Pharmacists Writes $5 Million Employment Tax Fraud Prescription Resulting in 41 Months of Jail Time

According to the DOJ a Collinsville, Virginia pharmacist pleaded guilty to failing to account for and pay over employment taxes, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Thomas T. Cullen for the Western District of Virginia.

According to court documents, Jerry R. Harper, Jr., 61, owned and operated Family Discount Pharmacy, Inc. (FDP) in Stanleytown, Virginia, with multiple locations in Stuart, Rocky Mount, Chatham, and Brosville, Virginia.  As owner of FDP, Harper was responsible for collecting and paying over FDP’s employment taxes. 

From 1998 through 2014, FDP Accrued Employment Tax Liabilities of More Than $5 Million.

 

Harper Withheld These Taxes from FDP Employees’ Wages, but Did Not Pay the Taxes to the Internal Revenue Service.

 

In over 15 years, Harper only filed one employment tax return with the IRS.

Harper admitted that instead of providing the employment taxes to the IRS, he caused FDP to pay his personal expenses.  For example, Harper wired over $1 million to his personal bank account, made over $500,000 in stock market investments, spent over $100,000 on his son’s pharmacy school tuition, and purchased over $370,000 of real property in Virginia and North Carolina.  Harper also used part of the money to purchase a Jeep Grand Cherokee and a jet ski.

 

 

“Today’s Guilty Plea Sends a Clear Message That This Type of Conduct Will Not Be Tolerated,”

Said Principal Deputy Assistant Attorney General Zuckerman.

“Employment tax violations represent tens of billions of dollars in lost revenue to the U.S. Treasury and the Justice Department is committed to prosecuting individuals involved in these tax frauds.”

 

On November 16, 2018 He Was Sentenced to 41 Months inPrison for Failing to Account for and Pay over Employment Taxes.



 

In addition to the term of imprisonment, he war ordered to serve 2 years of supervised release and to pay restitution in the amount of $5,069,555.73 and a fine of $25,000.00.

 

 Have a Criminal Tax Problem?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.
 

 

for a FREE Tax Consultation contact us at

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888 882-9243)

 

  



 

Bank Leumi Hands Over Another US Depositor to the IRS

According to DoJ, Israel Birman pleaded guilty on November 14, 2018 in U.S. District Court for the Central District of California to filing a false federal tax return on which he failed to report interest income he earned from bank accounts at Bank Leumi Le-Israel B.M.

 

According to court documents, between 2006 and 2014, Israel Birman held offshore bank accounts in Israel at Bank Leumi and Israel Discount Bank.  The accounts had balances over $10,000 each year, which required the filing of Reports of Foreign Bank and Financial Accounts (FBARs) with the Department of the Treasury.

In 2013, Israel Birman’s bank accounts at Israel Discount Bank had a total value of over $3.4 million. Israel Birman did not file FBARs for 2006-2014. Israel Birman instructed Bank Leumi to hold bank mail from delivery to the United States, and obtained access to his offshore funds through the use of “back-to-back” loans from Bank Leumi USA collateralized by his undeclared Bank Leumi funds.

In 2009 and 2010, Israel Birman earned taxable interest income on his Bank Leumi bank accounts totaling over $187,000. He failed to report that interest income on his 2009 and 2010 federal tax returns.

“The Department Of Justice Continues to Vigorously Investigate and Prosecute Offshore Account Holders

Who Maintain Undeclared Accounts and Willfully Ignore

Their US Reporting and Tax Obligations,”

Said Principal Deputy Assistant Attorney General Zuckerman.

 

In December 2014, Bank Leumi entered into a deferred prosecution agreement after the bank admitted to conspiring from at least 2000 until early 2011 to aid and assist U.S. taxpayers to prepare and present false tax returns by hiding income and assets in offshore bank accounts in Israel and other locations around the world. Under the terms of the deferred prosecution agreement, Bank Leumi paid the United States a total of $270 million and continues to cooperate with respect to civil and criminal tax investigations.

Sentencing is scheduled for January 28, 2019. Birman faces a maximum sentence of 3 years in prison, as well as a period of supervised release, restitution and monetary penalties.

As part of the plea agreement, Israel Birman has agreed to pay a civil penalty of not less than $1,709,883, representing 50% of the balance in his Israel Discount Bank account in 2013.

Do You Have Undeclared Offshore Income?

