Tax Fraud Blotter: Varied jobs, big frauds
Fish tales; from the general to the illegal; dinged; and other highlights of recent tax cases.
Powell, Ohio: Scott W. Atway, 44, has been sentenced to a year and a day in prison, four months of community confinement and eight months of house arrest for filing a false return.
For several years, including 2010 through 2013, Atway owned multiple Verizon Wireless stores in central Ohio, aside from being a self-employed attorney who operated his own law practice. In 2013, he also generated income from a real-estate holding company for his rental properties.
Atway provided incomplete or false documents to his preparer for these years and made false statements to her when asked to justify how he paid for his lifestyle.
During this timeframe, Atway was building and improving a luxury home; he paid more than $800,000 to contractors for additions including an enclosed tennis court, a basketball court, an in-ground pool, a six-car garage and an elevator. He was also buying high-end cars, including a Land Rover, a Porsche 911, a Lexus IS250, a BMW X6 and a nearly $143,000 Audi R8.
For these cars, he either received no financing or paid off the loans early, and the income he reported to the dealerships was much greater than what he reported on his returns.
Atway, who pleaded guilty late last year, was also ordered to pay $600,000 in restitution.
Yeadon, Pa.: Preparer Deron Joe has been convicted of one count of conspiring to defraud the U.S. by filing false returns and preparing false returns that generated inflated refunds for his clients, and of 11 counts of aiding and assisting in the filing of false returns.
According to court documents and evidence, from 2007 through 2010, Joe and a co-conspirator co-owned a tax prep business that prepared returns for clients that claimed false business expenses and other false deductions. For example, Joe made up 2106s to inflate clients’ refunds by thousands of dollars.
Sentencing is Jan. 3. Joe faces up to 36 years in prison and a maximum fine of $1.35 million.
Klawock, Alaska: A local couple has been sentenced for willfully failing to pay their individual income taxes.
Archie W. Demmert III, 58, and Roseann L. Demmert, 61, were both sentenced to each serve a year and a day in federal prison on two counts of willful failure to pay income tax. The Demmerts will pay restitution to the IRS for the calendar years charged covering 2011, 2012, 2013 and 2014.
In May, the Demmerts admitted that they earned income from commercial fishing for over a decade but willfully chose not to pay more $300,000 in income taxes, excluding penalties and interest.
According to court documents, the Demmerts have a history back to at least 1994 of avoiding their taxpayer obligations.
Porterville, Calif.: Preparer Leticia Bedolla, 39, has pleaded guilty to aiding and assisting in the preparation and presentation of a false and fraudulent return.
According to court documents, she operated Leticia Tax Service and sometimes fabricated amounts of deductions and deductible expenses without informing her clients. In other instances, Bedolla would ask a general question about a client’s personal expenses and then mischaracterize the information on the federal return to improperly claim a deduction or credit.
Her conduct resulted in a tax loss to the IRS of approximately $105,747.
Scottsdale, Ariz.: Spa executive William Whittington, 68, formerly of Pagosa Springs, Colo., has been sentenced to 18 months in prison for filing a false return.
According to court documents, Whittington filed a false 2010 individual income tax return on which he underreported income received from his offshore accounts and through the payment of his personal expenses by an entity over which he exercised managerial control. From 2010 to 2012, he directed that the Springs Resort & Spa in Pagosa Springs, a business managed by Whittington and family members at the time, pay more than $1 million of his personal expenses. The total additional tax due for those three years based on Whittington’s failure to report the payment of the personal expenses as income is $364,994.
From 2003 to 2010, Whittington failed to report $9.7 million in investment income generated through two offshore bank accounts in Liechtenstein. Combined with the tax loss from the resort payment of his personal expenses, Whittington’s fraudulent conduct created a $1.8 million tax loss. Whittington is a racecar driver whose team won the 1979 24 Hours of Le Mans. He was sentenced to prison in 1987 for evading income tax and importing tons of marijuana.
Whittington was also ordered to serve a year of supervised release. He paid some $1.8 million in restitution to the IRS as a condition of his plea agreement.
Washington: Michael Sang Han, 47, formerly of Palm Beach, Fla., has been sentenced to four years in prison following his conviction in a multi-million-dollar tax evasion scheme.
According to evidence and statements in court, Han owned and operated Envion, a company that he claimed held the patents on technology used to convert plastics into fuel oil. As early as 2004 Han convinced two individuals to invest nearly $40 million in his company, then used more than $17 million of that money to fund a personal lifestyle, including flying in private jets, enjoying lavish meals and adult entertainment. In 2010 and 2011, Han used $3 million to purchase a West Palm Beach home, paid $2 million for renovations and internal decorations, and spent more than $440,000 on multiple luxury cars, including BMWs, a Range Rover and a Ferrari. He also used millions of dollars of investors’ money to replace money he took from Envion in previous years.
According to evidence, Han also took steps to conceal his personal use of the investors’ money from his bookkeepers and preparers. He reported none of the money he converted for his personal use on his 2010 and 2011 income tax returns, evading more than $4 million in tax liability.
In addition to the prison term, Han was ordered to pay $4,954,027 to the IRS. Following his prison term, he will be placed on three years of supervised release.
Boston: Auto-body shop owner Richard Poillucci, 62, of Easton, Mass., has pleaded guilty in connection with preparing false returns for his company, Automotive Specialties Inc.
Poillucci’s shop specialized in repairing high-end vehicles. Between 2012 and 2015, he cashed millions of dollars in checks from the business at check-cashing establishments in Massachusetts and Rhode Island and willfully failed to report that income or expenses that he paid for in cash with the proceeds from those checks, on ASI’s returns. Poillucci failed to report approximately $569,367 to the IRS, avoiding some $215,552 in federal income taxes.
Sentencing is Jan. 22. Each of the counts of aiding the preparation of false returns carries a maximum of three years in prison, three years of supervised release and a fine of $250,000.
Annandale, Va.: Jose Manlapaz, 55, has been sentenced to nine years in prison for conspiracy, aiding in the preparation of false returns and mail and wire fraud.
According to court records, Manlapaz owned and operated the prep business JBM Financial Services or JBM Financial Group in Falls Church, Va. Between 2007 and 2017, he prepared thousands of false returns for clients by adding false or inflated items, including education credits, childcare expenses and fake business expenses. Manlapaz knew that the items he added would cause many clients to be audited, and set up a document mill in the Philippines called TMendoza Accounting Services to fabricate fake receipts and tax forms.
After investigators searched JBM in 2013, and up until a second search of JBM in 2017, Manlapaz and JBM kept preparing false returns, but removed his preparer information so it looked like his clients were submitting the returns themselves.
A search of his residence and two safe deposit boxes in 2017 resulted in the seizure of over $1.3 million in cash and valuables, including Rolex watches. The investigation also revealed that Manlapaz had also wired some $1.5 million to the Philippines during the conspiracy.