Money Laundering Is Dirty Business | AccountingWEB

Money Laundering Is Dirty Business

By Teresa Ambord

What do a Southern California CPA and a former Italian prime minister have in common? Chances are they'll soon both be viewing life from behind iron bars. Their crimes may fall under the same category - money laundering and, ultimately, tax evasion - but other than that, their stories bear no resemblance. 
Dirty Accountant/Marriage Counselor
In March 2013, CPA Steven Mark Pybrum will be sentenced by a US District Court judge on charges of filing false individual tax returns for 1999-2002. He has already been found guilty by a grand jury and is looking at a twelve-year sentence. 
Pybrum advertises himself as a tax and financial expert from his Santa Barbara, California, firm, Pybrum and Company. He also maintains a not-for-profit agency known as the Foundation for Harmony and Happiness. According to Pybrum, this agency was formed for the purpose of helping couples with conflict resolution and financial counseling in the hope of avoiding divorce.

The Laundry Kings

As money launderers go, Silvio Berlusconi was pretty successful before the authorities stopped him and his cohorts. Yet they pale in comparison to the guy some call the most successful criminal ever. At one time, Pablo Escobar's drug cartel controlled 80 percent of the world's cocaine trade, which explains why, in 1989, his personal fortune hovered around $9 billion. That made him the seventh richest man in the world. Of course, Escobar couldn't have amassed this wealth without the help of those willing to launder money for him. "(Y)ou bribe someone here, you bribe someone there, and you pay a friendly banker to help you bring the money back," said Escobar. Escobar's spree ended in 1993 in a gunfight with Columbian authorities. 

Then there was ex-president of the Phillippines, Ferdinand Marcos, who laundered billions of dollars of stolen public funds, using banks in the United States and Switzerland. Marcos' long reign (1965-1986) ended when he was the target of a massive operation known as "Operation Big Bird," which resulted in the retrieval of $7.5 billion. His criminal activity paid for an overall lavish lifestyle, yet what most people remember is that when it was all said and done, his wife Imelda's closet held more than 2,500 pairs of shoes. 
Topping the list as the best-known American mobster is still Al Capone. Capone was a ruthless Chicago crime boss in the 1920s. He's actually credited with the creation of the modern money laundering schemes, since he ran about $1 billion of dirty money through his businesses, the first of which were cash-heavy laundromats. The story most people remember about Capone is that, although he was known to be a cold-blooded killer and head of an organized crime syndicate, his downfall came when he was indicted on charges of tax evasion in 1931.
So what's the problem? 
Pybrum and Company earned about $380,000 each year for the four years in question for accounting services. But, according to the case against him, he deposited the money he earned for these services, not in his accounting firm's bank account, but in the account of the Foundation for Harmony and Happiness. Prosecutors maintain that Pybrum actually formed the tax exempt agency for the purpose of hiding his accounting income rather than for charitable purposes. In fact, they assert there's no reason to believe that the Foundation performed any charitable work or earned any fees in the four years in question. 
Evidence was presented to a grand jury to indicate that he spent the money in both accounts to pay personal expenses, including renting space in a mansion and purchasing an airplane, a fishing boat, and an SUV.
In late October, a grand jury found Pybrum guilty on four counts of filing false returns. The investigation was conducted by the IRS Criminal Unit.
Dirty Prime Minister/Media Mogul
Thousands of miles away, former Italian Prime Minister Silvio Berlusconi is also looking at tax fraud charges and a prison sentence, though he may find more mercy than Pybrum was granted, due to his age. 
At the end of October, a Milanese court sentenced him to four years behind bars and suspended him from public service for three years. 
The case against him
Berlusconi founded and still controls Mediaset, Italy's largest TV broadcaster. Over the last few decades, Mediaset rose to become the biggest commercial broadcaster in the nation (and now broadcasts in eight countries). His empire is similar to Rupert Murdoch's Fox News Corp, said Forbes Magazine. Berlusconi also controls Mondadori, the biggest Italian magazine publisher, which Forbes compares to Time Warner here in the United States. 
According to the charges against Berlusconi and four others (including American citizen Frank Agrama), Mediaset bought US movie and TV rights for what authorities are calling a "bloated price," which netted him more than $349 million. The charges accuse Berlusconi of using offshore entities to inflate the prices of these "rights" as a way to avoid taxes. Then, using his personal holding company, Fininvest, the rights were sold to Mediaset at an outrageous markup. 
"This was a very notable evasion," the judge told reporters. "These TV rights were subject to machinations and unjustifiable price increases." 
Berlusconi and the other defendants were fined the equivalent of $12.9 million in damages, pending two remaining rounds of appeals still available to them. Berlusconi's defense team protested that the court failed to consider that two previous rulings found him innocent. 
Considering his advanced age - seventy-six - it's doubtful he'll do much prison time on these charges. However, Berlusconi also faces charges of paying an underage Moroccan prostitute for sex and then using his political power to free her from detention. 
On the news of Berlusconi's conviction, shares of Mediaset fell 3 percent. 
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