Condo bunco; life goes on; heavy metals; and other highlights of recent tax cases.
Honolulu: Businessman Wagdy Guirguis and CPA Michael Higa have been convicted of conspiracy to defraud the U.S. government.
Guirguis was also convicted of three counts of filing false corporate income tax returns, one count of failure to file a corporate income tax return, three counts of tax evasion, one count of corruptly endeavoring to obstruct and impede internal revenue laws and one count of witness tampering. Higa was convicted of conspiracy and one count of aiding and assisting in the preparation of a false return for one of Guirguis’ business entities.
The convictions arise from a scheme to divert funds from Guirguis’ business entities for his own benefit and avoid federal employment and income taxes. According to court documents and evidence, Guirguis operated numerous engineering businesses and Higa was controller of these businesses. Higa also served as a nominee officer of another entity controlled by Guirguis.
When the IRS determined that Guirguis’ businesses owed more than $800,000 in federal employment taxes and assessed a penalty of $812,000, Guirguis and Higa took various steps to place income and assets out of the IRS’s reach, including using an entity to fraudulently convey a condominium to Guirguis’ wife. After an IRS revenue officer questioned Mrs. Guirguis’ sole ownership of this condominium, Guirguis and Higa instructed a bookkeeper to alter the books and records to conceal this transaction.
From 2001 through 2012, Guirguis and Higa also used the nominee entity to divert approximately $1.3 million from Guirguis’ businesses for Guirguis’ personal use. As a result of their diversion and concealment, Guirguis’ 2010 through 2012 returns omitted $553,000 in income, a tax deficiency of $165,000.
Guirguis filed corporate returns that fraudulently omitted millions of dollars of gross receipts: For one of his businesses, Guirguis simply did not file a corporate tax return, thereby not reporting more than $1.7 million in gross receipts.
After the IRS levied the bank accounts of one business, Guirguis diverted incoming funds owed to that business, directing payment of the funds to a different business. He also instructed a tenant to disregard IRS collection notices and pay rent directly to him, rather than to the IRS. Guirguis made false and misleading statements to IRS revenue officers and falsely told an employee that he did not know about the false backdating done in the books of the nominee entity, and asked the employee to sign a false statement to that effect.
Guirguis and Higa face a maximum of five years in prison each on the conspiracy counts. Guirguis faces a maximum of five years on each of the tax evasion counts, three years on each of the counts involving false returns and corrupt endeavors, and one year for failure to file a return, as well as a period of supervised release, restitution and monetary penalties. He faces an additional maximum 20 years for witness tampering. Higa also faces a maximum of three years on the aiding and assisting the filing of a false tax return count.
Miami: Former tax preparer Saul Frederick, 45, of Port-au-Prince, Haiti, has been sentenced to 61 months in prison, followed by three years of supervised release, and been ordered to pay $1,757,397 in restitution for his role in a stolen ID refund scheme.
Frederick previously pled guilty to one count of conspiracy to file false claims and aggravated ID theft.
According to the court record, in early 2010, Frederick worked as a preparer with co-conspirators Hugues Jean Noel, Frandy Prophete and Edy St. Jean at the prep business H&A Tax Multi-Service. The defendant and his co-conspirators used stolen personal ID information to prepare and file false federal income tax returns for tax years 2009 and 2010.
Many of the individuals whose information was used died during tax years 2009 and 2010, and the defendants further sought refunds using fabricated employment and income information.
According to court records, Frederick traveled to Haiti shortly before the charges were filed against him. He was apprehended in Port-au-Prince last summer.
Noel has been sentenced to 75 months in prison, followed by four years of supervised release, and been ordered to pay $1.79 million in restitution after pleading guilty to one count of conspiracy to defraud the U.S. government, one count of aggravated ID theft and one count of failure to appear. Prophete, 34, of Miami, was sentenced in 2013 to 61 months in prison, followed by three years of supervised release, and been ordered to pay $1.85 million in restitution. Prophete previously pled guilty to one count of conspiracy to file false and fraudulent claims and another count of aggravated ID theft. St. Jean remains a fugitive.
Monument, Colo.: Resident Craig Walcott has pleaded guilty to one count of attempting to evade payment of income taxes.
According to the plea agreement and court documents, Walcott operated a multi-level nutritional supplement marketing business and owned and leased residential real estate. In 2010, the IRS notified him of an assessment of taxes and penalties for the 2005, 2006 and 2007 tax years of more than $450,000.
Walcott took a series of steps to evade this tax liability, including transferring properties to nominee entities, encumbering other properties with fictitious mortgages to conceal their equity and filing false returns understating his income. Walcott also did not file income tax returns for 2012, 2013 and 2014.
He owes $628,733, which he has agreed to pay the IRS in restitution. Sentencing is Feb. 25, when Walcott faces a maximum of five years in prison as well as supervised release, restitution and monetary penalties.
Chicago: A federal court has entered a permanent injunction against Leticia Rodriguez and Rodriguez Tax Services, barring them from preparing federal returns for others and owning a prep business.
The court also ordered Rodriguez to disgorge $33,660, an approximation of her fees for fraudulently reporting child care expenses on 187 of her clients’ returns. The court found that Rodriguez repeatedly prepared returns in violation of the Internal Revenue Code by fabricating itemized deductions, falsifying self-employment income and falsely claiming child care expenses, according to the complaint.
Rogersville, Tenn.: Resident Brian Leo Snow has been sentenced to 30 months in prison for filing a fraudulent multi-million-dollar lien against a government employee and filing a false claim for a refund.
According to court documents, Snow failed to pay his federal taxes for 2000 to 2008 and then became the subject of IRS collection activity. After being held in contempt of court for failing to provide documents and records to the IRS, Snow filed false retaliatory liens claiming that various government officials owed him millions of dollars; each of these government officials had been involved in attempts to collect Snow’s back taxes.
Snow also filed three false claims with the IRS claiming more than $144 million in refunds to which he was not entitled.
Snow owes the IRS over $150,000 in taxes for tax years 2000 to 2008 and 2014 to 2015.
He was also ordered to serve three years of supervised release and pay $154,025 in restitution to the IRS.
Smyrna, Ga.: Precious metals broker Saleem Hakim, 49, has been convicted of three counts of failing to file federal income tax returns.
According to court documents and evidence, Hakim received funds from clients, converted a portion of the funds to precious metals and kept the remainder. For 2011 through 2013, Hakim retained more than $1 million yet filed no income tax returns.
Sentencing is Feb. 26, when Hakim faces a maximum of a year in prison on each count, as well as a period of supervised release and monetary penalties.