Mark Thomas Ellis, president and CEO of Winsted Holdings, pleaded guilty to a tax charge in U.S. District Court in Los Angeles.
The company, which was known as Indiginet before Ellis bought control in 2003, sold billions of shares of nearly worthless penny stock in an environmental care company, broadband Internet service provider, and medical spa franchiser before the Securities and Exchange Commission stepped in. In the tax case, Ellis admitted to owing $750,000 to the Internal Revenue Service.
Ellis, of Long Beach, entered his guilty plea after previously being summoned to appear to answer charges that he subscribed to a false personal income tax return for the 2004 tax year. The allegations are contained in a criminal information filed by prosecutors last year.
According to his plea agreement, Ellis admitted that, in 2004, he received over $748,000 from the company for his own personal use, providing himself with compensation in addition to his salary that he used to pay for personal expenses and to invest in an unrelated business. In addition, Ellis admitted that he did not disclose to his accountant who prepared his tax return that he had received the additional income and compensation from the company.
In his plea, Ellis admitted that he knew that his 2004 tax return was false and that it was illegal to file a false tax return with the IRS. Ellis stated that he knew that he had received the aforementioned income and that he failed to report it on his 2004 tax return.
In addition, Ellis acknowledged that he received additional payments totaling $1,497,537 from Indiginet or Universal Broadband Communications Inc. in 2003, 2005 and 2006. Ellis admitted that he deliberately failed to report these payments on his personal tax returns for the years indicated.
In total, Ellis received $2,246,271 that he did not report to the IRS for the years 2003 through 2006. He agreed that the resulting tax loss to the government, due to his underreporting, amounts to over $725,000. Ellis also agreed as a part of his plea that he is liable for the fraud penalty imposed by the IRS, which amounts to 75 percent of the tax due, on the amount of tax he owes to the government. U.S. District Judge Terry J. Hatter ordered Ellis to appear for sentencing on April 19, 2010. When sentenced, Ellis faces up to three years in federal prison and fines totaling $100,000.
The investigation and prosecution of Ellis was conducted by the IRS Criminal Investigation Division and the FBI in Los Angeles in conjunction with the U.S. Attorneys Office for the Central District of California.
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