Final salute; Patriot game; books by their covers; and other highlights of recent tax cases.
McComb, Mississippi: Tax preparer Elizabeth Stephens, 41, has been sentenced to 18 months in prison and ordered to pay $58,668 in restitution to the IRS for preparing false returns for clients.
Stephens, who
The owner of the prep business, Shameka Wells, was sentenced in July 2021 to 13 months in prison for filing a false return.
Atlanta: Exec Charles Johnson Sr. has pleaded guilty for not paying $1.4 million in payroll taxes and for failure to pay employment taxes.
Johnson was president and CEO of Williams-Russell and Johnson, an engineering firm. He failed to pay significant amounts of withheld income and employment taxes to the IRS, pension payments to the firm's retirement plan and health insurance premiums to the insurer. These funds were collected and withheld from employee paychecks for multiple years, from at least 2015 to 2019.
In addition to being president and CEO of the firm, Johnson was a fiduciary for the retirement and health plans. He was charged with failing to pay $1.4 million in employment taxes and failing to pay more than $480,000 to the firm's 401(k) and its health insurer for premium payments.
He has agreed to pay $1.4 million in restitution to the United States and $210,000 to the employees who participated in the benefit plans.
New Haven, Connecticut: Businessman Brian Hughes, formerly of Madison, Connecticut, has been sentenced to 30 months in prison to be followed by three years of supervised release for defrauding investors and for tax evasion.
In 2015, Hughes founded Handcrafted Brands to raise money to purchase Salute American Vodka, an alcoholic beverage company. Hughes subsequently solicited and received funds from dozens of investors ostensibly for the purchase and subsequent development of Salute. Hughes used the first investment he received, $150,000, to pay his taxes and his American Express bill.
Although HCB purchased Salute in 2016 for $450,000, Hughes continued to solicit investments from investors and used hundreds of thousands in invested funds for expenses unrelated to Salute. He also used funds to pay off an earlier investor under the guise of a return on a prior investment made by the earlier investor, a.k.a. a "lulling" payment.
Hughes also solicited investments purportedly on behalf of another company, with which he had no official relationship and had no authorization to raise capital for. Hughes spent the money for this investment on personal expenses, to pay earlier investors and on business related to Salute.
Finally, Hughes evaded his tax obligations for 2015 through 2018 by substantially underreporting his income to the IRS, resulting in a tax loss of $470,880.
Hughes, who previously pleaded guilty, was also ordered to pay full total restitution of $2,991,880 to investors in both HCB and the victim company and to the IRS.
Peculiar, Missouri: Business owner Jason Rigoli has been sentenced to a year and a day in prison for tax evasion.
Rigoli, who has owned and operated Granite Construction Services since 2006, admitted that he did not file a federal personal, business or employment tax return for eight years, from 2013 to 2020. He also failed to pay state income taxes, state employment taxes, workers' compensation taxes and unemployment taxes.
Rigoli used his business bank accounts for his personal expenses and used proceeds of his tax fraud to pay for travel, restaurant meals and liquor. He lied to IRS agents that he always paid his employees by check and that he paid his employees "by 1099" when in fact he often paid employees with cash and filed no W-2s or 1099s.
When IRS agents searched Granite Construction, they found false returns that were not filed with the IRS and which were labeled with notes such as "Fake/High," "2015 Completed F Taxes" and "Real 2014." Rigoli told agents that an accountant would soon be preparing and filing all his personal and business tax returns at one time. When later interviewed, the accountant contradicted this claim.
He also applied for two Economic Injury Disaster Loans for the same business but under two different names. He received a $150,000 loan for Granite Construction in August 2020 and that same month applied for a second EIDL for Patriot Construction Management, a shell company. For this fraudulent loan, Rigoli used his parents' address as the business address and the same employees as he used for his first EIDL loan; the Small Business Administration did not grant this second loan.
Rigoli kept very few books and records related to his business. To calculate taxes owing, the IRS reconstructed the books using bank records and documents recovered from the business. Because Rigoli often used cash and commingled accounts and because the IRS gave him the benefit of the doubt on business expenses and depreciation, the tax loss is relatively low: $110,819 total from 2016 to 2019.
When federal employment taxes are added, the total federal tax loss is $121,007. The Missouri state tax loss was $17,448.
In July, Rigoli filed for tax years 2017 and 2018, reporting taxes due and owing for those years. From 2014 to the date of sentencing, he paid just $139 in federal or state income or employment taxes.
Rigoli, who pleaded guilty in August, was also ordered to pay $138,455 in restitution.
Los Angeles: Edward Kim had been sentenced to 292 months in prison for fraudulently obtaining nearly $5.5 million in COVID-related jobless benefits by using the identities of California state prison inmates and other third parties, trafficking fentanyl and methamphetamines, and seeking to fraudulently obtain more than $356,400 in tax refunds.
From May 2020 to March 2021, Kim and his conspirators submitted some 459 fraudulent unemployment insurance claims to the California Employment Development Department using the names, Social Security numbers, dates of birth and other ID information of state prison inmates and others.
Kim received the inmates' information from various sources, including the dark web, and submitted online applications for unemployment insurance benefits that falsely represented the inmates and others who were unemployed because of the pandemic. Kim listed false mailing addresses, including his current and former apartments, to which the bank sent the EDD debit cards; he then made cash withdrawals at bank branches. He and his conspirators stole some $5,458,050.
In November 2019, he sent packages containing methamphetamine and fentanyl from a local FedEx store to the address of a UPS Store in Hawaii, where police arrested the conspirator who came to pick up the packages. The following summer, Kim began renting a local warehouse where he stored equipment and materials to make and distribute narcotics, as well as a marijuana grow operation. By then he'd also conspired with others to use stolen IDs to file phony federal income tax returns; the returns included false information designed to qualify for Economic Impact Payments.
With his conspirators, Kim caused at least 297 fraudulent federal returns to be filed which sought more than $356,400 in fraudulent EIPs.
During a traffic stop in November 2020, police found methamphetamine in Kim's car, along with a digital scale and 16 debit cards in the names of others. A search the following March of Kim's luxury apartment revealed methamphetamine, dozens of EDD letters and mailings and a notebook marked "stimulus scheme" that contained some 405 different IDs. A search of the area warehouse later turned up more EDD paperwork, ATM withdrawal receipts and methamphetamine. Still another search of the warehouse later turned up a ghost handgun.
Kim, who pleaded guilty in November, was also ordered to pay $5,458,050 in restitution to the California Employment Development Department and $16,800 to the IRS.