 

 

Is Your Name Being Handed Over to the IRS?

  

Want to Know Which Remaining OVDP Program is Right for You?

 

 

Contact the Tax Lawyers at 

Marini& Associates, P.A.  

 

 

 

for a FREE Tax Consultation Contact us at:

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888) 882-9243

 

Tax Returns & 5th Amendment Privilege? - Part I

According to Michael J. DeBlis III, if you’ve ever heard someone “plead the Fifth” on a crime-related television show, you’re aware of the power of the Fifth Amendment. A key part of the United States Constitution, the Fifth Amendment protects Americans from self-incrimination, meaning that if you are arrested for a crime, you are under no obligation to reveal information that may be used against you. While cases of pleading the Fifth are a little less common in real life than they are on Investigation Discovery, the Fifth Amendment does occasionally rear its head for ordinary individuals, particularly where taxes are concerned.

In cases potentially involving the Fifth Amendment, it’s important for taxpayers and attorneys alike to tread carefully. After all, anything you say or do can be held against you, whether you meant to reveal such information or not. As such, taxpayers may find themselves between a rock and a hard place, as the willingly-provided information gathered in an audit – personal information and details about potential wrongdoing that taxpayers would ordinarily never admit to in a court of law, for example – can then be used in a criminal proceeding, like in cases of fraud or tax evasion.
Facing the potential for criminal charges stemming from an IRS investigation is a slippery slope. In order to keep taxpayers as protected as possible in these proceedings, it’s critical to understand policies, procedures, and best practices to reduce the risk of penalty.

The Fifth Amendment and the Filing of Tax Returns

As the adage goes, there are only three absolutes in life birth, death, and taxes and pleading the Fifth isn’t always enough to send the IRS packing.

Under Code Sec. 6012, individuals in the U.S. are required to file annual income tax returns, and also to keep adequate records to support the gross income and expenses included with an annual filing. For those with a penchant for tax fraud, doing as such may seem as though it’s toeing the line of the Fifth Amendment, but the Supreme Court decided this isn’t the case; in United States v. Sullivan, the Court determined that preparing tax returns is not a violation of personal liberties. There may be some case for pleading the Fifth in cases in which the taxpayer is asked to disclose information that is otherwise privileged, but there is no defense for failing to file at all. Returns also cannot be substantially incomplete; they must provide enough information for the IRS to reasonably determine an individual’s tax liability.

If the IRS requests information the taxpayer feels should be privileged, a privilege claim can be made under select circumstances, on a case by case basis. In fact, the Tax Court recently ruled that the privilege against self-incrimination can be used to keep taxpayers from disclosing the source of certain forms of interest income if the return otherwise contains enough information for the IRS to accurately assess the correctness of the overall return.

Invoking the Fifth Amendment

Think invoking the Fifth Amendment may be enough to get the IRS off your case? It may be, but it also may not be.

Section 7602 grants the IRS fairly broad power to compel taxpayers into providing requested information in the course of a return examination. This power is not unlimited, however, and in the right occasion, the Fifth Amendment may indeed provide protection. However, before pleading the Fifth willy-nilly, it’s best to understand its exact role in the Constitution. It reads as follows: “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” In essence, this protects against government abuse, helping to safeguard citizens from having to choose between following the law and self-incrimination or perjury.

These privileges don’t just stop at criminal cases, however; civil proceedings are also included. This means that taxpayers are indeed permitted to plead the Fifth in proceedings with the IRS, assuming there is a valid reason to do so. If a taxpayer is found to be “faced with hazards of self-incrimination that are real and appreciable, not merely imaginary and unsubstantial” the request will be upheld.
For those potentially facing IRS sanctions or penalties, it’s only natural to ask, “why not invoke the Fifth Amendment at all times when dealing with the IRS?” After all, confessing to tax fraud or other challenges that the IRS may investigate would be self-incrimination, would it not? This is certainly a valid question, but it’s also one that may stand in the way of resolving complex tax situations, particularly for those with an educated appointed representative, like a tax accountant or lawyer. With a qualified representative speaking on behalf of a taxpayer, it’s unlikely that a case will evolve into one in which pleading the Fifth becomes essential, even in cases concerning fraud or other potentially criminal charges. It is also important to understand the rights of a taxpayer and his representative; when asked, the IRS must produce a copy of their administrative file under code section 7803. Generally, reviewing files and workplaces indicates that pleading the Fifth isn’t necessary. However, if the IRS refuses to give up files based on the perceived influence to proper tax administration, the taxpayer may want to proceed with as many privileges invoked as possible.

