to pay restitution of $71,133 to the IRS and $11,527 to the Illinois Department of Revenue.

Brunswick, Georgia: William Brunson, of Kingsland, Georgia, former executive director of the Camden County Public Service Authority, has been sentenced to 32 months in prison after misappropriating funds intended for payment of employees’ federal payroll taxes.

Brunson was responsible for paying over employment taxes on behalf of the Public Service Authority but failed to remit more than $677,000. In addition to not filing his personal returns during that period, Brunson also used a Camden County PSA credit card and other funds for his personal use, including the purchase of antique cars.

He was terminated from the PSA in May 2018 after an audit of PSA finances and an investigation by the Georgia Bureau of Investigation.

Brunson, who pleaded guilty, was also ordered to pay $677,768.40 in restitution and to serve three years of supervised release after completion of his prison term.

Ithaca, New York: Restaurateur Geoffrey Tyrrell has pleaded guilty to grand larceny and criminal tax fraud charges.

Between September 2013 and May 2017, Tyrell, owner of Fat Jacks BBQ, collected $199,491 in sales tax from customers and failed to file sales tax returns and remit the money to the state.

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