CryptoPunks; Eight Percent Fund; fake Transaction Summaries; and other highlights of recent tax cases.
Sacramento, California: Former Sacramento city councilman Shahriar "Sean" Loloee pleaded guilty to fraud and money laundering charges after admitting to obstructing Labor Department investigators and cheating on taxes tied to his Viva Supermarket stores, as well as fraudulently collecting more than $1 million in COVID relief funds.
Loloee faces a maximum of 59 years in federal prison on the seven charges against him. Sentencing is scheduled for October 15.
Loloee is charged with conspiracy to obstruct agency proceedings; conspiracy to defraud the IRS; filing false tax returns; money laundering; and wire fraud.
Loloee agreed to repay $1.2 million to the U.S. Small Business Administration for defrauding the Restaurant Revitalization Fund. He must also surrender another $1 million in personal assets, and hand over personnel files containing counterfeit immigration documents seized in an October 2023 raid by federal agents.
Loloee defended the labor practices at his stores in an interview with The Sacramento Bee following his plea and said he does not employ undocumented workers.
On the possibility of a federal prison sentence, he told the newspaper: "I'm not concerned about it. Life must go on."
Fair Lawn, New Jersey: Kfir Baroan, 50, of Fair Lawn, admitted evading more than $230,000 in taxes and pleaded guilty to tax evasion and willful failure to pay over payroll taxes.
Baroan owned and operated an auto body shop in Elmwood Park, where he earned significant income but failed to file personal tax returns from 2018 through 2021.
Although he hired a tax preparer to prepare returns for 2018 and 2019, Baroan chose not to file them. During that time, Baroan cashed more than $1.5 million in business checks at check-cashing facilities instead of depositing them into business accounts. He also used bank accounts tied to other businesses to move money for personal and business expenses and failed to keep accurate financial records.
Baroan paid employees in cash, failed to report their wages to the IRS and did not withhold or pay required payroll taxes, including Social Security and Medicare taxes.
In total, Baroan failed to pay at least $100,354 in personal income taxes and $133,806 in payroll taxes between 2018 and 2021.
The charges carry potential penalties of up to five years in prison and fines of up to $250,000 for each count. Baroan is scheduled to be sentenced on September 2.
Houston, Texas: A former CPA from Houston has been sentenced to 18 months in federal prison for failing to pay taxes withheld from employee wages.
Harry Lamar Curtis III, the owner of Information Advisory Group LLC, a cybersecurity and IT company, admitted to not filing business tax returns since 2016 and improperly withholding $1,647,142 owed to the IRS. Additionally, Curtis has not filed individual tax returns since 2008.
Curtis will serve three years of supervised release following his prison term.
Syracuse, New York: New York Attorney General Letitia James announced the conviction of Miles Burton Marshall, a Madison County tax preparer and insurance agent, for operating a massive Ponzi scheme that fraudulently stole more than $50 million from 988 investors in Madison County and other nearby counties.
Beginning in the early 1990s and continuing through March 2023, Marshall solicited potential investors, including his tax and insurance clients, to invest tens of millions of dollars into his so-called "Eight Percent Fund." Marshall told investors that their funds would be primarily used to purchase property, refurbish rental houses and pay expenses for rental properties. When soliciting investments, he falsely represented the profitability of his real estate business, claiming it was so profitable that he could promise investors 8% yearly returns.
After soliciting investments, Marshall used investors' money to pay investment returns to prior investors and to finance operating expenses for his other businesses. Marshall also spent hundreds of thousands of dollars from his investors on personal expenditures, including travel, and purchases at retail and online stores and at grocery stores, restaurants and yoga studios.
To further his scheme, Marshall directed his staff to generate fake "Transaction Summaries" for investors, falsely representing their account balances and the interest they purportedly earned. Marshall's investors relied on these false statements, believing they were earning a steady income, and continued to invest. As a result of Marshall's investment scheme, many investors lost their life savings.
The investigation revealed that by 2016, Marshall's total liabilities exceeded his assets by over $40 million. Still, he continued to solicit new investors and tell prior investors that their investments were profitable. Eventually, Marshall could no longer repay investors and filed for bankruptcy. In bankruptcy proceedings, Marshall made sworn statements that as of March 2023, his total assets were less than $22 million, and he owed 988 victim investors over $90 million, which included the principal they invested as well as accrued interest.
Marshall pleaded guilty to grand larceny in the second degree, securities fraud under the Martin Act and scheme to defraud in the first degree. Marshall is scheduled to be sentenced on June 11 to four to 12 years, and will also enter into judgments in favor of his 988 victims totaling approximately $90 million.
York County, Pennsylvania: A Dillsburg man was sentenced to one year of probation after he failed to report millions of dollars in earnings on his tax returns.
Waylon Wilcox, 46, made over $12.3 million total in 2021 and 2022 from the sale of non-fungible token, but he failed to report this income on his tax returns for those years.
In total, Wilcox sold 97 pieces of digital artwork from the "CryptoPunks" collection.
Wilcox saved about $3.3 million total by underreporting these NFT sales, though he has since paid that total back to the IRS, plus nearly $1 million in interest.
Wilcox will also pay a fine of $150,000 as part of his sentence.