In addition to the above, the burden of proving privilege falls on the one asserting privilege, which means that the taxpayer must be able to demonstrate why he is claiming privilege – and saying “because” isn’t a good reason at all. From there, it is up to the court to decide whether this choice is valid, and if it’s deemed to be unnecessary, the ability to plead the Fifth is essentially voided.
While the IRS occasionally issues threats, it’s highly unlikely that the results of an investigation will actually yield prosecution, making the need to invoke the Fifth essentially moot. Further, invoking the Fifth immediately colors the way a taxpayer looks to the IRS. Even if there’s nothing criminal to hide, simply bringing up privilege will lead to a presumption that there is. Doing this unnecessarily can send the IRS digging deeper than previously intended, and may also significantly delay the examination process and send legal costs soaring.

Have a Criminal Tax Problem?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.
 

 

for a FREE Tax Consultation contact us at

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888 882-9243)

 

  

 

IRS Criminal Investigation releases Fiscal Year 2018 Annual Report

The Internal Revenue Service released on November 14, 2018 the Criminal Investigation Division’s (CI) annual report, reflecting significant accomplishments and criminal enforcement actions taken in fiscal year 2018.

 

 

"This Report Shows That As Financial Crime Has Evolved

and Proliferated around the World, so

 Have IRS Criminal Investigation Special Agents and

Their Abilities to Track the Proceeds of Financial Crime,"

  

Said IRS Commissioner Chuck Rettig. “CI uses cutting-edge technology combined with sophisticated investigative work to bring the most impactful cases that affect tax administration. I am extremely proud of our special agents and professional staff and their work serving the nation.”


A major focus of CI in fiscal 2018 was traditional tax cases, including international tax enforcement, employment tax, refund fraud and tax-related identity theft. Other areas of emphasis included public corruption, cybercrime, terrorist financing and money laundering.

"We Prioritized the Use of Data in Our Investigations in Fiscal 2018," Said Don Fort, Chief of CI.

 

“The future for CI must involve leveraging the vast amount of data we have to help drive case selection and make us more efficient in the critical work that we do. Data analytics is a powerful tool for identifying areas of tax non-compliance.”

CI initiated 2,886 cases in fiscal 2018, with traditional tax cases accounting for 73 percent of the total. The number of CI special agents dipped below 2,100 by the end of fiscal 2018, which is the lowest level since the early 1970’s. Consequently, CI turned to data analytics to assist in finding the most-impactful cases.

CI is the only federal law enforcement agency with jurisdiction over federal tax crimes. CI achieved a conviction rate of 91.7 percent in fiscal 2018, which is among the highest of all federal law enforcement agencies. The high conviction rate reflects the thoroughness of CI investigations and the high quality of CI agents. CI is routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes.

CI has published an annual report since 1920 to highlight the agency’s successes and provide a historical snapshot of the make-up and priorities of the organization. The 2018 report is interactive, summarizes a wide variety of CI activity during the year, and features examples of cases from each field office on a wide range of financial crimes.

The current year, fiscal 2019, marks the 100-year anniversary of CI as a law enforcement agency. CI’s crime-fighting techniques have come a long way in that time. The federal fiscal year begins Oct. 1 and ends on Sept. 30.

“As we begin our 100th year, I could not be prouder to lead this exceptional agency of dedicated women and men," Fort said. "We have never been more capable, better trained or more relevant to the financial crimes landscape."



Have a Criminal Tax Problem?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.
 

 

for a FREE Tax Consultation contact us at

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888 882-9243)

 

 

Disregarded Entities Are Not Always Disregarded

Under the check the box rules, entities owned by one person can often be disregarded for federal tax purposes. Such entities are referred to as "disregarded entities." 

As time has progressed since the passage of the check the box rules, the IRS has created more and more exceptions to the disregarded treatment. The following is a summary of the principal exceptions, but is not intended to be exhaustive. If any readers think we have missed anything major, please feel free to comment to this posting.

1. Status is modified if the single owner of the entity is a bank. Treas. Regs. Section 301.7701-2(c)(2) (iii). 
2. Status is modified for certain tax liabilities. Treas. Regs. Section 301.7701-2(c)(2)(iii). These include: (1) federal tax liabilities of the entity with respect to any taxable period for which the entity was not disregarded; (2) federal tax liabilities of any other entity for which the entity is liable; and (3) refunds or credits of federal tax. 
3. Disregarded status ignored or modified for taxes imposed under Subtitle - Employment Taxes and Collection of Income Tax (Chapters 21, 22, 23, 23A 24, and 25 of the Code) and taxes imposed under Subtitle A including Chapter 2 - Tax on SelffEmployment Income. Treas. Regs. Section 301.7701-2(c) (2) (iv) (A). 
4. Status is modified for certain excise taxes, as described in Treas.Regs. Section 301.7701-2(c)(2J(v). Although liability for excise taxes isn't dependent on an entity's classification, an entity's classification is relevant for certain tax administration purposes, such as determining the proper location for filing a notice of federal tax lien and the place for hand-carrying a return under Code Section 6091
5. Conduit financing proposed regulations will treat a disregarded entity as separate from its single member. Code Section 7701 (I).
6. Special rules will apply in hybrid situations. Hybrid situations are circumstances where an entity is not disregarded in one jurisdiction but is disregarded in another.
7.  Final regulations (TD 9796) that treat domestic disregarded entities wholly owned, directly or indirectly, by foreign persons  as domestic corporations solely for purposes of making them subject to the reporting requirements under Internal Revenue Code, Section 6038A that apply to 25% foreign-owned domestic corporations.

 

Have a Tax Problem?  

 



 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 for a FREE Tax Consultation Contact us at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).

 

J5 Collaborate on Data Analytics Against 'Enablers'

On July 17, 2018 we posted The J5 International Tax Hunt is On! where we discussed that the tax authorities of the UK, US, Australia, Canada and Netherlands have set up a joint committee to improve international enforcement against tax crime and money laundering. The first meeting of the so-called J5 Group (Joint Chiefs of Global Tax Enforcement) was held during July 2018 where plans where developed to detect cyber criminals and enablers of offshore tax crime.

 

Now the J5 have held a meeting focussing on new data matching techniques to identify 'professional enablers suspected of facilitating significant tax fraud across international boundaries'.

The J5 have during the week of November 5th, brought together their leading data scientists, technology experts and investigators in a coordinated push to track down those people who make a living out of facilitating and enabling international tax crime.

The event, known as ‘The Challenge,’ was hosted by the Fiscal Information and Investigation Service (FIOD) in Amsterdam to identify, develop, and test tools, platforms, techniques, and methods that contribute to the mission of the J5. The Challenge focused on identifying professional enablers facilitating offshore tax fraud and financial crime posing a threat to the J5 jurisdictions.

Experts from each country gathered with the mission of optimizing data from a variety of open and investigative sources available to each country, including offshore account information. Using various analytical tools, the teams were tasked to find schemes, identify potential enablers, and propose actions to J5 leadership to address these threats.

At the conclusion of ‘The Challenge,’ each team identified new targets of investigations, developed investigative schemes to address those targets and increased their ability to share information and find similar patterns and targets in the future.

“Financial crime goes across borders,” said Hans van der Vlist, General Director of FIOD. “That is why operational collaboration is essential and possible. The J5 is a great example. The goal of this challenge is to define unknown professional enablers of tax fraud and financial crime.”

In addition to the Challenge, the J5 has already identified and is actively pursuing a number of professional enablers suspected of facilitating significant tax fraud across international boundaries. J5 partners are now working jointly to tackle each of these enablers through coordinated international action. These individuals were identified through intelligence sharing between J5 members since the alliance was formally announced (PDF 212KB)This link will download a file earlier this year in Montreal, Canada.

The J5 has also made progress in identifying websites that enable fraud through the promotion of schemes to hide income and assets offshore. J5 partners have shared intelligence and capability to collectively close in on these enablers by monitoring their users and using that in their investigations into those involved in these schemes.

 

Have Undeclared Income from an Offshore Account?
 

 

Want to Know What Voluntary Disclosure Program is Right for You?

  

 

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation Contact us at:

 www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

 

 

Sources:

Australian Tax Office Canada Revenue Agency

 

Former U.S. Congressman Sentenced to 10 Years in Prison for Tax Fraud and Election Crimes

According to DoJ, a former U.S. Congressman Stephen E. Stockman was sentenced on November 7, 2018 to serve 120 months in prison and ordered to pay $1,014,718.51 in restitution, to be followed by 3 years of supervised release, for orchestrating a four-year scheme to defraud charitable donors of hundreds of thousands of dollars and secretly to funnel the proceeds to pay for personal expenses and to illegally finance his campaigns for public office.

“Former Representative Stockman Stole Hundreds of Thousands of Dollars from Charities, then used the money to Pay Personal Expenses and Fund his Political Campaigns,”

said Assistant Attorney General Benczkowski. 

 

“At trial, the government proved to the jury that former Congressman Stockman ran his campaign and fraudulent charities to simply enrich himself and defrauded well-meaning donors,” said U.S. Attorney Patrick.

“This Type of Corruption by Public Officials Gives

Our Entire Democratic System a Black Eye.”



Former U.S. Representative Stephen E. Stockman, 61, was convicted by a federal jury in Houston on April 12, of 23 counts of mail fraud, wire fraud, conspiracy to make conduit contributions and false statements to the Federal Election Commission, making false statements to the Federal Election Commission, making excessive coordinated campaign contributions, money laundering, and filing a false tax return. 

Two of Stockman’s former congressional staffers previously pleaded guilty in the case. 

• Thomas Dodd, 39, of Houston, Texas, pleaded guilty on March 20, 2017, to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to make conduit contributions and false statements. 
• Jason T. Posey, 48, of Tupelo, Mississippi, pleaded guilty on Oct. 11, 2017, to one count of mail fraud, one count of wire fraud, and one count of money laundering.

“Former Congressman Stockman was entrusted by his constituents to serve in their best interest,” said FBI Special Agent in Charge DeSarno.  “Instead, Stockman used his position in a series of schemes for personal gain at the expense of the public.

Today’s Sentence Should Send a Clear Message

That the Laws of the Land Apply to Everyone,

Regardless of Position or Power.

 



According to the evidence presented at trial, from May 2010 to February 2014, Stockman and his co-defendants solicited $1,250,571.65 in donations from charitable organizations and the individuals who ran those organizations based on false pretenses, then used a series of sham nonprofit organizations and dozens of bank accounts to launder the money before it was used for a variety of personal and campaign expenses.

Specifically, the evidence established that

• in 2010, Stockman and Dodd solicited an elderly donor in Baltimore, Maryland for $285,000 to be used for legitimate charitable and educational purposes. 
• Stockman and Dodd used a sham charity named the Ross Center to funnel the money to be used for a variety of personal expenses. 
• The evidence further established that, in 2011 and 2012, Stockman and Dodd received an additional $165,000 in charitable donations from the Baltimore donor, much of which Stockman used illegally to finance his 2012 congressional campaign. 

The trial evidence also showed that

• shortly after Stockman took office as a Member of the U.S. House of Representatives in 2013, he and Dodd used the name of another sham nonprofit entity, Life Without Limits, to solicit and receive a $350,000 charitable donation, to be used to create an educational center called the Freedom House.  
• Stockman, Dodd, and Posey instead used this donation for a variety of personal and campaign expenses, including:
• illegal conduit campaign contributions,
• a covert surveillance project targeting a perceived political opponent,
• an in-patient alcoholism treatment for a female associate, and
• payments for hundreds of thousands of robocalls and mailings promoting Stockman’s candidacy for U.S. Senate in early 2014.

In addition, the evidence established that,

• in connection with Stockman’s Senate campaign, Stockman and Posey used another sham nonprofit entity to secure a $450,571.65 donation in order to fund a purportedly legitimate independent expenditure promoting Stockman’s candidacy.  
• The evidence showed that the purportedly independent expenditure was in fact secretly controlled by Stockman, who directed his campaign and Posey to file false affidavits with the FEC covering up Stockman’s involvement. 

Finally, the evidence at trial demonstrated that Stockman failed to pay taxes on any of the $1,250,571.65 in fraudulently acquired donations.  In addition, during the early stages of the investigation, Stockman directed Posey to flee to Cairo, Egypt, for two and a half years so that Posey could not be questioned by law enforcement.

 

Have a Criminal Tax Problem?

 



Contact the Tax Lawyers at

Marini & Associates, P.A.

 

for a FREE Tax Consultation Contact us at:

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888 882-9243).